<PAGE>
================================================================================
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 from ___________ to ___________
Commission File Number: 000-26891
HOTJOBS.COM, LTD.
(Exact name of registrant as specified in its charter)
DELAWARE 13-3931821
-------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
406 West 31st Street, 9th Floor
New York, New York 10001
------------------------
(Address of principal executive office) (Zip code)
(212) 699-5300
--------------
(Registrant's telephone number, including area code)
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 36,612,342 shares of the registrant's common
stock outstanding.
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<PAGE>
HOTJOBS.COM, LTD.
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION PAGE NUMBER
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets as of
September 30, 2000 (Unaudited) and December 31, 1999......... 1
Unaudited Condensed Consolidated Statements of
Operations for the Three and Nine Months Ended
September 30, 2000 and 1999.................................. 2
Unaudited Condensed Consolidated Statements of Cash
Flows for the Nine Months Ended September 30,
2000 and 1999................................................ 3
Notes to Unaudited Condensed Consolidated Financial
Statements................................................... 5
Item 2. Management's Discussion and Analysis of Financial Results
of Operations................................................ 8
Item 3. Quantitative and Qualitative Disclosures About Market Risk... 28
PART II. OTHER INFORMATION
Item 1. Legal Proceedings...................................... 28
Item 2. Changes in Securities and Use of Proceeds.............. 28
Item 6. Exhibits and Reports on Form 8-K....................... 29
Item 7. Signature.............................................. 30
iii
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
HOTJOBS.COM, LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
------------- -------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ................................................. $ 67,497,397 $ 88,372,658
Marketable securities ..................................................... 38,240,222 49,897,110
Accounts receivable, net .................................................. 20,191,682 6,456,227
Prepaid expenses and other current assets ................................. 7,028,135 2,744,041
------------- -------------
TOTAL CURRENT ASSETS ............................................... 132,957,436 147,470,036
Property and equipment, net ............................................... 20,652,882 4,572,496
Goodwill, net ............................................................. 41,218,074 --
Other assets .............................................................. 301,601 498,720
------------- -------------
TOTAL ASSETS ....................................................... $ 195,129,993 $ 152,541,252
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Line of credit ............................................................ $ 333,334 166,293
Accounts payable and accrued expenses ..................................... 28,961,395 9,233,739
Other current liabilities ................................................. 2,090,513 992,812
Deferred revenue - current portion ........................................ 14,601,316 4,292,808
Notes payable - current portion ........................................... 110,846 297,753
Current installments of obligations under capital leases .................. 193,799 205,840
------------- -------------
TOTAL CURRENT LIABILITIES .......................................... 46,291,203 15,189,245
Line of credit, excluding current portion .................................... 500,000 498,879
Deferred revenue, excluding current portion .................................. 1,350,809 1,080,544
Notes payable - non-current portion .......................................... -- 27,930
Obligations under capital leases, excluding current installments ............. 75,167 216,479
------------- -------------
TOTAL LIABILITIES .................................................. 48,217,179 17,013,077
Stockholders' equity:
Preferred stock, $0.01 par value, 10,000,000 shares authorized, none issued
and outstanding as of September 30, 2000 and
December 31, 1999, respectively ...................................... -- --
Common stock, $0.01 par value; 100,000,000 shares authorized;
36,583,261 and 31,344,419 shares issued and outstanding at
September 30, 2000 and December 31, 1999, respectively ................ 365,833 313,444
Deferred compensation ........................................................ (4,171,016) (5,509,523)
Additional paid-in capital ................................................... 222,861,476 177,952,759
Accumulated deficit .......................................................... (72,127,314) (37,219,056)
Accumulated other comprehensive loss ......................................... (16,165) (9,449)
------------- -------------
TOTAL STOCKHOLDERS' EQUITY ......................................... 146,912,814 135,528,175
------------- -------------
Commitments and contingencies
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ......................... $ 195,129,993 $ 152,541,252
============= =============
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
1
<PAGE>
HOTJOBS.COM, LTD.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------------ ------------------------------
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues:
e-Recruitment ........................ $ 21,682,374 $ 4,262,834 $ 49,846,626 $ 9,010,620
Software ............................. 4,552,730 362,653 8,382,918 1,063,487
Career expos ......................... 1,394,331 658,819 4,026,193 1,188,371
Other ................................ 1,185,509 353,778 2,788,856 809,420
------------ ------------ ------------ ------------
Total revenues ................ 28,814,944 5,638,084 65,044,593 12,071,898
Cost of revenues, excludes $5,053, $5,775,
$15,159 and $7,700 of non-cash
compensation ........................ 7,198,968 1,195,097 14,545,959 2,186,214
------------ ------------ ------------ ------------
Gross profit .................. 21,615,976 4,442,987 50,498,634 9,885,684
------------ ------------ ------------ ------------
Operating expenses:
Product development, excludes
$61,720, $216,490, $185,161 and
$240,143 of non-cash compensation.. 3,168,118 407,218 6,021,566 823,865
Sales and marketing, excludes
$48,005, $72,260, $147,143 and
$90,956 of non-cash compensation... 20,736,571 8,168,771 60,234,350 15,817,910
General and administrative, excludes
$366,601, $1,080,203, $1,030,934
and $1,200,877 of non-cash
compensation ...................... 7,132,592 2,610,433 17,112,510 4,883,433
Non-cash compensation ................ 481,379 1,374,728 1,378,397 1,539,676
Amortization of goodwill ............. 4,038,260 -- 6,138,862 --
------------ ------------ ------------ ------------
Total operating expenses ...... 35,556,920 12,561,150 90,885,685 23,064,884
------------ ------------ ------------ ------------
Loss from operations ...... (13,940,944) (8,118,163) (40,387,051) (13,179,200)
Net interest income (expense) ........... 1,826,128 204,350 5,478,792 149,077
------------ ------------ ------------ ------------
Net loss .................. $(12,114,816) $ (7,913,813) $(34,908,259) $(13,030,123)
============ ============ ============ ============
Deemed dividend attributable to
issuance of convertible preferred
stock ................................ $ -- $ 15,633,871 $ -- $ 16,200,000
------------ ------------ ------------ ------------
Net loss attributable to common stock ... $(12,114,816) $(23,547,684) $(34,908,259) $(29,230,123)
============ ============ ============ ============
Basic and diluted net loss per
common share ......................... $ (0.33) $ (1.00) $ (1.03) $ (1.37)
============ ============ ============ ============
Weighted average shares outstanding
used in basic and diluted net loss per
common share calculation ............. 36,289,591 23,608,858 33,986,438 21,364,231
============ ============ ============ ============
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
2
<PAGE>
HOTJOBS.COM, LTD.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
--------------------------------
2000 1999
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ........................................................... $ (34,908,259) $ (13,030,123)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization .................................. 9,408,642 461,455
Provision for doubtful accounts ................................ 2,622,318 638,827
Non-cash compensation .......................................... 1,378,397 1,539,676
Changes in operating assets and liabilities, net of effects of
acquisition:
Accounts receivable ............................................ (12,666,649) (3,817,074)
Prepaid expenses and other current assets ...................... (1,537,415) (23,933)
Accounts payable and accrued expenses .......................... 14,523,883 6,141,811
Deferred revenue ............................................... 5,128,781 1,855,252
Other .......................................................... 701,847 6,111
------------- -------------
NET CASH USED IN OPERATING ACTIVITIES .................. (15,348,455) (6,227,998)
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ............................................ (17,561,834) (2,020,346)
Purchase of marketable securities ............................... (234,165,222) (24,599,922)
Sale of marketable securities ................................... 246,475,000 --
Restricted cash ................................................. (1,800,000) --
Purchase of trademark ........................................... (34,898) --
Business acquisition, net of cash acquired ...................... 663,971 --
Note receivable ................................................. (400,000) --
------------- -------------
NET CASH USED IN INVESTING ACTIVITIES .................. (6,822,983) (26,620,268)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of stock for the Employee Stock
Purchase Plan .............................................. 880,185 --
Payment of note payable ........................................ (214,837) (51,229)
Proceeds from note payable ..................................... -- 480,998
Proceeds from line of credit ................................... 334,828 --
Repayment of line of credit .................................... (166,667) (180,000)
Proceeds from exercise of options .............................. 635,659 17,305
Repurchase of common stock ..................................... -- (61,000)
Repayment to affiliate ......................................... -- (3,784,900)
Proceeds from initial public offering of common stock .......... -- 23,281,452
Proceeds from issuance of redeemable convertible preferred stock -- 16,114,887
Principal payments under capital lease obligations ............. (153,354) (133,761)
------------- -------------
NET CASH PROVIDED BY FINANCING ACTIVITIES ............. 1,315,814 35,683,752
------------- -------------
EFFECT OF FOREIGN EXCHANGE RATES ON CASH ............................ (19,637) (454)
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS .. (20,875,261) 2,835,032
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD .................... 88,372,658 167,004
------------- -------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD .......................... $ 67,497,397 $ 3,002,036
============= =============
</TABLE>
3
<PAGE>
HOTJOBS.COM, LTD.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
--------------------------------
2000 1999
------------- -------------
<S> <C> <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid ............................................. $ 112,612 $ 142,282
NON-CASH TRANSACTIONS:
Equipment acquired under capital leases ................... $ -- $ 457,126
Barter transaction ........................................ $ 25,000 252,500
Stock issued for purchase of trademark .................... $ 12,562 $ --
Issuance of common stock and assumption of Resumix, Inc.
outstanding options in exchange for the capital stock of
Resumix, Inc., net of cash received and paid ........... $48,013,799 $ --
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
4
<PAGE>
HOTJOBS.COM, LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1) DESCRIPTION OF BUSINESS
HotJobs.com, Ltd. (the "Company") is a leading Internet-based recruiting
solutions company. The Company's suite of products and services leverages the
Internet to provide a direct exchange of information between job seekers and
employers. The Company's employment exchange, WWW.HOTJOBS.COM, allows member
employers access to a database of job seekers and a back-end system which
provides recruiters with the tools to post, track and manage job openings in
a real-time environment. The employment exchange also allows job seekers to
identify, research, apply and evaluate job opportunities while enabling them
to restrict access to their resumes. Headhunters are prohibited from using
the employment exchange, ensuring direct contact between job seekers and
member employers. The Company also offers its Resumix(R), Softshoe(R) and
Shoelace(TM) proprietary hiring management software and provides employers
with additional recruiting solutions such as WorkWorld(TM) career expos,
online advertising and consulting services.
The majority of the Company's revenues is recurring and is primarily derived
from employer memberships to the Company's online employment exchange,
WWW.HOTJOBS.COM. The Company operates in a highly competitive environment and
inherent in the Company's business are various risks and uncertainties,
including its limited operating history and unproven business model. The
Company's success may depend in part upon the emergence of the Internet as a
recruiting medium, prospective products and service development efforts and
the acceptance of the Company's products and services by the marketplace.
HotJobs.com, Ltd. was incorporated in Delaware on February 20, 1997
(inception) as Hot Jobs, Inc. On September 23, 1998, Hot Jobs, Inc. changed
its name to HotJobs.com, Ltd. On May 11, 2000, the Company acquired Resumix,
Inc. ("Resumix") pursuant to which Resumix became a wholly-owned subsidiary
of the Company.
2) ACQUISITION OF RESUMIX, INC.
On May 11, 2000, the Company acquired Resumix in a merger in which a
wholly-owned subsidiary of the Company was merged with and into Resumix, with
the result that Resumix is now a wholly-owned subsidiary of the Company.
In connection with the acquisition and in exchange for 100% of the
outstanding capital stock of Resumix, the Company issued 3,560,019 shares of
its common stock, of which 359,282 of these shares will be held in escrow
until May 11, 2001 pending satisfaction of certain conditions, and paid a
total of $392,456 in cash. In addition, the Company assumed Resumix's
existing stock option plans, resulting in the potential additional issuance
of approximately 1.1 million shares of the Company's common stock upon the
exercise of these options. The total purchase price for the acquisition,
including approximately $1.7 million of acquisition expenses, was
approximately $45.5 million. The excess of the purchase price over the fair
value of the assets acquired of approximately $47.3 million has been recorded
as goodwill and is being amortized on a straight-line basis over three years.
Resumix is based in Sunnyvale, California and has developed artificial
intelligence search capabilities for its recruiting software products. The
acquisition has been accounted for by the purchase method and, accordingly,
the results of operations of Resumix have been included in the Company's
consolidated financial statements from May 11, 2000.
The following unaudited pro forma financial information presents the combined
results of operations of the Company and Resumix, as if the acquisition had
occurred as of the beginning of the respective periods, after giving effect
to certain adjustments, including the amortization of goodwill. The pro forma
financial information does not necessarily reflect the results of operations
that would have occurred had the Company and Resumix constituted a single
entity during such period.
5
<PAGE>
UNAUDITED PRO FORMA FINANCIAL INFORMATION
(IN MILLIONS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------- -----------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues ..................... $ 28.8 $ 12.3 71.9 33.6
======== ======== ======== ========
Net loss ..................... $ (12.1) $ (14.9) $ (44.6) $ (31.7)
======== ======== ======== ========
Basic and diluted net loss per
common share ................. $ (0.33) $ (1.12) $ (1.25) $ (1.92)
======== ======== ======== ========
Weighted average shares
outstanding used in basic and
diluted net loss per common
share ........................ 36.3 27.2 35.7 24.9
======== ======== ======== ========
</TABLE>
3) BASIS OF PRESENTATION
The unaudited interim condensed consolidated financial statements of the
Company as of September 30, 2000 and for the three and nine months ended
September 30, 2000 and 1999, included herein have been prepared in accordance
with the instructions for Form 10-Q under the Securities Exchange Act of
1934, as amended, and Article 10 of Regulation S-X under the Securities Act
of 1933, as amended. Certain information and note disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to
such rules and regulations relating to interim consolidated financial
statements.
In the opinion of management, the accompanying unaudited interim condensed
consolidated financial statements reflect all adjustments, consisting only of
normal recurring adjustments, necessary to present fairly the financial
position of the Company at September 30, 2000, and the results of their
operations for the three and nine months ended September 30, 2000 and 1999
and their cash flows for the nine months ended September 30, 2000 and 1999.
The results of operations for such periods are not necessarily indicative of
results expected for the full year or for any future period. These
consolidated financial statements should be read in conjunction with the
audited consolidated financial statements as of December 31, 1999, and for
the two years then ended and for the period from February 20, 1997
(inception) to December 31, 1999 and related notes included in the Company's
Form 10-K filed with the Securities and Exchange Commission on
March 24, 2000. Certain reclassifications have been made to the financial
statements to conform to the three months ended September 30, 2000
presentation.
4) BUSINESS SEGMENT REPORTING
The Company has determined that it does not have any separately reportable
business segments.
5) RECENT ACCOUNTING PRONOUNCEMENTS
The Company is required to adopt SFAS No. 133 "ACCOUNTING FOR DERIVATIVE
INSTRUMENTS AND HEDGING ACTIVITIES" effective January 1, 2001, and has not
yet determined the effect SFAS No. 133 will have on its results of
operations and financial position. This statement is not required to be
applied retroactively for financial statements of prior periods.
FASB Interpretation No. 44, "ACCOUNTING FOR CERTAIN TRANSACTIONS INVOLVING
STOCK COMPENSATION" ("FIN No. 44") provides guidance for applying APB Opinion
No. 25, "ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES." With certain
6
<PAGE>
exceptions, FIN No. 44 applies prospectively to new awards, exchanges of
awards in a business combination, modifications to outstanding awards and
changes in grantee status on or after July 1, 2000. The implementation of
this standard had no significant effect on the Company's results of
operations.
In December 1999, the SEC issued Staff Accounting Bulletin No. 101, "REVENUE
RECOGNITION IN FINANCIAL STATEMENTS" ("SAB No. 101"), which summarizes
certain of the SEC staff's views in applying generally accepted accounting
principles to revenue recognition in financial statements. The Company will
be required to adopt the accounting provisions of SAB No. 101 no later than
the fourth quarter of 2000. The Company does not believe that the
implementation of SAB No. 101 will have a significant effect on its results
of operations.
6) LOAN AND SECURITY AGREEMENT
On September 16, 1999, the Company entered into a Loan and Security Agreement
with Silicon Valley Bank, which was subsequently modified on November 22,
1999. The agreement consisted of a $4,000,000 revolving line of credit and a
$1,000,000 equipment line of credit. The revolving line of credit had a term
of one year and bore interest at an annual rate of the bank's prime rate plus
75 basis points. On September 16, 2000, the term of the revolving line of
credit expired. No amounts were outstanding under the revolving line of
credit on September 16, 2000. The equipment line of credit has a term of 42
months and bears interest at an annual rate of the bank's prime rate plus 100
basis points. The Company was permitted to borrow under this equipment line
of credit only during the first nine months of the term. Interest on the
equipment line of credit is payable monthly and the principal is payable over
36 months commencing on April 1, 2000. As of September 30, 2000, the Company
had $833,334 outstanding under the equipment line of credit.
7) NON-CASH COMPENSATION
In connection with the granting of options in 1999, the Company recorded net
deferred compensation of approximately $7.5 million. For financial reporting
purposes, the deferred compensation is being amortized as non-cash
compensation over the vesting period of the related options. Accordingly, the
Company amortized $481,379 and $1,378,397 of deferred compensation as
non-cash compensation for the three and nine months ended September 30, 2000,
respectively, and $1,374,728 and $1,539,676 of deferred compensation as
non-cash compensation for the three and nine months ended September 30, 1999,
respectively. The deferred compensation remaining at September 30, 2000 of
approximately $4.2 million will be amortized as non-cash compensation over
the remaining vesting period of the related options through August 2003.
8) EMPLOYEE STOCK PURCHASE PLAN
On August 10, 1999, the Employee Stock Purchase Plan became effective. The
plan is designed to comply with the requirements of Section 423 of the
Internal Revenue Code. The plan allows eligible employees to purchase shares
of the Company's common stock through periodic payroll deductions at 85% of
the lower of the fair market value of the Company's common stock on the
employee's entry date into the offering period or the fair market value on
the semi-annual purchase date. Currently, a total of 128,848 shares of common
stock are available for issuance under the plan.
The plan has a series of successive offering periods, each with a maximum
duration of 24 months. The initial offering period began on August 10, 1999
and will end on the last business day in July 2001. The next offering period
will begin on the first business day in August 2001 and subsequent offering
periods will be set by the Compensation Committee of the Company's Board of
Directors.
On January 31, 2000, the first purchase date under the plan, employees
purchased 58,718 shares of the Company's common stock for $399,282, or $6.80
per share. On July 31, 2000, employees purchased 62,434 shares of the
Company's common stock for $480,903, or $7.70 per share on average. As of
September 30, 2000, employees have contributed $438,050 towards the next plan
purchase date of January 31, 2001. The amount contributed to the plan by the
employees is included in other current liabilities in the condensed
consolidated balance sheet as of September 30, 2000.
7
<PAGE>
9) COMMITMENTS AND CONTINGENCIES
a) In January 2000, the Company entered into a five-year lease agreement for
office space in Santa Monica, California, with total minimum future lease
payments remaining as of September 30, 2000 of approximately $593,000.
b) In February 2000, the Company entered into a four-year lease agreement
for office space in Austin, Texas, with total minimum future lease payments
remaining as of September 30, 2000 of approximately $425,000.
c) In July 2000, the Company entered into a five-year lease agreement for
office space in Toronto, Ontario, Canada, with total minimum future lease
payments remaining as of September 30, 2000 of approximately $308,000.
d) As of October 1, 2000, the Company has commitments of approximately $13.7
million for various advertising campaigns through January 2002. These
commitments include broadcasting, print, online and outdoor advertising.
10) BASIC AND DILUTED NET LOSS PER COMMON SHARE
The Company computes net loss per share in accordance with SFAS No. 128,
"COMPUTATION OF EARNINGS PER SHARE," and the SEC Staff Accounting Bulletin
No. 98 ("SAB 98"). Under the provisions of SFAS No. 128 and SAB 98, basic
net loss per share is computed by dividing the net loss available to common
stockholders for the period by the weighted average number of common shares
outstanding during the period. Diluted net loss per share is computed by
dividing the net loss for the period by the weighted average number of
common and common equivalent shares outstanding during the period. As the
Company had a net loss in each of the periods presented, basic and diluted
net loss per share is the same. Diluted net loss per share for the three and
nine months ended September 30, 2000 and 1999 does not include the effects
of options to purchase shares of common stock, as the effect of their
inclusion is anti-dilutive during each period.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information in this report contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. Such
statements are based upon current expectations, assumptions, estimates and
projections about HotJobs.com and our industry. These forward-looking
statements are subject to the many risks and uncertainties that exist in our
operations and business environment that may cause actual results,
performance or achievements of HotJobs.com to be different from those
expected or anticipated in the forward-looking statements. Any statements
contained herein that are not statements of historical fact may be deemed to
be forward-looking statements. For example, words such as "may," "will,"
"should," "estimates," "predicts," "potential," "continue," "strategy,"
"believes," "anticipates," "plans," "expects," "intends," and similar
expressions are intended to identify forward-looking statements.
HotJobs.com's actual results and the timing of certain events could differ
significantly from those anticipated in such forward-looking statements.
Factors that might cause or contribute to such a discrepancy include, but
are not limited to, those discussed elsewhere in this report in the section
entitled "Risk Factors" and the risks discussed in our other Securities and
Exchange Commission ("SEC") filings. The forward-looking statements included
in this report reflect the beliefs of our management on the date of this
report. We undertake no obligation to update publicly any forward-looking
statements for any reason, even if new information becomes available or
other events or circumstances occur in the future.
We are a leading provider of comprehensive recruiting solutions that
leverage the Internet to exchange information more efficiently between job
seekers and employers. The majority of our revenues is recurring and is
derived primarily from employer memberships to our WWW.HOTJOBS.COM
employment exchange. We also offer our Resumix, Softshoe and Shoelace
proprietary hiring management software and provide additional recruiting
solutions to employers such as our WorkWorld career expos, online
advertising and consulting services.
Founded in February 1997, we began operations with seven employees and we
have grown to 613 employees as of September 30, 2000. Our early operating
activities related primarily to the development of the necessary
technological infrastructure for the operation of WWW.HOTJOBS.COM. In
February 1997, we commercially launched our WWW.HOTJOBS.COM employment
exchange. In September 1997, we began to license our Softshoe hiring
management software. During 1998 and 1999, we experienced significant
increases in our revenue from sales of memberships to
8
<PAGE>
our employment exchange and license and hosting fees for our Softshoe
software. In early 1999, we introduced our WorkWorld career expos and
expanded our marketing programs to increase awareness of the HotJobs.com
brand. In May 2000, we acquired Resumix, which has developed
artificial intelligence search capabilities for its recruiting software
products. In 2000, we also launched our Shoelace turn-key hiring management
software. Hosted by HotJobs.com, Shoelace delivers the same technology that
powers the WWW.HOTJOBS.COM employment exchange on a private label version
that can be used on any corporate website. In May 1999, we raised net
proceeds of approximately $16.1 million in a private placement of our Series
A Preferred Stock. In the third quarter of 1999, we raised net proceeds of
approximately $23.2 million in our IPO and in the fourth quarter of 1999, we
raised net proceeds of approximately $114.9 million in our follow-on public
offering.
We have reclassified our revenues as follows:
o E-RECRUITMENT FEES, consisting of subscription fees paid by employers
for membership to our WWW.HOTJOBS.COM employment exchange and fees
derived from single-ad job postings on WWW.HOTJOBS.COM. We sell
memberships to each employer on a per recruiter basis and bill the
employer monthly, quarterly, semi-annually, annually or bi-annually.
Membership entitles each recruiter to post a specific number of jobs on
WWW.HOTJOBS.COM simultaneously and to search the resume database.
Single-ad job postings are billed when service is provided.
o SOFTWARE FEES, consisting mainly of license and maintenance fees
generated from customers of Resumix, license and hosting fees generated
from Softshoe and Shoelace customers as well as license and hosting
fees relating to a miscellaneous proprietary software product.
o CAREER EXPO FEES, consisting of fees from employers that rent booths at
our WorkWorld career expos.
o OTHER, consisting of fees primarily derived from co-operative
advertising, banner ads, consulting and barter advertising.
We recognize revenue as follows:
o E-RECRUITMENT FEES. We provide subscriptions for membership to our
employment exchange for a minimum term of three months. We recognize
subscription revenue over the subscription term. We recognize single-ad
job postings revenue over the period of delivery of service.
o SOFTWARE FEES. We recognize Resumix software license fees upon the
delivery of the software and Softshoe and Shoelace license fees ratably
over the four-year estimated useful life of the software, in accordance
with Statements of Position 97-2 and 98-9 issued by the American
Institute of Certified Public Accountants. We provide maintenance and
hosting services to our customers on a monthly basis, and we recognize
revenues in the month we provide the service.
o CAREER EXPO FEES. We recognize career expo fees in the month in which
the career expo takes place.
o OTHER. We recognize revenues related to these services over the period
of delivery of service.
We classify our cost of revenues and operating expenses as follows:
o COST OF REVENUES. Cost of revenues primarily consists of compensation
and other costs associated with the operation of our WWW.HOTJOBS.COM
employment exchange as well as costs incurred to provide maintenance,
hosting and training services for our software products and costs
associated with operating our career expos.
o PRODUCT DEVELOPMENT EXPENSE. Product development expense consists
primarily of costs associated with the compensation of product
development personnel. Our product development expenses constitute all
of our research and development expenditures.
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o SALES AND MARKETING EXPENSE. Sales and marketing expense consists
primarily of advertising and promotional expenses, sales and marketing
compensation, including base salary and sales commissions, public
relations expenses, conference expenses, printing fees and
telemarketing communications expenses. Sales commissions have remained
relatively constant as a percentage of revenues. However, the timing
and magnitude of marketing initiatives have caused, and will continue
to cause, fluctuations in sales and marketing expense as a percentage
of revenues.
o GENERAL AND ADMINISTRATIVE EXPENSE. General and administrative expense
consists primarily of compensation for administrative and executive
staff, fees for professional services, bad debt expense and general
office expense.
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 ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ ------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
e-Recruitment fees .......... 75% 76% 77% 74%
Software fees ............... 16 6 13 9
Career expo fees ............ 5 12 6 10
Other ....................... 4 6 4 7
---- ---- ---- ----
Total revenues ........... 100 100 100 100
Cost of revenues ............... 25 21 22 18
---- ---- ---- ----
Gross profit ............. 75 79 78 82
Operating Expenses:
Product development ......... 11 7 9 7
Sales and marketing ......... 72 145 93 131
General and administrative .. 25 46 26 40
Non-cash compensation ....... 1 25 2 13
Amortization of goodwill .... 14 -- 10 --
---- ---- ---- ----
Total operating expenses . 123 223 140 191
---- ---- ---- ----
Loss from operations ... (48) (144) (62) (109)
Net interest income (expense) 6 4 8 1
---- ---- ---- ----
Net loss ............... (42)% (140)% (54)% (108)%
==== ==== ==== ====
</TABLE>
We have incurred substantial losses in every fiscal period since our
inception. For the nine months ended September 30, 2000, we incurred a net
loss of approximately $34.9 million. As of September 30, 2000, we had an
accumulated deficit of approximately $72.1 million. Our net loss and
resulting accumulated deficit are primarily due to the costs we incurred to
develop our online employment exchange and software products and to expand
our sales and marketing programs.
We intend to devote significant resources to advertising and
brand-marketing programs designed to attract new employers to subscribe to
WWW.HOTJOBS.COM and new job seekers to use the site. We anticipate
increasing advertising spending in specific periods in the future. This may
result in sales and marketing expenses increasing as a percentage of total
revenues in these periods. As of September 30, 2000, we had commitments of
approximately $13.7 million for various advertising campaigns through
January 2002. These commitments include broadcasting, print, online and
outdoor advertising.
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We expect growth in the number of member employers of WWW.HOTJOBS.COM to
result in growth in subscription fees. Our strategy contemplates that revenue
from employer memberships will likely be the single largest source of revenue
for us in the immediate future.
DEFERRED COMPENSATION
We recorded deferred compensation net of options forfeited of approximately
$7.5 million in the year ended December 31, 1999, and amortized approximately
$2.0 million as non-cash compensation expense in 1999 and approximately $1.4
million for the nine months ended September 30, 2000. Deferred compensation
represents the difference between the exercise price of stock options granted
and the fair value for accounting purposes of the underlying common stock at
the date of the grant. The remaining deferred compensation at September 30,
2000 of approximately $4.2 million will be amortized over the remaining
vesting period of the options. We currently expect to amortize the remaining
deferred compensation as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD:
<S> <C>
October through December 2000......................... $0.5 million
Full Year 2001........................................ $1.8 million
Full Year 2002........................................ $1.4 million
Full Year 2003........................................ $0.5 million
</TABLE>
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
REVENUES
Our total revenues increased approximately 411% to approximately $28.8
million for the three months ended September 30, 2000 from approximately
$5.6 million for the three months ended September 30, 1999. Our total
revenues increased approximately 439% to approximately $65.0 million for the
nine months ended September 30, 2000, from approximately $12.1 million for
the nine months ended September 30, 1999. The increase in our total revenues
was due to increased revenue in all of our revenue categories.
E-RECRUITMENT FEES. e-Recruitment fees increased to approximately $21.7
million for the three months ended September 30, 2000, from approximately
$4.3 million for the three months ended September 30, 1999, and to
approximately $49.8 million for the nine months ended September 30, 2000,
from approximately $9.0 million for the nine months ended September 30, 1999.
The increases in both periods resulted primarily from an increase in the
number of employers subscribing to WWW.HOTJOBS.COM and an increase in the
number of single-ad postings as well as increased prices reflecting the
implementation of price increases in the first six months of 2000 for both
subscriptions to WWW.HOTJOBS.COM and single-ad postings.
SOFTWARE FEES. Software fees increased to approximately $4.6 million for the
three months ended September 30, 2000 from approximately $363,000 for the
three months ended September 30, 1999, and to approximately $8.4 million for
the nine months ended September 30, 2000, from approximately $1.1 million for
the nine months ended September 30, 1999. The increase in both periods
resulted primarily from the inclusion of Resumix revenues since May 11, 2000,
the date we required Resumix, as well as from an increase in the number of
companies that license our proprietary Softshoe software and the launch of
our Shoelace software in 2000 and the related hosting fees.
CAREER EXPO FEES. Career expo fees increased to approximately $1.4 million
for the three months ended September 30, 2000 from approximately $659,000 for
the three months ended September 30, 1999, and to approximately $4.0 million
for the nine months ended September 30, 2000, from approximately $1.2 million
for the nine months ended September 30, 1999. The increase in both periods
mainly resulted from an increase in the number of career expos held in 2000
versus 1999.
OTHER. Other revenues increased to approximately $1.2 million for the three
months ended September 30, 2000, from approximately $354,000 for the three
months ended September 30, 1999, and to approximately $2.8 million for the
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nine months ended September 30, 2000 from approximately $809,000 for the nine
months ended September 30, 1999. Other revenues increased primarily as a
result of increased co-operative advertising and banner revenues as well as
increased consulting revenues.
COST OF REVENUES
Cost of revenues increased to approximately $7.2 million for the three months
ended September 30, 2000 from approximately $1.2 million for the three months
ended September 30, 1999. For the nine months ended September 30, 2000, cost
of revenues increased to approximately $14.5 million from approximately $2.2
million for the nine months ended September 30, 1999. Cost of revenues as a
percentage of revenues for the three months ended September 30, 2000 and 1999
were 25% and 21%, respectively. For the nine months ended September 30, 2000
and September 30, 1999, cost of revenues as a percentage of revenue were 22%
and 18%, respectively. The increase in cost of revenues as a percentage of
revenues in the three and nine month periods ended September 30, 2000
compared to the same periods in 1999 principally results from the cost of
revenues related to Resumix products. We incur higher marginal costs on
revenues from Resumix products than with our other revenue categories.
OPERATING EXPENSES
PRODUCT DEVELOPMENT EXPENSE. Product development expense increased to
approximately $3.2 million for the three months ended September 30, 2000 from
approximately $407,000 in the three months ended September 30, 1999. For the
nine months ended September 30, 2000, product development expense was
approximately $6.0 million, compared to approximately $824,000 for the nine
months ended September 30, 1999. The increase in the three and nine months
ended September 30, 2000 compared to the same periods in 1999 reflects our
continuing efforts to enhance the content and features in our products and
services and resulted primarily from increased salaries and related expenses
associated with hiring additional technology personnel as well as the
inclusion of Resumix's product development costs since May 11, 2000.
SALES AND MARKETING EXPENSE. Sales and marketing expense increased to
approximately $20.7 million for the three months ended September 30, 2000
from approximately $8.2 million for the three months ended September 30,
1999. Sales and marketing expense increased to approximately $60.2 million
for the nine months ended September 30, 2000 from approximately $15.8 million
for the nine months ended September 30, 1999. The increase in sales and
marketing expense was primarily due to our extensive advertising campaigns,
which included television, outdoor signage, print, radio and online
advertising. In addition, sales and marketing expense increased due to the
hiring of additional sales and marketing personnel.
GENERAL AND ADMINISTRATIVE EXPENSE. General and administrative expense
increased to approximately $7.1 million for the three months ended September
30, 2000, from approximately $2.6 million for the three months ended
September 30, 1999. For the nine months ended September 30, 2000, general and
administrative expense increased to approximately $17.1 million from
approximately $4.9 million for the nine months ended September 30, 1999.
General and administrative expense increased primarily due to increased
administrative costs including salaries and related expenses associated with
supporting our growth.
NON-CASH COMPENSATION EXPENSE. We recorded approximately $481,000 and
approximately $1.4 million of non-cash compensation expense for the three and
nine months ended September 30, 2000, respectively, versus approximately $1.4
million and approximately $1.5 million for the three and nine months ended
September 30, 1999, respectively, which primarily represents the amortization
of a portion of the deferred compensation, net of options forfeited, recorded
in 1999 in connection with stock options granted with an exercise price below
the fair value for accounting purposes of the underlying common stock at the
date of grant. Deferred compensation is amortized over the period during
which the related options vest. The deferred compensation of approximately
$4.2 million remaining at September 30, 2000 will be amortized over the
remaining vesting period of the related options through August 2003.
AMORTIZATION OF GOODWILL. The amortization of goodwill of approximately $4.0
million and approximately $6.1 million in the three and nine months ended
September 30, 2000, respectively, represents the amortization of the goodwill
related to the Resumix acquisition. The total goodwill of approximately $47.3
million, which resulted from the acquisition of Resumix, will be amortized on
a straight-line basis over three years.
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NET INTEREST INCOME (EXPENSE)
For the three months ended September 30, 2000, we recorded net interest
income (expense) of approximately $1.8 million compared to approximately
$204,000 of net interest income (expense) for the three months ended
September 30, 1999. Net interest income (expense) was approximately $5.5
million for the nine months ended September 30, 2000, as compared to
approximately $149,000 of net interest income (expense) for the nine months
ended September 30, 1999. Net interest income (expense) in the three and nine
months ended September 30, 2000 reflects the investment of our excess cash,
which resulted from our initial public offering and our follow-on public
offering in the second half of 1999. Net interest income (expense) for the
three and nine months ended September 30, 1999 reflects the investment of
the cash received from our initial public offering and from the sale of
Series A Preferred Stock in May 1999.
NET LOSS
We recorded a net loss of approximately $12.1 million for the three months
ended September 30, 2000, compared to a net loss of approximately $7.9
million for the three months ended September 30, 1999. For the three months
ended September 30, 2000 and 1999, the basic and diluted net loss per common
share was $0.33 and $1.00, respectively. For the nine months ended September
30, 2000 and 1999, the net loss was approximately $34.9 million and
approximately $13.0 million respectively, or a basic and diluted net loss per
common share of $1.03 and $1.37, respectively. The increase in the net loss
for both periods of 2000 compared to 1999 was primarily attributable to the
increased sales and marketing costs associated with building brand awareness
and increased hiring to support and manage our growth as well as the
inclusion of the losses of Resumix since May 11, 2000 and the amortization
of goodwill relating to the Resumix acqusition in both periods of 2000.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, we have financed our activities primarily through funding
from OTEC, Inc., lines of credit, cash from operations, the private placement
of equity securities, our initial public offering and our follow-on public
offering. Through May 1999, OTEC provided us with approximately $3.8 million
to fund our operations. Effective May 10, 1999, we raised net proceeds, after
deducting costs of the offering, of approximately $16.1 million from the sale
of our Series A Preferred Stock in a private placement. On August 13, 1999 we
completed the initial public offering of 3,000,000 shares of our common stock
for gross proceeds of $24.0 million and net proceeds, after deducting costs
of the offering, of approximately $20.6 million. On September 2, 1999, the
underwriters exercised their over-allotment option to the extent of 350,000
shares, resulting in gross proceeds to us of $2.8 million, and net proceeds
after deducting costs of the offering of approximately $2.6 million. On
November 16, 1999, we completed a follow-on public offering of 3,600,000
shares of our common stock for gross proceeds of $108.0 million, and net
proceeds, after deducting costs of the offering, of approximately $102.1
million. On December 8, 1999, the underwriters exercised their
over-allotment option of an additional 450,000 shares, resulting in gross
proceeds to us of $13.5 million, and net proceeds, after deducting costs of
the offering, of approximately $12.8 million.
Net cash used in operating activities was approximately $15.3 million for the
nine months ended September 30, 2000, and approximately $6.2 million for the
nine months ended September 30, 1999. Net cash used in operating activities
for both the nine months ended September 30, 2000 and 1999 resulted primarily
from our net loss, which mainly resulted from costs incurred to support our
sales and marketing efforts and the increased personnel required to support
and manage our growing operations, combined with a higher level of accounts
receivable resulting from increased billings which was partially offset by
increases in accounts payable and accrued expenses and deferred revenue as
well as depreciation and amortization, provision for doubtful accounts and
non-cash compensation.
Net cash used in investing activities was approximately $6.8 million for the
nine months ended September 30, 2000, compared to approximately $26.6 million
for the nine months ended September 30, 1999. Net cash used in investing
activities in the nine months ended September 30, 2000 was primarily for the
purchase of marketable securities of $234.2 million and for capital
expenditures of approximately $17.6 million and $1.8 million of restricted
cash which represents a certificate of deposit which supports a letter of
credit, which were partially offset by proceeds of approximately $246.5
million from the sale of marketable securities and approximately $664,000 of
net cash acquired through the acquisition of Resumix, as the amount of cash
on hand at Resumix at the time of the acquisition exceeded
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<PAGE>
the amount of cash expended on the acquisition. For the three months ended
September 30, 1999, the net cash used in investing activities was for capital
expenditures of approximately $2.0 million and approximately $24.6 million
for the purchase of marketable securities.
Net cash provided by financing activities was approximately $1.3 million for
the nine months ended September 30, 2000, and approximately $35.7 million for
the nine months ended September 30, 1999. Net cash provided by financing
activities for the nine months ended September 30, 2000 consisted primarily
of approximately $880,000 from the issuance of stock under the Employee Stock
Purchase Plan, approximately $636,000 from the exercise of options, proceeds
of approximately $335,000 relating to the utilization of the remaining
equipment line of credit, which were partially offset by approximately
$215,000 of repayment of a note, approximately $167,000 of payment of the
line of credit and approximately $153,000 of capital lease payments. For the
nine months ended September 30, 1999, net cash provided by financing
activities resulted mainly from the net proceeds raised from the initial
public offering of common stock of approximately $23.3 million and $16.1
million of net proceeds which were raised in the private placement of Series
A Preferred Stock which was partially offset by the repayment of advances
from OTEC, Inc. of approximately $3.8 million.
As of September 30, 2000, we had approximately $67.5 million of cash and cash
equivalents and approximately $38.2 million of marketable securities. As of
September 30, 2000, our principal commitments consisted of approximately
$13.7 million for various advertising campaigns through January 2002 and
approximately $15.1 million of office lease commitments through December
2009. We believe that our existing cash and cash equivalents and marketable
securities will be sufficient to meet our anticipated cash requirements for
working capital and capital expenditures for at least the next 12 months. Our
capital requirements will depend on a number of factors, including market
acceptance of our products and services, the amount of our resources that we
devote to our products and services and expansion of our operations and the
amount of our resources we devote to promoting awareness of the HotJobs.com
brand. Consistent with our growth, we have experienced a substantial increase
in our sales and marketing expenses, capital expenditures and operating lease
arrangements since inception, and we anticipate that these increases will
continue for the foreseeable future. In addition, we will continue to
evaluate possible investments in businesses, products and technologies, the
consummation of any of which would increase our capital expenditures.
Although we currently believe that we have sufficient capital resources to
meet our anticipated working capital and capital expenditure requirements
beyond the next 12 months, unanticipated events and opportunities may require
us to sell additional equity or debt securities or establish new credit
facilities to raise capital in order to meet our capital requirements. If we
sell additional equity or convertible debt securities, the sale could dilute
the ownership of our existing stockholders. If we issue debt securities or
establish a new credit facility, our fixed obligations could increase and
result in operating covenants that would restrict our operations. We cannot
be sure that any such financing will be available in amounts or on terms
acceptable to us.
Risk Factors
AN INVESTMENT IN OUR COMPANY INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD
CONSIDER CAREFULLY THE FOLLOWING INFORMATION ABOUT THESE RISKS, TOGETHER WITH
THE OTHER INFORMATION CONTAINED IN THIS REPORT, BEFORE YOU DECIDE TO INVEST IN
OUR COMPANY. IF ANY OF THE FOLLOWING RISKS ACTUALLY OCCUR, OUR BUSINESS,
FINANCIAL CONDITION OR RESULTS OF OPERATIONS WOULD LIKELY SUFFER. IN THIS CASE,
THE MARKET PRICE OF OUR COMMON STOCK COULD DECLINE, AND YOU COULD LOSE ALL OR
PART OF YOUR INVESTMENT.
RISKS RELATED TO OUR FINANCIAL CONDITION AND BUSINESS MODEL
WE HAVE A LIMITED OPERATING HISTORY, SO IT WILL BE DIFFICULT FOR YOU TO EVALUATE
AN INVESTMENT IN HOTJOBS.COM.
We were incorporated and began generating revenues in February 1997.
Accordingly, we have only a limited operating history for you to evaluate our
business and prospects. As a new company, we face risks and uncertainties
relating to our ability to successfully implement our strategy. You must
consider the risks, expenses and uncertainties that an early stage company in
new and rapidly evolving markets like ours faces. Some of these risks include:
o ability to sustain historical revenue growth rates;
o ability to increase awareness of our brand;
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o managing our expanding operations, including the integration of
acquisitions;
o competition;
o attracting, retaining and motivating qualified personnel;
o maintaining our current, and developing new, strategic relationships;
o ability to improve current product and service offerings and
successfully introduce new products and services;
o ability to anticipate and adapt to the changing Internet market and any
changes in government regulation; and
o attracting and retaining a large number of member companies for our
employment exchange and licenses for our hiring management software.
We also depend on the growing use of the Internet for recruiting purposes
and on general economic conditions. If we cannot address these risks and
uncertainties or are unable to execute our strategy, we may not be successful.
WE WILL FACE TECHNICAL, OPERATIONAL AND STRATEGIC CHALLENGES THAT MAY PREVENT US
FROM SUCCESSFULLY INTEGRATING RESUMIX AND HOTJOBS.COM.
Our acquisition of Resumix involves risks related to the integration
and management of acquired technology, operations and personnel. The
integration of HotJobs.com and Resumix has been and will continue to be a
complex, time-consuming and expensive process and may disrupt our business if
not completed in a timely and efficient manner. We must operate as a combined
organization utilizing common information and communication systems,
operating procedures, financial controls and human resources practices. We
are in the process of combining our systems.
We may encounter substantial difficulties, costs and delays in integrating
the Resumix operations, including:
o incompatibility of business cultures and operations;
o loss of customers;
o perceived adverse changes in business focus;
o difficulty of incorporating acquired technology into our products and
services;
o potential conflicts in distribution, marketing or other important
relationships;
o difficulty maintaining uniform standards, controls, procedures and
policies;
o the loss of key employees;
o the potential disruption of the ongoing business and the diversion of
management's attention from ongoing business concerns.
In addition, although we performed a legal and financial analysis of
Resumix before we agreed to purchase Resumix, it is possible that our analysis
did not uncover every risk inherent in acquiring the business of another
company. Although the shareholders of Resumix have agreed to indemnify us for
the losses arising from some of these risks, the indemnification does not cover
all losses, and may be inadequate to cover losses that are indemnified. In such
event, it is likely we would not realize the expected benefits of the
acquisition and our stock price could decline.
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WE HAVE NOT BEEN PROFITABLE, AND WE EXPECT OUR LOSSES TO CONTINUE.
We have never been profitable. For the quarter ended September 30, 2000,
we incurred a net loss of approximately $12.1 million. At September 30, 2000, we
had an accumulated deficit of approximately $72.1 million. In connection with
our acquisition of Resumix, the amortization of related goodwill will be a
charge to our operating results. We expect to continue to lose money in the
foreseeable future because we anticipate incurring significant expenses in
connection with building awareness of the HotJobs.com brand, rapidly expanding
our sales, technology and other personnel, developing strategic relationships
and improving our products and services. In addition, we anticipate declining
revenue in our software business resulting from a redirection in our software
sales effort away from client/server sales toward the sale of Web-based
products. We forecast our future expense levels based on our operating plans and
our estimates of future revenues. We may find it necessary to accelerate
expenditures relating to our sales and marketing, products and technology and
expansion efforts or to otherwise increase our financial commitment to creating
and maintaining brand awareness or developing our products. Although our
revenues have grown in recent quarters, we cannot assure you that we will
achieve sufficient revenues for profitability. Even if we do achieve
profitability, we cannot assure you that we can sustain or increase
profitability on a quarterly or annual basis in the future. If our revenues grow
at a slower rate than we anticipate, or if our spending levels exceed our
expectations or cannot be adjusted to reflect slower revenue growth, we may not
generate sufficient revenues to achieve or sustain profitability.
YOU SHOULD NOT RELY ON OUR QUARTERLY OPERATING RESULTS AS AN INDICATION OF OUR
FUTURE RESULTS BECAUSE THEY ARE SUBJECT TO SIGNIFICANT FLUCTUATIONS.
FLUCTUATIONS IN OUR OPERATING RESULTS OR THE FAILURE OF OUR OPERATING RESULTS TO
MEET THE EXPECTATIONS OF PUBLIC MARKET ANALYSTS AND INVESTORS MAY NEGATIVELY
IMPACT OUR STOCK PRICE.
Our quarterly operating results may fluctuate significantly in the future
due to a variety of factors that could affect our revenues or our expenses in
any particular quarter. Fluctuations in our quarterly operating results could
cause our stock price to decline.
You should not rely on quarter-to-quarter comparisons of our results of
operations as an indication of future performance. Factors that may affect our
quarterly results include:
o mismatches between resource allocation and consumer demand due to
difficulties in predicting consumer demand in a new market;
o the demand for and acceptance of our Website, products, product
enhancements and services;
o the timing, amount and mix of subscription, license and service payments;
o the timing and integration of acquisitions;
o changes in general economic conditions, such as recessions, that could
affect recruiting efforts generally and online recruiting efforts in
particular;
o the magnitude and timing of marketing initiatives;
o the maintenance and development of our strategic relationships;
o the introduction, development, timing, competitive pricing and market
acceptance of our products and services and those of our competitors;
o the attraction and retention of key personnel;
o our ability to manage our anticipated growth and expansion;
o our ability to attract and retain customers;
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o our ability to attract qualified job seekers; and
o technical difficulties or system downtime affecting the Internet generally
or the operation of our products and services specifically.
As a result of the factors listed above and because the online recruiting
market is new and it is difficult to predict consumer demand, it is possible
that in some future periods our results of operations may be below the
expectations of public market analysts and investors. This could cause our stock
price to decline. In addition, we plan to significantly increase our operating
expenses to expand our sales and marketing, administration, consulting and
training, maintenance and technical support and product development groups. If
revenues fall below our expectations in any quarter and we are unable to quickly
reduce our spending in response, our operating results would be lower than
expected and our stock price may fall.
OUR BUSINESS MODEL IS UNPROVEN AND MAY NOT BE ADAPTABLE TO A CHANGING MARKET.
If we are not able to anticipate changes in the online recruiting market
or if our business model is not successful, we may not be able to expand our
business or to successfully compete with other companies, which could have a
material adverse effect on our business, results of operations and financial
condition. Our current business model depends on recurring revenue from
employers using our Website and hosting and maintenance fees associated with our
hiring management software.
Our revenue model and profit potential are unproven. If current
employers decide to discontinue any of our services and we are unable to
replace them with new employers, or if we fail to add a sufficient number of
new customers our revenues could decrease or grow at a slower rate than
expected. In addition, a redirection of our software sales effort away from
client/server sales toward the sale of Web-based products could cause our
software revenues to decrease. It is possible that we will be required to
further adapt our business model in response to additional changes in the
online recruiting market or if our current business model is not successful.
WE MAY NOT BE ABLE TO OBTAIN SUFFICIENT FUNDS TO GROW OUR BUSINESS AND ANY
ADDITIONAL FINANCING MAY BE ON TERMS ADVERSE TO THE INTERESTS OF OUR
STOCKHOLDERS.
Because we expect to generate losses for the foreseeable future, we do not
expect that income from our operations will be sufficient to meet our needs. We
may have to raise additional funds in the future in order to fund our
anticipated growth, more aggressive marketing programs or the acquisition of
complementary businesses, technologies and services. Obtaining additional
financing will be subject to a number of factors including:
o market and economic conditions;
o our financial condition and operating performance; and
o investor sentiment.
These factors may make the timing, amount, terms and conditions of
additional financing unattractive for us. If we are able to raise additional
funds and we do so by issuing equity securities, holders of our common stock may
experience significant dilution of their ownership interest and holders of these
securities may have rights senior to those of the holders of our common stock.
If we obtain additional financing by issuing debt securities or establishing a
new credit facility, the terms of such securities or credit facility could
restrict or prevent us from paying dividends and could limit our flexibility in
making business decisions.
If additional financing is not available when required or is not available
on acceptable terms, we may be unable to fund our expansion, successfully
promote our brand name, develop or enhance our products and services, take
advantage of business opportunities or respond to competitive pressures, any of
which could have a material adverse effect on our business.
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ECONOMIC FLUCTUATIONS MAY HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS,
RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
The level of economic activity and employment in the United States and
abroad may significantly and adversely affect demand for our services. When
economic activity slows, many companies hire fewer permanent employees. A
recession could cause employers to reduce or postpone their recruiting efforts
generally, and their online recruiting efforts in particular. Therefore, a
significant economic downturn or recession, especially in regions or industries
where our operations are heavily concentrated, could have a material adverse
effect on our business, financial condition and operating results. Further, we
may face increased pricing pressures during such periods. There can be no
assurance that during these periods our results of operations will not be
adversely affected.
RISKS RELATED TO OUR MARKETS AND STRATEGY
WE MAY NOT BE ABLE TO DEVELOP AWARENESS OF OUR BRAND NAME.
We believe that continuing to build and maintain awareness of our brand
name is critical to achieving widespread acceptance of our business and to
sustain or increase the number of employers and job seekers who use our Website.
Brand recognition is a key differentiating factor among providers of online
recruiting services, and we believe it could become more important as
competition in the online recruiting market increases. In order to maintain and
build brand awareness, we must succeed in our marketing efforts, provide high
quality services and increase the number of high quality job seekers using
WWW.HOTJOBS.COM. If we fail to successfully protect, promote, position and
maintain our HotJobs.com brand name, incur significant expenses in promoting our
brand and fail to generate a corresponding increase in revenue as a result of
our branding efforts, or encounter legal obstacles which prevent our continued
use of our brand name, our business, results of operations and financial
condition could be materially adversely affected.
WE MAY NOT BE ABLE TO SUCCESSFULLY INTRODUCE NEW OR ENHANCED PRODUCTS AND
SERVICES.
The failure of any new or enhanced products and services to achieve market
acceptance and generate revenue could result in a material adverse effect on our
revenues. In connection with the Resumix acquisition, we acquired several
products that will be offered separately and that will also be integrated into
our existing products and services. We may experience difficulty in marketing
these products in conjunction with our products and services and integrating
these products with our existing product and service offerings. We have recently
introduced, and we expect to continue to introduce enhanced products and
services in order to generate additional revenues, attract and retain more
employers, attract more job seekers to our Website and respond to competition.
Any new or enhanced product or service we introduce that is not favorably
received could damage our reputation and the perception of our brand name.
WE MAY LOSE BUSINESS IF WE FAIL TO KEEP PACE WITH RAPIDLY CHANGING
TECHNOLOGIES AND CUSTOMER NEEDS. To remain competitive, we must continually
improve the responsiveness, functionality and features of our products and
services and develop other products and services that are attractive to job
seekers and employers. If we are unable to timely and successfully develop and
introduce or acquire new services, products and enhancements to existing
products and services in response to our industry's changing technological
requirements, our revenues could be materially adversely affected. New
Internet-based services, products or enhancements that we have offered or may
offer in the future may contain design flaws or other defects that could require
extensive modifications or result in a loss of client confidence. In addition,
our current technology may not meet the future technical requirements of
employers. Trends that could have a critical impact on our success include:
o rapidly changing technology in online recruiting;
o evolving industry standards, including both formal and DE FACTO standards
relating to online recruiting;
o developments and changes relating to the Internet;
o evolving government regulations;
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o competing products and services that offer increased functionality; and
o changes in employer and job seeker requirements.
WE MAY LOSE JOB SEEKERS BECAUSE OUR WEBSITE CONTENT IS NOT ATTRACTIVE TO
THEM. Our future growth depends in part on our ability to attract job seekers
who are qualified for the jobs posted by our customers. This in turn depends in
part on our ability to deliver original and compelling content to these job
seekers. We cannot assure you that our content will be attractive to Internet
users. We also cannot assure you that we will be able to anticipate, monitor and
successfully respond to rapidly changing consumer tastes and preferences to
continue to attract a sufficient number of Internet users to our Website.
Internet users can freely navigate and instantly switch among a large number of
Websites. In addition, many other Websites offer very specific, highly targeted
content. These sites could have greater appeal than our Website to particular
groups within our target audience.
OUR BUSINESS AND GROWTH WILL SUFFER IF WE ARE UNABLE TO HIRE AND RETAIN HIGHLY
SKILLED PERSONNEL.
If we are unable to hire and retain highly skilled personnel, our growth
may be restricted, the quality of our products and services reduced and our
revenues may be reduced or grow at a slower rate than expected. Our future
success depends on our ability to attract, train, motivate and retain highly
skilled employees. In connection with the Resumix acquisition, we greatly
increased the number of our employees. We have experienced and expect that we
will continue to experience attrition in these employees. Competition for highly
skilled employees is intense, particularly in the Internet industry. We may be
unable to retain our skilled employees or attract, assimilate and retain other
highly skilled employees in the future. We have from time to time in the past
experienced, and we may experience in the future, difficulty in hiring and
retaining highly skilled employees with appropriate qualifications.
WE MAY NOT BE ABLE TO EFFECTIVELY MANAGE OUR EXPANDING OPERATIONS.
In order to execute our business plan, we must continue to grow
significantly. If we are not able to expand our operations in an efficient
manner, our expenses could grow disproportionately to revenues or our revenues
could decline or grow at a slower rate than expected, either of which could have
a material adverse effect on our business, results of operations and financial
condition.
We have recently experienced a period of rapid growth that has placed
considerable demands on our managerial, operational, financial and information
system resources. We continue to increase the scope of our operations, and we
have grown our workforce substantially. We had 173 employees as of September 30,
1999. At September 30, 2000, the number of employees had increased to 613,
including those employed by Resumix. We expect that the number of our employees
will continue to increase for the foreseeable future. Our growth is expected to
result in increased responsibility for both existing and new management
personnel. Our growth has placed, and our anticipated future growth combined
with the requirements we face as a public company will continue to place, a
significant strain on our management, operations, systems and resources. We
expect that we will need to continue to improve our financial and managerial
controls and reporting systems and procedures, and will need to continue to
expand, train and manage our workforce.
Our success depends to a significant extent on the ability of our
executive officers and other members of senior management to operate effectively
both independently and as a group and on our ability to successfully integrate
Resumix with and into our Company. We will also need to continue to expand and
maintain close coordination among our products and technology, finance and
administration and sales and marketing organizations. We cannot assure you that
if we continue to grow, management will be effective in attracting and retaining
additional qualified personnel, expanding our physical facilities, integrating
acquired businesses or otherwise managing growth.
We cannot assure you that our information systems, procedures or controls
will be adequate to support our operations or that our management will be able
to successfully offer our products and services and implement our business plan.
Our future performance may also depend on our effective integration of
additional acquired businesses. Any such integration, even if successful, may
take a significant period of time and expense, and may place a significant
strain on our resources. If we are not able to manage existing or anticipated
growth, our business, results of operations and financial condition could be
materially adversely affected.
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INTENSE COMPETITION MAY RENDER OUR SERVICES AND PRODUCTS UNCOMPETITIVE OR
OBSOLETE.
The market for online recruiting solutions is intensely competitive and
highly fragmented. We expect competition to continue to increase because there
are no substantial barriers to entry. We believe that our ability to compete
depends upon many factors both within and beyond our control, including the
following:
o the timing and market acceptance of new solutions and enhancements to
existing solutions developed either by us or our competitors;
o our customer service and support efforts;
o our sales and marketing efforts; and
o the ease of use, performance, price and reliability of solutions developed
either by us or our competitors.
We compete with companies, including recruiting search firms that offer a
single database job board solution, as well as newspapers, magazines and other
traditional media companies that provide online job search services. We also
compete with large Internet information hubs, or portals, such as recruiting
software companies and job fair companies. In addition, we compete with
companies that provide a combination of some or all of these offerings. We may
experience competition from potential customers to the extent that they develop
their own online recruiting offerings internally. In addition, we compete with
traditional recruiting services, such as headhunters, for a share of employers'
total recruiting budgets. We expect to face additional competition as other
established and emerging companies, including print media companies and
headhunters with established brands, enter the online recruiting market.
Many of our current and potential competitors have longer operating
histories, significantly greater financial, technical, marketing and other
resources and larger customer bases than we do. These factors may allow them to
respond more quickly than we can to new or emerging technologies and changes in
customer requirements. It may also allow them to devote greater resources than
we can to the development, promotion and sale of their products and services.
These competitors may also engage in more extensive research and development,
undertake more far-reaching marketing campaigns, adopt more aggressive pricing
policies and make more attractive offers to existing and potential employees and
strategic partners. We cannot assure you that our competitors will not develop
or acquire products or services that are equal or superior to our solutions or
that achieve greater market acceptance than our solutions. In addition, current
and potential competitors are making and are expected to continue to make
strategic acquisitions or establish cooperative, and, in some cases, exclusive
relationships with significant companies or competitors to expand their
businesses or to offer more comprehensive solutions.
We believe that there will be rapid business consolidation in the online
recruiting industry. In recent months, several of our competitors have either
completed or announced acquisitions. Accordingly, new competitors may emerge and
rapidly acquire significant market share. In addition, new technologies will
likely increase the competitive pressures that we face. The development or
acquisition of competing technologies by market participants or the emergence of
new industry standards may adversely affect our revenues and ultimately our
competitive position.
Due to competition, we may experience reduced margins on our products and
services, loss of market share or less use of WWW.HOTJOBS.COM by job seekers and
employers. If we are not able to compete effectively with current or future
competitors as a result of these and other factors, our revenues could be
materially adversely affected.
THE INTERNET IS NOT A PROVEN RECRUITING MEDIUM.
If we are unable to compete with traditional recruiting and job seeking
methods, our revenues could decline or grow at a slower rate than expected.
The future of our business is dependent on the acceptance and adoption by job
seekers and employers of the Internet as an effective job seeking and
recruiting tool. The online recruiting market is new and rapidly evolving,
and we do not yet know how effective online recruiting is compared to
traditional recruiting methods. The adoption of online recruiting and job
seeking, particularly among those companies that have historically relied
upon traditional recruiting methods, requires the
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acceptance of a new way of conducting business, exchanging information,
advertising and applying for jobs. Many of our potential employer customers have
little or no experience using the Internet as a recruiting tool, and only select
segments of the job-seeking population have experience using the Internet to
look for jobs. There can be no assurance that companies will allocate or
continue to allocate portions of their budgets to Internet-based recruiting. As
a result, we cannot be sure that we will be able to effectively compete with
traditional recruiting and job seeking methods. If Internet-based recruiting is
not widely accepted, our business, results of operations and financial condition
could be materially adversely affected.
WE WILL ONLY BE ABLE TO EXECUTE OUR BUSINESS MODEL IF USE OF THE INTERNET GROWS
AND ITS INFRASTRUCTURE IS ADAPTED TO THAT GROWTH.
If Internet usage does not continue to grow, we may not be able to meet
our business objectives. Increased Internet usage will depend, in large part,
upon the maintenance of the Web infrastructure, such as a reliable network
backbone with necessary speed, data capacity and security, and timely
development of enabling products, such as high-speed modems, for providing
reliable Web access and services and improved content. Internet usage may be
inhibited by any of the following factors:
o The Internet infrastructure may not be able to support the demands placed
on it, or its performance and reliability may decline as usage grows;
o Websites may not be able to provide adequate security and authentication
of confidential information contained in transmissions over the Internet;
o The Internet industry may not be able to adequately respond to privacy
concerns of potential users; and
o Government regulation may decrease the utility of the Internet for some
purposes.
We cannot assure you that the Web infrastructure or Internet industry will
be able to effectively respond to the demands placed on the Web by increased
numbers of users, frequency of use or increased bandwidth requirements of users.
A FAILURE TO ESTABLISH AND MAINTAIN PARTNERSHIPS AND ALLIANCES WITH OTHER WEB
PROPERTIES COULD LIMIT THE GROWTH OF OUR BUSINESS.
We have entered into, and expect to continue to enter into, arrangements
with third parties to increase our member base, bring traffic to our Website and
enhance the HotJobs.com brand. If any of our current agreements are terminated,
we cannot assure you that we will be able to replace the terminated agreement
with an equally beneficial arrangement. We also cannot assure you that we will
be able to renew any of our current agreements when they expire or, if we are,
that we will be able to do so on acceptable or favorable terms. We also do not
know whether we will be successful in entering into additional partnerships and
alliances or that any relationships, if entered into, will be on terms favorable
to us.
In late 1999, we brought an action for enforcement of an agreement between
Digital City, Inc. and us. The action has been resolved pursuant to a settlement
agreement. The settlement is not expected to have a material effect on our
business.
LOSS OF ANY OF OUR KEY MANAGEMENT PERSONNEL COULD NEGATIVELY IMPACT OUR
BUSINESS.
The loss or departure of any of our officers or key employees could
materially adversely affect our ability to implement our business plan and could
lower our revenues or cause our revenues to grow at a slower rate than expected.
In addition, our ability to retain the key employees of Resumix will be
important to the successful integration of Resumix and HotJobs.com. Our future
success depends to a significant extent on the continued service and
coordination of our management team, particularly Richard S. Johnson, our
President and Chief Executive Officer. We do not maintain key person insurance
for any member of our management team. In addition, certain members of our
management team,
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including our Chief Financial Officer and Chief Technology Officer, as well as
the Resumix management team, have joined us within the last year. These
individuals have not previously worked together and are becoming integrated into
our management team. If our key management personnel are not able to work
together effectively or successfully, our business could be materially adversely
affected. In addition, if one or more key employees join a competitor or form a
competing company, though we have non-competition agreements with each of our
key employees, we may lose existing or potential clients, which could have a
material adverse effect on our business, results of operations and financial
condition. Though we have confidentiality agreements with each of our employees,
if we were to lose a key employee, we cannot assure you that we would be able to
prevent the unauthorized disclosure or use of our procedures, practices, new
product development or client lists.
WE MAY NOT BE SUCCESSFUL IN OUR PLAN FOR INTERNATIONAL EXPANSION.
We may not be able to successfully execute our business plan in foreign
markets. If revenue from international ventures is not adequate to cover our
investment in those ventures, our total revenues could be materially adversely
affected. We believe that expansion into international markets through a
combination of internal business expansion, strategic alliances, joint ventures
and potential acquisitions will be important to continue to grow our business.
Our future international operations might not succeed for a number of reasons
including:
o difficulties in staffing and managing foreign operations;
o competition from local recruiting services;
o operational issues such as longer customer payment cycles and greater
difficulties in collecting accounts receivable;
o seasonal reductions in business activity;
o language and cultural differences;
o legal uncertainties inherent in transnational operations such as export
and import regulations, tariffs and other trade barriers;
o taxation issues;
o unexpected changes in trading policies, regulatory requirements and
exchange rates;
o issues relating to uncertainties of laws and enforcement relating to the
regulation and protection of intellectual property; and
o general political and economic trends.
WE MAY NOT BE ABLE TO SUCCESSFULLY MAKE ACQUISITIONS OF OR INVESTMENTS IN OTHER
COMPANIES.
We expect our growth to continue, in part, by acquiring additional
complementary businesses, products, services or technologies. From time to time,
we have had discussions with companies regarding our acquiring, or investing in,
their businesses, products, services or technologies. We cannot assure you that
we will be able to identify suitable acquisition or investment candidates. Even
if we do identify suitable candidates, we cannot assure you that we will be able
to make acquisitions or investments on commercially acceptable terms. Acquiring
other businesses and technologies involves several risks, including:
o availability of financing on terms we find acceptable;
o diversion of our management's attention from other business concerns;
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o entry into markets in which we have little or no direct prior experience;
o inability to identify and acquire businesses on a cost-effective basis;
o inability to manage and integrate acquired personnel, operations,
services, products and technologies into our organization effectively; and
o inability to retain and motivate key personnel and to retain the clients
or goodwill of acquired entities.
In pursuing acquisitions, we may compete with competitors that may be
larger and have greater financial and other resources than we have. Competition
for these acquisition targets could result in increased prices. In addition, in
executing our acquisition strategy, we may incur expenses without being able to
identify suitable acquisition candidates, which could reduce our profitability.
Furthermore, we may incur debt or issue equity securities to pay for any future
acquisitions, which could have the effects described in "We may not be able to
obtain sufficient funds to grow our business and any additional financing may be
on terms adverse to the interests of our stockholders."
RISKS RELATED TO THE INTERNET AND OUR TECHNOLOGY INFRASTRUCTURE
WE MAY EXPERIENCE REDUCED VISITOR TRAFFIC, REDUCED REVENUE AND HARM TO OUR
REPUTATION IN THE EVENT OF UNEXPECTED NETWORK INTERRUPTIONS CAUSED BY SYSTEM
FAILURES.
Any system failure, including network, software or hardware failure, that
causes an interruption in the delivery of our products and services or a
decrease in responsiveness of our products and services could result in reduced
visitor traffic, reduced revenue and could materially adversely affect our
reputation and brand. Our servers and software must be able to accommodate a
high volume of traffic. We have experienced system interruptions in the past,
and we believe that these interruptions will continue to occur from time to time
in the future. We believe that visitor traffic is also dependent on the timing
and magnitude of our advertising. We have experienced monthly fluctuations in
visitor traffic, including short-term reductions. Any substantial increase in
demands on our servers will require us to expand and adapt our network
infrastructure. If we are unable to add additional software and hardware to
accommodate increased demand, we could experience unanticipated system
disruptions and slower response times. Any catastrophic failure at one of our
co-location facilities could prevent us from serving our Web traffic for up to
several days, and any failure of one or more of our Internet service providers
may adversely affect our network's performance. Our clients may become
dissatisfied by any system failure that interrupts our ability to provide our
products and services to them or results in slower response times. Our insurance
may not adequately compensate us for any losses that may occur due to any
failures in our system or interruptions in our service.
BREACHES OF OUR NETWORK SECURITY COULD BE COSTLY.
Because we host HotJobs.com-related data for many of our customers, we may
be liable to any of those customers that experience losses due to our security
failures. As a result, we may be required to expend capital and resources to
protect against or to alleviate security breaches, which could reduce our
profitability. A significant barrier to confidential communications over the
Internet has been the need for security. We may incur significant costs to
protect against the threat of security breaches or to alleviate problems caused
by these breaches. If unauthorized persons penetrate our network security, they
could misappropriate proprietary information or cause interruptions in our
services. Misappropriation of our and our customers' proprietary information or
interruptions of our services could result in reduced visitor traffic and a loss
of member employers. Reduced visitor traffic may result in fewer job seekers
posting their resumes to our WWW.HOTJOBS.COM employment exchange, which, in
turn, may discourage employers from subscribing to the employment exchange. We
generate a substantial portion of our revenue from these subscription fees. Due
to the possibility of liability related to data we host for our customers and
the possibility of a resulting decrease in the number of job seekers and member
employers, a breach of our network security could have a material adverse effect
on our financial condition and results of operations.
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DISRUPTION OF OUR SERVICES DUE TO UNANTICIPATED PROBLEMS OR FAILURES COULD HARM
OUR BUSINESS.
Our technology resides on computer systems located in co-location
facilities owned by GlobalCenter, Level(3) and AboveNet in New York City.
This system's continuing and uninterrupted performance is critical to our
success. Customers and job seekers may become dissatisfied by any system
failure that interrupts our ability to provide our services to them,
including failures affecting our ability to serve web page requests without
significant delay to the viewer. Sustained or repeated system failures would
reduce the attractiveness of our solutions to customers and job seekers and
result in reduced traffic or contract terminations, fee rebates and
makegoods, thereby reducing revenue.
Slower response times or system failures may also result from straining
the capacity of our software, hardware, or network infrastructure. To the
extent that we do not effectively address any capacity constraints or system
failures, our business, results of operations and financial condition could
be materially and adversely affected.
In addition, computer viruses may cause our systems to incur delays or
other service interruptions and could damage our reputation and have a
material adverse effect on our business, financial condition and results of
operations. In June 1999, we detected a virus on a file server that supports
our office equipment. The inadvertent transmission of computer viruses could
expose us to a material risk of loss or litigation and possible liability.
Moreover, if a computer virus affecting our system is highly publicized, our
reputation could be materially damaged and our visitor traffic may decrease.
Our operations are dependent on our ability to protect our computer
systems against damage from fire, power loss, water damage,
telecommunications failures, vandalism and other malicious acts, and similar
unexpected adverse events. In addition, interruptions in our solutions could
result from the failure of our telecommunications providers to provide the
necessary data communications capacity in the time frame we require. Despite
precautions we have taken, unanticipated problems affecting our systems have
from time to time in the past caused, and in the future could cause,
interruptions in the delivery of our solutions. Our business, results of
operations and financial condition could be materially and adversely affected
by any damage or failure that interrupts or delays our operations.
WE MAY NOT BE ABLE TO ACCESS THIRD PARTY TECHNOLOGY UPON WHICH WE DEPEND.
If we lose the ability to access third party technology which we use, are
unable to gain access to additional products or are unable to integrate new
technology with our existing systems, we could experience delays in our
development and introduction of new services and related products or
enhancements until equivalent or replacement technology can be accessed, if
available, or developed internally, if feasible. If we experience these delays,
our revenues could be reduced or grow slower than expected and our business
could be materially adversely affected. We license technology that is
incorporated into our services and related products from third parties including
Oracle Corporation for database technology and Thunderstone Software-EPI, Inc.
for full-text indexing. In light of the rapidly evolving nature of Internet
technology, we may increasingly need to rely on technology from these or other
vendors. Technology from our current or other vendors may not continue to be
available to us on commercially reasonable terms, or at all.
In addition, although we believe that the costs of ensuring that our
systems and software and those of third parties with which we do business do not
experience any date-related problems will not be material, we cannot assure you
of this.
RISKS RELATED TO LEGAL UNCERTAINTY
WE MAY BECOME SUBJECT TO BURDENSOME GOVERNMENT REGULATIONS AND LEGAL
UNCERTAINTIES AFFECTING THE INTERNET THAT COULD ADVERSELY AFFECT OUR BUSINESS.
Legal uncertainties and new regulations could increase our costs of doing
business, require us to revise our products or services, prevent us from
delivering our products and services over the Internet or slow the growth of the
Internet, any of which could increase our expenses, reduce our revenues or cause
our revenues to grow at a slower rate than expected and materially adversely
affect our business, financial condition and results of operations. Laws and
regulations directly applicable to Internet communications, commerce, recruiting
and advertising are becoming more prevalent, and new laws and regulations are
under consideration by the U.S. Congress and state legislatures. Any legislation
enacted or restrictions arising from current or future government investigations
or policy could dampen the growth in use of the Internet generally and decrease
the acceptance of the Internet as a communications, commercial, recruiting and
advertising medium. The laws governing the Internet, however, remain largely
unsettled, even in areas
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where there has been some legislative action. It may take years to determine
whether and how existing laws such as those governing intellectual property,
privacy, libel and taxation apply to the Internet. In addition to new laws and
regulations being adopted, existing laws may be applied to the Internet.
Moreover, the laws and the interpretation of laws concerning the recruiting
industry are constantly changing. New and existing laws may cover issues that
include:
o user privacy;
o civil rights, affirmative action and other employment claims;
o consumer protection;
o libel and defamation;
o copyright, trademark and patent infringement;
o trade secret protection;
o rights of publicity and moral rights;
o database protection;
o domain name registration;
o pricing controls;
o characteristics and quality of products and services;
o sales and other taxes; and
o other claims based on the nature and content of Internet materials.
In addition, any imposition of state sales and use taxes on the products
and services sold over the Internet may decrease demand for products and
services that we sell over the Internet. The U.S. Congress passed legislation in
1998 that limits for three years the ability of states to impose any new taxes
on Internet-based transactions. Failure by Congress to renew this legislation
and the subsequent imposition of state taxes on Internet-based transactions
could adversely affect our future operating results which could result in a
decline in our stock price.
WE MAY BE UNABLE TO OBTAIN A U.S. TRADEMARK REGISTRATION FOR OUR BRAND OR TO
PROTECT OUR OTHER PROPRIETARY INTELLECTUAL PROPERTY RIGHTS.
FAILURE TO OBTAIN FEDERAL TRADEMARK REGISTRATION FOR WWW.HOTJOBS.COM COULD
DISRUPT OUR PROMOTION OF THE HOTJOBS.COM BRAND. If we are unable to secure the
rights to use the WWW.HOTJOBS.COM mark and related derivative marks, a key
element of our strategy of promoting "HotJobs.com" as a global brand could be
disrupted. Our success depends to a significant degree upon the protection of
our brands and their value, particularly the "HotJobs.com" brand name. We are
also susceptible to others imitating our brands, particularly HotJobs.com. Our
application to obtain a federal registration for "www.hotjobs.com." was approved
by the U.S. Trademark Office and published for possible opposition by third
parties on April 18, 2000. A domain name registrant claiming that trademark
registration could cause it damage subsequently filed an opposition. We will
vigorously contest the opposition and believe we have strong arguments to
prevail. Nevertheless, we cannot assure you of the result. In addition, in May
1998, another pending trademark applicant, who has since abandoned its
application, made claims regarding prior use and ownership of "hotjobs" as a
trademark. Adverse outcomes to these or similar claims or any related
litigation, should it occur, could result in us being limited or prohibited from
further using the "www.hotjobs.com" mark and related derivative marks in the
future.
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FAILURE TO PROTECT OUR INTELLECTUAL PROPERTY RIGHTS COULD PERMIT OTHERS TO
APPROPRIATE OUR PROPRIETARY TECHNOLOGY. The unauthorized reproduction or other
misappropriation of our proprietary technology, including our hiring management
software, could enable third parties to benefit from our technology and brand
name without paying us for them. If this were to occur, our revenues could be
materially adversely affected and the value of our brand could be diminished.
The steps we have taken to protect our proprietary rights may not be adequate to
deter misappropriation of proprietary information. We may not be able to detect
unauthorized use of our proprietary information or take appropriate steps to
enforce our intellectual property rights. In addition, the validity,
enforceability and scope of protection of intellectual property in
Internet-related industries is uncertain and still evolving. The laws of other
countries in which we market or may market our services in the future are
uncertain and may afford little or no effective protection of our intellectual
property. If we resort to legal proceedings to enforce our intellectual property
rights, the proceedings could be burdensome and expensive. The proceedings also
could involve a high degree of risk.
DEFENDING AGAINST INTELLECTUAL PROPERTY INFRINGEMENT CLAIMS COULD BE TIME
CONSUMING AND EXPENSIVE, AND WE MAY BE LIABLE FOR INFRINGING THE INTELLECTUAL
PROPERTY RIGHTS OF OTHERS. IF WE ARE NOT SUCCESSFUL IN DEFENDING AGAINST THESE
CLAIMS, WE COULD BE SUBJECT TO SIGNIFICANT DAMAGES AND THE DISRUPTION OF OUR
BUSINESS.
Successful intellectual property infringement claims against us could
result in monetary liability or a material disruption in the conduct of our
business. We cannot be certain that our products, content and brand names do
not or will not infringe valid patents, copyrights or other intellectual
property rights held by third parties. We expect that infringement claims in
our markets will increase in number as more participants enter the markets.
We may be subject to legal proceedings and claims from time to time relating
to the intellectual property of others in the ordinary course of our
business. We may incur substantial costs and expenses in defending against
these third party infringement claims, regardless of their merit.
WE MAY BE LIABLE AS A RESULT OF INFORMATION RETRIEVED FROM OR TRANSMITTED OVER
THE INTERNET.
We may be sued for defamation, civil rights infringement, negligence,
copyright, patent or trademark infringement, personal injury, product liability
or other legal claims relating to information that is published or made
available on WWW.HOTJOBS.COM and the other sites linked to it. These types of
claims have been brought, sometimes successfully, against online services in the
past. We could also be sued for the content that is accessible from
WWW.HOTJOBS.COM and through links to other Internet sites or through content and
materials that may be posted by members in chat rooms or on bulletin boards. In
addition, clients use our hiring management software to evaluate and make
decisions on the resumes of applicants. In the event that one of our clients was
sued alleging employment discrimination, we could be named in that lawsuit. We
also offer email services, which may subject us to potential risks, such as
liabilities or claims resulting from unsolicited email or spamming, lost or
misdirected messages, security breaches, illegal or fraudulent use of email or
interruptions or delays in email service. Our insurance does not specifically
provide for coverage of these types of claims and therefore may not adequately
protect us against these types of claims. In addition, we could incur
significant costs in investigating and defending such claims, even if we
ultimately are not liable. If any of these events occur, our revenues could be
materially adversely affected.
OTHER RISKS
OUR STOCK PRICE MAY EXPERIENCE EXTREME PRICE AND VOLUME FLUCTUATIONS.
The stock market in general and the market prices of shares in technology
companies, particularly those such as ours that offer Internet-based products
and services, have been extremely volatile and have experienced fluctuations
that have often been unrelated or disproportionate to the operating performance
of such companies. The market price of our common stock has fluctuated
significantly in the past and could continue to be highly volatile and subject
to wide fluctuations in response to many factors, some of which are largely
beyond our control. These factors include:
o quarterly variations in our results of operations;
o adverse business developments;
o changes in financial estimates by securities analysts;
o market conditions in the technology and related sectors;
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o investor perception of us and online recruiting services in general;
o announcements by our competitors of new products and services or
acquisitions; and
o general economic conditions both in the U.S. and in foreign countries.
Our stock price may also experience fluctuations due to approximately $4.2
million in non-cash deferred compensation that we expect to amortize through
August 2003.
SINCE OUR STOCK PRICE IS VOLATILE, WE MAY BECOME SUBJECT TO SECURITIES
LITIGATION THAT IS EXPENSIVE AND COULD RESULT IN A DIVERSION OF RESOURCES.
Litigation brought against us could result in substantial costs to us in
defending against the lawsuit and a diversion of management's attention.
Securities class action litigation has often been brought against companies that
experience volatility in the market price of their securities. Since our stock
price is volatile, we could be subject to securities litigation and incur higher
expenses than expected, which could have a material adverse effect on our
business and results of operations.
FUTURE SALES OF OUR COMMON STOCK MAY NEGATIVELY AFFECT OUR STOCK PRICE.
The market price of our common stock could decline as a result of sales of
a large number of shares of our common stock in the market or as a result of
sales by our existing stockholders, or the perception that these sales could
occur. We have and will continue to have a large number of shares of common
stock outstanding and available for resale. These sales might make it more
difficult for us to sell equity securities in the future at a time and at a
price that we deem appropriate. Unregistered shares of our common stock
currently outstanding are eligible for sale without registration pursuant to
Rule 144 under the Securities Act, subject to certain conditions of Rule 144 and
certain lock-up agreements. On September 11, 2000, the SEC declared effective
the registration statement for the resale of shares of our common stock held by
the former shareholders of Resumix and certain of our existing stockholders who
exercised their piggyback registration rights with respect to this registration
statement. Sales of substantial numbers of these shares could depress the price
of our common stock.
IT MAY BE DIFFICULT FOR A THIRD PARTY TO ACQUIRE HOTJOBS.COM, WHICH COULD
DEPRESS OUR STOCK PRICE.
Delaware corporate law, our amended and restated certificate of
incorporation and bylaws, and our stock option plans contain provisions that
could have the effect of delaying, deferring or preventing a change in control
of HotJobs.com or our management that stockholders may consider favorable or
beneficial. These provisions could discourage proxy contests and make it more
difficult for you and other stockholders to elect directors and take other
corporate actions. These provisions could also limit the price that investors
might be willing to pay in the future for shares of our common stock. These
provisions include:
o authorization to issue "blank check" preferred stock, which is preferred
stock that can be created and issued by the board of directors without
prior stockholder approval, with rights senior to those of common stock;
o a staggered board of directors, so that it would take three successive
annual meetings to replace all directors;
o prohibition of stockholder action by written consent;
o advance notice requirements for the submission by stockholders of
nominations for election to the board of directors and for proposing
matters that can be acted upon by stockholders at a meeting;
o immediate vesting of options issued under the stock option plans in
connection with a change of control; and
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o the payment of a cash distribution for surrendered options with limited
stock appreciation rights upon the successful completion of a hostile
tender offer for more than 50% of our outstanding voting stock.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
INTEREST RATE RISK. We are exposed to changes in interest rates primarily due
to our investment in short-term marketable securities, which are comprised of
cash, Taxable Discount Commercial Paper and Dutch Auction Rate Securities
with longer term maturities that generally reset at par every 35 days and may
include municipal obligations, money market preferred stock and taxable debt.
These investments are classified as available for sale securities and,
therefore, any changes in the market's interest rates affect the value of the
investment and such change in value is recorded as unrealized gains and
losses. Our interest rate risk based on a hypothetical increase in interest
rates of 100 basis points, for the financial instruments included in our
portfolio, would be a decrease of approximately $85,000 in the value of our
portfolio.
MARKET RISKS. Our accounts receivable are subject, in the normal course of
business, to collection risks. We regularly assess these risks and have
established policies and business practices to protect against the adverse
effects of collection risks. As a result, we do not anticipate any material
losses in this area.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, HotJobs.com is subject to legal proceedings and claims in the
ordinary course of business, including claims of alleged infringement of
trademarks, copyrights and other intellectual property rights. HotJobs.com is
not currently aware of any legal proceedings or claims that the Company believes
will have, individually or in the aggregate, a material adverse effect on its
financial position or results of operations.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
(d) Use of Proceeds
On August 10, 1999, the Securities and Exchange Commission declared
effective our Registration Statement on Form S-1 (File No. 333-80367) in
connection with our IPO. A total of 3,350,000 shares of our common stock
(including 350,000 shares issued pursuant to the exercise by the
underwriters of a portion of their over-allotment option) were sold at a
price of $8.00 per share to an underwriting syndicate led by Deutsche Bank
Securities Inc., BancBoston Robertson Stephens Inc., SG Cowen Securities
Corporation and E*OFFERING Corp. On August 13, 1999 and September 2, 1999,
3,000,000 and 350,000 shares of our common stock, respectively, were sold
and thereafter, the IPO was completed. The aggregated gross proceeds raised
in connection with the IPO were $26.8 million. The total costs incurred in
connection with the IPO, including underwriting discounts and commissions,
and fees for registration, legal, accounting, transfer agent, printing, and
other miscellaneous fees, were approximately $3.6 million, resulting in net
proceeds to us of approximately $23.2 million.
As of September 30, 2000, we had utilized all of the net proceeds of the
IPO. The net proceeds were used for general corporate purposes, including
increasing our sales and marketing efforts; developing our infrastructure,
products and services; obtaining additional office space; hiring additional
personnel; and possible acquisitions.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are filed as part of this report:
NUMBER DESCRIPTION
---------- --------------------------------------------------------------
3.1* Amended and Restated Certificate of Incorporation.
3.2* Amended and Restated Bylaws.
4.1* Specimen Common Stock certificate.
4.2 Please see Exhibits 3.1 and 3.2 for provisions of the
Certificate of Incorporation and Bylaws.
27.1 Financial Data Schedule for the Period Ended September 30,
2000.
----------
* Incorporated by reference to our Registration Statement on Form S-1 (File No.
333-80367), as amended.
(b) Reports on Form 8-K
We filed a Report on Form 8-K/A on July 24, 2000 to amend a filing on May 24,
2000 to include Item 7(a), the Financial Statements of Business Acquired and
Item 7(b), the Pro Forma Financial Information, for our Resumix acquisition.
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SIGNATURE
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.
HOTJOBS.COM, LTD.
(REGISTRANT)
DATED: November 14, 2000 BY: /s/ Lowell W. Robinson
--------------------------
Lowell W. Robinson
Chief Financial Officer
(Duly Authorized Officer and
Principal Accounting Officer)
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