DoubleClick Profits Leap

  |  April 16, 2004   |  Comments

The major ad technology provider reports a huge jump in net income, but falls a bit short of expectations.

DoubleClick , the largest provider of online ad technology, reported a dramatic rise in profit for the first quarter of 2004. The company had net income of $7.7 million, or five cents a share, on revenue of $68 million.

Profits for the same time period last year were $906,000, or one cent per share. The year-over-year increase was more than eightfold. It was driven by growth across all the company's product lines, according to CEO Kevin Ryan.

The company's earnings of five cents per share met the expectations of analysts polled by Thomson/First Call. However, analysts had predicted revenue of $70.1 million, and the company fell somewhat short, reporting $68 million. That figure still represents a hefty increase over revenue of $60.1 million for the same time period in the previous year.

The leap in profits for the first quarter of 2004 comes on the heels of DoubleClick's first full year of GAAP profitability in 2003, as reported last quarter. The company reinvented itself as a provider of technological advertising solutions to survive the dot-com downturn and resulting crash in online advertising spending.

The company said earnings benefited from a distribution of about $2.4 million from MaxWorldwide Inc.'s liquidation plans and a reversal of a $1.5 million reserve from a previous acquisition.

"There were two one-time gains that helped them get to their EPS (earnings per share) estimate. The income did not come from earnings," said Safa Rashtchy, senior analyst at US Bancorp Piper Jaffray. "One was a benefit from a distribution from a company they had gotten out of a year ago, and one was the reversal of a reserve, so the two contributed $3.9 million in pre-tax income." Also, the company came in at the low end of its guidance, he pointed out, which was "disappointing." DoubleClick had predicted between $68 and $72 million in revenue.

Expectations for online advertising-related companies have run high lately. Yahoo's phenomenally successful earnings report set the bar earlier this month.

DoubleClick's overall performance included year-over-year increases in revenue, gross margins, operating margins, net income and EBITDA. Its core business, the TechSolutions division, grew 9 percent. TechSolutions had first quarter revenues of $45.3 million compared with $41.5 million in the first quarter of 2003. All product groups within this division saw improvement, Ryan said.

DoubleClick used $20.4 million in connection with the open market repurchase of about 1.9 million shares of the company's stock during the quarter. Ryan said almost $22 million in stock of the $100 million initially authorized had been repurchased.

The company's ad management revenues were $33.3 million in 2004's first quarter compared to $31.1 million in the same time period a year ago. New clients signing up for ad management solutions in the first quarter included Sports Illustrated, Mass Transit Interactive and UOL-Universo Online-Brazil.

Ryan pointed to DoubleClick's strategy of selling a variety of its solutions to the same client as an important source of profit. He said 29 percent of its clients now use more than one product, up from 21 percent a year ago. In the first quarter, Unilever, Nestle, Purina Pet Care, Tribune Interactive and Lycos signed up for more than one product, according to Ryan.

DoubleClick's data business saw revenues of $22.8 million in the first quarter of 2004, up 22.8 percent from $18.5 million in the first quarter of 2003. Abacus quarterly revenues climbed 9.9 percent year-over-year to $20.4 million. The remaining data revenues came from DoubleClick's Data Management business, which was acquired in June.

DoubleClick said amortization charges and integration costs from its acquisition of SmartPath in March, 2004 will lower profit for 2004 by about $5 million. The company revised its expectations downward to $33 to $40 million.

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Janis Mara

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