Overture Reports First Quarter 2002 Results; Profitability Increases for Third Consecutive Quarter

April 25, 2002



PASADENA, Calif., Apr 25, 2002 (BUSINESS WIRE) -- Overture Services, Inc. (Nasdaq:OVER):

First Quarter 2002 Highlights:

First quarter revenue was $142.8 million versus $101.2 million in the fourth quarter of 2001.

First quarter net income was $29.3 million, or $0.48 per diluted share, versus $20.8 million, or $0.35 per diluted share, in the fourth quarter of 2001.

First quarter EBITDA (earnings before interest, taxes, depreciation and amortization) was $32.5 million, or $0.54 per diluted share, versus $24.5 million, or $0.41 per diluted share, in the fourth quarter of 2001.

Number of paid introductions increased to 587 million on a worldwide basis versus 442 million in the fourth quarter of 2001.

Average price per paid introduction increased to $0.24 on a worldwide basis versus $0.23 in the fourth quarter of 2001.

German Pay-For-Performance marketplace was launched.
Overture Services, Inc. (Nasdaq:OVER), the world's leading provider of Pay-For-Performance search to Web sites across the Internet, today announced first quarter 2002 revenue of $142.8 million, a 175% increase over revenue of $52.0 million in the first quarter of 2001, and a 41% increase over revenue of $101.2 million in the fourth quarter of 2001.

Overture reported first quarter 2002 net income of $29.3 million, or $0.48 per diluted share, compared to a first quarter 2001 net loss of $(6.7) million, or a net loss of $(0.13) per basic and diluted share. In the fourth quarter of 2001, Overture reported net income of $20.8 million, or $0.35 per diluted share.

Overture also reported first quarter 2002 EBITDA of $32.5 million, or $0.54 per diluted share, compared to a first quarter 2001 EBITDA loss of $(3.9) million, or an EBITDA loss of $(0.08) per basic and diluted share. In the fourth quarter of 2001, Overture reported positive EBITDA of $24.5 million, or $0.41 per diluted share.

Overture ended the first quarter of 2002 with a strong balance sheet, including approximately $226 million in unrestricted cash and liquid investments.


Revenue Drivers/Key Metrics

The key metrics driving Overture's revenue are paid introductions, or paid clicks, and the average price per introduction paid by Overture's advertisers. On a worldwide basis, in the first quarter of 2002, Overture facilitated 587 million paid introductions compared to 318 million paid introductions on a worldwide basis in the first quarter of 2001 and 442 million in the fourth quarter of 2001.
On a worldwide basis, advertisers paid Overture an average of $0.24 for each paid introduction during the first quarter of 2002 compared to an average of $0.16 for each paid introduction in the first quarter of 2001 and $0.23 in the fourth quarter of 2001.


Expanding Affiliate Relationships and Enhancing Product Quality

On April 24, 2002, Overture announced that its existing U.S. search distribution agreement with America Online has been extended through May 1, 2002. During this extension period, Overture will continue to serve America Online with its Pay-For-Performance search results under the current implementation.
In the first quarter of 2002, Overture announced an expanded agreement with MSN through December 2003 under which Overture is providing its Pay-For-Performance search results to MSN Search in the U.S., U.K. and Canada. The agreement builds upon an existing relationship between Overture and MSN, under which Overture provides its search results to users of MSN Search from the Microsoft Internet Explorer search pane.

Also in the first quarter of 2002, Overture signed an exclusive, one-year renewal agreement with Infoseek Corporation, which is part of the Walt Disney Internet Group. As part of the agreement, Overture provides its full set of search results to Infoseek's Web site located at www.go.com. In addition, Overture announced a two-year agreement with BellSouth, as well as renewed and extended the term of its agreement to provide services to iWon.com through July 2003.

Subsequent to the first quarter of 2002, Overture announced an agreement with Hewlett-Packard Company to provide HP's Pavilion notebook and desktop PC owners in the United States access to Overture's search results. In addition, the company recently announced a renewal agreement to become the exclusive keyword search provider for United Online's Internet Service Provider properties, NetZero and Juno, for two years.

Expressed as a percentage of revenue, traffic acquisition costs were 54% in the first quarter of 2002, compared to 51% in the fourth quarter of 2001. The company expects that its traffic acquisition costs as a percentage of revenue could increase in coming quarters due to the cost of entering new international markets, facilitating long-term growth of the business as well as the competitive landscape.

Product quality is a key factor in building relationships with the company's affiliate partners. Overture's 100-person editorial team rejects approximately 35% of all submitted listings, which helps ensure relevant results to the users of the company's affiliate partners. It is this filtering system that differentiates Overture from other paid listings products in the marketplace.


Focus on Advertiser Retention and Growth

Overture brings its advertisers together with consumers by allowing them to bid on search terms that are relevant to their businesses. Overture's advertisers represent a broad spectrum of direct marketers, including retailers, service providers and publishers; online and offline businesses, including well-recognized companies with broad product lines.
Overture continued to attract a mix of small, medium and large advertisers. These new advertisers represent a diverse cross-section of consumer and business-to-business industries. Lenscrafters, Hickory Farms and Sunglass Hut are some examples of the well-known brands that have recently become Overture advertisers.

By the end of the first quarter of 2002, Overture's worldwide advertiser base grew to approximately 60,000 active, paying advertisers, up from 43,000 advertisers at March 31, 2001 and up from 53,000 advertisers at December 31, 2001. Advertiser spending with Overture also continued to increase during the first quarter of 2002 as the company's advertisers spent an average of $2,540, up 102% in the quarter from an average of $1,260 in the prior year period, and up 28% from an average of $1,980 in the fourth quarter of 2001.


Continued Momentum in International Markets

Overture continued to gain momentum overseas with the February 2002 launch of its operations in Germany. Overture's marketplace in Germany reaches 73% of German Internet users through partners such as T-Online, the Deutsche Telekom subsidiary, freenet.de and AltaVista Germany. By the end of the first quarter of 2002, close to 1,000 businesses had signed up to participate as advertisers in Overture's German marketplace.
Overture's European operation signed its first pan-European contract to provide its Pay-For-Performance search listings on the search results pages of AOL Europe's Web properties in the U.K., Germany and France under a multi-year agreement. Overture's listings are already live on AOL Europe's Web properties in the U.K. and Germany, and listings on AOL France will commence in conjunction with Overture's launch in that market.

In the first quarter of 2002, Overture signed an agreement to provide its search results to www.MSN.co.uk, distributing its high-quality Pay-For-Performance search listings on MSN Search in the United Kingdom. With the implementation of these agreements, Overture extended its reach in the U.K. to over 80% of the U.K.'s 22 million Internet users. In addition, Overture recently renewed its agreement with AltaVista in the U.K. for an additional year with an improved implementation.

In addition, Overture is committed to launching in France in the second half of 2002 and is continuing to explore its approach to entering Japan.




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