DoubleClick Beats Predictions, Raises 2004 Guidance

DoubleClick , the largest provider of online ad technology, beat Wall Street’s expectations and raised its guidance for 2004, reporting earnings of $3.8 million, or $0.03 a share, on revenue of $72.9 million for 2003’s fourth quarter.

A poll by Thomson/First Call reported a consensus of analyst expectations for earnings of $2.75 million, or $0.02 a share, on revenue of $70.1 million.

This was the first full year of GAAP profitability for DoubleClick, which reinvented itself as a provider of technological advertising solutions to survive the dot-com downturn and the resulting crash in online advertising spending.

Kevin Ryan, DoubleClick’s CEO, said increased revenue across all product lines, particularly an upturn in ad serving and email, fueled the decision to raise the bar for full year 2004 earnings. Ryan upped the earnings target to between $0.27 and $0.32 a share on revenue of between $290 million and $310 million. Analysts had previously predicted earnings per share of $0.28 and revenue of $293 million.

The company’s TechSolutions division had fourth quarter revenues of $46.9 million compared with $43.5 million in the third quarter of 2003 and $43.6 million in the fourth quarter of 2002. Gross margins for the division were 68.1 percent, an increase from 62.0 percent sequentially and from 54.1 percent in the fourth quarter of 2002.

New customers signing up in the fourth quarter included Carat Interactive, which struck an exclusive agreement in which DoubleClick will manage online campaigns for Pfizer on a global basis.

Other first-time clients for ad management solutions were Business Week Online, eDiets, HomeStore.com, and ING Direct, among others.

“The ad management product saw improvement on the agency side,” noted Ryan. Agencies planning to use DART Motif, the company’s rich media ad serving and tracking product, now include Ford Motor Media, MPG Media Contacts, Starcom IP, Tribal DDB-Dallas, Universal McCann Interactive and Zentropy Partners.

DART Motif is expected to become a significant part of sales in 2004. Its pricing structure is higher than that for regular ad serving. Ryan said Wednesday that while initial warm-up campaigns with the product were done gratis to encourage adoption, “we are now charging for Motif.”

Revenue for the ad management products, which include DART for Advertisers and DART for Publishers, rose in the quarter. The segments brought in $34.1 million in the fourth quarter of 2003 compared to $31 million in the third quarter of 2003 and $32.8 million in the 2002 fourth quarter.

In refreshing news, DoubleClick’s email management and related services brought in $11 million for the 2003 fourth quarter, compared to $9.6 million in the third quarter of 2003 and $10.2 million for the fourth quarter of 2002.

DoubleClick’s multi-channel marketing automation and analytics products, Ensemble and SiteAdvance, contributed revenues of $1.9 million for the fourth quarter of 2003 compared to $2.9 million in the third quarter of 2003. For the year, Ensemble and SiteAdvance revenues totaled $7.2 million.

The company’s data business saw double-digit growth for the fourth quarter of 2003 and the year 2003 compared to the previous quarter and year. Revenue jumped 27.5 percent, to $26 million, compared to $20.4 million for the same quarter in 2002. For the full year, DoubleClick Data revenue grew $15.1 percent, to $95.9 million compared to $83.3 million in the previous year.

Compared to the prior quarter, the numbers were down – DoubleClick Data revenue for the previous quarter was $31.3 million – because of the traditional surge in spending in the third quarter, when catalogers are getting ready for gift-giving season.

Company executives were cryptic about further acquisition plans. DoubleClick acquired CSC Advanced Database Solutions, a privately held data management company, last summer.

Encouraged by the overall increase in revenue, especially the upturn in ad serving and email, DoubleClick raised its guidance for the full year 2004, upping the earnings target to between $0.27 and $0.32 per share on revenue between $290 million and $310 million.

The company also boosted first-quarter targets higher, saying it would earn $0.03 to $0.06 cents a share on revenue of $68 to $72 million.

“The recovery is finally hitting DoubleClick and because the company is profitable we think there is tremendous leverage in their model,” said Safa Rashtchy, senior analyst at Piper Jaffray. “The guidance is conservative and their stock is undervalued. I feel bullish on DoubleClick.”

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