<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE PERIOD ENDED SEPTEMBER 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD ENDED FROM TO
COMMISSION FILE NUMBER 000-25943
JUPITER MEDIA METRIX, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 11-3374729
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
</TABLE>
21 ASTOR PLACE
NEW YORK, NY 10003
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(212) 780-6060
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
MEDIA METRIX, INC.
250 PARK AVENUE SOUTH
NEW YORK NY 10003
(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR,
IF CHANGED SINCE LAST REPORT)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
As of October 31, 2000, there were 34,929,612 shares of the registrant's
common stock outstanding.
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<PAGE> 2
JUPITER MEDIA METRIX, INC.
INDEX
<TABLE>
<S> <C> <C>
PART I FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements (Unaudited)............... 3
Consolidated Balance Sheets -- September 30, 2000 and
December 31, 1999...................................... 3
Consolidated Statements of Operations -- Three and Nine
Months Ended September 30, 2000 and 1999............... 4
Consolidated Statement of Stockholders' Equity -- Nine
Months Ended September 30, 2000........................ 5
Consolidated Statements of Cash Flows -- Nine Months Ended
September 30, 2000 and 1999............................ 6
Notes to Consolidated Financial Statements................ 7
Item 2. Management's Discussion and Analysis of Financial Condition 8
and Results of Operations.................................
Item 3. Quantitative and Qualitative Disclosures of Market Risk..... 13
PART II OTHER INFORMATION
Item 1. Legal Proceedings........................................... 23
Item 2. Changes in Securities and Use of Proceeds................... 23
Item 3. Defaults Upon Senior Securities............................. 23
Item 4. Submission of Matters to a Vote of Security Holders......... 23
Item 5. Other Information........................................... 24
Item 6. Exhibits and Reports on Form 8-K............................ 24
</TABLE>
<PAGE> 3
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUPITER MEDIA METRIX, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS, EXCEPT FOR SHARE DATA)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
------------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $104,081 $ 97,364
Marketable securities..................................... 22,057 14,877
Receivables:
Trade, less allowance for doubtful accounts of $646 in
2000 and $500 in 1999................................. 28,246 5,473
Expenditures billable to clients....................... 1,337 520
-------- --------
Total receivables......................................... 29,583 5,993
Prepaid expenses and other current assets................. 6,804 454
-------- --------
Total current assets........................................ 162,525 118,688
Property and equipment, at cost, net of accumulated
depreciation and amortization of $3,773 in 2000 and $561
in 1999................................................... 31,424 5,308
Intangibles acquired, net of accumulated amortization of
$27,076 in 2000 and $7,792 in 1999........................ 485,776 52,948
Due from minority interests in consolidated subsidiaries.... 310 1,617
Other assets................................................ 6,996 283
-------- --------
Total assets................................................ $687,031 $178,844
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities.................. $ 39,288 $ 10,560
Advance billings to clients............................... 43,049 5,126
Current portion of long-term debt......................... 712 196
-------- --------
Total current liabilities................................... 83,049 15,882
Deferred rent............................................... 1,121 --
Long-term debt.............................................. 18 173
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value -- 10,000,000 shares
authorized............................................. -- --
Common stock, $.01 par value -- 150,000,000 shares
authorized; shares issued and outstanding -- in 2000
34,810,091 and 19,681,999 in 1999...................... 348 197
Additional paid-in capital................................ 684,810 202,031
Accumulated other comprehensive loss...................... (150) (83)
Accumulated deficit....................................... (64,032) (38,110)
Deferred compensation..................................... (18,133) (1,246)
-------- --------
Total stockholders' equity.................................. $602,843 $162,789
-------- --------
Total liabilities and stockholders' equity.................. $687,031 $178,844
======== ========
</TABLE>
See accompanying notes.
<PAGE> 4
JUPITER MEDIA METRIX, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- --------------------
2000 1999 2000 1999
-------- ------- --------- -------
<S> <C> <C> <C> <C>
Revenues.......................................... $ 16,476 $ 5,496 $ 39,298 $12,931
Costs of revenues................................. 4,821 2,962 13,948 6,800
-------- ------- --------- -------
Gross profit...................................... 11,655 2,534 25,350 6,131
Operating expenses:
Research and development........................ 5,160 1,352 11,635 3,026
Sales and marketing............................. 6,342 2,229 15,871 5,376
General and administrative...................... 3,930 1,694 10,709 4,031
Amortization of deferred compensation and other
stock-based compensation..................... 329 554 652 858
Amortization of intangibles..................... 8,155 749 19,284 2,246
-------- ------- --------- -------
Total operating expenses.......................... 23,916 6,578 58,151 15,537
-------- ------- --------- -------
Loss from operations.............................. (12,261) (4,044) (32,801) (9,406)
Minority interests................................ 661 806 2,294 806
Interest and other income, net.................... 1,465 609 4,585 1,019
-------- ------- --------- -------
Net loss.......................................... (10,135) (2,629) (25,922) (7,581)
Preferred stock dividends......................... -- -- -- (109)
-------- ------- --------- -------
Net loss applicable to common stockholders........ $(10,135) $(2,629) $ (25,922) $(7,690)
======== ======= ========= =======
Basic and diluted net loss per share applicable to
common stockholders............................. $ (0.47) $ (0.15) $ (1.27) $ (0.50)
======== ======= ========= =======
Shares used in the calculation of basic and
diluted net loss per share applicable to common
stockholders.................................... 21,510 17,371 20,355 15,533
======== ======= ========= =======
</TABLE>
See accompanying notes.
<PAGE> 5
JUPITER MEDIA METRIX, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
NINE MONTHS ENDED SEPTEMBER 30, 2000
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
ACCUMULATED
COMMON STOCK ADDITIONAL OTHER TOTAL
--------------- PAID-IN COMPREHENSIVE ACCUMULATED DEFERRED STOCKHOLDERS'
SHARES AMOUNT CAPITAL LOSS DEFICIT COMPENSATION EQUITY
------ ------ ---------- ------------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1999... 19,682 $197 $202,031 $ (83) $(38,110) $ (1,246) $162,789
Comprehensive loss:
Net loss..................... -- -- -- -- (25,922) -- (25,922)
Unrealized losses on
marketable securities..... -- -- -- 63 -- -- 63
Foreign currency
translation............... -- -- -- (130) -- -- (130)
--------
Total comprehensive loss....... (25,989)
Issuance of common stock in
connection with
acquisition.................. 52 1 1,759 -- -- -- 1,760
Exercise of warrants and stock
options...................... 154 1 440 -- -- -- 441
Amortization of deferred
compensation and other stock-
based compensation........... -- -- 2,979 -- -- (2,327) 652
Purchase of Jupiter
Communications, Inc.......... 14,922 149 477,601 (14,560) 463,190
------ ---- -------- ----- -------- -------- --------
BALANCE AT SEPTEMBER 30,
2000......................... 34,810 $348 $684,810 $(150) $(64,032) $(18,133) $602,843
====== ==== ======== ===== ======== ======== ========
</TABLE>
See accompanying notes.
<PAGE> 6
JUPITER MEDIA METRIX, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------
2000 1999
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss.................................................... $(25,922) $ (7,581)
Adjustments to reconcile net loss to net cash used in
operating activities:
Loss on disposal of equipment............................. -- 8
Provision for bad debts................................... 146 173
Depreciation and amortization of property and equipment... 3,212 240
Amortization of deferred compensation and other
stock-based compensation............................... 652 884
Amortization of intangibles............................... 19,284 2,246
Minority interests........................................ (2,294) --
Changes in operating assets and liabilities:
Receivables............................................ (10,045) (1,501)
Prepaid expenses and other current assets.............. (329) (807)
Other assets........................................... 78 --
Accounts payable and accrued liabilities............... (5,269) 2,715
Advance billings to clients............................ 6,583 1,421
Due to The NPD Group, Inc.............................. 67 (4,367)
-------- --------
Net cash used in operating activities....................... (13,837) (6,569)
CASH FLOWS FROM INVESTING ACTIVITIES
Cash acquired net of cash paid for acquisitions............. 38,460 --
Purchase of marketable securities........................... (7,117) (23,509)
Purchases of property and equipment......................... (13,758) (1,477)
Security deposits........................................... (799) (125)
-------- --------
Net cash provided (used) in investing activities............ 16,786 (25,111)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayments on long-term debt................................ (145) (414)
Proceeds from long-term debt................................ -- 478
Proceeds from exercise of warrants and options.............. 442 1,290
Contributions from minority interests....................... 3,601 --
Redemption of redeemable preferred stock.................... -- (4,789)
Net proceeds from initial public offering................... -- 49,383
-------- --------
Net cash provided by financing activities................... 3,898 45,948
-------- --------
Effect of exchange rate changes on cash..................... (130) --
-------- --------
Net increase (decrease) in cash and cash equivalents........ 6,717 14,268
Cash and cash equivalents at beginning of period............ 97,364 8,012
-------- --------
Cash and cash equivalents at end of period.................. $104,081 $ 22,280
======== ========
SUPPLEMENTAL INFORMATION
Interest paid............................................... $ 24 $ 49
======== ========
</TABLE>
See accompanying notes.
<PAGE> 7
JUPITER MEDIA METRIX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements for Jupiter
Media Metrix, Inc. (the "Company") have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three and nine-month periods ended September 30, 2000
are not necessarily indicative of the results that may be expected for the year
ending December 31, 2000.
The balance sheet at December 31, 1999 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
For further information, refer to the financial statements and footnotes
thereto included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1999, as filed with the Securities and Exchange Commission.
B. ACQUISITION
Effective January 1, 2000, the Company acquired the Internet audience
measurement business operated by SIFO Group AB ("SIFO") in Sweden. The new
company, MMXI Nordic, is a wholly owned subsidiary of the Company. The Company
acquired all of the outstanding shares of MMXI Nordic in exchange for $5,692,000
and 52,000 shares of the Company's common stock. In connection with this
acquisition, SIFO purchased 8.0% of MMXI Europe, reducing the Company's
ownership to 50.1%.
C. MERGER WITH JUPITER COMMUNICATIONS, INC.
On September 20, 2000, the Company completed a merger (the "Merger") with
Jupiter Communications, Inc. ("Jupiter") by issuing 14,921,856 shares of the
Company's common stock in exchange for all of the outstanding common stock of
Jupiter. In addition, the Company assumed all of the outstanding stock options
to purchase common stock of Jupiter. The total purchase price of $471.8 million,
including merger related costs and expenses of $8.6 million, was tentatively
allocated to the net operating assets acquired of $78.4 million, including cash
of $41.7 million, and goodwill and other intangibles of $393.4 million. In
addition, deferred compensation of $14.6 million, which represents the intrinsic
value of unvested Jupiter options, was recorded. In connection with the closing
of the Merger, the Company changed its name from Media Metrix, Inc. to Jupiter
Media Metrix, Inc.
The Merger was accounted for using the purchase method of accounting and
the operations of Jupiter have been included in the accompanying consolidated
financial statements from the date of the closing of the Merger.
The following unaudited pro forma consolidated financial information gives
effect to the Merger as if it had occurred as of the beginning of each period:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30
--------------------
2000 1999
-------- --------
<S> <C> <C>
Revenues (in thousands)................................ $104,344 $ 39,984
Net loss applicable to common stockholders (in
thousands)........................................... $(95,901) $(70,028)
Net loss per share applicable To common stockholders... $ (2.76) $ (2.30)
</TABLE>
The unaudited pro forma consolidated financial information is not
necessarily indicative of the results of operations which would have occurred
had the merger been completed as of January 1, 1999.
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
The following discussion of our financial condition and results of
operations should be read in conjunction with the consolidated financial
statements and the notes to those statements included elsewhere in this
quarterly report. This discussion contains forward-looking statements that
involve risks and uncertainties. Our actual results may differ materially from
those anticipated in these forward-looking statements as a result of various
factors, including, but not limited to, those set forth under "Risk Factors That
May Affect Future Results" and elsewhere in this quarterly report, and in other
reports and documents filed from time to time with the Securities and Exchange
Commission.
OVERVIEW
We offer innovative and comprehensive Internet measurement, analysis,
intelligence and events to provide businesses with global resources for
understanding and profiting from the Internet. Our business units include Media
Metrix, which offers clients a broad range of products and services that measure
audience, commerce and new media usage on the Internet and other digital media;
AdRelevance, which specializes in the automated retrieval and delivery of online
advertising data; Jupiter Research, which provides business-to-business and
business-to-consumer clients with strategic analysis and insights, including
industry trends, accurate forecasts and best practices, all backed by
proprietary data; and Jupiter Events, a leading provider of conferences focusing
on the global digital economy.
Our business was originally conducted as a division within The NPD Group,
Inc. ("NPD"), a leading marketing research firm. Prior to March 1996, we were
engaged primarily in product research and development. In March 1996, PC Meter,
L.P., was formed to further commercialize our Internet audience measurement
business in an entity separate from NPD. In April 1997, PC Meter was merged into
Media Metrix, Inc. and we raised approximately $4.0 million in a private
placement to fund the expansion of our Internet audience measurement business.
In November 1998, we merged with RelevantKnowledge, then our leading
competitor for Internet audience measurement services. In October 1999, we
acquired AdRelevance in a stock-for-stock transaction valued at approximately
$59.4 million. In connection with our acquisition of AdRelevance, we recognized
$54.3 million of intangibles, which are being amortized over a three-year
period. In addition, in October 2000, we issued an additional 82,921 shares of
our common stock and 17,450 options, based on the achievement of certain
post-closing milestones in connection with the acquisition of AdRelevance.
On September 20, 2000, we completed our merger with Jupiter Communications,
Inc. for a total purchase price of $471.8 million, including merger-related
expenses of approximately $8.6 million. In connection with this transaction, we
recognized $14.6 million in deferred compensation, which represents the
intrinsic value of unvested options to purchase common stock of Jupiter
Communications, which will be amortized over the remaining vesting period of the
options. In addition, of the total purchase price, we recorded goodwill and
other intangibles of $393.4 million, which will be amortized over an estimated
five years. The operations of Jupiter Communications from September 21, 2000
have been included in the financial statements and financial information
included in this quarterly report.
We have formed a number of joint ventures to offer audience measurement
products and services based on Internet usage in foreign countries. In
connection with the formation of each of these international joint ventures, we
have granted each of our joint venture partners an option, subject to certain
conditions, to exchange such partner's shares in the respective joint ventures
for shares of our common stock. If any partner elects to exercise its option to
convert its shares into shares of our common stock, we will need to record
additional goodwill in an amount equal to the difference between the then fair
market value of our shares of common stock multiplied by the number of shares
issued and the net book value of the joint venture of which the partner is a
shareholder attributable to such partner. The minority interests related to each
joint venture, included in our statement of operations, consist of the loss
related to our partners' interests in our foreign subsidiaries.
<PAGE> 9
Our revenues consist of measurement products and services, research
services and events and other revenues. Prior to our merger with Jupiter
Communications, which was completed on September 20, 2000, our revenues were
derived solely from our measurement products and services.
Our measurement offerings, which consist of the products and services from
our Media Metrix and AdRelevance units, include both syndicated measurement
products and customized measurement products. We sell our syndicated measurement
products on an annual subscription basis, and typically bill our syndicated
clients, in advance, for up to the next twelve months of products. Contracts for
our syndicated measurement products are non-cancelable and non-refundable. Since
1997 and prior to the merger with Jupiter Communications, syndicated measurement
products have accounted for approximately 90% of our revenues, while customized
measurement products and services have accounted for approximately 10%. We
recognize revenues for the syndicated measurement products and services over the
term of the related contract as services are provided. Revenues for customized
measurement products and services are recognized in the period in which the
product or service is delivered.
Our research offerings, which consist of the products and services from our
Jupiter Research unit, are a combination of proprietary written analysis,
supporting data and access to our research analysts. As with our syndicated
measurement products, we typically sell our Jupiter Research products on an
annual subscription basis and bill the clients in advance. Jupiter Research
contracts are non-cancelable and non-refundable. We recognize revenues for our
Jupiter Research products and services over the term of the related contract as
services are provided. We also sell book-length studies and custom research
products. Revenues from these services are recognized upon the sale of the study
or completion of the project. We also produce, through our Jupiter Events unit,
a wide range of conferences which offer senior executives the opportunity to
hear first-hand the insights of our research analysts and the leading decision
makers in the Internet and technology industries. Our Jupiter Events revenues
consist of revenues from individual attendees, sponsors, which display their
logo in our conference program and/or host a reception, and exhibitors, which
receive a booth to promote their companies. Other revenues are derived primarily
from the sale of Web sponsorships. Revenues attributable to our conferences and
other services are recognized upon the completion of the event and over the term
of the Web sponsorship.
Our growing client base, which currently totals over 2,000, is highly
diversified and includes companies in the advertising, financial services,
technology and Internet, media, telecommunications, retail, travel, consumer
products and professional service industries. As of September 30, 2000, our
total contract value for our syndicated measurement products and our Jupiter
Research contracts was $113 million. Total contract value represents the
annualized value of all outstanding syndicated measurement and research products
without regard to the remaining duration of such contracts.
We believe that our high customer renewal rate provides us with a growing
base of recurring revenues from our syndicated measurement and research
products. Of the customers subscribing under annual contracts for our syndicated
measurement products and services at the end of the first nine months of 1999,
over 95% remained customers at the end of the first nine months of 2000. In
addition, of the contracts renewed in the first nine months of 2000, we
experienced an average increase in contract dollar value of over 34% due to the
purchase of additional services by our renewing clients. A substantial portion
of our Jupiter Research contracts have also been renewed for an equal or higher
dollar amount. Approximately 70% of research contracts expiring during the
twelve months ended September 30, 2000 were renewed.
We have incurred significant losses from operations since our inception. We
incurred losses from operations of $32.8 million in the first nine months of
2000, $25.9 million in 1999, $7.2 million in 1998 and $4.7 million in 1997. As
of September 30, 2000, we had an accumulated deficit of $64.0 million. We expect
that we will incur significant expenses in the future associated with our
ongoing international expansion, particularly costs associated with recruiting
and maintaining panels in a number of countries, and increased personnel. In
addition, we intend to invest in further development and improvement of our
technologies and development of additional products and services.
<PAGE> 10
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated our results of
operations expressed as a percentage of revenues:
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
-------------------- --------------------
2000 1999 2000 1999
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues................................................ 100.0% 100.0% 100.0% 100.0%
Costs of revenues....................................... 29.3 53.9 35.5 52.6
----- ----- ----- -----
Gross profit............................................ 70.7 46.1 64.5 47.4
Operating expenses:
Research and development.............................. 31.3 24.6 29.6 23.4
Sales and marketing................................... 38.5 40.6 40.4 41.6
General and administrative............................ 23.8 30.8 27.2 31.2
Amortization of deferred compensation and other
stock-based compensation........................... 2.0 10.1 1.7 6.6
Amortization of intangibles........................... 49.5 13.6 49.1 17.3
----- ----- ----- -----
Total operating expenses................................ 145.1 119.7 148.0 120.1
----- ----- ----- -----
Loss from operations.................................... (74.4) (73.6) (83.5) (72.7)
Minority interests...................................... 4.0 14.7 5.8 6.2
Interest and other income, net.......................... 8.9 11.1 11.7 7.9
----- ----- ----- -----
Net loss................................................ (61.5)% (47.8)% (66.0)% (58.6)%
===== ===== ===== =====
</TABLE>
Three Months Ended September 30, 2000 Compared to Three Months Ended September
30, 1999
Revenues. Revenues increased 199.8% to $16.5 million for the three months
ended September 30, 2000 from $5.5 million for the three months ended September
30, 1999. Sales of syndicated audience measurement products and services
accounted for approximately 90% of revenues for each of the three months ended
September 30, 2000 and 1999, excluding revenues attributable to Jupiter
Communications. Sales of customized products and services and the inclusion of
$2.5 million in revenues attributable to Jupiter Communications for the ten-day
period following the completion of the merger on September 20, 2000, accounted
for the remaining revenues. The increase in revenues was due primarily to a
substantial increase in the number of our customers including new customers as a
result of our international growth, an increase in the amount of products and
services sold to our customers and the inclusion of revenues attributable to
Jupiter Communications.
Costs of Revenues. Excluding the operations of Jupiter Communications,
costs of revenues consist primarily of costs associated with the recruitment and
maintenance of the panel, data collection and production costs. Panel and data
collection costs include costs associated with mailing and printing, incentives,
help desk and associated personnel. Production costs include computer usage
charges, printing, report distribution costs and personnel costs. Gross profit
was $11.7 million for the three months ended September 30, 2000, or 70.7% of
revenues. Gross profit was $2.5 million for the three months ended September 30,
1999, or 46.1% of revenues. The increase in gross profit as a percentage of
revenues for the three months ended September 30, 2000 over the prior period was
due to an increase in revenues, partially offset by costs related to recruiting
panels and other start up costs in connection with our international operations.
Research and Development. Research and development costs consist primarily
of personnel and other related costs attributable to the development of new
products and services. All research and development costs have been expensed as
incurred. Research and development costs were $5.2 million for the three months
ended September 30, 2000, or 31.3% of revenues. Research and development costs
were $1.4 million for the three months ended September 30, 1999, or 24.6% of
revenues. The increase in research and development costs as a percentage of
revenues for the three months ended September 30, 2000 was due primarily to
<PAGE> 11
increases in research and development personnel and consulting costs, including
costs relating to our new on-line meter, data warehouse and client interface
system which were introduced during the second quarter of 2000.
Sales and Marketing. Sales and marketing costs consist of salaries,
bonuses, commissions, travel and expenses, promotional costs and other costs
incurred in marketing and selling our products and services. Sales and marketing
costs were $6.3 million for the three months ended September 30, 2000, or 38.5%
of revenues. Sales and marketing costs were $2.2 million for the three months
ended September 30, 1999, or 40.6% of revenues. The increase in absolute dollars
was due primarily to the increase in sales and marketing personnel both in the
United States and abroad, as well as additional marketing costs. The inclusion
of Jupiter Communications for the ten-day period following the merger resulted
in an additional $700,000 in sales and marketing expenses.
General and Administrative. General and administrative costs consist
primarily of personnel, lease payments for our facilities, telephone and
utilities and professional services fees. General and administrative costs were
$3.9 million for the three months ended September 30, 2000, or 23.8% of
revenues. General and administrative costs were $1.7 million for the three
months ended September 30, 1999, or 30.8% of revenues. The increase in absolute
dollars was due to the expenses associated with our international expansion and
increased personnel and expansion of our office facilities. The decrease in
general and administrative costs as a percentage of revenues was due primarily
to revenues increasing at a greater rate. The inclusion of Jupiter
Communications for the ten-day period following the merger resulted in an
additional $611,000 in general and administrative expenses, which was 24.3% of
Jupiter Communications' revenues.
Amortization of Deferred Compensation and Other Stock-based
Compensation. Amortization of deferred compensation and other stock-based
compensation of $329,000 for the three months ended September 30, 2000 and
$554,000 for the three months ended September 30, 1999 represents a non-cash
compensation expense recorded in connection with stock options granted in 1999
and 1998 and the acceleration of the vesting provisions of certain stock options
resulting in a new measurement date.
Amortization of Intangibles. Amortization charges of $8.1 million for the
three months ended September 30, 2000 represent the amortization of intangibles
acquired in our merger with RelevantKnowledge and our acquisitions of
AdRelevance and MMXI Nordic. Also included is an amortization amount of $2.2
million, which represents the amortization amount for the ten-day period
following the merger with Jupiter Communications, based on total goodwill and
other intangibles of $393.4 million.
Loss from Operations. Loss from operations was $12.3 million for the three
months ended September 30, 2000, or 74.4% of revenues, and $4.0 million for the
three months ended September 30, 1999, or 73.6% of revenues. Loss from
operations in terms of absolute dollars was higher in the three months ended
September 30, 2000 due to the continued expansion of our business in the United
States and internationally and the amortization of intangibles. The increase in
loss from operations as a percentage of revenues was due to an increase in the
amortization of intangibles from the AdRelevance, MMXI Nordic and Jupiter
Communications acquisitions, offset by an increase in revenues relative to the
increases in costs of revenues and operating costs. We expect these losses to
continue as our business continues to expand both in the United States and
internationally over the next few quarters.
Interest and Other Income, net. Interest and other income, net of interest
expense, was $1.5 million, or 8.9% of revenues, for the three months ended
September 30, 2000 as compared to $609,000 for the three months ended September
30, 1999, or 11.1% of revenues. The increase in interest and other income was
due to the investment of the proceeds of our initial and secondary public
offerings.
Nine Months Ended September 30, 2000 Compared to Nine Months Ended September
30, 1999
Revenues. Revenues increased 203.9% to $39.3 million for the nine months
ended September 30, 2000 from $12.9 million for the nine months ended September
30, 1999. Sales of syndicated audience measurement products and services
accounted for approximately 90% of revenues for each of the nine months ended
September 30, 2000 and 1999. Sales of customized products and services accounted
for the remaining
<PAGE> 12
revenues. The increase in revenues was due primarily to a substantial increase
in the number of our customers including new customers as a result of
international growth, and an increase in the amount of products and services
sold to our customers. This amount also includes $2.5 million in revenues
attributable to Jupiter Communications for the ten-day period following the
completion of the merger on September 20, 2000.
Costs of Revenues. Gross profit was $25.4 million for the nine months
ended September 30, 2000, or 64.5% of revenues. Gross profit was $6.1 million
for the nine months ended September 30, 1999, or 47.4% of revenues. The increase
in gross profit as a percentage of revenues for the nine months ended September
30, 2000 over the prior period was due to an increase in revenues, partially
offset by costs related to recruiting panels and other start up costs in
connection with our international operations.
Research and Development. Research and development costs were $11.6
million for the nine months ended September 30, 2000, or 29.6% of revenues.
Research and development costs were $3.0 million for the nine months ended
September 30, 1999, or 23.4% of revenues. The increase in research and
development costs as a percentage of revenues for the nine months ended
September 30, 2000 was due primarily to increases in research and development
personnel and consulting costs, including certain costs relating to our new data
warehouse and client interface system which were introduced during the second
quarter of 2000.
Sales and Marketing. Sales and marketing costs were $15.9 million for the
nine months ended September 30, 2000, or 40.4% of revenues. Sales and marketing
costs were $5.4 million for the nine months ended June 30, 1999, or 41.6% of
revenues. The increase in absolute dollars was due primarily to the increase in
sales and marketing personnel both in the United States and abroad, as well as
additional marketing costs. The inclusion of Jupiter Communications for the
ten-day period following the merger resulted in an additional $700,000 in sales
and marketing expenses.
General and Administrative. General and administrative costs were $10.7
million for the nine months ended September 30, 2000, or 27.2% of revenues.
General and administrative costs were $4.0 million for the nine months ended
September 30, 1999, or 31.2% of revenues. The increase in absolute dollars was
due to the expenses associated with our international expansion and increased
personnel and expansion of our office facilities. The decrease in general and
administrative costs as a percentage of revenues was due primarily to revenues
increasing at a greater rate. The inclusion of Jupiter Communications for the
ten-day period following the merger resulted in an additional $611,000 in
general and administrative expenses.
Amortization of Deferred Compensation and Other Stock-based
Compensation. Amortization of deferred compensation and other stock-based
compensation of $652,000 for the nine months ended September 30, 2000 and
$858,000 for the nine months ended September 30, 1999 represents a non-cash
compensation expense recorded in connection with stock options granted in 1999
and 1998 and the acceleration of the vesting provisions of certain stock options
resulting in a new measurement date.
Amortization of Intangibles. Amortization charges of $19.3 million for the
nine months ended September 30, 2000 represent the amortization of intangibles
acquired in our merger with RelevantKnowledge and our acquisitions of
AdRelevance and MMXI Nordic. Also included is an amortization amount of $2.2
million, which represents the amortization amount for the ten-day period
following the completion of the merger with Jupiter Communications, resulting in
total goodwill and other intangibles of $393.4 million. Amortization charges of
$2.2 million for the nine months ended September 30, 1999 represent the
amortization of RelevantKnowledge's panel and other intangibles acquired in that
merger.
Loss from Operations. Loss from operations was $32.8 million for the nine
months ended September 30, 2000, or 83.5.% of revenues, and $9.4 million for the
nine months ended September 30, 1999, or 72.7% of revenues. Loss from operations
in terms of absolute dollars was higher in the nine months ended September 30,
2000 due to the continued expansion of our business in the United States and
internationally and amortization of intangibles. The increase in loss from
operations as a percentage of revenues was due to an increase in the
amortization of intangibles from the AdRelevance, MMXI Nordic and Jupiter
Communications acquisitions, offset by an increase in revenues relative to the
increases in costs of revenues and operating costs.
<PAGE> 13
Interest and Other Income, net. Interest and other income, net of interest
expense was $4.6 million, or 11.7% of revenues, for the nine months ended
September 30, 2000 as compared to $1.0 million for the nine months ended
September 30, 1999, or 7.9% of revenues. The increase in interest and other
income was due to the investment of the proceeds of our initial and secondary
public offerings.
Minority Interests. Minority interests increased from $806,000 for the
nine months ended September 30, 1999 to $2.3 million for the nine months ended
September 30, 2000 because of expansion of international operations in which we
have partners with minority interests.
LIQUIDITY AND CAPITAL RESOURCES
Since our inception, we have financed our operations primarily through an
initial investment and loan by NPD, the private placement of equity securities,
RelevantKnowledge's cash on hand at the time of the merger, Jupiter
Communications' cash on hand at the time of the merger, cash from operations and
the proceeds of public offerings. On May 12, 1999, we completed the initial
public offering of 3,250,000 shares of our common stock for gross proceeds of
$55.3 million, and net proceeds of $49.4 million. On October 29, 1999, we
completed a secondary offering of 3,000,000 shares of our common stock. Of the
shares offered, we sold 1,500,000 shares and 1,500,000 shares were sold by
existing stockholders. Gross proceeds to us were $75.8 million, and net proceeds
to us were $71.1 million.
Net cash used in operating activities was $13.8 million for the nine months
ended September 30, 2000, compared to $6.6 million for the nine months ended
September 30, 1999. The variance for 2000 compared to 1999 was primarily due to
the net repayment of $4.4 million to NPD during 1999 for services performed
under a management agreement, offset by additional operating expenses primarily
related to expansion of operations and new product development. Our operating
expenses will continue to increase due to increased costs related to our
domestic and international expansion, including costs associated with new leased
space.
Net cash generated from investing activities was $16.8 million for the nine
months ended September 30, 2000, compared to net cash used of $25.1 million for
the nine months ended September 30, 1999. The positive cash flow can be
attributed to the completion of the merger with Jupiter Communications, which
furnished $44.2 million in cash. This was offset by the purchase of marketable
securities for $7.1 million and property, plant and equipment for $13.8 million.
Net cash provided by financing activities was $3.9 million for the nine
months ended September 30, 2000, compared to $45.9 million for the nine months
ended September 30, 1999. Cash provided by financing activities for 2000
primarily relates to proceeds received from contributions from our partners
related to our international operations and the exercise of stock options. Cash
provided by financing activities for 1999 primarily relates to proceeds received
from our public offerings of our common stock.
As of September 30, 2000, we had $104.1 million of cash and cash
equivalents and $22.1 million of marketable securities. As of September 30,
2000, our material capital commitments consisted of improvements to our
additional leasehold space, which we anticipate to be approximately $5 million.
We expect to invest at least an additional $20 million over the next year
in our international operations, in improvements in our technology and data
delivery systems and in connection with lease commitments and related capital
improvements associated with the expansion of our business. We currently
anticipate that we will experience an increase in our capital expenditures and
lease commitments consistent with our anticipated growth in operations,
infrastructure and personnel. In addition, we currently anticipate that we will
continue to experience growth in our operating expenses for the foreseeable
future and that operating expenses will be a material use of our cash resources.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE OF MARKET RISK
The carrying values of financial instruments including cash and cash
equivalents, accounts receivable, accounts payable and notes payable,
approximate fair value because of the short maturity of these instruments.
12
<PAGE> 14
We have historically had very low exposure to changes in foreign currency
exchange rates, and therefore have not used derivative financial instruments to
manage foreign currency fluctuation risk. We conduct business on a worldwide
basis through our international subsidiaries. As we continue to expand globally,
the risk of foreign currency exchange rate fluctuation may increase. Therefore,
in the future, we may consider utilizing derivative instruments to mitigate such
risks. Currently, we manage our level of exposure by denominating international
sales and payment of related expenses in the foreign subsidiaries' local
currency.
RISK FACTORS THAT MAY AFFECT FUTURE RESULTS
There is limited information upon which you can evaluate our business.
We have been in operation since 1996 as an entity independent from The NPD
Group, Inc. In addition, AdRelevance began selling its products and services in
the fall of 1999 and many of the research services and conferences offered by
Jupiter Communications were first introduced in 1999 and 2000. As a result, we
have a limited operating history upon which you can evaluate the combined
business and the products and services to be offered by Jupiter Media Metrix.
Due to this limited operating history, it is difficult or impossible for us to
predict future results of operations. Moreover, any evaluation of our business
and prospects must be made in light of the risks and uncertainties frequently
encountered by companies in new and rapidly evolving markets such as ours. Many
of these risks and uncertainties are discussed elsewhere in this section. We
cannot assure you that we will be successful in addressing all of these risks
and uncertainties. Our failure to do so could cause our business and financial
results to suffer.
WE HAVE A HISTORY OF OPERATING LOSSES WHICH MAY CONTINUE FOR THE FORESEEABLE
FUTURE.
We have incurred substantial costs to create, market and distribute our
products and services, to attract and retain qualified personnel, to expand into
international markets and to otherwise grow our business. As a result, we
incurred net losses of approximately $25.9 million in the nine months ended
September 30, 2000.
We intend to invest heavily in new products and services, technology
improvements and international expansion. As a result, we will need to achieve
significant revenue increases to achieve and maintain profitability. Although
our revenues and the number of our clients have continued to increase, we may
not be able to continue to effectively expand our business. The number of
clients or the number of products and services for which our clients subscribe
may grow more slowly than we anticipate or may decrease in the future. In
addition, even if we become profitable, we may not be able to sustain
profitability or increase our profits on a quarterly or annual basis in the
future.
OUR OPERATING RESULTS MAY FLUCTUATE FROM QUARTER TO QUARTER.
Our revenues, expenses and operating results have varied from quarter to
quarter. Our operating results may continue to vary as a result of a variety of
factors, many of which are beyond our control. These factors include, among
others:
- the level and timing of new business and renewals of subscriptions to our
products and services;
- the announcement or introduction of new products and services by us or
our competitors;
- price competition;
- the amount and timing of costs relating to changes in the size or
composition of our panels;
- the amount and timing of operating costs and capital expenditures
relating to the expansion of our business, particularly our planned
international expansion;
- the timing of our Internet conferences; and
- the timing of acquisitions and the impact on our operations and our
operating results.
Due to all the foregoing factors and the other risks described in this
section, you should not rely on quarter-to-quarter comparisons of our results of
operations as an indication of future performance.
<PAGE> 15
WE DEPEND ON INCREASED SALES OF, AND HIGH RENEWAL RATES FOR, OUR
SUBSCRIPTION-BASED PRODUCTS AND SERVICES.
Our business and financial results are dependent on our ability to attract
and retain subscribers to our online measurement and research products. In
addition, our business model assumes that we will be able to increase the level
of sales over time to our existing clients. In the past, we have experienced
high renewal rates for our online measurement and research products. We cannot
assure you, however, that we will continue to experience high renewal rates. Our
subscription renewal rates may decline as a result of a consolidation in our
customer base or if a significant number of our customers cease operations. Our
sales to new or existing customers could also decline as a result of our
inability to continue to deliver high-quality and timely research analysis to
our clients, our failure to anticipate and understand market trends or our
inability to develop and update products and services to meet the changing
technological demands of our clients. If our renewal rate percentage or sales
decline, it could have a material adverse effect on our business, results of
operations and financial condition.
THE INTERNET AUDIENCE MEASUREMENT INDUSTRY IS SUBJECT TO RAPID CHANGE AND
EVOLVING INDUSTRY STANDARDS.
To date, no Internet audience measurement service has been adopted as the
universally accepted standard. As a result, some of our existing and potential
customers may challenge or refuse to accept our audience measurement reports.
Our customers may also be dissatisfied with our methodology for measuring
Internet audiences or may feel that our panels are not representative of
Internet users. Furthermore, it is possible that another Internet audience
measurement service could be adopted as the industry standard. Several key
industry organizations, including the Internet Advertising Bureau, the Media
Ratings Council, the Advertising Research Foundation and FAST Forward, have
initiatives focusing on appropriate standards for Internet audience measurement.
Our products and services may ultimately not comply with recommended industry
guidelines if we determine that compliance would not be economically feasible or
otherwise not consistent with our business strategy. To the extent that our
measurement approach diverges from the course of action recommended by some or
all of these trade groups, our business, results of operations and financial
condition could be materially and adversely affected.
In addition to the lack of a universally accepted standard, the audience
measurement business is characterized by rapidly changing technology, numerous
competitive products and services and shifting customer demands and needs. As a
result, our future success in this field depends on our ability to adapt to
rapidly changing technologies, including the tracking of Internet usage through
new technologies, and to improve the features, reliability and timeliness of our
product and service offerings in response to competitive product and service
offerings. In addition, the widespread adoption of new Internet networking
technologies could require us to expend substantial amounts of capital to change
our services or technology infrastructure, thereby increasing the costs of
operating our business. We cannot assure you that we will be able to continue to
offer Internet audience measurement services that satisfy all the information
needs of our existing and potential clients.
OUR RESEARCH AND EVENTS BUSINESSES MAY SUFFER IF WE ARE UNABLE TO ANTICIPATE
MARKET TRENDS OR IF WE FAIL TO PROVIDE INFORMATION THAT IS USEFUL TO OUR
CLIENTS.
The success of our research and events businesses depend in large part on
our ability to anticipate, research and analyze rapidly changing technologies
and industries, as well as our ability to provide this information in a timely
and cost-effective manner. Internet commerce is relatively new and is undergoing
frequent and dramatic changes, including the introduction of new products and
the obsolescence of others, shifting business strategies and revenue models, the
formation of numerous new companies and high rates of growth. Because of these
rapid and continuous changes in the Internet commerce markets, we face
significant challenges in providing timely analysis and advice. Many of the
industries and areas on which we focus are relatively new, and it is very
difficult to provide predictions and projections as to the future marketplace,
revenue models and competitive factors. If our predictions or projections prove
to be wrong, or if we are unable to continually update our information, our
reputation may suffer and demand for our research products and services may
decline. In addition, many companies have not embraced the use of the Internet
as a medium for commerce and are unclear as to how to allocate corporate
resources effectively. As a result, some companies
<PAGE> 16
may conclude that our research products are not useful to their businesses. If
we are unable to continue to provide credible and reliable information that is
useful to companies engaged in Internet commerce, or to provide this information
in a timely manner, our business and financial results will suffer.
OUR BUSINESS MAY SUFFER IF ONLINE ADVERTISING DOES NOT CONTINUE TO GROW.
Our AdRelevance unit specializes in the automated retrieval and delivery of
online advertising data. In addition, many of our research and measurement
products and events are focused on the growth and effectiveness of online
advertising. As a result, our future success will depend in part on an increase
in the use of the Internet as an advertising medium. The Internet advertising
market, however, is relatively new and rapidly evolving, and there is
significant uncertainty about the demand and market acceptance for Internet
advertising. Many of our current or potential customers have little or no
experience using the Internet for advertising purposes. The adoption of Internet
advertising, particularly by entities that have historically relied on
traditional media for advertising, requires the acceptance of a new way of
conducting business. These companies may find Internet advertising to be less
effective for promoting their products and services as compared to traditional
advertising. In addition, most current and potential Web publisher customers
have little or no experience in generating revenues from the sale of advertising
space on their Web sites. We cannot assure you that the market for Internet
advertising will continue to grow at the rate it has over the past few years. If
the market for Internet advertising does not continue to grow or grows more
slowly than we expect, then our business, results of operations and financial
condition could be materially and adversely affected.
OUR BUSINESS MAY SUFFER IF WE ARE UNABLE TO ATTRACT ATTENDEES, SPONSORS AND
EXHIBITORS TO OUR CONFERENCES.
Our business and financial results depend in part on our ability to attract
attendees, sponsors and exhibitors to our growing number of conferences. We
cannot assure you that we will be able to select topics for our conferences that
potential attendees, sponsors and exhibitors will find timely and interesting.
We also cannot assure you that our competitors will not produce conferences on
similar topics or that we will continue to be able to attract prominent industry
leaders to participate in our conferences. If we are unable to produce
compelling events, if we face increase competition for our conferences or if we
are unable to attract prominent speakers, the growth of our conference business
will be hindered. Our business and financial results may also suffer if we are
forced to cancel any conferences as a result of inclement weather or some other
unexpected event.
OUR BUSINESS MAY SUFFER IF THE USE OF THE INTERNET AS A COMMERCIAL MARKETPLACE
DOES NOT CONTINUE TO GROW.
Our future success depends on the continued growth of the Internet as a
viable commercial medium. However, the continued growth of the Internet as a
widely-used medium for commerce and communication is uncertain, and this growth
may be inhibited for a number of reasons, including:
- inadequate network infrastructure;
- unwillingness of companies and consumers to shift their purchasing from
traditional vendors to online vendors;
- security and authentication concerns with respect to the transmission of
confidential information, such as credit card numbers, over the Internet;
- privacy concerns, including those related to the ability of Web sites to
gather user information without the user's knowledge or consent;
- significant uncertainty about the demand and market acceptance for
Internet advertising and the lack of standards to measure the
effectiveness of Internet advertising; or
- lack of availability of cost-effective, high-speed service.
<PAGE> 17
The markets in which we operate are highly competitive, and such competition is
likely to increase in the future.
Each of the markets in which we operate are highly competitive. In March
1999, NetRatings and Nielsen Media Research introduced a new Web site ratings
service, Nielsen/NetRatings, that competes directly with many aspects of our
audience measurement services. Nielsen Media Research is the leading provider of
television audience measurement services in the United States and Canada. In
September 1999, NetRatings also entered into a joint venture with ACNielsen
Corp. to develop and maintain audience measurement panels and to market
Nielsen/NetRatings' products and services in international markets. ACNielsen is
a leading provider of market research, information and analysis to consumer
products and services industries and is a provider of television audience
measurement services outside the United States and Canada. We also face
competition internationally from NetValue, a French company which has begun
providing audience measurement services in Europe and the United States.
We also compete indirectly with operators of site-centric and other
consumer-centric measurement systems. Site-centric measurement systems measure
audience visits at a specific Web site by monitoring the Web site's server.
Consumer-centric systems measure the market either in a manner similar to us or
qualitatively through on-line and telephonic interviews. Lastly, we may face
increased competition from individual Web sites that develop an independent
method of measuring their own audience and from other companies that develop
alternative audience measurement technologies to those already provided by us.
In the market for Internet commerce-related research products and services,
our principal competitor is Forrester Research, Inc. Numerous other companies
compete with us both domestically and internationally in providing research and
analysis related to a specific industry or geographic area. In addition, we face
increased direct and indirect competition from information technology research
firms, business consulting and accounting firms, electronic and print publishing
companies and equity analysts employed by financial services companies. We also
face strong competition in the business of producing conferences related to
Internet commerce, and an increasing number of companies are sponsoring these
conferences in the United States and abroad. These competitors include
publishing and media companies, research providers, financial services companies
and consulting firms and companies which focus solely on the production of
conferences.
We expect competition to increase because of the business opportunities
presented by the growth of Internet commerce around the world. Competition may
also intensify as a result of industry consolidation, because of technological
advancements in the way to measure Internet activity or because some of our
competitors may be able to provide additional or complementary services, such as
consulting services. Increased competition may result in reduced operating
margins, loss of market share and diminished value in our services, as well as
different pricing, service or marketing decisions.
Our current and potential competitors include companies that may have
greater financial, information gathering and marketing resources than we have.
This may allow them to devote greater resources than we can to the promotion of
their brand and to the development and sale of their products and services. We
cannot assure you that we will be able to compete successfully against current
and future competitors.
We face many challenges as we continue to expand internationally.
Our current strategy includes further expansion of our measurement services
and research products, as well as our Internet conferences, outside of the
United States. Our expansion into international markets, however, requires
significant management attention and resources and may negatively impact our
near-term results of operations. For example, the international markets for
audience measurement services have historically been extremely localized and
difficult to penetrate. As a result, the costs of establishing and maintaining
panels in foreign countries has been and will continue to be substantial. We
cannot assure you that we will be able to develop new products and services
based on data obtained in those markets or that there will be sufficient client
demand for these measurement products. In addition, we cannot assure you that
there will be sufficient demand for our research products and conferences in
some of the international markets in which we promote such products and events.
<PAGE> 18
Our success in penetrating markets outside of the United States also
depends heavily on our continued ability to develop and to maintain strategic
relationships with local audience measurement or marketing research companies,
as well as local distributors for our research services. These companies assist
us in recruiting and maintaining measurement panels, controlling costs and
managing our international operations and marketing and selling products and
services. Recruiting international partners may become increasingly difficult as
competition in the international markets increases. If we do not succeed in
attracting or retaining our strategic partners or distributors in markets
outside the United States, our business, financial condition and results of
operations could be materially adversely affected.
In addition, our international operations will be subject to a number of
inherent risks, including:
- the impact of recessions in economies outside the United States;
- changes in regulatory requirements;
- reduced protection for intellectual property rights in some countries;
- potentially adverse tax consequences;
- economic and political instability; and
- fluctuations in currency exchange rates.
These risks may have a material adverse effect on our business, results of
operations or financial condition.
We may not be able to attract and retain experienced personnel.
Our success depends in large part on the continued contributions of our
senior management team, research analysts, sales representatives and technical
personnel. However, we face intense competition in hiring and retaining
personnel from, among others, technology and Internet companies, market research
and consulting firms, print and electronic publishing companies and financial
services companies. Many of these firms have substantially greater financial
resources than we do to attract and retain qualified personnel from a limited
pool of attractive candidates. In addition, some people that we may attempt to
hire could be subject to non-competition agreements that could impede our
recruitment efforts. To the extent that we are unable to retain our existing
management, research analysts, sales representatives or technical personnel, or
attract additional personnel that our critical to the operation of our business,
our business and financial results may suffer.
We may not be able to protect and enforce our intellectual property rights.
We regard the protection of our patents, copyrights, service marks,
trademarks and trade secrets as important to our future success. We rely on a
combination of patent, copyright, trademark, service mark and trade secret laws
and contractual restrictions to establish and protect our proprietary rights. We
cannot assure you, however, that the steps we have taken will be sufficient to
protect our intellectual property from infringement or misappropriation.
Moreover, effective intellectual property protections may not be available in
every country in which we offer our products and services to the extent these
protections are available in the United States.
We seek to obtain the issuance of patents for our technology, and the
registration of our material trademarks and service marks, in the United States
and in selected other countries. We cannot assure you, however, that all of our
pending or future patent or trademark applications and registrations will be
issued or granted, or that our patents and trademarks will be upheld as valid if
they are subjected to a challenge. In September 2000, we filed a patent
infringement lawsuit against PC Data, alleging that the use of their technology
infringes on the patent that we received covering our metering methodology. We
cannot assure you that we will prevail in this litigation.
Other parties may assert claims against us that we have misappropriated a
trade secret or infringed a patent, copyright, trademark or other proprietary
right belonging to them. Our use of the brand name "Media
<PAGE> 19
Metrix" in Europe has been challenged by Mediametrie, S.A., a French company
which measures audiences of various media. Rather than engage in a protracted
dispute, we have elected to have our European joint venture conduct business
under the name "MMXI Europe". Mediametrie has also challenged our use of the
domain name "mediametrix.com".
Any infringement or related claims, even if not meritorious, could be
costly and time consuming to litigate, may distract management from other tasks
of operating the business and may result in the loss of significant rights or
the ability to operate parts of our business.
We may not be successful in effectively promoting our brand names.
We believe that maintaining and strengthening our brands is an important
aspect of our business. Our brand names, including "Jupiter Media Metrix",
"Media Metrix", "Jupiter", "AdRelevance" and "Jx Intelligence" are critical in
our efforts to attract clients and attendees to our conferences. We believe that
the importance of brand recognition will increase due to the increasing number
of competitors entering the market for Internet audience measurement and
research services. Our ability to promote and position our brands depends
largely on:
- the success of our marketing efforts;
- our ability to provide our customers with high quality products; and
- our ability to secure rights to our brand names in the major markets in
which we will be active.
As described above, our use of the brand name "Media Metrix" in Europe has
been challenged by Mediametrie, S.A., a French company that measures audiences
of various media. We cannot assure you that we will not have any future disputes
with Mediametrie, or any other companies, with respect to the use of any of our
brand names.
To promote our brands in response to competitive pressures, we may find it
necessary to increase our marketing budget or otherwise increase our financial
commitment to creating and maintaining brand loyalty among our clients. If we
fail to promote and maintain our brands, or incur excessive expenses attempting
to promote and maintain our brand, our business, results of operations and
financial condition will be materially adversely affected.
Disruption of our web sites or services due to security breaches and system
failures could harm our business and result in client cancellations.
The success of each of our businesses depends on the efficient and
uninterrupted operation of our computer and communications systems. Our
measurement services depend on systems that accurately track and monitor
Internet usage and activity and the unimpeded processing of large quantities of
data. In addition, many research services clients pay us so that their employees
can read our research solely on our Web sites and many of our research products
are being increasingly delivered via the Web. Furthermore, the operation of our
business is heavily dependent on systems and networks that connect numerous
offices spread around the world. Our infrastructure and the infrastructure of
our service providers, however, are vulnerable to security breaches, computer
viruses or similar disruptive problems. These systems are also subject to
telecommunications failures, power loss and various other system failures. Any
failure of our current or future systems or networks, whether intentional or
accidental, could impede the processing of data, the delivery of our products
and services, the operation of our Web sites and the day-to-day management of
our business. As a result, these failures could cause some of our clients to
discontinue purchasing some of our products and services, prevent clients from
purchasing our products and services or attending our events and harm our
business reputation.
In addition, as our company continues to grow and offer additional products
and services around the world, we will need to expand our systems to accommodate
increased data and service additional employees. This could lead to systems
failure or to a corruption of our data and could have a material adverse effect
on our business, results of operations and financial condition.
<PAGE> 20
We depend on our key personnel.
Our future success depends on the continued services and on the performance
of our senior management and other key employees, in particular the services of
Tod Johnson, our Chief Executive Officer; Gene DeRose, our President and Chief
Operating Officer; Mary Ann Packo and Kurt Abrahamson, our Group Presidents and
Jean Robinson, our Chief Financial Officer. Mr. Johnson also serves as the Chief
Executive Officer of NPD. Mr. Johnson has spent a substantial portion of his
time on our matters and we anticipate that he will continue to do so. However,
he will not be able to devote all of his time to our affairs. As a result, Mr.
Johnson's other responsibilities could divert his attention from our affairs.
The loss of the services of any of our key employees could have a material
adverse effect on our business, results of operations and financial condition.
We do not maintain any "key person" life insurance policies.
We may not be able to effectively manage our internal growth.
We are currently experiencing a period of rapid expansion. We anticipate
that future expansion will be necessary in order to grow our business and to
take advantage of new opportunities in the markets for Internet measurement
services and Internet commerce-related research products and services. In order
to succeed, we may need to attract and hire additional research, sales,
technical, administrative, operations and management personnel. We may also
continue to open additional offices in foreign countries. We cannot assure you
that current and planned personnel, systems, procedures and controls will be
adequate to support our future operations. If we fail to effectively manage our
internal growth, our business, results of operations and financial condition
could be materially adversely affected.
We may fail to realize the anticipated benefits of our recent merger with
Jupiter Communications.
The success of our recent merger with Jupiter Communications will depend,
in part, on our ability to take advantage of the opportunities and synergies
from combining Media Metrix and Jupiter Communications. To realize the
anticipated benefits of this combination, we will have to:
- Effectively combine and leverage Media Metrix' audience and advertising
measurement services with the research and events businesses of Jupiter
Communications;
- Successfully increase revenues from the cross-promotion and sales of the
existing products and services of Media Metrix and Jupiter
Communications;
- Sucessfully realize revenues from new products and services;
- Effectively and efficiently integrate the policies, technology
infrastructure, procedures and operations of Media Metrix and Jupiter
Communications; and
- Successfully retain key employees and attract additional experienced
personnel to the combined company.
If members of our management team are not able to develop strategies and
implement a business plan that achieves these objectives, the anticipated
benefits of the merger may not be realized. In addition, we may incur
unanticipated expenses in integrating the businesses of Jupiter Communications
and Media Metrix. If we do not successfully integrate Media Metrix and Jupiter
Communications, or if we incur increased expenses in integrating the two
companies, our business and financial results may suffer and the price of our
common stock could decline.
We may fail to successfully integrate future acquisitions.
If appropriate opportunities present themselves, we intend to acquire other
complementary businesses, technologies, services or products. We cannot assure
you, however, that we will be able to complete future acquisitions successfully
or to effectively and efficiently integrate an acquired entity with our current
business. In addition, the key personnel of an acquired company may decide not
to work for us. As a result, these difficulties could disrupt our current
business, distract our management and employees, increase our expenses
<PAGE> 21
and adversely affect our financial results. Furthermore, we may incur debt or
issue equity securities to pay for future acquisitions. The issuance of equity
securities could be dilutive to our existing shareholders' interests.
We rely on technology licensed from others.
We rely on technologies that we license from third parties. We cannot
assure you that these licenses will not infringe on the proprietary rights of
others. Moreover, these third party technology licenses may not continue to be
available to us on commercially reasonable terms, if at all. As a result, we may
need to substitute technology of lower quality or performance standards or at
greater cost.
We may be exposed to possible liability for information that we publish or
disseminate, as well as for supplying inaccurate information to our clients.
As a publisher and distributor of original research, market projections and
measurement reports, we face potential liability based on a variety of theories,
including defamation, negligence, copyright or trademark infringement, and other
legal theories based on the publication or distribution of this information.
Claims of this kind, whether brought in the United States or abroad, would
likely divert management time and attention and could result in significant cost
to investigate and defend, regardless of the merit of any of these claims. The
filing of any such claims may also damage our reputation as a high-quality
provider of unbiased, timely analysis and result in client cancellations or
overall decreased demand for our products and services. In addition, if we
become subject to these types of claims and are not successful in our defense,
we may be forced to pay substantial damages. Our insurance may not adequately
protect us against these claims.
We may also face liability for information that we supply to customers if
the information is inaccurate. The information in our databases, like that in
any database, may contain inaccuracies that our customers may not accept. Any
dissatisfaction by our customers with our measurement or research methodologies
or databases could have a material adverse effect on our ability to attract new
customers and retain existing customers. Any liabilities which we may incur
because of irregularities or inaccuracies in the data we supply to our customers
could materially adversely affect our business, results of operations and
financial condition.
We face risks related to the storage of personal information about our
panelists.
We do not attempt to capture information regarding our panelists' banking,
credit card or password data. This information, however, may come into our
possession. Our panel data are released only in an aggregated format or in a
form not identifiable on an individual basis. However, if someone penetrates our
network security or otherwise misappropriates sensitive data about our
panelists, we could be subject to liability. These liabilities could include
claims for unauthorized purchases with credit card information, impersonation or
other similar fraud claims. They could also include claims for other misuses of
personal information, such as unauthorized marketing purposes. These claims
could result in litigation and could have a material adverse effect on our
business, results of operations and financial condition.
We face risks associated with potential governmental regulation.
Laws and regulations regarding Internet usage and commerce in the United
States and abroad could decrease the acceptance of the Internet as a commercial
medium and result in decreased demand for our products and services. However,
due to the increasing popularity of the Internet, governmental bodies both in
the United States and abroad are becoming more focused on adopting and proposing
legislation specifically related to the Internet, covering issues such as user
privacy, content restrictions, taxation, advertising, intellectual property
matters and information security. The nature and effect of any recently adopted
or proposed legislation or regulation cannot be fully determined. Any new
legislation or regulation could have a material adverse effect on our business,
results of operations and financial condition.
Several states have proposed legislation that would limit the uses of
personal user information gathered using the Internet. These regulations have
required proprietary on-line service and Web site owners to establish privacy
policies. The Federal Trade Commission has also recently settled a proceeding
with one on-line service regarding the manner in which personal information is
collected from users and provided to third
<PAGE> 22
parties. The European Union has enacted its own privacy regulations that may
result in limits on the collection and use of user information. Because all of
our panelists consent to the retrieval of their personal data, to date these
regulations and proceedings have not materially impacted our operations.
Changes to existing laws or the passage of new laws could, among other
things:
- create uncertainty in the marketplace that could reduce demand for our
services;
- limit our ability to collect and to use data from our panels;
- increase the cost of doing business as a result of litigation costs or
increased service delivery costs;
- decrease the efficacy of Internet advertising or impede AdRelevance from
gathering data for our advertising tracking services; or
- in some other manner have a material adverse effect on our business,
results of operations and financial condition.
Our executive officers and directors have substantial control over our
affairs.
Our executive officers and directors and entities affiliated with them in
the aggregate, beneficially owned approximately 24% of our common stock as of
October 31, 2000. In particular, The NPD Group, Inc. which is controlled by Tod
Johnson, our Chairman and Chief Executive Officer, owned approximately 12% of
our outstanding common stock as of October 31, 2000.
These stockholders acting together have the ability to exert substantial
influence over all matters requiring approval by our stockholders. These matters
include the election and removal of directors and any merger, consolidation or
sale of all or substantially all of our assets. This concentration of ownership
could have the effect of delaying, deferring or preventing a change in control,
or impeding a merger or consolidation, takeover or other business combination.
We cannot predict our future capital needs, and we may not be able to secure
additional financing.
We may need to raise additional funds in the future to fund our domestic
and international operations, to expand or enhance the range of products and
services we offer or to respond to competitive pressures and/or perceived
opportunities. We cannot be sure that additional financing will be available on
terms favorable to us, or at all. If adequate funds are not available when
required or on acceptable terms, the growth of our business may be hindered and
our business and financial results may suffer.
Our stock has experienced, and may continue to experience, price and volume
fluctuations.
Our common stock, which is quoted on the Nasdaq National Market, has
experienced significant price and volume fluctuations. These fluctuations are
likely to continue in the future. The market prices of the securities of
Internet-related companies have been especially volatile. Some companies that
have had volatile market prices for their securities have been subject to
securities class action suits filed against them. If a suit were to be filed
against us, regardless of the outcome, it could result in substantial costs and
a diversion of our management's attention and resources. This could have a
material adverse effect on our business, results of operations and financial
condition.
We have anti-takeover provisions which may make it difficult for a third party
to acquire us.
Provisions of our certificate of incorporation, our bylaws and Delaware law
could make it more difficult for a third party to acquire us, even if doing so
might be beneficial to our stockholders.
<PAGE> 23
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2: CHANGES IN SECURITIES AND USE OF PROCEEDS.
The effective date of our first registration statement, filed on Form S-1
under the Securities Act of 1933 (No. 333-72883) relating to the initial public
offering of our common stock, was May 6, 1999. A total of 3,250,000 shares of
our common stock were sold at a price of $17.00 per share to an underwriting
syndicate led by Donaldson, Lufkin & Jenrette Securities Corporation, BancBoston
Robertson Stephens Inc. and Thomas Weisel Partners LLC. The offering commenced
on May 7, 1999, and closed on May 12, 1999. An additional 200,000 shares of
common stock were sold on behalf of selling stockholders as part of the same
offering. The initial public offering resulted in gross proceeds of $55.3
million, $3.9 million of which was applied toward the underwriting discount.
Expenses related to the offering totaled approximately $2.0 million. Net
proceeds to us and the selling stockholders were $49.4 million and $3.2 million,
respectively. From the time of receipt through September 30, 2000, proceeds were
applied as follows:
- $4.8 million towards the redemption of our redeemable preferred stock
from NPD;
- $36.3 million for working capital purposes;
- $5.7 million for the Internet audience measurement business operated by
SIFO Group AB in Sweden; and
- the remainder has been invested in short term, investment grade
securities.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
A special meeting of the stockholders of Media Metrix was held on September
20, 2000. The purpose of the meeting was to consider and vote on the following
proposals:
1. to approve a proposal to amend the certificate of incorporation of
Media Metrix to (i) change the name of Media Metrix to Jupiter Media
Metrix, Inc. and (ii) to increase the authorized number of shares of Media
Metrix common stock from 60,000,000 to 150,000,000 shares.
2. to approve the proposed issuance of shares of Media Metrix common
stock in the merger of MMX Acquisition Corp., a wholly owned subsidiary of
Media Metrix, with and into Jupiter Communications, Inc. in accordance with
the Agreement and Plan of Merger, dated as of June 26, 2000, among Media
Metrix, MMXI Acquisition Corp. and Jupiter Communications, as amended.
3. to approve an amendment to the Media Metrix 2000 Equity Incentive
Plan to increase the maximum number of shares of Media Metrix common stock
available for issuance in calendar year 2000 under the plan from 2,000,000
to 4,000,000, to increase the maximum amount of the annual increase in
shares available for issuance under the plan from the lesser of 1,000,000
shares or 4% of the outstanding shares to the lesser of 2,000,000 shares or
4% of the outstanding shares, and to increase the maximum number of shares
available for issuance during the term of the plan from 6,000,000 to
12,000,000.
4. to approve an amendment to the Media Metrix 2000 Employee Stock
Purchase Plan to increase the maximum number of shares of Media Metrix
common stock available for issuance under the plan from 100,000 to
2,000,000.
<PAGE> 24
The results of the voting on each of the proposals set forth above is as
follows:
1. Proposal No. 1 was approved with 13,131,562 shares cast in favor of
the proposal, 19,814 shares cast against the proposal and 319,183
abstentions;
2. Proposal No. 2 was approved with 13,115,832 shares cast in favor of
the proposal, 33,444 shares cast against the proposal and 321,283
abstentions;
3. Proposal No. 3 was approved with 10,100,499 shares cast in favor of
the proposal, 3,041,498 shares cast against the proposal and 328,562
abstentions;
4. Proposal No. 4 was approved with 12,891,938 shares cast in favor of
the proposal, 249,141 shares cast against the proposal and 329,480
abstentions;
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS.
27 Financial Data Schedule
(b) REPORTS ON FORM 8-K.
Current Report on Form 8-K, dated September 22, 2000, relating to the
merger between Media Metrix, Inc., MMX Acquisition Corp. and Jupiter
Communications, Inc.
<PAGE> 25
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
JUPITER MEDIA METRIX, INC.
By: /s/ TOD JOHNSON
------------------------------------
Tod Johnson
Chairman and Chief Executive Officer
Dated: November 14, 2000
By: /s/ JEAN ROBINSON
------------------------------------
Jean Robinson
Chief Financial Officer
Dated: November 14, 2000
