Lackluster Stock Photo Results For a21

Posted on 11/27/2006 by Jim Pickerell | Printable Version | Comments (0)

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LACKLUSTER STOCKPHOTO RESULTS FOR a21


November 27, 2006

a21, Inc. has reported $5,904,000 in revenues for Q2 2006, but only $2,986,000 of that was for the stock photo side of the business. ArtSelect which provides wall art for homes and businesses provided $2,918,000.

In its press release a21 trumpeted its revenue growth of nearly 190% between Q3 2005 and Q3 2006, but that growth was due to two acquisitions made during the year - Ingram Publishing and Art Select - not to a growth in its core stock photography business. In fact, revenue for stock photography licensing was down a little over 1% from the previous quarter. On the other hand this was better than the 11% drop between Q2 2005 and Q3 2005.

The following lists revenue per quarter for the last 10 quarters for the stock photo side of a21's business. It should be noted that prior to October 2005 all the photo revenue was generated by the Superstock brand. At that point the company acquired Ingram, an RF and subscription brand.






















Q2 2004

$2,527,297

Q3 2004

$2,076,995

Q4 2004

$2,100,000

Q1 2005

$2,313,000

Q2 2005

$2,327,000

Q3 2005

$2,064,000

Q4 2005

$2,859,000

Q1 2006

$2,935,000

Q2 2006

$3,023,000

Q3 2006

$2,986,000



Now that the three public companies - Getty, Jupiter and a21 - have reported for Q3 it is worth noting what happened to stock photography revenue in the quarter compared with the previous quarter. Getty had a $7.49 million drop, or 4% of total revenue. Jupiter had a 1.4% drop and a21 a 1.2% drop. Everyone (including non public companies) acknowledges that the quarter was weak and uncharacteristic - (Getty had almost no change in stock photo revenue between Q3 2004 and Q3 2005) - but so far no one has been able to give an very convincing explanation why.

The good news for a21 seems to be in diversification outside of the stock photo business. ArtSelect offers customers an online custom frame shop and art gallery. Shoppers choose their own prints, frames, and mats online. They can view their selection against a background of their own wall color, and quickly arrive at the combination that fits their home decor. The company features an extensive selection of art prints and canvas reproductions.

Since this is the first full quarter that a21 has owned ArtSelect, it is a little early to determine how much growth potential there might be in this line of business. But it is hard to find reason for optimism for growth in the still photo side of the business.

Net loss for the third quarter of 2006 was $1.4 million, or $0.02 per fully diluted share, compared to a net loss of $1.3 million, or $0.03 per fully diluted share, for the same prior year period. Included in third quarter 2006 results were approximately $400,000 in non-cash amortization and depreciation charges associated with the ArtSelect and Ingram acquisitions that the Company did not have in the third quarter of 2005 as well as higher corporate legal and audit costs. Additionally, the Company recorded a one-time, non-cash deemed dividend of $336,000 associated with a beneficial conversion feature of the convertible preferred stock issued as partial consideration for the ArtSelect acquisition. The deemed dividend was recognized during the third quarter as a result of the share authorization contingency being met during the quarter.

At September 30, 2006, the Company's cash position was $6.2 million and working capital $6.5 million. Cash used in operations for the third quarter of 2006 was down significantly on a sequential basis from cash used in operations during the second quarter of 2006.

Thomas Costanza, Vice President and Chief Financial Officer of a21, stated, "With the capital raised during 2006 and the contributions being realized from our combined businesses, we are in good position to drive further operating improvements through revenue growth and operating leverage. In the third quarter, we reduced cash used in operations. We aim to further strengthen our financial position and operational results to create significant value for our shareholders."


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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