Jupiter Announces 2005 Results

Posted on 3/10/2006 by Jim Pickerell | Printable Version | Comments (0)

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JUPITERMEDIA ANNOUNCES 2005 RESULTS



March 10, 2006

Jupitermedia Corporation has reported revenues for the quarter ended December 31, 2005 of $36.1 million compared to revenues of $18.1 million for the same period last year, an increase of 99%. Operating income for the fourth quarter of 2005 was $9.0 million compared to operating income of $4.9 million for the same period last year. Income before income taxes for the fourth quarter of 2005 was $6.6 million compared to $5.0 million for the same period last year. The provision for income taxes for the fourth quarter of 2005 increased to $1.4 million from $143,000 for the same period last year. Net income for the fourth quarter of 2005 was $5.4 million, or $0.15 per diluted share, compared to net income of $5.5 million, or $0.16 per diluted share, for the same period last year.

"Our financial results for the fourth quarter included record revenues and operating income" stated Jupitermedia's Chairman and CEO Alan M. Meckler. "We have been emphasizing the development of our Jupiterimages division and the fourth quarter illustrates continued organic and overall growth in the sales and distribution of commercial images. Jupitermedia continues to grow as a powerful creator and distributor of a wide range of commercial images. The improvement in gross margins and operating margins for our Jupiterimages division demonstrates the leverage of owning our own images and it also demonstrates the progress that we are making with the integration of our many recent acquisitions. The full benefit of this integration will be more apparent in future quarters. In the meantime we continue to evolve as a company making positive financial progress not only with Jupiterimages, but with our JupiterWeb and JupiterResearch divisions as well," added Meckler.

Business Outlook

Jupitermedia expects Q1 2006 revenues to be between $35.5 and $36 million. For all of 2006 the company expects revenues between $166 and $170 million and earnings per diluted share of $0.65 to $0.69.

The following are Jupiter's numbers for each quarter in 2005 for the entire company and the Jupiterimages division which now represents 70% of gross revenue. The numbers are in millions of dollars. I have also listed the acquisitions made be Jupiter in each quarter. In is interesting to compare the revenue trends in light of the acquisitions made.


















































































Q1 2005

Q2 2005

Q3 2005

Q4 2005

Year 2005

Jupiterimages

$12.163

$19.731

$24.011

$24.753

$80.658

All Jupiter

$25

$33.8

$34.4

$36.084

$124.6

Percent Imaging

49%

58%

70%

70%

Acquisitions

March

May

July

October

Dynamic Graphics

Goodshoot

Picture Arts

Banana Stock

Creatas

November

Picture Quest

PR Direct

IT Stock

December

Bigshot Media

BBM

Agence Images

Animation Factory

Media Builder



At first glance one might think that sales may be falling off because the gross revenue generated by the combined company doesn't seem to total the sum of the parts before acquisition.

For example I would have expected Picture Arts to have added about $5 million a quarter based on their annual income before acquisition. But, in the third quarter overall growth was only about $4.3 million. I would have expected Banana Stock to have added a minimum of $1.5 million a quarter, but in the fourth quarter overall growth was only about half of that.

The problem with this logic is that it fails to take into account the fact that images from these brands were being licensed by distributors already owned by Jupiterimages before the acquisition. PictureArts and Banana Stock images were being licensed by Creatas and PictureQuest. When sales were made of images belonging to these companies a percentage was retained by the selling agency and a percentage was paid to the producing agency. So part of the revenue that showed up on PictureArts' and Banana Stock's books had already been accounted for by Creatas and PictureQuest. When all the brands are owned by one company (JupiterImages) the double counting is eliminated.

It is important to note that in this process photographers also reap some of the benefit. Before, photographers were getting a percent of a percent (that's right two cuts) of the total fee for the usage. Now, Jeff Burke has recently written to all photographers explaining that in future the photographer's royalty will be calculated on the total gross fee collected, not on that portion of the gross fee that the old brand would have collected before it became part of Jupiterimages.

Thus, in the initial quarter after acquisition sales may not appear to be rising as fast as they actually are, but once integration is complete the normal growth will be accurately reflected.

Many people have speculated that once PictureArts was no longer represented by Getty Jupiterimages' sales would drop significantly. In the conference call Meckler pointed out that the revenue from Getty for the fourth quarter was only about $2 million and in the Q1 2006 it is expected to be $500,000 to $600,000. This small amount of revenue should not have a significant impact on the bottom line. For the first half of 2006 overall growth is not expected to be strong, but it should ramp up in Q3 and for the entire year they expect it to be in the range of 15%.

One of the things expected to help sales is an expanded sales and support staff that now numbers between 150 and 160 worldwide. (By comparison Getty's revenue is almost 9 times that of Jupiter, but their sales staff numbers only about 600 to 700.) About 25 to 30 of Jupiter's recently acquired sales staff are people who were former employees of Jupiter's competitors. Jupiter also has over 200 distributors around the world.

Meckler indicated that the pace of acquisitions would slow in 2006, but they are still looking for a few companies to round out their product offering. He also emphasized - once again - the company's intention to own as much of the content they represent as possible in order to have flexibility in how it is marketed and to increase their margins.

Meckler was asked the proportion of revenue that is generated by RM and RF, but refused to provide these specifics. My estimate is that $15 to $19 million of the 2005 revenue came from RM and royalties were paid to the image suppliers on almost all of it.

In December 2005, Jupitermedia announced that it closed a $100 million senior credit facility arranged by JPMorgan Securities, Inc. Jupitermedia borrowed $53 million under this credit facility to repay indebtedness under a previous credit facility. President and COO Chris Cardell said that $35 to $40 million of this credit is still available.

New Online Images Offerings

Recently, Jupitermedia has continued to expand and strengthen its Jupiterimages offerings with the addition of the following:

In December 2005, Jupitermedia announced the launch of a new image collection entitled (re)view. An archive of 4,000 retro, rights-managed images, (re)view is available at www.jupiterimages.com.

In January 2006, Jupitermedia announced an exclusive worldwide partnership with Photographic Youth Music Culture Archive (PYMCA), a rights-managed image company based in London, U.K. The PYMCA collection is available at www.jupiterimages.com.

In February 2006, Jupitermedia announced the launch of FlashKit's FlashFoundry.com (www.flashfoundry.com), a new paid subscription service offering over 100,000 professional-quality Flash components, video, buttons, animations and templates. Web designers and PowerPoint users can easily add Flash content to their Web sites and presentations in just minutes, rather than creating it from scratch.


Copyright © 2006 Jim Pickerell. The above article may not be copied, reproduced, excerpted or distributed in any manner without written permission from the author. All requests should be submitted to Selling Stock at 10319 Westlake Drive, Suite 162, Bethesda, MD 20817, phone 301-251-0720, e-mail: wvz@fpcubgbf.pbz

Jim Pickerell is founder of www.selling-stock.com, an online newsletter that publishes daily. He is also available for personal telephone consultations on pricing and other matters related to stock photography. He occasionally acts as an expert witness on matters related to stock photography. For his current curriculum vitae go to: http://www.jimpickerell.com/Curriculum-Vitae.aspx.  

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