Overture Services

(OVER)

may have suffered its share of online distribution setbacks, but it sure can churn out the greenbacks.

The pay-per-click Internet search engine company posted strong second-quarter earnings Thursday, beating Wall Street estimates, and boosted its financial guidance for future periods. Overture's results demonstrate that it is still able to grow despite competitive worries, and that the online advertising slump endured by online giant

AOL Time Warner

(AOL)

doesn't seem to be extending to the pay-per-click segment.

Overture's shares, which have ranged from $10.20 to $43.16 over the past year, rose 23 cents to $21.19 in normal trading. After hours, shares fell 33 cents.

Rising Margins

Overture posted second-quarter revenue of $152.5 million, about two-and-a-half times the company's sales in the second quarter of 2001 and ahead of estimates. The company had said last week that it would exceed its guidance of $133 million in sales for the quarter, which ended June 30.

Net income for the quarter amounted to $17.5 million, or 29 cents per share, ahead of the 23-cent guidance and beyond Thomson Financial/First Call's five-analyst consensus of 25 cents per share.

Investors have been concerned about the competition for advertising dollars and consumers' attention that Overture faces from other companies such as the privately held

Google

. In fact, America Online's move in early May to dump Overture's search results in favor of Google's was a primary reason, along with seasonality, that the number of searches for which Overture received money fell from 587 million in the first quarter to 515 million in the second.

Wall Street's concern about competition continued last week, when Overture lost

Ask Jeeves

(ASKJ)

as a partner.

Overcoming

But Overture showed this quarter it could overcome the distribution loss by increasing the average amount of money it reaped per click -- that is, the money it receives from an advertiser if an Internet user clicks on that advertiser's listing to go to that site. After enjoying several quarters in which average revenue per click rose about a penny per quarter, the figure jumped from 24 cents in the first quarter of 2002 to 30 cents in the second quarter.

The percentage of revenue that Overture pays to the Web sites that run its advertising -- a figure of some concern to its advertisers -- fell from 54% in the first quarter of the year to 53% in the second, but will rise to 60% and beyond in the rest of 2002 and in 2003, says Overture.

On a conference call with analysts Thursday, Overture boss Ted Meisel said the company expected annual revenue growth of 30% to 50% over the next several years, and pretax income growth of about 20% to 30% annually. The company also boosted its revenue outlook for the next quarter by around $20 million, to $160 million.

With the rest of the tech market stuck in a slow-growth nightmare, some investors will surely continue to click on Overture no matter what the risk.