Agency Business Boosts Epsilon In Q1, More So Than Data And Tech

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Epsilon Q1 2013Epsilon, a data-focused direct marketing company, is seeing continued growth not from its data or technology businesses but from its agency side, after acquiring digital ad agency Hyper Marketing Inc. (HMI) in late 2012.

The companies focused on integration during the first quarter, said Charles Horn, CFO and EVP of Alliance Data Systems Corporation, Epsilon's parent company during today's earnings call. The combined offerings have strengthened Epsilon's work with current clients and won it new accounts as well.

"These early wins are strong indicators of the strength of the combined offering and the validation of HMI's talent in multiple disciplines that will greatly expand Epsilon's digital capabilities in key channels such as mobile, social, targeted display and web development," Horn said.

Alliance Data Systems increased revenue 18% to $1.1 billion during the first quarter of 2013 compared to Q1 2012, with Epsilon contributing $318 million, or a 39% increase over Q1 2012. Epsilon's technology and data businesses were essentially flat in Q1 2013, at $104 million and $40 million respectively, compared to $105 million and $40 million in Q1 2012. The agency business increased 110% from $83 million to $174 million, with HMI contributing $74 million. [Press release]

"Data revenue dropped 2% due to continued softness in our consumer demographic data offerings, which offset growth," Horn said. "Agency impressed with revenue increasing 110% for the quarter, aided by the acquisition of HMI in the fourth quarter 2012. Excluding HMI, agency revenue still grew a robust 21%, driven by strength in the telecom vertical. We expect that agency will continue to be the leading driver of revenue growth for Epsilon for the remainder of 2013."

Epsilon is also planning the launch of a new email platform in Q3 2012, which company representatives mentioned several times, and it will add revenue to the technology business, providing growth for the full year.

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