Jupitermedia Reports Image Division Growth In Q1

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May 11, 2007

Jupitermedia Corporation had $34.8 million in revenues for Q1 2007 the same as in the previous quarter, but in the middle of their estimate for the quarter. Revenue was up a little less than $900,000 compared to Q1 2006. All the revenue growth was in the Image Division which had $27.914 million in sales up $1.1 million or 4% compared to Q1 2006.

Loss per diluted share from continuing operations was $0.03 and included non-cash stock-based compensation expense, and $1.9 million in legal and other fees associated with discussions with Getty Images, Inc. regarding a potential sale of the company. Discussions with Getty were terminated on March 7, 2007.

"Our revenues for the first quarter year of 2007 showed improvement over the same quarter of the prior year due to progress made with our Jupiterimages business. Jupitermedia continues to grow as a powerful creator and distributor of a wide range of commercial images and digital content. In addition to the expansion of our image offerings, we increased our wholly-owned royalty-free music offerings during the quarter," stated Jupitermedia's Chairman and CEO Alan M. Meckler. "We have also made additional investments to reinvigorate our Online Media business, with the launch of several new IT Web sites and companion trade shows. In the first quarter we announced the acquisition of the remaining 50.1% interest in the ISPCON trade shows and the acquisition of JustTechJobs.com, which is a natural e-commerce offering for our Online Media business audience of over 15 million unique users," added Meckler.

Online Image Division

The following is a breakdown of the various categories of the Online Images division.

Overall image revenue was up 4% compared with a year earlier. The 8% increase in Single Images & CD sales compared with Q1 2006 is encouraging but revenue in this category is still lower than in Q4 2005. Meckler described RM sales as "stellar". While the margins are not as high in RM as RF Meckler said it is a profitable part of Jupiter's business and they would be putting more emphasis on this line of business in the future. He estimated that RM represents about 15% of single images sales, or in the neighborhood of $2 million.

"Higher quality images will be more valuable in the coming years as the mid to larger agencies and media companies want to truly differentiate themselves in their ad, marketing and, branding campaigns. They will want higher image quality and special images rather than the vast number of images that are coming from micropayment and other sources," Meckler continued.

While subscriptions were flat compared to the previous quarter they have been slowly climbing over the past year-and-a-half. Meckler pointed out that the actual revenue recognized in any given quarter from subscriptions is not a true reflection of the strong growth given the deferred revenue in this category.

When a subscription is purchased a portion of the revenue is deferred depending on the length of the subscription. In Q1 2006 there was $12.6 million in deferred revenue, in Q4 2006 $13.5 million and in Q1 2007 $14.5 million.

While the "Distributors and Other" category seemed to grow quite substantially, Meckler said that International sales through distributors continued to decline. (I suspect "Other" which includes licensing is a significant portion of this category.) Direct sales by wholly owned offices around the world have more than compensated for the decline in distributor sales. Meckler expects sales by third party distributors to continue to shrink as major suppliers put more emphasis on direct sales and owning offices around the world.

When questioned as to the impact Getty's purchase of Punchstock might have on future Jupiter revenue (Jupiter has about 272,920 images out of 1.4 million on the site) Meckler said, "Based on the agreements we have we don't think we'll see much change." [I estimate that Jupiter's images on Punchstock generate about $2.4 million annually for Punchstock and Jupiter gets about 20% of that, or approximately $500,000 annually.)

Business Outlook

The company expects second quarter 2007 revenue to be in the range of $36 to $37 million. A significant portion of this expected increase may be for the online media side of the business since it is traditionally stronger in Q2 and Q4.

The following chart shows Jupitermedia's gross revenue for the last six quarters and the percentage of revenue contributed by the Jupiterimages division.

Acquisitions Contribute Little To Growth

In the past 12 months Jupiter has acquired several respected photo resources including: IFA Bilderteam Gmbh (Germany); Workbookstock (Los Angeles); Cover-Imagen y Publicaciones (Spain); and controlling interest of HAAP Media Ltd. that operates Stockxpert.com and www.sxc.hu;

Also acquired were: Steve Shapiro Music; JustTechJobs.com; StudioCutz.com; BlueFuseMusic.com; NoiseFuel.com; MediaMusicLoops.com; the remaining 50.1% of ISPCON trade show; INBOX trade show

Total revenue growth for the period was a little over $1.1 million, or 4% of total revenue. Either there is no organic growth since March 31, 2006 or the acquisitions are doing very little to add growth.

In addition to acquisitions Jupiter launched the following new offerings during the year.

1 - Jupiter Greetings.com a paid subscription service that combined content from www.animationfactory.com and www.royaltyfreemusic.com,

2 - RoyaltyFreeMusic's subscription service,

3 - www.photos.jp, the first micropayment stock photography site in Japan,

4 - www.comstockcomplete.com, a new subscription service offering over 100,000 RF images.

New Online Media Offerings

Jupitermedia continued to expand its content and advertising opportunities with the addition of the following:

In February 2007, Jupitermedia announced its new Web Video Summit tradeshow (www.webvideosummit.com) will be held June 27-28, 2007 at the San Jose Marriott in San Jose, California. The conference will serve those who create and distribute video over the Web, with industry expert Dave Burstein chairing the program.

In March 2007, Jupitermedia announced the launch of WebVideoUniverse.com (www.webvideouniverse.com), a Web site focused on shooting, editing and distributing video over the Web. WebVideoUniverse.com includes comprehensive coverage of this emerging vertical market with sections including: Filming, Editing/Encoding, Distributing, Marketing/Promotion, Resources and Discussion, and is part of internet.com's IT channel.

In March 2007, Jupitermedia announced the launch of ITCareerPlanet.com (www.itcareerplanet.com), a Web site dedicated to helping IT professionals stay up-to-date with the latest news and resources related to their careers. ITCareerPlanet.com can be found on the EarthWeb.com network and includes IT career news and advice, job trends, salary trends and IT staff management coverage. This launch follows a recent related announcement of Jupitermedia's acquisition of JustTechJobs.com (www.justtechjobs.com), an online tech job site that brings together IT professionals and employees.