DoubleClick Breaks Even on Q4 Earnings

The online advertising industry’s biggest player posted a breakeven quarter Thursday, besting earlier lowered guidance, surprising analysts who had expected a loss of $0.02 per share, and raising hopes for the end of online marketing’s current woes.

Company executives said that weakening competition and its burgeoning technology business contributed to record revenues of $132.3 million for fourth quarter, up 41 percent from the year-ago period. Revenues for 2000 were up 96 percent from the previous year, to $506 million.

Pro-forma gross profit for the fourth quarter totaled $73.4 million, up 41 percent from the year-ago quarter. Only DoubleClick’s media unit recorded slowing growth, with revenues for that unit totaling $60.4 million, up 19 percent from last year but down 6 percent from third quarter.

Exclusive of charges, net income was $216,000 for the fourth quarter, effectively breaking even.

Silicon Alley-based DoubleClick’s performance was something of a surprise, considering the tumultuous times the industry has been facing as of late, with major players like Engage and 24/7 Media cutting staff, reorganizing management and retooling their businesses.

The news of the company’s breaking even also comes less than a month after DoubleClick gave guidance that it could post a $0.03 fourth quarter loss per share — dashing hopes at the time for a repeat of its third quarter $0.03 positive earnings.

The only sour note on Thursday came as the company lowered its estimates for the first quarter of 2001. Rather than posting the previously-expected pro forma per-share loss of $0.05 to $0.07, DoubleClick said it now expects to lose $0.09 to $0.07, based on revenues of about $110 million to $115 million.

The fourth-quarter performance brings DoubleClick’s full year pro forma loss to $0.11 per share, a penny lower than 1999, but in line with analyst estimates. Analysts will likely be more disappointed with the expectations for first-quarter 2001. They had pegged the company’s first quarter losses at $0.05, and now will need to adjust to the company’s guidance of a $0.09 to $0.07 per-share loss.

For 2001, DoubleClick executives projected annual revenue growth of 6 to 12 percent, but declined to give closer outlook citing limited visibility for its media business. Revenues for that portion of its business are expected to be down about 25 percent over 2001, due largely to a renegotiated contract with AltaVista, plus the impact from the weak economic and advertising environment.

Despite that prediction, DoubleClick said it anticipates a profitable year overall, with pro-forma earnings per share projected to be $0.07 to $0.09.

“I am very proud of how well our organization executed in a tough industry environment,” said DoubleClick chief executive Kevin Ryan. “Despite a dismal quarter for the industry, we are one of the few Internet companies to post a breakeven quarter and generate cash from operations.”

“Some of our leading competitors … are still far from breakeven. As you can imagine, this has been encouraging clients to come our way,” Ryan said, adding that new clients are signing on for an average of three years.

Ryan had other good news for investors. DoubleClick’s data business — comprised largely of its Abacus Direct unit — “now has the right structure in place and is starting to report proper results,” he said. That’s an improvement from last quarter, when Abacus produced less-than-expected revenue in what is typically its strongest quarter. A management shakeup at the unit followed thereafter.

New products coming down the pipe for first quarter include DoubleClick’s email campaign manager for advertisers, due to launch within first quarter of 2001. First quarter will also bring the expected closure of DoubleClick’s acquisition of media planning services firm @Plan. Ryan also hinted at new products that would combine the company’s data, research and ad serving products, and other products “possibly outside of the strict marketing services definition … we want to take adv of our brand name.”

Ryan also said that DoubleClick plans to invest heavily in its email business, following the breakup of its proposed merger with email marketer NetCreations — a breakup that netted DoubleClick $8 million in fees called for under the terms of the original deal. The company expects to spend $5 million of that dough building up its email capabilities in the first half of 2001.

“E-mail is a growing business, has many players and is very fragmented,” Ryan said. But, “I’ll be very disappointed if we’re not the clear leader by the end of this year.”

Shares of DCLK were trading up $1.69, to $12.94, in after-hours trading on the REDIBook ECN.

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