Doubleclick (NASDAQ:DCLK)
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DoubleClick Reports Fourth Quarter and Full Year 2004 Results
Company records significant increase in Cash Flow from Operations
NEW YORK, Feb. 3 /PRNewswire-FirstCall/ -- DoubleClick Inc. (NASDAQ:DCLK), the
leading provider of data and technology solutions for marketers, advertising
agencies and web publishers, today announced financial results for the fourth
quarter and full year ended December 31, 2004, and gave its business outlook
for the first quarter of 2005.
4Q04 4Q03 FY04 FY03
Revenue (000's) $83,469 $72,937 $301,623 $271,337
GAAP Net Income(1) (000's) $10,572 $3,841 $37,510 $16,918
GAAP EPS(2) $0.08 $0.03 $0.26 $0.11
"We benefited from significant margin improvements in Ad Management and Email
compared to the fourth quarter of 2003, and had stronger than expected results
from our Performics division," said Kevin Ryan, Chief Executive Officer,
DoubleClick. "In addition, we had our best quarter of cash flow from
operations generation in over four years."
Fourth Quarter Accomplishments
Highlights of the Company's performance follow:
* Margin improvements in its Ad Management and Email products and better
than expected revenue from DoubleClick's Search Engine and Affiliate
Marketing products led to record gross and operating margins in the
Company's TechSolutions segment;
* The Company recorded an over 40% increase in quarterly cash flow from
operations versus 4Q03;
* The Performics division saw a quarterly revenue increase of over 60%
year on year;
* The Company's Data Management quarterly revenue grew over 40% against
4Q03; and
* The Company took steps to improve its Marketing Automation business,
including forming a partnership with Omniture to market their site
analytics product.
Fourth Quarter Results
DoubleClick reported revenue for the fourth quarter of $83.5 million versus
$72.9 million in the year-ago period. GAAP net income for the most recent
quarter was $10.6 million, or $0.08 per share, compared with $3.8 million, or
$0.03 per share, in the fourth quarter of 2003. The Company achieved a gross
margin of 74.8% during the quarter compared to 66.6% in the year-ago period.
EBITDA(3) was $17.4 million for the fourth quarter of 2004 compared to $16.2
million in 4Q03. Total GAAP operating expenses were $53.3 million in the
quarter, versus $47.9 million in the fourth quarter of 2003. Total company
headcount was 1,541 as of December 31, 2004, against 1,223 twelve months prior.
Fourth quarter 2004 results did not include any material unusual items. Fourth
quarter 2003 GAAP earnings were negatively impacted by $5.4 million in charges
related to the relocation of the Company's New York headquarters. These charges
were partially offset by the reversal of a $1.3 million reserve relating to the
favorable resolution of certain tax matters.
DoubleClick generated $33.7 million in cash flow from operations during the
fourth quarter. The year over year increase in quarterly cash flow from
operations was driven primarily by higher overall company GAAP net income and
stronger working capital versus 4Q03. The Company had $552.3 million in cash
and marketable securities, and had a net cash(4) position of $417.3 million, or
$3.32 per share, as of December 31, 2004.
Full Year Results
DoubleClick reported revenue for the full year of $301.6 million versus $271.3
million in 2003. Full year 2004 GAAP net income was $37.5 million, or $0.26
per share, compared with $16.9 million, or $0.11 per share, in the prior year.
The Company achieved a gross margin of 71.2% during the year compared to 65.3%
in 2003. EBITDA was $66.7 million for 2004 compared to $67.9 million in the
prior year. Total GAAP operating expenses were $192.7 million for the full
year, versus $164.4 million in 2003.
DoubleClick's full year 2004 GAAP net income and EBITDA benefited from a
non-operating gain of approximately $7.1 million from the Company's sale of its
15% interest in AdLINK Internet Media AG and from a restructuring credit
relating to DoubleClick's Louisville, Colorado facility, which lowered
operating expenses by $4.5 million. In addition, 2004 GAAP net income and
EBITDA benefited from a distribution from MaxWorldwide, Inc. of approximately
$2.4 million in connection with its plan of liquidation and dissolution, and
from the reversal of a $1.5 million reserve relating to a prior acquisition.
These gains were partially offset by a write-down of DoubleClick's Enterprise
Marketing Solutions (EMS) business of approximately $5.6 million.
2003 GAAP net income was negatively impacted by $14.6 million in accelerated
depreciation charges associated with the relocation of the Company's New York
headquarters and the termination of a lease for the Company's San Francisco
facility. These charges were partially offset by a $1.3 million reserve
reversal relating to the resolution of certain tax matters. GAAP net income
and EBITDA benefited from a net restructuring credit of $9.1 million associated
with these facilities and $1.4 million received by the Company in connection
with an insurance claim. These benefits were partially offset by a $4.4
million loss relating to the redemption of DoubleClick's 4.75% Convertible
Subordinated Notes.
TechSolutions
The TechSolutions segment reported fourth quarter revenue of $56.8 million
versus $46.9 million in 4Q03. TechSolutions gross margin was 79.2%, versus
68.1% in the December quarter of 2003. TechSolutions operating margin was
25.0%, versus 11.0% in the fourth quarter of 2003. Margins improved primarily
because of higher revenue from the Company's Ad Management, Email, Search
Engine Marketing, and Affiliate Marketing products.
For the full year, the TechSolutions segment recorded revenue of $196.3
million, a gross margin of 74.4%, and an operating margin of 15.9%. This
compares to revenue of $175.4 million, a gross margin of 63.4%, and an
operating margin of 5.9% for full year 2003. The year-over-year quarterly and
annual improvement in revenue is primarily a result of the inclusion of the
results of Performics and SmartPath, which were acquired in June and March of
2004, respectively. Full year 2004 TechSolutions expenses were adversely
affected by the EMS write-down of approximately $5.6 million, and 2003
TechSolutions expenses included roughly $10.8 million in accelerated
depreciation charges related to the Company's facilities.
Ad Management
The Company's Ad Management revenue was $33.2 million in 4Q04 versus $34.1
million in the year-ago period. For the year, Ad Management revenue was $128.1
million against $128.8 million in 2003. These declines were principally due to
pricing declines outweighing volume increases in the Company's Publisher
business. These declines were partially offset by an increase in revenues from
DoubleClick's Advertiser products, where volume increases continued to outweigh
price declines.
DoubleClick has recently signed several new contracts for use of its Ad
Management solutions. These wins include Ant Farm Interactive, Friendster,
I-level, IMHO Scandinavia, and Luxury Link.
Marketing Automation
The Company's Marketing Automation products had revenue of $14.5 million in the
most recent quarter, against $12.8 million in 4Q03. For 2004, the division
recorded revenue of $54.0 million versus $46.6 million in the prior year. The
year-over-year revenue increase for the quarter and year was due to the
acquisition of SmartPath and organic growth from the Company's Email business.
DoubleClick has struck new Marketing Automation deals with clients including
AOL France, AirAsia, and bonprix.
"We were pleased to see that gross and operating margins continued to improve
in our TechSolutions segment," said David Rosenblatt, President of DoubleClick.
"However, we plan to focus on making sure that all of our products are
achieving their optimal level of growth in terms of both revenue and
profitability."
Performics
The Company's Search Engine and Affiliate Marketing products recorded revenue
of $9.1 million in 4Q04, and $14.1 million for the two quarters of 2004 in
which Performics was a division of DoubleClick. These figures were higher than
DoubleClick's previous outlook due largely to stronger than expected growth in
overall e-commerce and search advertising spending.
Agreements to use the division's solutions have recently been reached with ADT
Security Services, Armani Exchange, CountryWide Financial, World Savings Bank,
Yves Rocher, and Walt Disney World's search program.
Data
DoubleClick reported Data segment revenue of $26.7 million in 4Q04, compared to
$26.0 million in 4Q03. For the year, Data segment revenue was $105.3 million,
compared to $95.9 million in 2003. Overall Data gross margin was 65.3% for the
quarter and 65.2% for the year, against 64.0% and 68.8% in the relevant prior
periods. Data operating margins were 21.3% and 22.3% for the quarter and year,
versus 22.6% and 28.4% in the comparable year ago timeframes. Data segment
margins declined versus the previous year's periods primarily because a higher
percentage of the segment's sales were generated by the lower margin Data
Management Solutions (DMS) division.
Abacus
Abacus quarterly revenue was $22.4 million versus $23.1 million in the year-ago
period. Abacus annual revenue was $92.7 million against $90.4 million in 2003.
Abacus quarterly revenue fell primarily because increases in U.S. Business to
Business Alliance revenue did not make up for lower spending by Business to
Consumer cataloguers. During the quarter, DoubleClick announced the formation
of a U.K. Business to Business Alliance, and added 77 net new members across
all wholly owned Abacus Alliances globally, bringing the total to over 2,500.
DMS
DMS generated $4.2 million in revenue for 4Q04 against the year-ago quarter's
$3.0 million. For full year 2004, DMS revenue was $12.6 million versus $5.5
million in 2003. DoubleClick's DMS business was acquired June 30, 2003, and
its results were consolidated beginning in 3Q03. Since the beginning of 4Q04,
the Company has signed over 20 new deals for the use of its DMS solutions and
its other smaller Data products.
"Fourth quarter DMS revenue grew by over 40% year over year, and our U.S.
Business to Business Alliance continued to show an even faster growth rate"
added Brian Rainey, President, Abacus, a division of DoubleClick Inc. "In
addition, we have signed up several dozen members for our newer International
Alliances."
First Quarter 2005 Outlook
DoubleClick's guidance presented below does not include the potential impact of
any mergers, acquisitions, divestitures or business combinations that may be
announced after the date hereof, but does include the impact of retention
bonuses and professional fees related to the Company's strategic review
announced October 31, 2004.
DoubleClick expects 1Q05 revenue to be between $70 million and $75 million.
The Company expects total Company gross margin to be in the high 60s to low 70s
percentage range. GAAP operating expenses are expected to be between $51
million and $53 million. Items in interest and other, net and taxes are
expected to be approximately $1 million, based on an assumed tax rate of
approximately 15%. The Company anticipates recording GAAP earnings of between
$(0.01) and $0.03 per share.
The Company's segment projections for 1Q05 are as follows:
* TechSolutions revenue is expected to be between $45 million and $50
million, including $28 million to $31 million from Ad Management, $11
million to $13 million from Marketing Automation, and approximately $6
million from Performics. Overall TechSolutions gross margin is
expected to be in the mid 70s percentage range.
* Data revenue is expected to be between $24 million and $26 million,
including approximately $20 million to $22 from Abacus; overall Data
gross margin should be in the low 60s percentage range.
"We are taking steps to ensure that we optimize our investments while
maintaining tight cost controls," said Bruce Dalziel, Chief Financial Officer,
DoubleClick. "In 2005, we expect to improve upon our 2004 results."
Conference Call Today
The DoubleClick Conference Call to discuss this earnings press release is
scheduled for today at 5:00 p.m. EST. This call will be available live via
Webcast, and on a replay basis afterward on the Company's website
http://www.doubleclick.net/ under Investor Relations or at
http://ir.doubleclick.net/. The Webcast is also being distributed over CCBN's
Investor Distribution Network to both institutional and individual investors.
Individual investors can listen to the call at http://www.fulldisclosure.com/
or by visiting any of the investor sites in CCBN's Individual Investor Network.
Institutional investors can access the call via http://www.streetevents.com/.
Additional financial metrics can be found in the "Financial Reports" section of
DoubleClick's Investor Relations website, at http://ir.doubleclick.net/.
About DoubleClick
DoubleClick is the leading provider of data and technology solutions for
advertising agencies, marketers, and web publishers to plan, execute, and
analyze their marketing programs. DoubleClick's marketing solutions help
clients yield the highest return on their marketing dollar. DoubleClick Inc.
has global headquarters in New York City and maintains 22 offices around the
world.
Note: This press release includes forward-looking statements, including
earnings and revenue projections and plans set forth under the section titled
"First Quarter 2005 Outlook" above, as well as sentences using the words
"expects," "plans," "should," or "believes" and all other statements that are
not purely historical. The results or events predicted in these statements may
vary materially from actual future events or results. Factors that could cause
actual events or results to differ from anticipated events or results include:
intense competition in DoubleClick's industry, lack of growth or decline in
online advertising or marketing, changes in government regulation,
uncertainties related to DoubleClick's decision to review strategic options,
failure to manage the integration of acquired companies, failure to
successfully manage the Company's international operations and other risks that
are contained in documents which the Company files from time to time with the
Securities and Exchange Commission, including the Company's most recent reports
on Form 10-K and Form 10-Q. In addition, any forward-looking statements
represent the Company's estimates only as of today and should not be relied
upon as representing the Company's estimates as of any subsequent date. While
the Company may elect to update forward-looking statements at some point in the
future, it may choose not to do so, even if the Company's estimates change.
(1) A description of certain items affecting FY04, FY03 and 4Q03 is
provided in the attached schedule for reconciliation of GAAP Net
income to EBITDA.
(2) Under FASB EITF Issue No. 04-8, DoubleClick's current and former
Convertible Subordinated Notes are now included in the calculation of
diluted EPS for their respective reporting periods. The impact of
FASB EITF 04-08 resulted in a reduction of GAAP EPS of less than
$0.01 for 4Q04 and 4Q03; $0.02 for FY2004; and approximately $0.01
for FY2003. The outlook DoubleClick provided in October of 2004 was
exclusive of the effects of EITF Issue No. 04-8. The outlook
provided in January of 2005 was inclusive of the effects of EITF
Issue No. 04-8.
(3) EBITDA (or Earnings Before Interest, Tax, Depreciation, and
Amortization) is a non-GAAP financial measure. Please see the
attached schedule for a reconciliation of GAAP net income to EBITDA.
Please see the Form 8-K filed on February 3, 2005 by the Company with
the SEC for a discussion of why the Company believes EBITDA is a
useful financial measure to investors and of how and when management
uses EBITDA.
(4) Net cash may be considered a non-GAAP financial measure and is
defined as gross cash and cash equivalents of $126.1 million,
restricted cash of $15.3 million, and investments in marketable
securities of $410.9 million minus zero coupon convertible
subordinated notes of $135 million. Please see the Form 8-K filed on
February 3, 2005 by the Company with the SEC for a discussion of why
the Company believes net cash is a useful financial measure to
investors and of how and when management uses this measure.
DOUBLECLICK INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended Year Ended
December 31, December 31,
2004 2003 2004 2003
(Unaudited, in thousands, except per
share amounts)
Revenue:
Technology $56,810 $46,892 $196,295 $175,403
Data 26,659 26,045 105,328 95,934
Revenue 83,469 72,937 301,623 271,337
Cost of revenue 21,046 24,353 86,959 94,131
Gross profit 62,423 48,584 214,664 177,206
Operating expenses:
Sales and marketing 28,554 24,625 104,029 92,308
General and administrative 9,890 10,378 35,864 36,063
Product development 13,173 11,922 46,459 39,180
Amortization of intangibles 1,639 1,016 5,228 5,896
Impairment of goodwill and
intangible assets - - 5,592 -
Restructuring credits, net - - (4,514) (9,092)
Total operating expenses 53,256 47,941 192,658 164,355
Income from operations 9,167 643 22,006 12,851
Other income (expense)
Equity in losses of affiliates (415) (112) (1,299) (2,551)
Loss on early extinguishment of
debt - - - (4,406)
Gain on distribution from
affiliate - - 2,400 -
Gain on sale of investment in
affiliate 7,125
Interest and other, net 2,033 2,940 10,485 12,063
Total other income 1,618 2,828 18,711 5,106
Income before income taxes 10,785 3,471 40,717 17,957
Provision (benefit) for income
taxes 213 (370) 3,207 1,039
Net income $10,572 $3,841 $37,510 $16,918
Basic net income per share $0.08 $0.03 $0.29 $0.12
Weighted average shares used in
basic net income per share 125,632 137,571 131,159 137,074
Diluted net income per share $0.08 $0.03 $0.26 $0.11
Weighted average shares used in
diluted net income per share 138,505 151,634 144,178 150,345
DOUBLECLICK INC.
CONSOLIDATED BALANCE SHEETS
December 31, December 31,
2004 2003
(Unaudited, in thousands, except
share amounts)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $126,135 $183,484
Investments in marketable securities 264,332 151,898
Restricted cash 3,635 16,328
Accounts receivable, net of allowances of
$10,051 and $7,519, respectively 84,165 51,491
Prepaid expenses and other current assets 12,257 17,473
Total current assets 490,524 420,674
Investment in marketable securities 146,552 312,434
Restricted cash 11,668 11,668
Property and equipment, net 77,821 75,786
Goodwill 72,948 18,658
Intangible assets, net 22,395 10,847
Investment in affiliates 5,772 13,422
Other assets 13,749 14,408
Total assets $841,429 $877,897
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $34,964 $4,164
Accrued expenses and other current
liabilities 56,844 63,152
Deferred revenue 13,687 8,188
Total current liabilities 105,495 75,504
Convertible subordinated notes - Zero
Coupon, due 2023 135,000 135,000
Other long term liabilities 20,570 27,046
Total liabilities 261,065 237,550
STOCKHOLDERS' EQUITY:
Preferred stock, par value $0.001;
5,000,000 shares authorized,
none outstanding - -
Common stock, par value $0.001;
400,000,000 shares authorized,
140,564,907 and 139,329,875 shares
issued, respectively 141 139
Treasury stock, 14,864,925 and
1,846,170 shares, respectively (109,223) (10,396)
Additional paid-in capital 1,294,510 1,287,775
Accumulated deficit (612,013) (649,523)
Other accumulated comprehensive income 6,949 12,352
Total stockholders' equity 580,364 640,347
Total liabilities and stockholders'
equity $841,429 $877,897
DOUBLECLICK INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended Year Ended
December 31, December 31,
2004 2003 2004 2003
(Unaudited, in thousands)
OPERATING ACTIVITIES
Net income $10,572 $3,841 $37,510 $16,918
Adjustments to reconcile net
income to net cash
provided by (used in) operating
activities:
Depreciation and leasehold
amortization 5,908 13,787 25,413 51,252
Amortization of intangible
assets 2,973 1,944 10,092 9,427
Equity in losses of affiliates 415 112 1,299 2,551
Gain on distribution from
affiliate - - (2,400) -
Gain on sale of investment in
affiliate (7,125)
Loss on early extinguishment of
debt - - - 4,406
Restructuring credits, net - - (4,514) (9,092)
Impairment of goodwill and
intangible assets - - 5,592 -
Other non-cash items 475 366 2,389 1,673
Provisions for bad debts and
advertiser discounts 1,760 1,867 12,231 8,234
Changes in operating assets and
liabilities, net of the effect
of acquisitions:
Accounts receivable (7,304) (112) (25,272) (9,134)
Prepaid expenses and other
assets 1,008 1,917 7,424 4,631
Accounts payable 12,995 (2,122) 14,319 (4,218)
Lease termination and
related payments - - (7,625) (70,874)
Accrued expenses and other
liabilities 3,301 2,037 (7,388) (22,619)
Deferred revenue 1,636 314 1,539 1,763
Net cash provided by (used in)
operating activities 33,739 23,951 63,484 (15,082)
INVESTING ACTIVITIES
Purchases of investments in
marketable securities (32,622) (74,850) (127,706) (409,045)
Maturities of investments in
marketable securities 33,878 116,881 177,155 541,367
Restricted cash 24 (255) 12,693 (2,905)
Purchases of property and
equipment (7,754) (11,346) (26,295) (28,580)
Proceeds from distribution from
affiliate - - 2,400 -
Proceeds from sale of investment
in affiliate - - 9,519 656
Proceeds from sale of intangible
asset, net - - - 900
Investment in Abacus Germany (411) - (1,216) -
Acquisition of businesses, net of
cash assumed - - (72,002) (2,757)
Net cash (used in) provided by
investing activities (6,885) 30,430 (25,452) 99,636
FINANCING ACTIVITIES
Proceeds from the issuance of
common stock 420 587 4,305 5,038
Proceeds from issuance of
convertible subordinated notes,
net - - - 131,963
Proceeds used in repurchase of
convertible bonds - - - (157,952)
Purchases of treasury stock - (1,447) (98,827) (1,447)
Payments under capital lease
obligations and notes payable - (578) (3,675) (8,887)
Net cash provided by (used in)
financing activities 420 (1,438) (98,197) (31,285)
Effect of exchange rate changes on
cash 3,279 3,849 2,816 6,544
Net increase (decrease) in cash
and cash equivalents 30,553 56,792 (57,349) 59,813
Cash and cash equivalents at
beginning of period $95,582 $126,692 $183,484 $123,671
Cash and cash equivalents at end
of period $126,135 $183,484 $126,135 $183,484
DOUBLECLICK INC.
RECONCILIATION OF EBITDA TO GAAP NET INCOME
(Unaudited, in thousands)
Three Months Ended Year Ended
December 31, 2004 December 31, 2004
2004 2003(3) 2004(2) 2003(4)
GAAP Net Income $10,572 $3,841 $37,510 $16,918
Plus: tax provision (benefit) 213 (370) 3,207 1,039
Less: interest income, net (2,230) (2,965) (9,523) (10,702)
Plus: amortization of intangibles(1) 2,973 1,944 10,092 9,427
Plus: depreciation and leasehold
amortization 5,908 13,787 25,413 51,252
EBITDA $17,436 $16,237 $66,699 $67,934
GAAP Diluted Net Income Per Share $0.08 $0.03 $0.26 $0.11
(1) For the three months ended December 31, 2004 and December 31, 2003,
$1.3 million and $0.9 million, respectively, of amortization expenses
of intangible assets relating to purchased technology was included as
a component of cost of revenue in the Consolidated Statement of
Operations. For the years ended December 31, 2004 and December 31,
2003, $4.9 million and $3.5 million, respectively, of amortization
expenses of intangible assets relating to purchased technology was
included as a component of cost of revenue in the Consolidated
Statement of Operations.
(2) 2004 GAAP Net Income and EBITDA benefited from a $7.1 million non-
operating gain from the sale of the Company's 15% interest in AdLINK
Internet Media AG, a $4.5 million restructuring credit relating to
the Company's Louisville, Colorado facility, a distribution from
MaxWorldwide of $2.4 million in connection with its plan of
liquidation and dissolution and a $1.5 million reserve reversal
relating to a prior acquisition. These benefits were partially offset
by a $5.6 million impairment charge resulting from the write-down of
the Company's Enterprise Marketing Solutions business. These items
added a net total of approximately $0.07 per share to GAAP Net Income
in 2004.
(3) For the three months ended December 31, 2003, GAAP Net Income was
negatively impacted by $5.4 million in accelerated depreciation
charges associated with the relocation of the Company's New York
headquarters. This charge was partially offset by a $1.3 million
reserve reversal relating to the resolution of certain tax matters.
These items lowered GAAP Net Income by approximately $0.03 per share
in 4Q03.
(4) 2003 GAAP Net Income was negatively impacted by $14.6 million in
accelerated depreciation charges associated with the relocation of
the Company's New York headquarters and the termination of a lease
for the Company's San Francisco facility. These charges were
partially offset by a $1.3 million reserve reversal relating to the
resolution of certain tax matters. GAAP Net Income and EBITDA
benefited from a net restructuring credit of $9.1 million associated
with these facilities and $1.4 million received by the Company in
connection with an insurance claim. These benefits were partially
offset by a $4.4 million loss relating to the redemption of the
Company's 4.75% Convertible Subordinated Notes. These items lowered
GAAP Net Income by approximately $0.05 per share in 2003.
INVESTOR CONTACT: Jason McGruder
Manager, Investor Relations
212-381-5182
PRESS CONTACT: Jennifer Miller
VP, Corporate Communications
212-381-5705
DATASOURCE: DoubleClick Inc.
CONTACT: Investors - Jason McGruder, Manager, Investor Relations,
+1-212-381-5182, Media - Jennifer Miller, VP, Corporate Communications
+1-212-381-5705, both of DoubleClick Inc.
Web site: http://www.doubleclick.com/
http://ir.doubleclick.net/