Web publisher eUniverse, interactive agency Digitas and e-mail shop Digital Impact all produced better-than-expected results for the most recent quarter, joining the ranks of online advertising firms seeing an upswing in business conditions.
On the surface, Boston-based Digitas looked to still be suffering from the interactive advertising malaise that’s plagued the industry for quarters, posting a net loss of $6.3 million, or $0.10 per share, on $47 million in revenue. (Last quarter, the firm took in $51 million in revenues and posted a net loss of $44.8 million, including one-time charges. In fourth-quarter 2000, Digitas saw a net loss of $5.5 million, with $79.5 in revenues.)
But while billings were down for the most recent quarter, on a pro forma basis, the company reported earnings of $1 million, or $0.02 per share — well above the $0.01 pro forma loss anticipated by Wall Street, according to Thomson Financial/First Call estimates.
The better-than-expected performance also led Digitas to give guidance of pro forma earnings of $0.02 to $0.06 for next quarter, above previous guidance and analysts’ estimates.
On the other side of the continent, Los Angeles-based eUniverse posted $2 million in net earnings, or $0.09 per share, on revenue of $10.1 million. That revenue was up 51 percent from last quarter, and 122 percent from a year earlier.
The performance marks eUniverse’s third quarter of net profitability. A year earlier, it was operating in the red, posting a loss of $0.17 per share. On a pro-forma basis, the company posted earnings of $2.3 million, or $0.10 per share. Wall Street had expected a $0.06 per-share pro-forma profit, according to Thomson Financial/First Call consensus.
The unexpected performance also encouraged the company to raise its outlook for the fourth quarter, and for the next two years. Next quarter, executives said the firm should pull in revenue of $11.3 million, and earnings of $2.3 million, or about $0.10 per share — a penny higher than previously forecast.
For all of next year, eUniverse anticipates revenues of $33.2 million and earnings of $5.5 million, or $0.25 per share. That’s up from previously expected revenue of $31.7 million, and a profit of $5 million, or $0.22 per share. (Analyst consensus had last predicted a $0.23 per share pro-forma profit for next year.)
For 2003, the company said its purchase of ad network L90, announced earlier this month, should drive revenue to $62 million and earnings to $11.8 million. (The transaction is slated to close by first quarter of 2003.) Previous fiscal 2003 guidance, also provided earlier this month, predicted revenue of $47.5 million and net earnings of $9.5 million, respectively, or $0.44 per share.
A third firm, online direct marketer Digital Impact, also reported better-than-anticipated results from its fiscal third quarter. The San Mateo, Calif.-based company brought in $10.3 million in revenues, and posted a pro forma loss of $2.6 million, or $0.09 per share.
Analysts had expected the firm to post a $0.12 per-share loss on a pro forma basis. Like its peers, the firm predicted greater earnings during its next quarter.
Now, according to president and chief executive William Park, the company is on track for reaching cash flow breakeven by June.
All three companies owe much of their performance to internal developments. eUniverse, for example, rolled out several profitable subscription services, which supplemented shortcomings in ad revenue. Digitas, meanwhile, undertook a major restructuring during the year, as did Digital Impact.
“Our fiscal management … enabled us to move swiftly, to adapt our own cost structure to a deteriorating economic environment,” said Digitas chairman and CEO David Kenny. “Over the last year, we took over $100 million in annual expenses out of our cost structure, while concurrently improving the quality and impact of our deliverables.”
“Our secure financial base enabled us to focus the restructuring on building a stronger company,” he added.
The three firms also didn’t rule out the possibility for greater upside as the market improves.
“Our streamlined business model coupled with our diversified revenue stream and strong management team are driving eUniverse’s success,” said eUniverse chairman and CEO Brad Greenspan. “With the addition of L90 and the planned launch of other compelling product offerings during our fourth quarter, we believe our strong growth trend will continue into the foreseeable future.”
Digitas’ chief financial officer, Jeff Cote, expressed much the same sentiment, saying: “We are confident that our leaner cost structure and continued gains in market share will generate further improvements in our operating margins when economic growth resumes.”
The three firms’ results come following promising news from industry leaders Yahoo! and DoubleClick.
Both larger firms also topped analysts’ estimates, pointing to restructuring and refocusing in their businesses.
