News
Jupiter Media posts weak second quarter results
In his opening statement on Jupiter Media’s management conference call to discuss the company’s second quarter results with analysts, CEO Alan Meckler remarked, “We did not have a stellar quarter per our guidance estimates but we did continue to build a stellar company.” Wall Street took little comfort in this news as reflected in Jupiter’s stock price since the 2Q results were made public after the close of the market, yesterday. The company’s gross revenue for the second quarter of 2006 increased by 20% over that for the same quarter in 2005 from $29.1MM to 35MM and gross margins remained relatively flat over the same periods at 64%. Its operating margin, however, fell significantly from 26% in the 2Q05 to only 12% in 2Q06 and operating income dropped from $7.6MM to $4.4MM. Wall Street has continued to hammer Jupiter’s stock as a result. After closing at $9.40 yesterday, August 8, it has dropped, as of this writing, to $6.77 today.
During management’s conference call with analysts about the second quarter results, CEO Alan Meckler attributed the company’s poor performance to having moved too fast in building up the sales force for the images division in the first quarter, well before the launch of its new web-site. That sales force, he argued, while unable to overcome the disadvantages of a slow and cumbersome search engine, still added significantly to the operating expenses.
Jupiter’s new web-site, originally scheduled to launch in March, didn’t come on-line until the end of June. In addition to the cost of rebuilding the new site and search engine, President and COO Chris Cardell cited several other non-recurring costs during the quarter that had an adverse effect on the company’s profitability, such as a keywording overhaul, catching up on a 401-K matching plan retroactively to January 1, investment in a new web-site in Japan, and continuing accounting system integration costs related to past acquisitions. When asked whether any external market conditions might have contributed to the declining results, management maintained steadfastly the that the causes were primarily internal problems that have been solved. This will result in a return to higher operating profit margins in the Images division in the 40% range (as opposed to 34% in 2Q06.) They also noted that the images business showed organic growth (i.e., apart from the effects of acquisitions) of 13%.
Other salient points made by management on the conference call:
The company does not anticipate increasing marketing expenses in the face of market conditions (editor’s note: Getty Images recently announced plans to increase RF marketing in the US due to weaker than anticipated sales in that market.)
The company projects 10% organic growth in the Images division and 5% in the Online Media division over the second half of this year.
Alan Meckler says he expects micro-stock to become between 10% and 20% of the overall market within the next several years.
Getty’s acquisition of Stockbyte/Stockdisc and subsequent removal of those collections from Jupiter cost Jupiter approximately $300,000.
The company now has 15,000 stock footage clips and will launch a new web-site dedicated exclusively to footage within the next few months though, presently, RF Footage, Flash and Music continue to lose money.
Meckler continues to see a positive outlook for the company in the long term, making the point that “Every organization, whether it be a for-profit business or a non-profit must have a presence on the web. Not every one will need images and not every one will need music, but millions of them will, and Jupiter will be there for them.”
Click here to view the original press release.
Posted in: News, Stock Photo Companies
