Brought to you buy: MERRIMAN - CURHAN - FORD
Investment Conclusion
Aptimus acquired High Voltage Interactive, a lead-generation company focused on the education vertical for $7.5M or less than 1.0x forward sales for a profitable company, which is attractive considering that APTM trades at EV/sales of 2.1x (2007). High Voltage should be a nicely accretive acquisition, should increase revenues in 2007 by nearly 50%, accelerate path to profitability, and should effectively lower valuation multiples for the consolidated entity.
• Financial impact. The acquisition is expected to add at least $1M to 3Q06 revenues and $2M in 4Q06; this would increase Aptimus’ revenues by more than 50% in 4Q06. We believe that the acquisition should add $8.6M in revenue in FY07 (but likely more with sales synergies), and be accretive to EBITDA. Aptimus also reiterated its organic growth projections for 3Q06 of at least 10% Q/Q.
• Strategic fit — marrying traffic with advertiser base. Aptimus has the traffic (especially with AOL in the network now) and the acquisition adds more advertisers, which should lift Aptimus’ monetization rates (revenue per thousand page impressions).
• Raising estimates. We believe that our revenue estimates in FY07 have further upside from AOL and the acquisition, but also from the upcoming launch with another undisclosed top-five web property in the United States. See page 2 for details.
• Valuation. APTM trades at EV/sales of 1.8x (2007) — down from the 2.1x where it traded prior to the acquisition. With FY07 revenues projected to grow 55% organically, plus contribution from the acquisition and more upside likely from AOL and other publisher sign-ups, we believe Aptimus could see expansion in valuation multiples. The recent signing of the AOL agreement also gave us renewed confidence in the company’s value proposition and technology
edge in the marketplace.
