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a21 reports 1st quarter 2006 financial results
A21 Group, owner of SuperStock, PureStock, and Ingram Publishing, posted $2,935K in revenue for the first quarter of 2006, a 27% increase over the first quarter of last year. The company credits 90% of the increase ($561K) to the acquisition of Ingram Publishing which took place in October of last year. This indicates the company achieved only 2.7% organic growth in revenue from 1Q 2005 to 1Q 2006. The company's gross profit margin remained unchanged from the 2005 to the 2006 period at just over 69%.A21's Selling, General and Administrative expenses of $3,186K represents a significant increase in the 1st quarter of 06 vs. the first quarter of 05. A new accounting rule pertaining to share based compensation required the inclusion of $1MM in such compensation in SG&A. This rule did not effect until January 1 of this year, so the results for 1Q 05 reflect no comparable expense. Taking out the share based compensation figure, the remaining S,G&A of $2, 186K still represents a 40% increase over 1Q 05. Management attributes this increase to S,G&A expenses related to the Ingram acquisition as well as additional legal and audit expenses associated with the administration of a publicly traded corporation.
The company's earnings before interest, taxes, depreciation and amortization (EBITDA) swung from a gain of $34K in the first quarter of 2005 to a loss of $1,154K in the first quarter of 2006. Excluding the share based compensation charges, the EBITDA loss is $154K. The company incurred a net loss in the 2006 period of $2,416K vs. $982K in 2005.
Looking strictly at the numbers, we can draw several interesting conclusions from these results:
§ Ingram accounted for approximately $560K in revenue for the quarter or almost 20% of SuperStock's revenue.
§ We can extrapolate from this that Ingram, as a separate company before the acquisition, must have generated about $2MM in sales annually.
§ The acquisition of Ingram apparently had no impact on the gross margin, as it remained unchanged from before the acquisition. We would have expected the Ingram acquisition to increase SuperStock's wholly-owned collection and therefore improve its gross margins. It is possible that the mix of non-Ingram material sold created a decline in gross margin which the Ingram material offset.
§ While Ingram helped increase revenue by 26%, it also contributed to what management calls an "incremental increase" in S,G&A.
§ We expect the company will achieve better efficiencies with Ingram once it has fully integrated the newly acquired operation.
Despite the loss the company posted in the first quarter of 06, the company strengthened its financial position by securing new funding of $15.5MM including $5MM from Morgan Stanley. The company just used part of that cash to acquire an online custom framed art supplier company, ArtSelect. Management clearly has plans for further growth as indicated in CEO Tom Butta's comments about the first quarter results: "In the first quarter, we grew revenue while integrating the Ingram operation into SuperStock. In addition, we consolidated our UK presence in a new expanded location in London while opening a new market facing office in New York. On the product side, we launched a new, highly competitive Subscription offering, Purestock X, into our direct and distribution channels. And we continued to bolster our management team with the addition of industry veteran, Ellen Bough, as VP, Visual Content. With a strong balance sheet and businesses demonstrating organic growth, we believe the Company continues to be well positioned to take advantage of opportunities to grow organically as well as via acquisition."
Click here to view the original press release from a21 Inc.
Posted in: A21 Group, News, Stock Photo Companies
