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Long on Conversant (NASDAQ:CNVR)

Contributor: Luis V. Sanchez


Contact: LUISVSANCHEZ@GMAIL.COM
Ticker: CNVR
Recommendation: Long
Time Frame: 6 Months to 18 Months
Country: United States
Situation: Value
Catalysts: Divestiture, Rebranding, Growth Initiatives
Market Cap: $1.65 billion
Date of Recommendation: 5/26/2014
Recommendation Price: $24.64
Target Price: $40.00
Disclosure: I am currently long CNVR stock

Contents
pp. 1-10 Investment Thesis for Conversant
Supplement
I. Digital Advertising Industry Analysis
II. Business Overview
III. Financial Analysis
IV. Management Profile
V. Comparable Companies Analysis
Appendix
A. Precedent Transactions
B. Discounted Cash Flow Model
C. Sum of the Parts Analysis
D. Leveraged Buyout Model
E. Financial Statements
1

Investment Thesis for Conversant
Executive Summary
Conversant is a US digital marketing company which helps advertisers target and sell online ads
Leader in affiliate marketing and digital personalized marketing, strong presence in display
advertising, growing platforms in mobile and video advertising
Sales and profitability declines in Owned and Operated unit and display advertising led to
negative sentiment and stock price declines
Company changed name from ValueClick to Conversant , sold owned and operated business,
restructured display and is investing in growth platforms
Strong cash flows from remaining business and improved performance resulting from
restructuring point to a deeply undervalued business likely to positively surprise
Strong management team, track record of share repurchases and attractiveness as an
acquisition target or spin-off candidate support underlying valuation
Target price of $40 implies stock is 40% undervalued
Business Summary
Conversant (CNVR or the Company) is a digital marketing and advertising company based in
Westlake, California. In 2013, the Company generated $573mm in sales and $203mm in EBITDA (36%
margin). CNVR operates in two business units: Media (70%) and Affiliate Advertising (30%).
The Media unit operates one of the largest online ad networks in North America, reaching 80% of
internet users each month, and has solutions for every major category of digital advertising (display,
mobile, ect.). Media uses data collected from its network and 3
rd
parties to sell targeted ads.
Affiliate Advertising operates the dominant platform in online direct advertising, Commission Junction
(CJ), with over 70% market share. Affiliate receives subscription fees for managing an online
advertiser/marketer exchange platform and commissions for successful ad campaigns.
The Company has disappointed investors with poor growth. Challenges include: years of declining sales
and profitability from (now divested) Owned and Operated (O&O), weakness from its European ops
(+20% sales before 2012), and competitive pressures and operational issues in display advertising.
In 2013, Conversants display ad business deteriorated due to poor execution and competitive threats.
During the year, CNVR shifted staff from display to focus on the Affiliate business because of an
opportunity to win affiliate clients resulting from Googles exit from the category. Display also faced
competitive pressures from an accelerated shift from ad networks to ad exchanges due to more wide-
spread adoption of programmatic advertising. Display declined from ~$150mm in revenue and ~25%
EBIT margin in 2012 to ~$115mm in revenue (+20% decrease) and <20% EBIT margin in 2013.

2

Restructuring Efforts
In response to challenges, Conversant has taken actions to upgrade its platform and improve execution:
February 2010 Sold lead generation business (part of O&O) for $45 million
August 2010 Purchased Investopedia (online publishing, part of O&O) for $42 million
April 2011 Purchased Greystripe (mobile ads) for $70 million, +55% CAGR since acquisition
August 2011 Purchased Dotomi (CRM business) for $292 million, +60% CAGR since acquisition
September 2012 Sold European Search business (part of O&O)
December 2012 Appointed John Giuliani (former COO) to CEO
January 2013 Began One Conversant initiative to integrate products across the company
January 2013 Announced initiative to expand salesforce 30% - 50%
December 2013 Sold Owned & Operated unit for $120 million, completing the transformation
from a digital publishing and marketing company to a pure-play digital marketing company
February 2014 Changed name from ValueClick to Conversant and launched branding campaign
February 2014 Purchased SET Media (video)
February 2014 Launched programmatic real-time-bidding (RTB) media buying platform
March 2014 Appointed new president of European ops to launch CRM product globally
After years of restructuring, the remaining business is highly attractive. The Company shed its lower-
value Owned & Operated assets and reduced its exposure to Europe to ~7% of sales. CNVR re-deployed
staff to display advertising and reported that the business has recently stabilized (Q4 2013, Q1 2014).
Capabilities Past vs. Present Product Mix

As a part of the re-brand, Conversant retained PR firm Edelman to launch a branding campaign. The
Company rolled out a new logo and website, took out ads in trade publications, published marketing
studies and has aggressively set up meetings with clients. As a PR stunt, CNVR sent 9,000 cellphones to
advertisers with personalized messages to help spread the word of the re-brand.
Before John Giuliani became CEO, ValueClick was a collection of independently operated online
advertising businesses with little cross over and siloed sales teams. Over the last 18 months, Giuliani has
made a major push through his One Conversant strategy to better align the enterprise. Giuliani started
with technology and focused his engineers around integrating the product offerings (display, CRM, ect.).
2010 Today
Affiliate Advertising
P
Affiliate Advertising
P
CRM Marketing
O
CRM Marketing
P
Display
P
Display
P
Email
P
Email
P
Lead Generation
P
Lead Generation
O
Mobile
O
Mobile
P
Programmatic Bidding
O
Programmatic Bidding
P
Search Engine
P
Search Engine
O
Social
O
Social
P
Text
P
Text
P
Video
O
Video
P
Web Publishing
P
Web Publishing
O
CRM
35%
Affiliate
30%
Affiliate
28%
Display
35%
Display
20%
O&O
29%
2010 2013
Tech 7%
Tech 7%
Mobile/
Video 12%
3

The result was the development of a cross-platform solution which leverages CNVRs database to track
consumers and has the capability to deliver ultra-targeted ads in multiple formats simultaneously across
devices (tablet, desktop, ect.). Another development was the use of a company-wide ad exchange
bidder (media buyer) which has enabled CNVR to achieve more efficient media buys for its clients.
Clients have embraced the new cross-platform services and the Company reported in its Q1 2014
earnings call that over 40% of Media unit sales are related to cross-platform campaigns. The new cross-
platform tracking and ad capabilities are a huge differentiator for the Company and strongly position
CNVR as a leader in the ultra-targeted ad space also known as personalized advertising.
With the business unit restructuring complete and the technology platform integration largely on its
way, management has turned its focus towards developing and restructuring its salesforce. The
Company seeks to grow its salesforce by ~30% from its 2013 level over the next year. ~50% of CNVRs
employees are currently sales and marketing. The hiring push will add ~200 people over the next year
and will hit EBITDA margin by ~2-3% in the near term but will support a reacceleration of growth.

Given the operational issues experienced in 2013 due to a shortage of sales staff and CNVRs goal of
growth, expanding the salesforce makes sense. CNVRs salesforce will represent 55%-60% of its total
employee count which compared to peer levels of ~40% is high. However, CNVRs business is higher-
touch (more client-centric, less engineering-centric) and therefore justifies a larger relative salesforce.
The salesforce is currently organized by product line and technical expertise. There has notably been
very little emphasis on cross-selling in the past. Management wants to keep the current sales teams
intact and layer over it a client-centric salesforce that will focus on servicing specific clients with the goal
of providing large clients more tailored solutions and cross-selling.
Management Summary
Conversants management team is young, has industry experience and is strongly incentivized.
Management owns ~5% of shares outstanding and 70-90% of executive pay is performance-linked.

Estimated Employees 2013A 2014E 2015E 2016E 2017E 2018E
Sales & Marketing 645 838 922 959 997 1,037
General & Administrative 322 332 342 352 363 374
Engineers 322 332 342 352 363 374
Total Employees 1,289 1,502 1,605 1,663 1,722 1,784
Growth 16.5% 6.9% 3.6% 3.6% 3.6%
Cost Per Employee (000's) $64.40 $68.91 $73.73 $78.89 $84.41 $90.32
Growth 10.2% 7.0% 7.0% 7.0% 7.0% 7.0%
Sales & Marketing Expense $83,011 $103,477 $118,367 $131,179 $145,382 $161,125
Growth 10.6% 24.7% 14.4% 10.8% 10.8% 10.8%
Key Executives Position Age
Industry
Experience
Current
Base
Board
Comp.
Cash
Bonus
Equity
Awards
Unvested
Options
Public Stock
Ownership
John A. Guiliani CEO 53 24 Years $600,000 $0 117% Base 150% Base $13,500,000 $62,400,000
John P. Pitstick CFO 40 9 Years 325,000 0 108% Base 250% Base 2,000,000 3,900,000
Peter Wolfert CTO 50 14 Years 325,000 0 108% Base 250% Base 2,000,000 5,300,000
Scott Barlow Council 45 15 Years 325,000 0 108% Base 250% Base 2,000,000 2,000,000
James R. Zarley Chairman 69 16 Years 0 227,488 N/A N/A 0 5,300,000
4

John Giulianis first year as CEO was rocky, but he appears to be the right person for the job. Giulianis
background is rooted in 24 years of experience in traditional and digital marketing. Giuliani held
positions at Frito-Lay, Beecham Products, ACTMEDIA, Catalina Marketing Services and Dotomi. At
Dotomi, Giuliani was CEO and grew the business over 3 years until its eventual sale to ValueClick in 2011
for ~$292m. Giuliani stayed on as CEO of Dotomi within ValueClick leading up to his promotion to CEO.
Giuliani has a strong track record of building marketing businesses. At Catalina Marketing, Giuliani was
President of North America and his leadership resulted in record sales and profitability. Giuliani led
Dotomi from start-up to signing up 40 of the top 100 retailers, generating over 50 million in sales and
eventually selling the business for $292 million. Finally, once at Conversant, Giuliani became president of
Dotomi and continued to grow the business at a +60% annual rate to its current $200 million in sales.
Giulianis track record and his broad marketing experience show that he understands the industry and
knows how to successfully grow a business. Although 2013 was a tough year with poor execution and
sales declines, Giuliani has led the transformation to Conversant which looks increasingly promising.
Giuliani is not sailing the ship alone. Longtime CEO Jim Zarley (1999 2007) is Chairman of the board
and the management team consists of seasoned company veterans including the CFO and CTO.
Market Perception and Valuation Summary
Despite the recent stumble, CNVR should be viewed as a high quality business because it operates in a
high growth industry (eMarketer: digital advertising to grow 15% through 2018), offers differentiated
services with strong competitive positions (ad network scale similar to AOL & Yahoo, leadership in select
categories) and generates significant free cash flow (Levered FCF margin consistently +20%).
The recent strategic actions catalyze the company to become more profitable and reaccelerate growth.
Improved financial performance should result from added focus, investments made into sales and
marketing, the strengthening position of CNVRs portfolio and CEO Giulianis very capable leadership.
However, the market does not give credit to the quality of CNVRs assets and overly discounts the
expected impact from the recent strategic actions. The average Wall Street analyst rating is a hold (4
buy, 8 hold, 2 sell) and 19% of the equitys public float is short.

The current stock price of $24.64 undervalues the Company as much as 20% - 60% ($30 - $60) when
valuing the pro forma company and analyzing the potential levers of value. Due to the companys recent
underperformance and historical weakness in key digital advertising categories (video, mobile, social),
the market exceedingly discounts CNVRs growth initiatives and under-appreciates the strategic changes
that have been made. However, recent outperformance suggests that the market may have begun to
accept the growth story and improved business mix.
Stock Performance 6-Mo 1-Yr 3-Yr 5-Yr
Conversant 17% (7%) 41% 136%
Digital Marketers (Peers) (6%) 31% 103% 129%
Web Publishers (Former Peers) 1% 28% 5% 181%
Digital Marketing (Peers): AOL, CTCT, CRTO, FB, FUEL, GOOGL, MM, YHOO
Web Publishing (Former Peers): AOL, RATE, DMD, IACI, MARK, TST, WBMD, YHOO
5

The remaining company also warrants a higher valuation because it has transitioned to a pure-play
digital marketing business model. Web publishers receive lower valuations because they are more
capital intensive (high content costs) and have more difficulty achieving scale due to fragmentation.
Digital marketing companies benefit from a more scalable model and higher margins, but face the risk of
technological antiquation. CNVRs portfolio of marketing services provide concentrated access to high-
growth advertising segments while mitigating the risk of any single technology disrupting the business.

CNVR currently trades at $24.64. Standard valuation methods imply an intrinsic value between $31 - $42
with a downside valuation between $28 - $32 and an upside valuation as high as $60. My target price of
$40 is premised on the Company achieving its base case and continuing to buy back shares. I believe
there is a clear asymmetric opportunity as the stock trades below the sum of its part as well as what a
financial buyer would pay to take CNVR private. In addition, other levers of value exist for the Company
to monetize its Affiliate unit through a spin/sale or for the entire company to be sold to a strategic buyer
(likely an advertising agency) seeking to gain exposure to the high growth digital marketing industry.
Potential Levers of Value

Note: detailed financial models found in appendix
Base Case Valuation
In the base case, the Company is expected to grow at a low double digit to high single digit rate for the
next 5 years and achieve a long term growth rate of 4% thereafter; this equates to a projected 5 year
CAGR of ~9% which compares to the pro forma 5 year historic organic growth CAGR of ~12% and pro
forma 5 year historic total growth CAGR of ~16%. Most of the growth is expected to come from
O&O Divestiture Leaves A Faster Growing, More Profitable Business
Legacy ValueClick Pro Forma Conversant
'09 - '13 Sales CAGR 10.1% '09 - '13 Sales CAGR 15.9%
2013 EBIT Margin 27.1% 2013 EBIT Margin 29.3%
2013 EBITDA Margin 32.1% 2013 EBITDA Margin 35.5%
Employee Count 1,600 Employee Count 1,300
2013 ROIC % 17.2% 2013 ROIC % 18.3%
North America & Europe Focused on North America
Former Peer Group New Peer Group
Peer EV/ NTM EBITDA 9.9x Peer EV/ NTM EBITDA 16.5x
Peer EV/ LTM EBITDA 12.1x Peer EV/ LTM EBITDA 28.5x
Peer EV/ LTM SALES 1.7x Peer EV/ LTM SALES 2.6x
$27.93
$31.08 $31.57 $32.04
$35.65
$45.39
$24.64
$31.48
$41.66
$44.20 $44.67
$46.24
$59.80
Current Price LBO
Floor
Standalone
Base Case
Sale to
Strategic
Affiliate
Spin/Sale
Base Case +
Buyback
Bull Case +
Buyback
Upside: 28% 69% 81% 88% 143% 79%
6

CRM/Mobile/Video/Affiliate, little growth is expected from Display/Tech. Projected growth rates for
each category are either in-line or at the lower end of the market for each respective product.
EBITDA margin is expected to be 32%-35% which factors in the improved mix from high-growth products
and increased hiring. Projected capex is ~1% of sales, consistent with historical pro forma levels. Change
in working cap. is expected at ~1.5% of sales. Using a 40% tax rate, unlevered FCF margin is 20%-22%.
Using a 14% discount rate and assuming a 4% long-term growth rate implies a DCF enterprise value of
~$2.4 billion. Adding net cash and short-term tax assets implies an equity value of $2.44 bn or $35.58.
Buyback Scenario
Given the Companys track record of share repurchases (~$500 million of share buybacks in past 3
years), balance sheet capacity ($90 million in cash equivalents, $340 million in undrawn revolver) and
free cash flow of ~$150 million in 2014, I believe Conversant has the ability to buy back as much as $400
million in shares in the next 12 months or ~25% of the current market cap.
Realistically, CNVR will repurchase shares at the rate it accumulates free cash flow which is consistent
with past repurchase decisions. CNVR will likely use its cash on hand to continue investing in internal
projects, expanding its salesforce and making small, targeted acquisitions.
Running an accretion/dilution analysis of repurchasing between $200 million - $400 million in shares
would add $3 - $6 per share. Taking the mid-point of $4.5 and adding it to my DCF implied base case
valuation arrives at my target price of $40 for CNVR to achieve in the next 12 18 months.
Comparable Company Valuation
Comparing Conversant to its selected digital marketing peer group, CNVR has higher margins (EBITDA
margin 36% vs. 14%, EBIT margin 29% vs. 7%) and similar but lower growth (projected sales growth of
11% vs. 13%, projected EBITDA growth of 18% vs. 40%); however, the Company trades at lower earnings
and cash flow multiples than its peers (forward P/E 15.5x vs. 24.1x, EV / NTM EBITDA 7.5x vs. 16.5x).
The median peer trading multiples from the last 5 years are forward P/E of 22x and EV/ NTM EBITDA of
11x which if applied to CNVRs projected financials implies share prices of $35 and $34. If CNVR is
successful in executing on its plan, the market should re-value CNVR in-line with digital marketing peers.
Sum-of-the-Parts Analysis
A sum-of-the-parts framework can be used to analyze what the assets would be worth if sold or spun-off
individually. Conversant is a good candidate to be valued using this framework because its two assets
are siloed and are not very synergistic (separate sales organizations, few shared assets, little cross-sell).
Affiliate is highly valuable because it is a dominant, growing platform that requires little investment.
Affiliate is a performance marketer and collects commissions and platform subscription fees; it does not
depend on discretionary ad budgets and is not very cyclical. The unit is large enough to be an
independent public company with ~$100 million in annual cash flow. Affiliates cash flow is being raided
7

by the parent to fund the Media units growth and buy back stock. The unit could be better run if it were
independent because it could focus on geographic growth (current business primarily in North America).
I believe significant value could be unlocked if Affiliate is spun or sold. I estimate that the unit is worth
between 12x 16x EBITDA which is below the premium comparable peers such as FB that have higher
growth and larger addressable markets but above the peers that have lower growth and are less
profitable such as CTCT. Applying the midpoint of 14x EBITDA to 2014E EBITDA and adjusting for
corporate overhead expenses implies a value of $1.385 billion or ~$21 after allocating net cash.
Media is a larger business in terms of sales and has higher potential growth business but is less
profitable (25% adj. EBITDA margin vs. Affiliates 55% adj. EBITDA margin), faces intense competition, is
cyclical and must continue to invest in technology to remain competitive. I estimate a 8x 12x EBITDA
multiple for the unit which is below the peer trading multiples but in-line with the historic multiple of
Yahoo, a close comparable. Applying the mid-point of 10x EBITDA to 2014E EBITDA and adjusting for
corporate overhead expenses implies a value of $1.180 billion or ~$18 after allocating net cash.
The sum-of-the-parts valuation implies a $38 share price which is 56% above the current share price.
The Affiliate business alone is potentially worth $1.6 billion or CNVRs market cap. You can buy CNVR
today and get the Media unit for free. I believe the negative sentiment around Media has masked the
value of the stable cash-cow Affiliate business and that a spin or sale could unlock significant value.
Sale to a Strategic
Conversant is an attractive target for the major advertising agencies. Agencies have struggled to grow
due to the shift in ad budgets towards digital media and have sought to expand into the category.
Publicis (PUB) and WPP have had the most success in digital media and have grown above their peers.
PUB has the stated goal of growing digital advertising to 50% of sales by 2018 through organic and
inorganic means. PUB has already made large digital acquisitions over the past 3 years including Rosetta
Marketing (TEV $575, 12x EBITDA) and LBi International (TEV $522, 11x EBITDA). With the termination of
the Publicis-Omnicom merger, both companies now have considerable capacity to make acquisitions.
WPP has the stated goal of growing its digital advertising sales to 45% of its revenue. WPP has also made
a recent sizable acquisition, buying AKQA in 2012 (TEV $540, 12.8x EBITDA).
Interpublic Group (IPG) has also clearly stated its priority in growing its digital advertising exposure and
has made digital advertising acquisitions including Reprise Media in 2007 and Huge in 2008.

2014 Ad Spend Forecasts
Analog Digital Total
Worldwide 2.5% 16.3% 5.5%
United States 1.2% 18.4% 4.9%
Japan 0.6% 6.5% 1.9%
Eurozone (1.0%) 7.2% 0.7%
China 4.6% 34.8% 11.6%
Brazil 9.4% 4.7% 9.2%
Source: ZenithOptimedia
Sales Growth and Digital Sales Mix
3 Year CAGR Digital Sales %
PUB 9% 38%
WPP 6% 35%
IPG 3% 25-35%
OMC 5% 20-30%
MM
76% 100%
FB 59% 100%
GOOGL 27% 100%
CNVR
12% 100%
Source: Company filings and investor presentations
8

CNVR is a business that agencies can understand because it is client-centric vs. engineering-centric.
CNVR has broad exposure to digital advertising and would immediately provide capabilities in the most
attractive and growing segments of the industry. Finally, CNVR has a strong customer list with over 40 of
the top 100 retailers, large financial institutions and consumer products companies.
CNVR is large enough to be a meaningful acquisition to a large advertising agency but small enough to
be digestible. At CNVRs current valuation of 7.5x EBITDA, a strategic can afford to pay equity owners a
significant premium (30% - 60%) and still be very accretive. Also, the holding company structure of the
major advertising agencies would make the transaction easy to structure.
After conducting a screen for digital marketing and advertising transactions over $100 million in size
over the past 3 years, the median multiple buyers have been willing to pay is 12x EBITDA. Applying the
12x multiple to CNVRs 2014E EBITDA implies a share price of $38. The range of valuations for a sale
would likely be 10x - 14x or $32 - $42 per share; the lower end of the valuation range is implied by the
LBO floor analysis and the higher end could be arrived at for a strategic buyer with synergies.
Leveraged Buyout Floor (Downside Analysis)
The downside valuation is premised off what the company would be worth if it were sold or split apart.
A leveraged buyout analysis (LBO) points to a minimum value range of $28 $32.
CNVR is a viable LBO candidate because it generates strong cash flow, is capital-light, has a clean balance
sheet and is a digestible size. The cyclicality of advertising and the intense competition in the Media
business would require a financial sponsor to contribute a higher percentage of equity than the typical
25% in LBOs. I estimate that using a 40% equity contribution, a financial buyer would be willing to pay
9.5x to 10.5x 2013 EBITDA to take CNVR private and achieve a market IRR of 20% - 25%. This take-out
range implies a share price of $28 - $31.5, which is 12% - 22% above CNVRs current trading price.
Additional Risks and Considerations
Threat of continued deterioration in media:
Deterioration in traditional display is what drove underperformance vs. peers and led to the negative
investor sentiment. Display went from ~$150mm in sales in 2011 to ~$115mm in sales in 2013 due to a
shift towards programmatic advertising and a shortage of sales staff.
I do not anticipate a dramatic turnaround in display because programmatic advertising will continue to
take share and put pricing pressure on advertising networks. However, I believe the unit is stabilizing
because the Company has re-staffed the salesforce and has invested in programmatic capabilities.
Because display experienced sales declines while other units grew, it went from representing ~35% of
sales in 2010 to less than 20% sales today. Even if traditional display is flat to down, the unit now has a
reduced impact on the broader results of the company.

9

Challenge of hiring and integrating the new salesforce:
CNVR is expanding its salesforce by 30-50% over the next 2 years. The additional ~200 and ~100
employees in 2014E and 2015E will add ~$20mm and $15mm in additional overhead or 3.2% and 2.1%
2014E and 2015E sales. If CNVR misses growth targets, the increased costs will be a drag on margins.
I believe that CNVR will be successful in hiring and integrating the salesforce because CEO John Giuliani
has a strong track record of managing salesforce expansions and with the completion of the O&O sale
and product integration investment, Giuliani can focus on the salesforce initiative.
Threat of intense Competition:
The digital marketing landscape is highly fragmented. Dozens of large technology companies and
countless start-ups have a stake in the advertising technology landscape. In just a few years, companies
like RocketFuel and Criteo have pioneered programmatic advertising and taken share from CNVR.
Despite the intense competition, I believe CNVR has a diverse and well positioned portfolio of product
offerings and continues to invest internally and through acquisition to optimize its platform. CNVR has
one of the largest advertising networks and one of the most complete databases of consumer
information. The Company spends $40 - $50mm on technology maintenance and development which
has resulted in the creation of valuable offerings such as tag management and cross platform solutions.
The Company has also invested strategically in acquisitions where it needs to fill holes in capabilities.
The re-branding effort, salesforce expansion, and focus on digital marketing services will also improve
CNVRs competitive position.
On the Affiliate side, a strong competitor currently does not exist and established tech companies would
likely not enter the market because the market size is too small (~$250m) to justify an investment.
Threat of internet privacy regulation:
User data can improve a product and subsidize internet services, but gone unchecked private data can
be abused. It would not be surprising for internet privacy to come under greater scrutiny and result in
greater regulation and more onerous requirements for the collection and use of private user data.
Privacy regulation would mean that CNVR would have to modify its platforms to follow new rules and
could result in reduced quality of data which could hurt ad sales. If the use of user browser history
(cookies) was banned, ~50% of sales would be meaningfully impacted (Display and CRM).
CNVR manages one of the industrys largest databases of internet user profiles; this database is a key
asset for the firm and is important for the Companys success in its CRM and display advertising
products. The Company asserts that all collected data is immediately anonymized and carefully secured.
CNVR does not sell any data to 3
rd
parties. In addition to using internet cookies and tracking software,
CNVR receives data from 3rd party providers and directly from its CRM clients.
10

While investors should be mindful of the privacy issue risk, this is not an acute threat because there is
no pending privacy regulation. As mobile, video, and affiliate products grow quicker than display and
CRM, the Company will rely less on cookies and more on contextual ad formats that are not as sensitive.
Because the threat of privacy regulation impacts the entire industry, a powerful lobby has been amassed
by the major players to which CNVR is a free rider. Through innovation the industry can improve the way
it collects, packages and uses data which alleviates the existential threat to the business model.
Challenge of industry cyclicality:
Advertising is cyclical because ad spend is discretionary and quickly cut in a downturn. Online advertising
has been insulated from cyclicality because of its rapid growth. As digital media consumption continues
to grow at an exponential rate, the rapid growth in online advertising is expected to persist for the next
5 years even as broader advertising spend grows on par with GDP.
Conversants Affiliate segment is not very cyclical because it is a performance based marketer that gets
paid commissions for successful campaigns and receives subscription fees for managing a platform.

Conclusion
Conversant presents a compelling long equity opportunity. The Company is misunderstood by investors
and Wall St. and labeled an out of date tech stock that cannot grow in-line with its peers. However, I
believe the restructuring efforts to be promising and see a reacceleration of growth as the base case
outcome. CNVRs valuation is attractive using any metric and by my estimation trades well below the
sum of its parts and what the assets would be worth to a financial or strategic buyer. I believe the stock
could be 40% - 60% undervalued and recommend going long with a $40 target price.
US Advertising Growth
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013E 2014E
15E-'20E
CAGR
Total Advertising NA (4.8%) 5.1% 6.6% 10.2% 5.2% 7.0% 2.2% 0.1% (7.7%) 3.9% 4.3% 3.3% 4.2% 4.4% 4.1%
Direct Marketing 7.2% 2.3% 2.6% 5.3% 9.0% 7.0% 8.0% 5.0% 4.0% (5.0%) 7.0% 5.0% 6.0% 6.0% 6.0% 4.3%
Media Advertising 18.8% (8.5%) 6.5% 7.4% 10.8% 4.2% 6.7% 0.6% (2.5%) (9.2%) 1.6% 4.7% 4.9% 3.8% 4.8% 3.9%
Internet 75.0% (11.8%) (15.8%) 20.9% 32.5% 30.3% 34.6% 25.6% 10.6% (3.4%) 14.9% 21.9% 15.2% 15.7% 14.6% 7.0%
Source: Group M, Interactive Advertising Bureau (IAB)
11

I. Digital Advertising Industry Analysis
Industry Structure
Advertising is a $300 billion industry in the United States. 15% of ad-spend or ~$45 billion is spent on
online advertising. The digital advertising landscape is composed of publishers, advertisers and ad tech
firms. Technology facilitates transactions and creates the infrastructure known as the ad-tech stack.

In the early web days, advertisers went directly to publishers to sell ads. As the internet expanded in the
1990s, the number of web pages exploded and advertising networks developed. Ad networks aggregate
web pages and use data about the context of the pages and the demographics of the user-base to
bundle the ad inventory and sell the inventory to advertisers. The pricing model for networks can be
cost per view (CPM), cost per click (CPC) or a hybrid; most networks use a CPM pricing model.
As search engines were popularized, advertising exchanges emerged to match search criteria with ad
placements. Unlike networks which collect inventory upfront, exchanges sell excess or remnant
inventory - historically this has not been the most desirable inventory. Advertisers can use exchanges to
make targeted media buys based on individual user data as opposed to aggregated demographics.
Because exchanges present more targeted data, they are incredibly efficient at selling the excess
inventory. The pricing model for also be CPM, CPC or a hybrid; most exchanges rely on CPC pricing.
Top 10 Advertising Networks Performance vs. Network Marketing

Source: comScore Source: Internet Advertising Bureau (IAB)

Ad exchanges have driven the increased use of programmatic advertising. Demand Side Platforms
(DSPs) and Supply Side Platforms (SSPs) were developed as tools to assist media buyers and sellers
Media
Buyer /
Advertiser
Publisher
Demand
Side
Platforms
Supply
Side
Platforms
Ad
Exchanges
Ad
Networks
Buy-Side Sell-Side Ad-Tech Stack
0
25
50
75
100
125
150
175
200
225
N
e
t
w
o
r
k

U
s
e
r
s

(
m
i
l
l
i
o
n
s
)
2012 2013
0%
10%
20%
30%
40%
50%
60%
70%
2000 2002 2004 2006 2008 2010 2012
S
h
a
r
e

o
f

D
i
g
i
t
a
l

C
a
m
p
a
i
g
n
s
CPC CPM Hybrid
12

to optimize their advertising strategies. Exchanges rapidly grew from representing less than 10% of the
market in 2000 to representing over 60% of the market today due to their efficiency and transparency.
US Advertising Transaction Style

Source: GroupM
As the ad-tech stack firmly took shape, major players consolidated the stack and bundled it into a single
offering. For example, Google acquired DoubleClick (diversified ad platform), Admob (ad network),
Teracent (Optimization), InviteMedia (DSP), and Admeld (SSP).
Ad networks have also consolidation and improved their capabilities and optimization. Ad networks use
exchanges and programmatic techniques to sell inventory. Successful ad networks have differentiated
themselves by specializing in an industry vertical or by collecting and using proprietary data.
Growth Trends
Ad Spending Lags Consumption Time Spent Online

Source: eMarketer Source: Internet Advertising Bureau (IAB)

Over the last 10 years, online ad sales have grown at a double rate every year except in 2009. Broader
advertising growth has not had a double digit year since 2004. The trend is expected to continue as
advertisers shift their advertising budgets from analog media to digital media. As online consumption
94% 94%
95% 95% 94%
92%
90%
87% 86% 85%
83%
80%
77%
74%
72%
70%
67%
64%
61%
58%
54%
6% 5% 4%
3% 3%
4%
5%
6% 6%
6%
7%
7%
7%
7%
7%
6%
5%
4%
4%
2%
2%
1% 1% 2% 3% 4% 5%
7%
8% 9% 10%
13%
14%
16%
18%
19%
21%
23%
25%
26%
28%
2% 3% 4%
5%
7%
9% 11%
14%
16%
2
0
0
0
2
0
0
1
2
0
0
2
2
0
0
3
2
0
0
4
2
0
0
5
2
0
0
6
2
0
0
7
2
0
0
8
2
0
0
9
2
0
1
0
2
0
1
1
2
0
1
2
2
0
1
3
E
2
0
1
4
E
2
0
1
5
E
2
0
1
6
E
2
0
1
7
E
2
0
1
8
E
2
0
1
9
E
2
0
2
0
E
Human Analog Human Digital Programmatic non-RTB Programmatic RTB
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
M
e
d
i
a

A
d
v
e
r
t
i
s
i
n
g

%

S
h
a
r
e
Time Spent Dollars Spent
0
5
10
15
20
25
30
35
40
2007 2008 2009 2010 2011 2012 2013
G
l
o
b
a
l

H
o
u
r
s

S
p
e
n
t

O
n
l
i
n
e

(
b
i
l
l
i
o
n
s
)
Other Social Networking Email
Retail Search Instant Messages
13

continues to grow, the gap between user time spent and advertising dollars spent relative to other
media will continue to exist and drive online advertising growth over the long term.
All online categories are expected to show growth over the next several years. The fastest growth is
expected to come from mobile and video. Mobile should grow rapidly due to the increased penetration
and utilization of mobile devices. Video should grow rapidly due to improvements in connectivity speed
allowing for more video consumption as well as the introduction of improved video ad formats.
Historical and Projected Industry Growth



US Advertising Growth
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013E 2014E
15E-'20E
CAGR
Total Advertising NA (4.8%) 5.1% 6.6% 10.2% 5.2% 7.0% 2.2% 0.1% (7.7%) 3.9% 4.3% 3.3% 4.2% 4.4% 4.1%
Direct Marketing 7.2% 2.3% 2.6% 5.3% 9.0% 7.0% 8.0% 5.0% 4.0% (5.0%) 7.0% 5.0% 6.0% 6.0% 6.0% 4.3%
Media Advertising 18.8% (8.5%) 6.5% 7.4% 10.8% 4.2% 6.7% 0.6% (2.5%) (9.2%) 1.6% 4.7% 4.9% 3.8% 4.8% 3.9%
Internet 75.0% (11.8%) (15.8%) 20.9% 32.5% 30.3% 34.6% 25.6% 10.6% (3.4%) 14.9% 21.9% 15.2% 15.7% 14.6% 7.0%
US Advertising Mix
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013E 2014E
2020E
Mix
Total Advertising 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Direct Marketing 33.8% 36.3% 35.5% 35.0% 34.6% 35.3% 35.5% 36.5% 38.1% 39.1% 40.4% 40.2% 39.3% 39.5% 39.3% 40.2%
Media Advertising 66.2% 63.7% 64.5% 65.0% 65.4% 64.7% 64.5% 63.5% 61.9% 60.9% 59.6% 59.8% 60.7% 60.5% 60.7% 59.8%
Internet 4.1% 3.8% 3.1% 3.5% 4.2% 5.2% 6.5% 8.0% 8.8% 9.3% 10.2% 12.0% 13.3% 14.8% 16.3% 22.4%
US Internet Advertising Growth
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013E 2014E
15E-'20E
CAGR
Total Internet 75.0% (11.8%) (15.8%) 20.9% 32.5% 30.3% 34.6% 25.6% 10.6% (3.4%) 14.9% 21.9% 15.2% 15.7% 14.6% 7.0%
Search NA 252.9% 215.9% 182.1% 51.4% 33.6% 31.3% 28.8% 21.4% (1.2%) 9.9% 30.2% 12.8% 10.0% 8.0% 5.0%
Display NA (33.8%) (32.1%) (12%) 13.5% 52.0% 28.2% 31.9% 5.3% (3.4%) 20.7% 21.9% 15.2% 10.0% 10.0% 7.0%
Video NA NA NA NA NA 30.3% 169.2% 25.6% 65.9% 28.9% 43.6% 46.2% 15.2% 35.0% 30.0% 18.0%
Mobile NA NA NA NA NA NA NA NA NA 189.9% 53.2% 52.3% 107.4% 75.0% 50.0% 20.0%
Other Internet NA 3.8% (21.4%) (5.0%) 23.4% 17.6% 38.2% 19.0% (4.8%) (15.8%) 10.7% (1.6%) (1.2%) 1.0% 1.0% 2.0%
Source: Group M, Interactive Advertising Bureau (IAB)
14

II. Business Overview
Founded in 1998 as ValueClick, Conversant is one of the largest online advertising networks with over
170 million unique visitors a month. CNVR has a portfolio of products for assisting agencies (~10% sales)
and brands (~90% sales) target and purchase ads in every major category of digital advertising. The
Company has market leadership in affiliate marketing and personalized marketing in addition to a strong
presence in display, text and email marketing and a growing presence in mobile, social and video.
The company recently acquired SET media to improve its video platform, launched a real time bidding
programmatic buying platform and announced a partnership with Twitter. After selling its O&O
business, the Company became a pure-play digital marketing and advertising company. After
rebranding to Conversant, the Company has made an effort to sell a cross-platform, full-service digital
marketing and advertising model. Conversant operates in two segments: Affiliate Marketing and Media.
Affiliate Marketing
Affiliate Marketing represents approximately 30% of company sales ($163 million) and 45% of operating
profit ($102 million). The unit is composed of Commission Junction (CJ) which is the largest direct
online sales platform with ~70% market share. CJ works with thousands of brands and over 60,000
publishers related to transactions totaling over $700 million annually. The platform is levered to the shift
towards e-commerce which eMarketer forecasts will grow at a 12% CAGR through 2016.
Commission Junction connects major brands to direct marketers by soliciting ad campaigns for direct
marketers to execute. Marketers are offered commissions for the successful execution of campaigns
(e.g. achieved target page views or social media actions). CJ makes money by charging brands a platform
management fee and taking a percentage of the commissions paid to direct marketers. CJ is trusted to
track the performance of the campaigns and to disburse commission payments to the direct marketers.
Advertisers are attracted to CJ because 1) CJ is a unique platform that diversifies an ad budget. 2) CJ
provides a high return on advertising spend with average order values higher than traditional channels
and 25% of sales to customers new to the brands. 3) CJ is performance based and highly measurable.
In North America, affiliate marketing is a duopoly where CJ and Linkshare control over 90% of the
market. Google exited the category in early 2013 due to its low market share position (~25%). CJ
experienced accelerated growth in 2013 due to customer additions from Google.
CJs dominant platform allows it to maintain pricing power with lucrative subscription and commission
fees. CJ requires little maintenance capex or working capital and over 70% of segment employees are in
client-facing roles. CJ could be expanded internationally, but it is not a current a priority. CJ has a small
presence in Europe where affiliate marketing is not a developed category.
In 2014, CNVR plans to introduce Affiliate Personalization which will leverage data from CNVRs profile
database to identify individuals and customize promotional offers.

15

Media
The Media segment represents approximately 70% of company sales ($410 million) and 55% of
operating profit ($137 million). The Media segment is a digital marketing business which works with
brands (~66% sales) and advertisers (~33% sales) on formulating cross-platform marketing strategies,
purchasing advertising inventory and executing cross-platform campaigns. The segment makes money
by taking a commission on the advertising inventory it sells to media buyers (85% segment sales) and
providing technology solutions for ad-serving (mediaplex) (15% segment sales).
The Media segment is organized by product and industry and has separate sales teams for each product
as well as sales teams which cover all products (including affiliate marketing). The primary products
within the segment include ValueClick Media (ad network for display, text and email), Greystripe
(mobile), Dotomi (CRM), video and medialplex (technology / ad-serving).
The Media segment is data driven and relies on the scale of its network to make highly targeted ad
purchasing decisions. CNVR collects data from across its network of publishers, exchanges and data
partners which it uses to sell targeted ads. CNVR has one of the most complete 1
st
party data bases of
263 million verified anonymous profiles with 200 unique attributes. CNVRs data provides a key strategic
asset which can be better monetized with a more complete product portfolio and stronger sales team.
CRM is Medias flagship product. CRM campaigns require CNVR to work closely with the client to collect
the clients private customer data in order to create customized campaigns. CRM campaigns are ultra-
targeted to the customer level and provide clients high conversion rates. CRM requires careful
collaboration between the client and engineers which creates switching costs and leads to a sticky client
relationship. CRM clients pay a premium for the tailored product and are ideal to cross sell.
CNVR is investing in its Media segment to grow its sales force and improve capabilities. The Company
has invested 8-9% of total sales to optimize and develop products. CNVR has developed an RTB DSP
which allows clients to use existing products programmatically. CNVR has also developed a best in class
tag management technology which is effective in tracking internet users across platforms and across
different devices. The tag management system has allowed CNVR to develop a superior database.
CNVR has prioritized the integration of its products. As a result, CNVR has developed a cross-product
offering which can seamlessly launch campaigns across devices and products. Clients have embraced the
new capabilities and the Company reported that over 40% of campaigns are now cross-platform.
Looking ahead, the Company seeks to better monetize its assets through improved capabilities and a
stronger sales organization. In March 2014, the Company named Oded Benyo as President of our
European operations. His appointment will lay the groundwork to launch the CRM product globally.

16

III. Financial Analysis
Base Case Model Output ($ in Thousands)



Revenue Analysis ($ in Thousands)

2009A 2010A 2011A 2012A 2013A 2014E 2015E 2016E 2017E 2018E
Media Sales 111,744 124,016 139,270 149,432 162,838 179,122 195,243 210,862 227,731 245,950
Affiliate Sales 162,041 168,891 261,064 390,388 410,283 458,407 506,446 551,905 597,995 643,579
Total Sales 273,785 292,907 400,334 539,820 573,121 637,529 701,688 762,767 825,726 889,528
Sales Growth 7.0% 36.7% 34.8% 6.2% 11.2% 10.1% 8.7% 8.3% 7.7%
Gross Profit 184,237 199,138 269,682 370,234 397,782 444,079 490,524 535,129 581,363 628,508
Gross Margin 67.3% 68.0% 67.4% 68.6% 69.4% 69.7% 69.9% 70.2% 70.4% 70.7%
EBITDA 73,487 90,860 125,537 172,060 203,196 216,997 238,553 260,345 282,377 303,777
EBITDA Margin 26.8% 31.0% 31.4% 31.9% 35.5% 34.0% 34.0% 34.1% 34.2% 34.2%
EBIT 62,619 80,734 104,305 133,930 167,782 183,221 211,536 237,717 262,119 284,882
EBIT Margin 22.9% 27.6% 26.1% 24.8% 29.3% 28.7% 30.1% 31.2% 31.7% 32.0%
Net Income 99,020 157,838 101,130 101,716 101,879 108,635 126,329 142,608 158,120 173,033
Profit Margin 36.2% 53.9% 25.3% 18.8% 17.8% 17.0% 18.0% 18.7% 19.1% 19.5%
Dilluted Shares 87,210 82,334 81,489 78,898 74,122 70,476 67,285 64,535 62,104 59,803
Shares (5.6%) (1.0%) (3.2%) (6.1%) (4.9%) (4.5%) (4.1%) (3.8%) (3.7%)
Dilluted EPS $0.43 $0.60 $0.79 $1.02 $1.15 $1.54 $1.88 $2.21 $2.55 $2.89
EPS Growth 39.8% 30.8% 29.5% 12.7% 33.5% 21.8% 17.7% 15.2% 13.6%
Levered FCF 148,197 158,494 169,735 181,856 194,426
% Sales 23.2% 22.6% 22.3% 22.0% 21.9%
Capex 6,375 7,017 7,628 8,257 8,895
% Sales 1.0% 1.0% 1.0% 1.0% 1.0%
Working Cap 32,982 14,932 7,573 9,838 10,835 11,874 13,264 14,607
% Sales 8.2% 2.8% 1.3% 1.5% 1.5% 1.6% 1.6% 1.6%
2013A 2014E 2015E 2016E 2017E 2018E 2013 Mix 2018 Mix 5 Yr CAGR
Affiliate 162,838 179,122 195,243 210,862 227,731 245,950 28% 28% 9%
CRM 200,592 230,681 260,670 286,737 312,543 337,546 35% 38% 11%
Display 114,624 115,770 116,928 118,097 119,278 120,471 20% 14% 1%
Mobile / Video 66,410 83,013 99,616 117,546 136,354 155,443 12% 17% 19%
Tech 28,656 28,943 29,232 29,524 29,820 30,118 5% 3% 1%
Total Sales 573,121 637,529 701,688 762,767 825,726 889,528
Growth Cases Commentary
Affiliate
Base 10.0% 9.0% 8.0% 8.0% 8.0% Continues to execute, growth below eCommerce
Bull 12.0% 11.0% 10.0% 10.0% 10.0% Category expansion, growth in-line with eCommerce
Bear 8.0% 7.0% 6.0% 5.0% 5.0% Dissapointing category growth, flat to negative pricing
CRM
Base 15.0% 13.0% 10.0% 9.0% 8.0% Continues to execute, customer adds and cross selling
Bull 20.0% 18.0% 15.0% 13.0% 10.0% Larger sales force successful in customer acquisitions
Bear 10.0% 9.0% 8.0% 7.0% 6.0% Volumes improve, but competition brings down price
Display
Base 1.0% 1.0% 1.0% 1.0% 1.0% Business stablizes, continues to lower prices
Bull 5.0% 5.0% 5.0% 5.0% 5.0% Share gains in programmatic, volumes improve
Bear (10.0%) (10.0%) (10.0%) (10.0%) (10.0%) RTB fails to gain traction, continues to lose share
Mobile / Video
Base 25.0% 20.0% 18.0% 16.0% 14.0% Grows at market rate, executes on plan
Bull 30.0% 27.0% 25.0% 20.0% 18.0% Grows above market, share gains, inorganic growth
Bear 10.0% 9.0% 8.0% 7.0% 6.0% Captures half of market growth
Tech 1.0% 1.0% 1.0% 1.0% 1.0% Services bundled with advertising networks
Total Company
Base 11.2% 10.1% 8.7% 8.3% 7.7%
Bull 14.9% 14.1% 12.9% 11.7% 10.4%
Bear 4.0% 4.1% 4.0% 3.7% 3.6%
17

IV. Management Profile
John Giuliani, President and Chief Executive Officer, Director
John Giuliani is president, CEO and a board member. Giuliani joined the management team and board in
August 2011 after the Dotomi acquisition. From April 2012 until December 2012, Giuliani was COO.
John Giuliani is a seasoned executive with nearly 25 years of experience in growing successful
organizations. Before joining Dotomi, Giuliani founded Rainmaker Consulting Group Inc., which
specialized in strategic sales and marketing consulting for marketing services firms. He also served as
President of North America for Catalina Marketing Services, providing behavioral insights, database
marketing and Internet solutions to key Fortune 1000 companies. His leadership at Catalina resulted in
record revenues and net profits. Giuliani spent four years at ACTMEDIA working with the launch of the
Instant Coupon Machine, as well as in CPG sales and marketing with Beecham Products and Frito-Lay.
Giuliani is a board member for Bluestem Brands and f/k/a Fingerhut Direct Marketing. Giuliani has been
on boards for Q Interactive, SuperMarkets Online, Affinova, Claria, Imagitas, and El Dorado Marketing.
Giuliani has an MBA from the Kellogg School of Management and a B.S. from the University of Illinois.
Peter Wolfert, Chief Technology Officer
Peter Wolfert is responsible for managing all of the engineering and technology resources. His expertise
in management information systems has led the industry and served a multitude of clients. Prior to
joining the company in 2000, Wolfert was the SVP and director of information technology for Mellon
Capital Management and served as SVP of information technology at AIM Funds in San Francisco. He has
also served as SVP of information technology at Trust Company of the West.
John P. Pitstick, Chief Financial Officer
John Pitstick is CFO and manages the company's finance functions. Pitstick joined the company in 2005
and served as VP of finance prior to his promotion to CFO in 2007. Pitstick was a senior manager in the
audit practice of Ernst & Young, where he focused on the technology industry for nearly ten years.
Scott Eagle, Chief Marketing Officer
Scott Eagle leads the Companys marketing function, including strategy and the integration of marketing
programs across Conversant. An accomplished senior executive with a strong background in client-side
digital marketing and consumer brand management, Eagle has over 25 years of experience as a
marketing leader managing major Fortune 500 brands and building successful new companies. Eagle has
served as CMO for Empowered Careers, eHarmony and Claria Corporation, and he has held
management positions at Concentric Network Corporation, MFS Communications and P&G.
Scott Barlow, Vice President and General Counsel
Scott Barlow has served as general counsel since 2001. Barlow has been the boards secretary since
2002. Barlow was a member of the management team of Mediaplex during the acquisition in 2001.
18

Executive Compensation

Compensation for management is well aligned with shareholder interests. For a company the size of
CNVR, managements base salary is reasonable. Management is incentivized with both cash bonuses
and equity awards for achieving sales and profitability milestones. The table above summarizes base
salary and total potential incentive payouts and the table below outlines the performance targets. If
management achieves its performance goals, they can earn up to 3-4 times their base salary; put simply,
~70 90% of managements compensation is variable and depends on business growth and profitability.
In 2013, CNVR achieved the minimum target for performance on profitability and did not achieve any
targets for revenue. As a result, $300,000 was paid to Guiliani and $125,000 was paid to Pitstick, Wlfert,
& Barlow as cash bonus compensation ~40% of potential cash bonuses. $811,600 in equity was awarded
to Pitstick & Wolfert, $608,700 in equity was awarded to Barlow and no equity was awarded to Guiliani.
Managements Public Equity Ownership Executive Compensation Targets


Management holds a healthy level of CNVR equity. If you take each executives total shares held and
unvested options, the totals are all +10x their base salaries. Guiliani has ~$75 million tied up in CNVR
stock (most of his net worth) or ~4% of shares outstanding. Guiliani was first given equity as
consideration for the Dotomi acquisition (2/3 of his equity). Over time, Guiliani has built up his position
by not selling his share compensation and by doing so has demonstrated his conviction in the business.
Other executives have been sellers of their equity. A worrying sign is that since he was re-elected
chairman of the board in May, James Zarley sold 2/3 of his equity. James has never been a big holder of
CNVR stock but has traded the name in the past. In 2007, Zarley held $16 million worth of stock which
he had reduced to $1 million by 2008. Zarley began accumulating again and reached $19 million in 2011
before selling again. Given his age Zarley might be planning to step down as chairman after this year.
Key Executives Position Age
Industry
Experience
Current
Base
Board
Comp.
Cash
Bonus
Equity
Awards
Unvested
Options
Public Stock
Ownership
John A. Guiliani CEO 53 24 Years $600,000 $0 117% Base 150% Base $13,500,000 $62,400,000
John P. Pitstick CFO 40 9 Years 325,000 0 108% Base 250% Base 2,000,000 3,900,000
Peter Wolfert CTO 50 14 Years 325,000 0 108% Base 250% Base 2,000,000 5,300,000
Scott Barlow Council 45 15 Years 325,000 0 108% Base 250% Base 2,000,000 2,000,000
James R. Zarley Chairman 69 16 Years 0 227,488 N/A N/A 0 5,300,000
0%
1%
2%
3%
4%
5%
6%
Sep-11 May-12 Jan-13 Sep-13 May-14
E
q
u
i
t
y

O
w
n
e
r
s
h
i
p

(
%

M
a
r
k
e
t

C
a
p
)
John A. Guiliani John P. Pitstick Peter Wolfert
Scott Barlow James R. Zarley Total
Minimum Midpoint Maximum Actual
Revenue $602m $611m $620m $573m
Adj. EBITDA $222m $235m $247m $222m
Implied
Growth
11.5% 13.2% 14.9% 6.2%
Implied
Margin
36.9% 38.4% 39.8% 38.8%
Note: Adjusted EBITDA includes Stock Based Compensation
19

V. Comparable Companies Analysis
AOL
AOL operates Advertising.com (ad network), AdLearn (optimization and bid management), and AdLearn
(DSP). ADTECH is an ad server that enables publishers, networks and advertisers to manage online
advertising campaigns. Adap.Tv is a programmatic video advertising platform (online video and linear
TV). Aol On Network is a video hub that includes original programming. BeOn is a branded content and
entertainment platform. Marketplace is AOL's SSP and Pictela is a premium ads platform. Aol has a
partnership with Yahoo! and Microsoft to cross-sell each other's non-guaranteed display inventory and
has partnered with Yahoo!'s Right Media for execution.
Constant Contact
Constant Contact is a software-as-a-service (SaaS) provider focused on helping small- and medium-sized
businesses market their products and services through email, events, online surveys, local deals, loyalty
programs, social media, and business listings. Constant Contact, through its NutShellMail acquisition in
May 2010 and BantamLive in February 2011, brought social media monitoring and CRM tools into the
fold. In January 2012, the company acquired CardStar a loyalty app provider, and the acquisition of
SinglePlatform in June 2012 added an online business listings network to Constant Contacts offering.
Criteo
Criteo is a search retargeting company whose technology enables e-commerce sites to reengage with
potential customers. Services include CPC performance optimization, programmatic buying, mobile
advertising solutions and Ad-X Tracking (mobile campaign optimization).
Facebook
Facebook is the world's largest social media platform. Advertisers pay for ads displayed on Facebook on
a CPM and CPC basis. Ads can be bought in three ways: Premium sales (human), Marketplace (self-
serve) and Facebook exchange. FB in December 2013 began testing video ads in News Feed on all
devices. In February 2013 FB acquired ad serving and ad delivery platform Atlas from Microsoft.
Rocket Fuel
Rocket Fuel is a leading programmatic media-buying platform. The company purchases impressions
from ad exchanges and other programmatic inventory sources with the goal of optimizing for its clients
goals such as increased sales or brand awareness.
Google
Google's advertising properties include Google.com search engine powered by AdWords, YouTube,
Gmail, Google Maps, Chrome internet browser, and Android OS and related apps. Ad services products
include DoubleClick, Google AdSense and Google Display Network. DoubleClick operates an ad exchange
and provides ad management and ad serving solutions for publishers and advertisers. Google AdSense is
20

Google's original ad network, which grew out of the AdWords platform first developed for the search
engine. It extended "contextual keyword" targeting to third-party websites, using mostly text-based ads.
Google Display Network offers static image, text and video ads on websites across the internet. Google's
major IP marketing-related acquisitions include DoubleClick (April 2007), Admob (May 2010), Invite
Media (June 2010), Admeld (June 2011), and Wildfire (July 2012)
Millennial Media
Millennial Media is a digital advertising platform with a mobile-first approach to audience targeting.
Products include mMedia (turnkey self-service mobile ad solution), MYDAS (mobile ad technology
platform), Millennial Media Exchange (mobile ad exchange) and mmDev (developer portal). Services
include programmatic buying, cross-screen targeting, measurement and attribution and interactive
creative solutions. In August 2013 Millennial Media acquired mobile advertising platform Jumptap.
Other Millennial Media acquisitions include Condaptive (mobile location-based data) in May 2011 and
TapMetrics (mobile app analytics) in February 2010.
Yahoo
Yahoo! is one of the largest media properties on the internet attracting ~800 million users a month.
Yahoo is a major seller of online advertising through its unified advertising solution under four general
categories, native, audience, premium and search on its various well trafficked properties, including
Yahoo! Homepage, Yahoo! Sports, Yahoo! News and Yahoo! Mail. Yahoo! Advertising's Native ad
solution is expected to power sponsored ads on Tumblr (acquired in June 2013).

Stock Performance 6-Mo 1-Yr 3-Yr 5-Yr
NASDAQGS:CNVR Conversant 17% (7%) 41% 136%
Median Digital Marketers (Peers) (6%) 31% 103% 129%
Median Web Publishers (Former Peers) 1% 28% 5% 181%
Digital Marketers (Peers) 6-Mo 1-Yr 3-Yr 5-Yr
NYSE:AOL AOL (16%) 3% 88% NA
NasdaqGS:CTCT Constant Contact 8% 97% 24% 75%
NasdaqGS:CRTO Criteo (8%) NA NA NA
NASDAQGS:FB Facebook 34% 152% NA NA
NasdaqGS:FUEL Rocket Fuel (48%) NA NA NA
NASDAQGS:GOOGL Google 7% 29% 118% 179%
NYSE:MM Millennial Media (37%) (46%) NA NA
NASDAQGS:YHOO Yahoo (4%) 33% 119% 129%
Web Publishers (Former Peers) 6-Mo 1-Yr 3-Yr 5-Yr
NYSE:AOL AOL (16%) 3% 88% NA
NYSE:RATE Bankrate (21%) 13% NA NA
NYSE:DMD Demand Media (17%) (52%) (68%) NA
NASDAQGS:IACI IAC Interactive 12% 23% 78% 289%
NASDAQCM:MARK Remark Media 19% 96% 5% 233%
NASDAQGM:TST TheStreet 17% 34% (22%) 32%
NASDAQGS:WBMD WebMD 7% 44% (14%) NA
NASDAQGS:YHOO Yahoo (4%) 33% 119% 129%
21


Digital Marketing Peer Trading Multiples ($ in Millions)
Company Name Market Cap
Enterprise
Value Net Debt
EV / LTM
EBITDA
EV / NTM
EBITDA P/E Fwd. P/E
EV /
Revenue
AOL $2,967 $3,001 $24 6.9x 5.9x 40.4x 16.9x 1.3x
Facebook 157,448 145,211 (12,237) 31.1x 19.7x 79.6x 41.7x 16.3x
Google 376,536 327,656 (48,880) 17.6x 12.5x 31.2x 20.3x 5.3x
Millennial Media 424 326 (98) NM NM NM NM 1.2x
Yahoo 35,258 33,543 (1,773) 37.8x 24.6x 29.2x 21.0x 7.2x
Constant Contact 922 791 (131) 26.0x 13.2x 106.2x 27.2x 2.7x
Criteo 1,904 1,587 (318) 37.1x 22.9x NM 74.2x 2.3x
Rocket Fuel 862 673 (189) NM NM NM NM 2.4x
Median $2,436 $2,294 ($254) 28.5x 16.5x 40.4x 24.1x 2.6x
Conversant 1,650 1,623 (30) 8.0x 7.5x 20.8x 15.5x 2.8x
Valuation Gap (72.0%) (54.5%) (48.5%) (35.8%) 11.0%
Digital Marketing Peer Operating Metrics
Company Name
EBITDA
Margin EBIT Margin
1 Yr Sales
Growth
1 Yr EBITDA
Growth
Fwd. Sales
Growth
Fwd. EBITDA
Growth
Debt /
Capital 5 Yr Beta
AOL 18.4% 10.8% 7.5% 11.2% 7.3% 11.2% 6.0% 0.89
Facebook 52.3% 40.6% 62.4% 258.3% 33.3% 258.3% 2.3% 1.08
Google 29.8% 23.2% 18.7% 8.7% 5.8% 8.7% 8.4% 1.14
Millennial Media NM NM 45.4% 144.5% 15.0% 144.5% 0.0% 1.17
Yahoo 19.0% 9.4% (4.7%) (33.1%) (3.8%) (33.1%) 8.3% 1.04
Constant Contact 10.3% 4.1% 13.7% 59.7% 11.5% 59.7% 0.0% 1.58
Criteo 6.2% 3.7% 73.9% 161.6% 33.1% 161.6% 3.6% NA
Rocket Fuel NM NM 115.9% 21.6% 52.6% 21.6% 10.3% NA
Median 18.7% 10.1% 32.1% 40.7% 13.3% 40.7% 4.8% 1.11
Conversant 35.5% 29.3% 6.2% 18.1% 11.2% 18.1% 9.8% 1.08
Performance Gap 16.8% 19.2% (25.9%) (22.6%) (2.0%) (22.6%)
Web Publishing (Former) Peer Trading Multiples
Company Name Market Cap
Enterprise
Value Net Debt
EV / LTM
EBITDA
EV / NTM
EBITDA P/E Fwd. P/E
EV /
Revenue
AOL $2,967 $3,001 $24 6.9x 5.9x 40.4x 16.9x 1.3x
Bankrate 1,573 1,626 53 14.2x 11.1x NM 21.2x 3.4x
Demand Media 377 316 (61) 9.9x 6.5x NM NM 0.8x
IAC Interactive 5,187 5,251 37 9.9x 8.7x 20.4x 16.2x 1.7x
Remark Media 70 75 5 NM NM NM NM NM
TheStreet 90 32 (58) NM NM NM NM 0.6x
WebMD 1,557 1,731 174 19.9x 11.2x 84.5x 30.8x 3.2x
Yahoo 35,258 33,543 (1,773) 37.8x 24.6x 29.2x 21.0x 7.2x
Median $1,565 $1,679 $14 12.1x 9.9x 34.8x 21.0x 1.7x
CNVR Peers 2,436 2,294 (254) 28.5x 16.5x 40.4x 24.1x 2.6x
Valuation Gap 136.9% 66.2% 16.1% 14.7% 46.8%
Web Publishing (Former) Peer Operating Metrics
Company Name
EBITDA
Margin EBIT Margin
1 Yr Sales
Growth
1 Yr EBITDA
Growth
Fwd. Sales
Growth
Fwd. EBITDA
Growth
Debt /
Capital 5 Yr Beta
AOL 18.4% 10.8% 7.5% 11.2% 7.3% 11.2% 6.0% 0.89
Bankrate 23.6% 11.2% 10.2% 9.2% 12.7% 9.2% 25.5% 2.17
Demand Media 8.3% NM (2.8%) (54.2%) (5.3%) (54.2%) 15.9% 0.37
IAC Interactive 17.5% 13.7% 4.1% 17.4% 6.1% 17.4% 38.3% 0.66
Remark Media NM NM 265.0% 60.9% NA 60.9% 87.0% 2.82
TheStreet NM NM 11.4% (78.4%) NA (78.4%) 0.0% 0.88
WebMD 16.2% 13.1% 12.8% 155.2% 7.5% 155.2% 86.1% 0.63
Yahoo 19.0% 9.4% (4.7%) (33.1%) (3.8%) (33.1%) 8.3% 1.04
Median 18.0% 11.2% 8.8% 10.2% 6.7% 10.2% 20.7% 0.89
CNVR Peers 18.7% 10.1% 32.1% 40.7% 13.3% 40.7% 4.8% 1.11
Performance Gap 0.7% (1.2%) 23.2% 30.5% 6.6% 30.5%
22

Appendix A: Precedent Transactions ($ in Millions)


Date
Announced Target Buyer
Enterprise
Value
LTM
Revenue
LTM
EBITDA
EV / LTM
EBITDA
EV / LTM
Revenue
11/25/2013 Harris Interactive Inc. Nielsen (NLSN) $121 $140 $12 10.3x 0.9x
09/09/2013 Mopub Twitter (TWTR) 350 100 NA NA 3.5x
08/13/2013 Jumptap, Inc. Millennial Media Inc. (MM) 245 64 11 22.9x 3.8x
08/12/2013 Digital Generation, Inc. Extreme Reach, Inc. 885 386 103 8.6x 2.3x
06/04/2013 ExactTarget Salesforce.com (CRM) 2,350 292 16 NM 8.0x
03/29/2013 Brand Matter, LLC Sequential Brands (SQBG) 109 11 6 17.1x 9.9x
12/18/2012 Arbitron Inc. Nielsen (NLSN) 1,331 445 130 10.2x 3.0x
10/10/2012 Vertis Holdings, Inc. Quad/Graphics, Inc. (QUAD) 267 1,188 NA NA 0.2x
09/20/2012 Lbi International Publicis Groupe SA (PUB) 522 281 47 11.0x 1.9x
07/12/2012 Aegis Group Plc Dentsu (TSE:4324) 4,920 1,213 410 12.0x 4.1x
07/05/2012 Archway Marketing Services Investcorp Bank BSC 300 NA NA NA NA
06/20/2012 AKQA, Inc. WPP plc (WPP) 540 189 42 12.8x 2.9x
11/01/2011 interclick, inc. Yahoo! Inc. (YHOO) 264 128 11 24.8x 2.1x
09/20/2011 Ning, Inc. Glam Media, Inc. 150 NA NA NA NA
09/01/2011 JTC Prison Industries, LLC Liquidity Services (LQDT) 172 73 18 9.4x 2.3x
08/02/2011 Dotomi, LLC Conversant, Inc. (CNVR) 292 50 NA NA 5.9x
05/17/2011 Rosetta Marketing Group Publicis Groupe SA (PUB) 575 215 48 12.0x 2.7x
04/28/2011 Shopzilla, Inc. Symphony Technology 165 184 NA NA 0.9x
04/25/2011 Greystripe Conversant, Inc. (CNVR) 70 37 4 18.7x 1.9x
01/24/2011 Pareto Corporation The Riverside Company 129 87 11 11.7x 1.5x
Median $280 $162 $17 12.0x 2.5x
Average 688 282 62 14.0x 3.2x
Note: Advertising & Marketing industry acquisitions since 2011 over $100 EV, highlighted indicates close comparable business
Source: S&P Capital IQ
23

Appendix B: Discounted Cash Flow Model ($ in Thousands)








*Tax adjustment related to short-term tax assets expected to reverse in next year
2014 2015 2016 2017 2018 Terminal
EBITDA $216,997 $238,553 $260,345 $282,377 $303,777 $315,929
Less: D&A 33,775 27,017 22,628 20,257 18,895 19,651
EBIT $183,221 $211,536 $237,717 $262,119 $284,882 $296,277
Less: Taxes 73,289 84,614 95,087 104,848 113,953 118,511
Plus: D&A 33,775 27,017 22,628 20,257 18,895 19,651
Less: Capex 6,375 7,017 7,628 8,257 8,895 9,251
Working Capital 9,838 10,835 11,874 13,264 14,607 15,191
Unlevered FCF $127,495 $136,086 $145,757 $156,008 $166,323 $172,975
Discount Period 0.5 1.5 2.5 3.5 4.5
Discount Factor 0.9366 0.8216 0.7207 0.6322 0.5545 0.5545
PV Cash Flow $119,410 $111,804 $105,043 $98,623 $92,232 $95,921
Sum of Cash Flows 623,032
Terminal Value 1,751,931
Net Cash 30,000 Assumptions:
*Tax Adjustment 40,000 WACC 14.0%
Equity Value $2,444,963 Tax Rate 40.0%
LT Growth 4.0%
Dilluted Shares 68,727 Exit Multiple 10.0x
Implied Sh Price $35.58 *Exit Multiple used to calculate Terminal Value
WACC Analysis
Risk Free Rate 3.0%
ERP 7.0%
Re-Levered Beta 1.05
Cost of Equity 10.4%
Interest on Debt 4.0%
Tax Rate 40.0%
Cost of Debt 2.4%
Debt / Capital 9.8%
Equity / Capital 90.2%
Calculated WACC 9.6%
Size Spread 1.0%
Tech Risk Spread 3.0%
Adjusted WACC 13.6%
Long Term Growth vs. Discount Rate Sensitivity
Long Term Growth
3.0% 3.5% 4.0% 4.5% 5.0%
12.0% $40.89 $42.84 $45.04 $47.52 $50.36
13.0% $36.56 $38.08 $39.77 $41.66 $43.79
14.0% $33.02 $34.24 $35.58 $37.05 $38.69
15.0% $30.09 $31.08 $32.15 $33.33 $34.63
16.0% $27.62 $28.43 $29.31 $30.27 $31.32 D
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Exit Multiple vs. Discount Rate Sensitivity
Exit Multiple
8.0x 9.0x 10.0x 11.0x 12.0x
12.0% $32.61 $35.37 $38.14 $40.90 $43.66
13.0% $31.52 $34.17 $36.82 $39.48 $42.13
14.0% $30.48 $33.03 $35.58 $38.12 $40.67
15.0% $29.48 $31.93 $34.38 $36.83 $39.28
16.0% $28.53 $30.89 $33.24 $35.60 $37.96 D
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Appendix C: Sum of the Parts Analysis ($ in Thousands)










*Tax adjustment related to short-term tax assets expected to reverse in next year
Affiliate Business 2014E Media Business 2014E Consolidated 2014E
Sales $179,122 Sales $458,407 Sales $637,529
Growth % 10.0% Growth % 11.7% Growth % 11.2%
EBIT 112,497 EBIT 152,631 EBIT 183,221
Corp Adj. 23,012 Corp Adj. 58,893
Adj. EBIT $89,484 Adj. EBIT $93,737
Margin % 50.0% Margin % 20.4%
D&A 9,490 D&A 24,286 D&A 33,775
EBITDA $98,974 EBITDA $118,023 EBITDA $216,997
Margin % 55.3% Margin % 25.7% Margin % 34.0%
Selected Multiple 14.0x Selected Multiple 10.0x Trading Multiple 7.5x
Implied Value $1,385,633 Implied Value $1,180,229 Enterprise Value $1,623,433
Sum of the Parts $2,565,862 Standalone $1,623,433
Net Cash 30,000 Net Cash 30,000
*Tax Adjustment 40,000 Value Split *Tax Adjustment 40,000
Equity Value $2,635,862 Afilliate Value/Sh $20.71 Equity Value $1,693,433
Diluted Shares 68,727 Media Value/Sh $17.64 Diluted Shares 68,727
Share Price $38.35 Share Price $24.64
Discount 36%
Affiliate Multiple vs. Media Multiple Sensitivity
Affiliate Multiple
12.0x 13.0x 14.0x 15.0x 16.0x
8.0x $32.04 $33.48 $34.92 $36.36 $37.80
9.0x $33.76 $35.20 $36.64 $38.08 $39.52
10.0x $35.47 $36.91 $38.35 $39.79 $41.23
11.0x $37.19 $38.63 $40.07 $41.51 $42.95
12.0x $38.91 $40.35 $41.79 $43.23 $44.67 M
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Appendix D: Leveraged Buyout Model ($ in Thousands)
Key Transaction Assumptions Implied Value Range (20% - 25% IRR)







LTM EBITDA $203,196
Purchase Multiple 10.5x
Purchase Price $2,133,558
Exit Multiple 10.0x
IRR 21%
Leverage 6.3x
Equity Check 40%
Sponsor Ownership 95%
Tax Rate 40%
EV @ 10.5x $2,133,558
Plus Net Cash 30,000
Divided by Shares 68,727
High Share Price $31.48
EV @ 9.3x $1,889,723
Plus Net Cash 30,000
Divided by Shares 68,727
Low Share Price $27.93
Sources $ Uses $
Cash on Hand 90,000 CNVR Acquisition 2,133,558
Equity Check 853,423 Existing Debt 60,000
New Bank Debt @ L+450 812,784 Fees 30,000
New Bonds @ 9.5% 467,351
Total Sources $2,223,558 Total Uses $2,223,558
LBO Cash Flows 2014 2015 2016 2017 2018
EBITDA $216,997 $238,553 $260,345 $282,377 $303,777
EBITDA Less:
Cash Interest 78,720 76,295 74,354 70,741 65,188
Cash Taxes 40,000 52,295 63,544 74,750 86,076
Capex 6,375 7,017 7,628 8,257 8,895
Working Capital 9,838 10,835 11,874 13,264 14,607
Free Cash Flow $82,064 $92,110 $102,945 $115,365 $129,011
Net Debt $1,198,071 $1,105,961 $1,003,015 $887,651 $758,640
Leverage 5.5x 4.6x 3.9x 3.1x 2.5x
Interest Coverage 2.8x 3.1x 3.5x 4.0x 4.7x
Consideration At Exit
Sponsor Equity $853,423 EV $3,037,774
Total Debt 1,280,135 Net Debt 758,640
Consideration $2,133,558 Equity Value $2,279,134
Sponsor Equity $2,229,184
Equity Check 40% IRR 21%
Purchase Multiple vs. Exit Multiple Sensitivity
Purchase Multiple
9.0x 9.5x 10.0x 10.5x 11.0x
8.0x 21% 18% 16% 14% 12%
9.0x 24% 22% 20% 18% 16%
10.0x 27% 25% 23% 21% 19%
11.0x 30% 28% 26% 24% 22%
12.0x 33% 31% 29% 27% 25%
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Appendix E: Financial Statements
Income Statement ($ in Thousands)

*Normalized Net Income = Income Before Taxes x (1-Normalized Tax Rate of 40%)
2009A 2010A 2011A 2012A 2013A 2014E 2015E 2016E 2017E 2018E
Affiliate Marketing 111,744 124,016 139,270 149,432 162,838 179,122 195,243 210,862 227,731 245,950
Media 162,041 168,891 261,064 390,388 410,283 458,407 506,446 551,905 597,995 643,579
Total Revenue 273,785 292,907 400,334 539,820 573,121 637,529 701,688 762,767 825,726 889,528
Cost of revenue 89,548 93,769 130,652 169,586 175,339 193,450 211,164 227,638 244,363 261,021
Gross profit 184,237 199,138 269,682 370,234 397,782 444,079 490,524 535,129 581,363 628,508
Sales & Marketing 44,737 40,286 56,537 75,059 83,011 103,477 118,367 131,179 145,382 161,125
General and admin 39,957 35,443 38,753 52,552 41,581 45,581 49,581 53,581 57,581 61,581
Technology 17,427 24,985 35,461 49,730 51,024 56,024 61,024 66,024 71,024 76,024
Stock Based Comp 8,629 7,564 13,394 20,833 18,970 22,000 23,000 24,000 25,000 26,000
EBITDA 73,487 90,860 125,537 172,060 203,196 216,997 238,553 260,345 282,377 303,777
Amortization 5,186 5,096 14,920 27,731 23,151 22,400 15,000 10,000 7,000 5,000
Depreciation 5,682 5,030 6,312 10,399 12,263 11,375 12,017 12,628 13,257 13,895
EBIT 62,619 80,734 104,305 133,930 167,782 183,221 211,536 237,717 262,119 284,882
Net Interest (expense) 239 2,240 3,118 747 (25,180) (2,163) (987) (37) 1,414 3,506
Income before taxes 62,858 82,974 107,423 134,677 142,602 181,058 210,549 237,681 263,533 288,388
Income tax expense 13,348 9,075 22,663 56,073 52,160 72,423 84,220 95,072 105,413 115,355
Effective Tax Rate 21.2% 10.9% 21.1% 41.6% 36.6% 40.0% 40.0% 40.0% 40.0% 40.0%
Continuing Ops 49,510 73,899 84,760 78,604 90,442 108,635 126,329 142,608 158,120 173,033
Discontinued Ops 49,510 83,939 16,370 23,112 11,437 0 0 0 0 0
Net income 99,020 157,838 101,130 101,716 101,879 108,635 126,329 142,608 158,120 173,033
*Norml. Net Income 37,715 49,784 64,454 80,806 85,561 108,635 126,329 142,608 158,120 173,033
*Norm. EPS
Basic $0.43 $0.61 $0.80 $1.04 $1.18 $1.59 $1.96 $2.32 $2.69 $3.08
Diluted $0.43 $0.60 $0.79 $1.02 $1.15 $1.54 $1.88 $2.21 $2.55 $2.89
Shares:
Basic 86,716 81,615 80,323 77,342 72,376 68,239 64,615 61,492 58,735 56,127
Diluted 87,210 82,334 81,489 78,898 74,122 70,476 67,285 64,535 62,104 59,803
Common Size 2009A 2010A 2011A 2012A 2013A 2014E 2015E 2016E 2017E 2018E
Affiliate Marketing 40.8% 42.3% 34.8% 27.7% 28.4% 28.1% 27.8% 27.6% 27.6% 27.6%
Media 59.2% 57.7% 65.2% 72.3% 71.6% 71.9% 72.2% 72.4% 72.4% 72.4%
Cost of revenue 32.7% 32.0% 32.6% 31.4% 30.6% 30.3% 30.1% 29.8% 29.6% 29.3%
Gross Margin 67.3% 68.0% 67.4% 68.6% 69.4% 69.7% 69.9% 70.2% 70.4% 70.7%
Sales & Marketing 16.3% 13.8% 14.1% 13.9% 14.5% 16.2% 16.9% 17.2% 17.6% 18.1%
General and admin 14.6% 12.1% 9.7% 9.7% 7.3% 7.1% 7.1% 7.0% 7.0% 6.9%
Technology 6.4% 8.5% 8.9% 9.2% 8.9% 8.8% 8.7% 8.7% 8.6% 8.5%
Stock Based Comp 3.2% 2.6% 3.3% 3.9% 3.3% 3.5% 3.3% 3.1% 3.0% 2.9%
EBITDA Margin 26.8% 31.0% 31.4% 31.9% 35.5% 34.0% 34.0% 34.1% 34.2% 34.2%
Amortization 1.9% 1.7% 3.7% 5.1% 4.0% 3.5% 2.1% 1.3% 0.8% 0.6%
Depreciation 2.1% 1.7% 1.6% 1.9% 2.1% 1.8% 1.7% 1.7% 1.6% 1.6%
EBIT Margin 22.9% 27.6% 26.1% 24.8% 29.3% 28.7% 30.1% 31.2% 31.7% 32.0%
Net Interest (expense) 0.1% 0.8% 0.8% 0.1% (4.4%) (0.3%) (0.1%) (0.0%) 0.2% 0.4%
Income before taxes 23.0% 28.3% 26.8% 24.9% 24.9% 28.4% 30.0% 31.2% 31.9% 32.4%
Income tax expense 4.9% 3.1% 5.7% 10.4% 9.1% 11.4% 12.0% 12.5% 12.8% 13.0%
Continuing Ops 18.1% 25.2% 21.2% 14.6% 15.8% 17.0% 18.0% 18.7% 19.1% 19.5%
Discontinued Ops 18.1% 28.7% 4.1% 4.3% 2.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Net income 36.2% 53.9% 25.3% 18.8% 17.8% 17.0% 18.0% 18.7% 19.1% 19.5%
Norml. Net Income 13.8% 17.0% 16.1% 15.0% 14.9% 17.0% 18.0% 18.7% 19.1% 19.5%
Growth 2009A 2010A 2011A 2012A 2013A 2014E 2015E 2016E 2017E 2018E
Affiliate Marketing 11.0% 12.3% 7.3% 9.0% 10.0% 9.0% 8.0% 8.0% 8.0%
Media 4.2% 54.6% 49.5% 5.1% 11.7% 10.5% 9.0% 8.4% 7.6%
Revenue 7.0% 36.7% 34.8% 6.2% 11.2% 10.1% 8.7% 8.3% 7.7%
Gross profit 8.1% 35.4% 37.3% 7.4% 11.6% 10.5% 9.1% 8.6% 8.1%
EBITDA 23.6% 38.2% 37.1% 18.1% 6.8% 9.9% 9.1% 8.5% 7.6%
EBIT 28.9% 29.2% 28.4% 25.3% 9.2% 15.5% 12.4% 10.3% 8.7%
Net income 59.4% (35.9%) 0.6% 0.2% 6.6% 16.3% 12.9% 10.9% 9.4%
Norml. Net Income 32.0% 29.5% 25.4% 5.9% 27.0% 16.3% 12.9% 10.9% 9.4%
Norm. EPS
Basic 40.3% 31.5% 30.2% 13.1% 34.7% 22.8% 18.6% 16.1% 14.5%
Diluted 39.8% 30.8% 29.5% 12.7% 33.5% 21.8% 17.7% 15.2% 13.6%
Shares:
Basic (5.9%) (1.6%) (3.7%) (6.4%) (5.7%) (5.3%) (4.8%) (4.5%) (4.4%)
Diluted (5.6%) (1.0%) (3.2%) (6.1%) (4.9%) (4.5%) (4.1%) (3.8%) (3.7%)
27

Balance Sheet ($ in Thousands)

Statement of Cash Flows

2012A 2013A 2014E 2015E 2016E 2017E 2018E
Current assets:
Cash and equivalents 136,638 81,319 50,000 88,114 144,547 204,011 266,618
Receivables 147,487 148,738 165,758 182,439 198,319 214,689 231,277
Prepaid and other 9,360 9,897 11,009 12,117 13,172 14,259 15,361
Income taxes receivable 7,430 7,057 26,389 26,389 26,389 26,389 26,389
Deferred tax assets 10,346 1,556 4,982 4,982 4,982 4,982 4,982
Total current assets 311,261 248,567 258,138 314,041 387,410 464,330 544,627
Note receivable 27,615 0 0 0 0 0 0
PP&E 29,014 28,006 23,006 18,006 13,006 8,006 3,006
Goodwill 434,507 388,922 402,254 402,254 402,254 402,254 402,254
Intangible assets 81,822 48,501 50,387 35,387 25,387 18,387 13,387
Deferred tax assets 12,278 12,422 336 336 336 336 336
Other assets 3,199 2,913 2,434 2,434 2,434 2,434 2,434
Discontinued Assets 0 88,444 0 0 0 0 0
Total assets 899,696 817,775 736,555 772,458 830,827 895,747 966,044
Current liabilities:
Payables and accrued 128,383 126,472 134,310 140,809 145,439 149,186 151,818
Other current liabilities 4,018 4,057 4,513 4,967 5,399 5,845 6,297
Total current liabilities 132,401 130,529 138,823 145,777 150,838 155,031 158,115
Income taxes payable 25,716 24,050 23,911 23,911 23,911 23,911 23,911
Deferred tax liabilities 1,330 855 10,639 10,639 10,639 10,639 10,639
Other liabilities 7,044 8,740 9,288 9,288 9,288 9,288 9,288
Credit Facility 142,500 140,000 15,510 0 0 0 0
Discontinued Liabilities 0 8,704 0 0 0 0 0
Total liabilities 308,991 312,878 198,171 189,615 194,676 198,869 201,953
Stockholders' equity:
Common & APIC 538,100 461,889 386,741 304,871 215,570 118,178 12,358
RE & AOCI 52,605 43,008 151,643 277,972 420,581 578,701 751,734
Stockholders' equity 590,705 504,897 538,384 582,843 636,151 696,878 764,092
Total liabilities and equity 899,696 817,775 736,555 772,458 830,827 895,747 966,044
2012A 2013A 2014E 2015E 2016E 2017E 2018E
CF operating activities:
Net income 101,716 101,879 108,635 126,329 142,608 158,120 173,033
Total D&A 44,189 39,398 33,775 27,017 22,628 20,257 18,895
SBC 21,767 20,167 22,000 23,000 24,000 25,000 26,000
Other 3,314 24,681 0 0 0 0 0
Working Capital: (14,932) (7,573) (9,838) (10,835) (11,874) (13,264) (14,607)
Operating Cash Flow 156,054 178,552 154,572 165,511 177,362 190,114 203,322
CF investing activities:
Capital expenditures (17,472) (13,694) (6,375) (7,017) (7,628) (8,257) (8,895)
Investments 4,191 7,460 0 0 0 0 0
Acquisitions / Sales (241) 0 42,122 0 0 0 0
Investment Cash Flow (13,522) (6,234) 35,747 (7,017) (7,628) (8,257) (8,895)
CF financing activities:
Proceeds SBC 7,236 8,855 10,000 10,000 10,000 10,000 10,000
SBC Tax Benefit 3,251 4,319 4,000 4,000 4,000 4,000 4,000
Share buybacks (110,795) (223,824) (111,148) (118,870) (127,301) (136,392) (145,820)
Pre-debt fin cash flows (100,308) (210,650) (97,148) (104,870) (113,301) (122,392) (131,820)
Net Debt Borrowing (25,000) (4,201) (124,490) (15,510) 0 0 0
Financing Cash Flow (125,308) (214,851) (221,638) (120,380) (113,301) (122,392) (131,820)
FX 2,738 2,147 0 0 0 0 0
Discontinued Ops 0 (14,933) 0 0 0 0 0
Change in cash 19,962 (55,319) (31,319) 38,114 56,434 59,464 62,607
Beginning Cash 116,676 136,638 81,319 50,000 88,114 144,547 204,011
Ending Cash 136,638 81,319 50,000 88,114 144,547 204,011 266,618