<PAGE> 1
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 June 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
Media Metrix, Inc.
(Exact name of registrant as specified in its charter)
Delaware 11-3374729
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
250 Park Avenue South
New York, NY 10003
(Address of principal executive offices) (Zip Code)
(212) 515-8700
(Registrant's telephone number, including area code)
N/A
(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
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
Common Stock, as of the latest practicable date:
Common Stock, par value $.01 per share, 19,869,166 shares outstanding as of
August 4, 2000
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Media Metrix, Inc.
Index
<TABLE>
<S> <C>
PART I Financial Information
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets --
June 30, 2000 and December 31, 1999 .............................. 1
Consolidated Statements of Operations --
Three and Six Months Ended June 30, 2000 and 1999 ................ 2
Consolidated Statement of Stockholders' Equity --
Six Months Ended June 30, 2000 ................................... 3
Consolidated Statements of Cash Flows --
Six Months Ended June 30, 2000 and 1999 .......................... 4
Notes to Consolidated Financial Statements ....................... 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations .............................. 6
Item 3. Quantitative and Qualitative Disclosures of Market Risk .......... 14
PART II Other Information
Item 1. Legal Proceedings ................................................ 15
Item 2. Changes in Securities and Use of Proceeds ........................ 15
Item 3. Defaults Upon Senior Securities .................................. 15
Item 4. Submission of Matters to a Vote of Security Holders .............. 15
Item 5. Other Information ................................................ 15
Item 6. Exhibits and Reports on Form 8-K ................................. 16
Signatures
</TABLE>
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Part I. Financial Information
Media Metrix, Inc.
Consolidated Balance Sheets
(in thousands, except for share data)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
2000 1999
---- ----
ASSETS (Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 68,818 $ 97,364
Marketable securities 27,877 14,877
Receivables:
Trade, less allowance for doubtful accounts of $658 in 2000
and $500 in 1999 10,017 5,473
Expenditures billable to clients 1,506 520
--------- ---------
Total receivables 11,523 5,993
Prepaid expenses and other current assets 857 454
--------- ---------
Total current assets 109,075 118,688
Property and equipment, at cost, net of accumulated depreciation
and amortization of $2,134 in 2000 and $561 in 1999 13,445 5,308
Intangibles acquired, net of accumulated amortization
of $18,922 in 2000 and $7,792 in 1999 49,045 52,948
Due from minority interests in consolidated subsidiaries -- 1,617
Other assets 1,050 283
--------- ---------
Total assets $ 172,615 $ 178,844
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 12,575 $ 10,560
Advance billings to clients 10,308 5,126
Current portion of long-term debt 123 196
--------- ---------
Total current liabilities 23,006 15,882
Minority interests 23 --
Long-term debt 150 173
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value -- 5,000,000 shares authorized -- --
Common stock, $.01 par value -- 60,000,000 shares authorized;
shares issued and outstanding -- 19,841,896 in 2000 and
19,681,999 in 1999 198 197
Additional paid-in capital 204,223 202,031
Accumulated other comprehensive loss (81) (83)
Accumulated deficit (53,898) (38,110)
Deferred compensation (1,006) (1,246)
--------- ---------
Total stockholders' equity 149,436 162,789
--------- ---------
Total liabilities and stockholders' equity $ 172,615 $ 178,844
========= =========
</TABLE>
See accompanying notes.
1
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Media Metrix, Inc.
Consolidated Statements of Operations
(Unaudited)
(in thousands, except for per share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Revenues $ 12,618 $ 4,257 $ 22,822 $ 7,435
Costs of revenues 4,716 2,118 9,127 3,838
-------- -------- -------- --------
Gross profit 7,902 2,139 13,695 3,597
Operating expenses:
Research and development 3,558 992 6,474 1,673
Sales and marketing 5,400 1,812 9,529 3,147
General and administrative 3,690 1,288 6,779 2,337
Amortization of deferred compensation and
other stock-based compensation 41 197 323 305
Amortization of intangibles 5,565 748 11,130 1,497
-------- -------- -------- --------
Total operating expenses 18,254 5,037 34,235 8,959
-------- -------- -------- --------
Loss from operations (10,352) (2,898) (20,540) (5,362)
Minority interests 1,154 -- 1,632 --
Interest and other income, net 1,519 331 3,120 411
-------- -------- -------- --------
Net loss (7,679) (2,567) (15,788) (4,951)
Preferred stock dividends -- (27) -- (109)
-------- -------- -------- --------
Net loss applicable to common stockholders $ (7,679) $ (2,594) $(15,788) $ (5,060)
======== ======== ======== ========
Basic and diluted net loss per share applicable to
common stockholders $ (0.39) $ (0.16) $ (0.80) $ (0.35)
======== ======== ======== ========
Shares used in the calculation of basic and
diluted
net loss per share applicable to common
stockholders 19,836 15,866 19,777 14,583
======== ======== ======== ========
</TABLE>
See accompanying notes.
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Media Metrix, Inc.
Consolidated Statement of Stockholders' Equity
Six months ended June 30, 2000
(Unaudited)
(in thousands, except for share data)
<TABLE>
<CAPTION>
ACCUMULATED
ADDITIONAL OTHER
COMMON STOCK PAID-IN COMPREHENSIVE
SHARES AMOUNT CAPITAL LOSS
------ ------ ------- ----
<S> <C> <C> <C> <C>
Balance at December 31, 1999 19,681,999 $ 197 $ 202,031 $ (83)
Comprehensive loss:
Net loss -- -- -- --
Unrealized losses on marketable securities -- -- -- 14
Foreign currency translation -- -- -- (12)
Total comprehensive loss
Issuance of common stock in connection with
acquisition 52,000 -- 1,759 --
Exercise of warrants and stock options 107,897 1 350 --
Amortization of deferred compensation -- -- -- --
Acceleration of vesting on options -- -- 83 --
----------- ------- --------- -------
Balance at June 30, 2000 19,841,896 $ 198 $ 204,223 $ (81)
=========== ======= ========= =======
</TABLE>
<TABLE>
<CAPTION>
TOTAL
ACCUMULATED DEFERRED STOCKHOLDERS'
DEFICIT COMPENSATION EQUITY
------- ------------ ------
<S> <C> <C> <C>
Balance at December 31, 1999 $ (38,110) $ (1,246) $ 162,789
Comprehensive loss:
Net loss (15,788) -- (15,788)
Unrealized losses on marketable securities -- -- 14
Foreign currency translation -- -- (12)
---------
Total comprehensive loss (15,786)
Issuance of common stock in connection with
acquisition -- -- 1,759
Exercise of warrants and stock options -- -- 351
Amortization of deferred compensation -- 240 240
Acceleration of vesting on options -- -- 83
---------- --------- ---------
Balance at June 30, 2000 $ (53,898) $ (1,006) $ 149,436
========== ========= =========
</TABLE>
See accompanying notes.
3
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Media Metrix, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
2000 1999
OPERATING ACTIVITIES
<S> <C> <C>
Net loss $(15,788) $ (4,951)
Adjustments to reconcile net loss to net cash
used in operating activities:
Loss on disposal of equipment -- 8
Provision for bad debts 170 98
Depreciation and amortization of property and equipment 1,573 121
Amortization of deferred compensation and other stock-based
Compensation 240 305
Acceleration of vesting on options 83 25
Amortization of intangibles 11,130 1,497
Minority interests (1,632) --
Changes in operating assets and liabilities:
Receivables (5,249) (1,695)
Prepaid expenses and other current assets 1,014 (195)
Other assets (638) --
Accounts payable and accrued liabilities (55) (3,230)
Advance billings to clients 5,178 1,570
-------- --------
Net cash used in operating activities (3,974) (6,447)
INVESTING ACTIVITIES
Cash paid for acquisition (5,692) --
Purchase of marketable securities (12,986) (10,481)
Purchases of property and equipment (9,390) (355)
Security deposits (19) (136)
-------- --------
Net cash used in investing activities (28,087) (10,972)
FINANCING ACTIVITIES
Repayments on long-term debt (96) (62)
Proceeds from exercise of warrants and options 351 1,258
Contributions from minority interests 3,272 --
Redemption of redeemable preferred stock -- (4,789)
Net proceeds from initial public offering -- 49,383
-------- --------
Net cash provided by financing activities 3,527 45,790
-------- --------
Effect of exchange rate changes on cash (12) --
-------- --------
Net decrease in cash and cash equivalents (28,546) (28,371)
Cash and cash equivalents at beginning of period 97,364 8,012
-------- --------
Cash and cash equivalents at end of period $ 68,818 $ 36,383
======== ========
SUPPLEMENTAL INFORMATION
Interest paid $ 7 $ 30
======== ========
</TABLE>
See accompanying notes.
4
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Media Metrix, Inc.
Notes to Consolidated Financial Statements
June 30, 2000
A. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements 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 six-month periods ended June
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 to by generally accepted accounting principles for
complete financial statements.
For further information, refer to the financial statements and footnotes thereto
included in Media Metrix' 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, Media Metrix 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 Media Metrix. Media Metrix
acquired all of the outstanding shares of MMXI Nordic in exchange for $5,692,000
and 52,000 shares of Media Metrix common stock. In connection with this
acquisition, SIFO purchased 8.0% of MMXI Europe, reducing Media Metrix'
ownership to 50.1%.
C. MERGER WITH JUPITER COMMUNICATIONS, INC.
On June 27, 2000, Media Metrix and Jupiter Communications, Inc. announced that
they had executed an Agreement and Plan of Merger pursuant to which MMX
Acquisition Corp., a wholly-owned subsidiary of Media Metrix, will be merged
with and into Jupiter (the "Merger"). Under the terms of the agreement, each
share of common stock of Jupiter issued and outstanding immediately prior to the
consummation of the merger will be converted into the right to receive 0.946 of
a share of Media Metrix common stock. The Merger is intended to constitute a
reorganization under Section 368(a) of the Internal Revenue Code of 1986, as
amended, and to be accounted for as a purchase transaction. Consummation of the
Merger is subject to various conditions, including, among other things, receipt
of the necessary approvals of the stockholders of Jupiter and Media Metrix and
certain regulatory approvals.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
Statements in this Quarterly Report on Form 10-Q concerning our future prospects
are "forward-looking statements" under the federal securities laws.
Forward-looking statements involve risks and uncertainties, and future events
and circumstances could differ significantly from those anticipated in the
forward-looking statements. We cannot assure you that future results will be
achieved, and actual results could differ materially from forecasts and
estimates. Important factors that could cause actual results to differ
materially are discussed in the section "Risk Factors" included in our Annual
Report on Form 10-K. You are encouraged to review such risk factors carefully.
OVERVIEW
We provide Internet audience measurement products and services to
leading Internet advertisers, advertising agencies, media companies, technology
companies and financial institutions. We have been at the forefront of the
development and coordination of technology and standards needed to facilitate
advertising and transactions between companies doing business over the Internet.
The quality and depth of our customer base and our customer renewal rate of over
95% reflect our position as a widely accepted Internet audience measurement
service. As a result of our acquisition of AdRelevance in October 1999, we now
offer advertising measurement products and services to our customers.
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, although NPD continued to
provide PC Meter with administrative and support services and technology
licenses. In April 1997, PC Meter was merged into Media Metrix, and we raised
approximately $4.0 million in a private placement to fund the expansion of our
business. The assets and liabilities and related revenues and expenses of PC
Meter have been reflected in our financial statements at their historical book
values.
In November 1998, we merged with RelevantKnowledge, then our leading
competitor. Following the merger, we increased our panel size and began to
integrate the best technological features from each company into our systems and
processes.
In October 1999, we acquired AdRelevance. The acquisition was
structured as a stock-for-stock transaction valued at approximately $59.4
million. In addition, we may issue additional shares of our common stock and
options and warrants having a value of approximately $2.6 million, based on the
closing price of our common stock on June 30, 2000, if AdRelevance achieves
certain post-closing goals measured as of October 2000. In connection with our
acquisition of AdRelevance, we recognized $54.3 million of intangibles,
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which are being amortized over a three-year period. Also, a non-recurring
in-process research and development cost of $6.8 million was expensed at the
time of the acquisition.
In connection with the formation of each of its international joint
ventures, Media Metrix granted each of its joint venture partners an option,
subject to certain conditions, to exchange such partner's shares in the
respective joint ventures for shares of Media Metrix common stock. If any
partner elects to exercise its option to convert its shares into shares of Media
Metrix common stock, Media Metrix will need to record additional goodwill in an
amount equal to the difference between the then fair market value of the shares
of Media Metrix' 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.
Our revenues are derived from our measurement products and services.
Our product offerings include both syndicated products and customized products.
We sell our syndicated products on an annual subscription basis. We typically
bill our syndicated clients, in advance, for up to the next twelve months of
products. Since 1997, syndicated products have accounted for approximately 90%
of our revenues, while customized products and services have accounted for
approximately 10%. Our combined customer base increased from approximately 100
customers at the end of 1997 to more than 900 as of June 30, 2000. Of the
customers subscribing under annual contracts for our syndicated products and
services in the first six months of 1999, over 95% remained customers at the end
of the first six months of 2000. With this high customer retention rate, we have
a growing base of recurring revenues from our syndicated products and services.
In addition, of the contracts renewed in the first six months of 2000, we
experienced an average increase in contract dollar value of over 40% due to the
purchase of additional services by our renewing clients.
We recognize revenues for the syndicated products and services over the
term of the related contract as services are provided. Revenues for customized
products and services are recognized in the period in which the product or
service is delivered.
Our business model is based on creating multiple products and services
from our core panel-based market research, technologies and databases. We began
establishing a panel of individuals in the United States under continuous
measurement in 1996. Today, Media Metrix has panels consisting of more than
100,000 people under measurement worldwide. We recruit individuals to become
members of our panel through random digit dial (RDD) telephone solicitation. We
also use direct mail to reach individuals identified within the RDD sample. We
incur costs in connection with recruiting and retaining members of our panel.
These costs are expensed in the year incurred. Our rate of expense growth, other
than panel and production, is primarily driven by increases in headcount and
sales and marketing expenditures.
We have incurred significant losses from operations since our
inception. We incurred losses from operations of $20.5 million in the first six
months of 2000, $25.9 million in 1999,
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$7.2 million in 1998 and $4.7 million in 1997. As of June 30, 2000, we had an
accumulated deficit of $53.9 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. We
plan on continuing to hire personnel to manage our current and anticipated
international operations and on entering into joint ventures with local
partners. In addition, we intend to invest heavily in further development and
improvement of our technologies and development of additional products and
services.
In the event that the merger with Jupiter is consummated, we will
recognize deferred compensation estimated to be approximately $22 million,
relating to the acquisition of unvested stock options in the merger. These costs
will be amortized over the remaining vesting period of up to four years. In
addition, we expect to record goodwill and other intangibles of approximately
$367.5 million (based on Jupiter's June 30, 2000 balance sheet), which will be
amortized over an estimated five years. Also, we expect to incur merger-related
expenses of approximately $15 million in the third quarter of 2000.
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 SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues 100.0% 100.0% 100.0% 100.0%
Costs of revenues 37.4 49.8 40.0 51.6
-------- -------- -------- --------
Gross profit 62.6 50.2 60.0 48.4
Operating expenses:
Research and development 28.2 23.3 28.4 22.5
Sales and marketing 42.8 42.6 41.7 42.3
General and administrative 29.3 30.2 29.7 31.4
Amortization of deferred compensation and
other stock-based compensation 0.3 4.6 1.4 4.1
Amortization of intangibles 44.1 17.6 48.8 20.2
-------- -------- -------- --------
Total operating expenses 144.7 118.3 150.0 120.5
-------- -------- -------- --------
Loss from operations (82.1) (68.1) (90.0) (72.1)
Minority interests 9.2 -- 7.1 --
Interest and other income, net 12.0 7.8 13.7 5.5
-------- -------- -------- --------
Net loss (60.9)% (60.3)% (69.2)% (66.6)%
======== ======== ======== ========
</TABLE>
THREE MONTHS ENDED JUNE 30, 2000 COMPARED TO THREE MONTHS ENDED JUNE 30, 1999
Revenues. Revenues increased 196.4% to $12.6 million for the three
months ended June 30, 2000 from $4.3 million for the three months ended June 30,
1999. Sales of
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syndicated audience measurement products and services accounted for
approximately 90% of revenues for each of the three months ended June 30, 2000
and 1999. Sales of customized products and services 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, and an increase in the amount of products and services
sold to our customers.
Costs of Revenues. 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 $7.9 million for the three months
ended June 30, 2000, or 62.6% of revenues. Gross profit was $2.1 million for the
three months ended June 30, 1999, or 50.2% of revenues. The increase in gross
profit as a percentage of revenues for the three months ended June 30, 2000 over
the prior period was due to an increase in revenues, while at the same time our
panel-related costs have remained constant.
In the three months ended June 30, 2000, Media Metrix invested
approximately $2.1 million in recruiting panels and other start up costs in
connection with its international operations in the U.K., France, Germany,
Sweden, Canada, Japan, Australia and Brazil. However, Media Metrix has not
realized sufficient revenues from its international operations to offset against
these costs, which has resulted in a lower overall gross margin for the period
compared to the gross margin applicable to the U.S. operations alone for the
same period.
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 $3.6 million for the
three months ended June 30, 2000, or 28.2% of revenues. Research and development
costs were $1.0 million for the three months ended June 30, 1999, or 23.3% of
revenues. The increase in research and development costs as a percentage of
revenues for the three months ended June 30, 2000 was due primarily to 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 personnel,
commissions, travel and entertainment expenses, public relations costs, trade
show expenses, seminars and marketing materials. Sales and marketing costs were
$5.4 million for the three months ended June 30, 2000, or 42.8% of revenues.
Sales and marketing costs were $1.8 million for the three months ended June 30,
1999, or 42.6% of revenues. The increase in absolute dollars was due primarily
to the increase in sales and marketing personnel, including the addition of
personnel in connection with our acquisition of AdRelevance and our
international expansion, as well as additional marketing costs.
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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
$3.7 million for the three months ended June 30, 2000, or 29.3% of revenues.
General and administrative costs were $1.3 million for the three months ended
June 30, 1999, or 30.2% 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, including the addition of personnel and
office facilities in connection with our acquisition of AdRelevance. The
decrease in general and administrative costs as a percentage of revenues was due
primarily to revenues increasing at a greater rate.
Amortization of Deferred Compensation and Other Stock-based
Compensation. Amortization of deferred compensation and other stock-based
compensation of $41,000 for the three months ended June 30, 2000 and $197,000
for the three months ended June 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 $5.6 million for
the three months ended June 30, 2000 represent the amortization of intangibles
acquired in our merger with RelevantKnowledge and our acquisitions of
AdRelevance and MMXI Nordic. Amortization charges of $748,000 for the three
months ended June 30, 1999 represent the amortization of RelevantKnowledge's
panel and other intangibles acquired in that merger.
Loss from Operations. Loss from operations was $10.4 million for the
three months ended June 30, 2000, or 82.1% of revenues, and $2.9 million for the
three months ended June 30, 1999, or 68.1% of revenues. Loss from operations in
terms of absolute dollars was higher in the three months ended June 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 amortization of
intangibles from the AdRelevance and MMXI Nordic acquisition 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 12.0% of revenues, for the three months
ended June 30, 2000 as compared to $331,000 for the three months ended June 30,
1999, or 7.8% of revenues. The increase in interest and other income was due to
the investment of the proceeds of our initial and secondary public offerings.
SIX MONTHS ENDED JUNE 30, 2000 COMPARED TO SIX MONTHS ENDED JUNE 30, 1999
Revenues. Revenues increased 206.9% to $22.8 million for the six months
ended June 30, 2000 from $7.4 million for the six months ended June 30, 1999.
Sales of syndicated audience measurement products and services accounted for
approximately 90% of revenues
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for each of the six months ended June 30, 2000 and 1999. Sales of customized
products and services 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 international growth, and an
increase in the amount of products and services sold to our customers.
Costs of Revenues. Gross profit was $13.7 million for the six months
ended June 30, 2000, or 60.0% of revenues. Gross profit was $3.6 million for the
six months ended June 30, 1999, or 48.4% of revenues. The increase in gross
profit as a percentage of revenues for the six months ended June 30, 2000 over
the prior period was due to an increase in revenues, without a commensurate
increase in costs.
In the six months ended June 30, 2000, Media Metrix invested
approximately $3.6 million in recruiting panels and other start up costs in
connection with its international operations in the U.K., France, Germany,
Sweden, Canada, Japan, Australia and Brazil. However, Media Metrix has not
realized sufficient revenues from its international operations to offset against
these costs, which has resulted in a lower overall gross margin for the period
compared to the gross margin applicable to the U.S. operations alone for the
same period.
Research and Development. Research and development costs were $6.5
million for the six months ended June 30, 2000, or 28.4% of revenues. Research
and development costs were $1.7 million for the six months ended June 30, 1999,
or 22.5% of revenues. The increase in research and development costs as a
percentage of revenues for the six months ended June 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 $9.5 million for
the six months ended June 30, 2000, or 41.7% of revenues. Sales and marketing
costs were $3.1 million for the six months ended June 30, 1999, or 42.3% of
revenues. The increase in absolute dollars was due primarily to the increase in
sales and marketing personnel, including the addition of personnel in connection
with our acquisition of AdRelevance and our international expansion, as well as
additional marketing costs.
General and Administrative. General and administrative costs were $6.8
million for the six months ended June 30, 2000, or 29.7% of revenues. General
and administrative costs were $2.3 million for the six months ended June 30,
1999, or 31.4% 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, including the addition of personnel and
office facilities in connection with our acquisition of AdRelevance. The
decrease in general and administrative costs as a percentage of revenues was due
primarily to revenues increasing at a greater rate.
Amortization of Deferred Compensation and Other Stock-based
Compensation. Amortization of deferred compensation and other stock-based
compensation of $323,000 for
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the six months ended June 30, 2000 and $305,000 for the six months ended June
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 $11.1 million for
the six months ended June 30, 2000 represent the amortization of intangibles
acquired in our merger with RelevantKnowledge and our acquisitions of
AdRelevance and MMXI Nordic. Amortization charges of $1.5 million for the six
months ended June 30, 1999 represent the amortization of RelevantKnowledge's
panel and other intangibles acquired in that merger.
Loss from Operations. Loss from operations was $20.5 million for the
six months ended June 30, 2000, or 90.0% of revenues, and $5.4 million for the
six months ended June 30, 1999, or 72.1% of revenues. Loss from operations in
terms of absolute dollars was higher in the six months ended June 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 amortization of
intangibles from the AdRelevance and MMXI Nordic acquisition offset by an
increase in revenues relative to the increases in costs of revenues and
operating costs.
Interest and Other Income, net. Interest and other income, net of
interest expense was $3.1 million, or 13.7% of revenues, for the six months
ended June 30, 2000 as compared to $411,000 for the six months ended June 30,
1999, or 5.5% of revenues. The increase in interest and other income was due to
the investment of the proceeds of our initial and secondary public offerings.
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, 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, Media Metrix sold 1,500,000 shares and
1,500,000 shares were sold by existing stockholders. Gross proceeds to Media
Metrix were $75.8 million, and net proceeds to Media Metrix were $71.1 million.
Net cash used in operating activities was $4.0 million for the six
months ended June 30, 2000, compared to $6.4 million for the six months ended
June 30, 1999. The variance for 2000 compared to 1999 was primarily due to the
net repayment of $4.1 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.
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Net cash used in investing activities was $28.1 million for the six
months ended June 30, 2000, compared to $11.0 million for the six months ended
June 30, 1999. The increase was primarily attributable to cash paid for the
Internet audience measurement business operated by SIFO Group AB in Sweden and
the purchase of fixed assets due to the growth of the business both domestically
and internationally and the computer equipment purchased related to the building
of our data warehouse and our new client interface system. We expect our
expenditures to increase due to increased costs incurred in connection with
improvements to our leasehold space.
Net cash provided by financing activities was $3.5 million for the six
months ended June 30, 2000, compared to $45.8 million for the six months ended
June 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 warrants and stock options. Cash
provided by financing activities for 1999 primarily relates to proceeds received
from our initial public offering.
As of June 30, 2000, we had $68.8 million of cash and cash equivalents
and $27.9 million of marketable securities. As of June 30, 2000, our material
capital commitments consisted of improvements to our additional leasehold space,
which we anticipate to be $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. 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.
IMPACT OF YEAR 2000
In prior years, we discussed the nature and progress of our plans to
become ready for the Year 2000. In late 1999, we completed the remediation and
testing of our systems. As a result of those planning and implementation
efforts, we did not experience any significant disruptions in our essential
information technology and non-information technology systems. We believe that
our systems successfully responded to the Year 2000 date change. We are not
aware of any material problems resulting from Year 2000 issues, either with our
products, our internal systems or the products and services of third parties. We
will continue to monitor our essential computer systems and applications and
those of our suppliers and licensors throughout the year 2000 to ensure that any
latent Year 2000 matters that may arise are addressed promptly.
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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.
We have historically had very low exposure to changes in foreign
currency exchange rates, therefore we 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.
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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 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 June 30, 2000, proceeds
were applied as follows:
- $4.8 million towards the redemption of our redeemable preferred stock from
The NPD Group, Inc.;
- $24.3 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
None
ITEM 5. OTHER INFORMATION
None
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS.
2 Agreement and Plan of Merger, among Media Metrix, Inc., MMX
Acquisition Corp. and Jupiter Communications, Inc., dated as
of June 26, 2000 (Incorporated by reference to the Company's
Registration Statement on Form S-4 (File No. 333-42316), filed
with the SEC on July 27, 2000)
10.1 Lease Agreement between 352 P.A.S. Associates and Media
Metrix, Inc. dated as of March 1, 2000 (Incorporated by
reference to the Company's Registration Statement on Form S-4
(File No. 333-42316), filed with the SEC on July 27, 2000)
10.2 Sublease between The NPD Group, Inc. and Media Metrix, Inc.
dated as of April 2000 (Incorporated by reference to the
Company's Registration Statement on Form S-4 (File No.
333-42316), filed with the SEC on July 27, 2000)
10.3 Sublease between TMP Worldwide, Inc. and Media Metrix, Inc.
dated as of April 2000 (Incorporated by reference to the
Company's Registration Statement on Form S-4 (File No.
333-42316), filed with the SEC on July 27, 2000)
10.4 Lease Agreement between Grace Brusseau, individually, and
Grace Brusseau and Stephen Kay, co-trustees of Testamentary
Trust of Michael J. Borelli, dba Grazia Investment Company and
Media Metrix, Inc. dated December 17, 1999 (Incorporated by
reference to the Company's Registration Statement on Form S-4
(File No. 333-41316), filed with the SEC on July 27, 2000)
27 Financial Data Schedule
99 Press Release dated June 27, 2000. (Incorporated by reference
to the Company's Form 8-K filed with the SEC on June 27, 2000)
(b) REPORTS ON FORM 8-K.
Current Report on Form 8-K, dated June 27, 2000, relating to the merger
between Media Metrix, Inc., MMX Acquisition Corp. and Jupiter
Communications, Inc.
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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.
Media Metrix, Inc.
------------------
(Registrant)
Dated: August 8, 2000 By: /s/ Tod Johnson
-------------------------------------
Tod Johnson
Chief Executive Officer
Dated: August 8, 2000 By: /s/ Thomas A. Lynch
-------------------------------------
Thomas A. Lynch
Chief Financial Officer and Treasurer
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