L90 sees better-than-expected 1Q results

L90 (Nasdaq: LNTY) expects to beat the current consensus forecast in its first quarter as a public company.

After market close Wednesday, the Internet advertising company said it expects first quarter system revenue ranging between $8 million and $9 million, well ahead of the consensus revenue estimate of $5.8 million. "The surprise isn't that they're doing well, but the surprise is how well things are going for them," said Chris Hansen, analyst with Banc of America Securities, one of the managing underwriters for L90's IPO in January.

Analysts already expected L90 to top their original expectations. Hansen on Tuesday raised his first quarter revenue estimate to $6.4 million from $5.7 million.

But few people expected L90 to post sequential revenue gains ranging between 31 percent and 47 percent over fourth quarter revenue of $6.1 million. The first three months of the year are traditionally flat compared to the December quarter, Hansen said.

The company's ability to exceed the growth of the overall advertising industry illustrates the difference between L90's high-end niche and the rest of the market, Hansen said. "L90 is much more focused on providing sponsorship and premium creative advertising solutions on premium sites," he said.

Hansen said he probably won't change his estimate of a first quarter loss of 33 cents per share, which is in line with First Call's consensus forecast. Some of L90's greater-than-expected revenue will improve the bottom line, CFO Thomas A. Sebastian said.

"At the same time, I think it would be a mistake operationally for us to underinvest in our growth," he said.

L90 was profitable in its 1997 and the first half of 1998. The company since then has lost money as it focused on expanding. L90 "at the moment" expects to be profitable again in the second half of 2002, Sebastian said.

"We could return to profitability much more quickly if we wanted to, but I think it would be a mistake," he said. "I think that in order to maximize shareholder value we should continue to grow rapidly and expand our market share. ... Given that we have a lot of money in the bank, we basically are in a position to do that.">