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Jupitermedia Corporation (JUPM)

Q3 2006 Earnings Call

November 9, 2006 11:00 am ET

Executives

Alan M. Meckler - Chairman of the Board, Chief Executive Officer

Christopher J. Baudouin - Executive Vice President, Chief Financial Officer

Christopher S. Cardell - President, Interim Chief Financial Officer, Chief Operating Officer, Director

Analysts

Kit Spring - Stifel Nicolaus

Fred Searby - JP Morgan

Matthew Troy - Citigroup

Joe Maxa - Dougherty & Company

Jeff Shelton - Natexis Bleichroeder, Inc.

Herman Wun

Vineet Sharma - Deutsche Bank

Presentation

Operator

Good day, and welcome to Jupitermedia's third quarter 2006 financial results conference call. Today’s call is being recorded. I would now like to turn the call over to Mr. Alan M. Meckler, Chairman and CEO of Jupitermedia. Go ahead, please, sir.

Alan M. Meckler

Thank you for joining us today. I am here in Darien, Connecticut, our world headquarters with Christopher Cardell, President and Chief Operating Officer, and Christopher Baudouin, our Chief Financial Officer.

Prior to my making additional comments, I am going to turn the call over to Chris Baudouin for a quick note.

Christopher J. Baudouin

Before we begin our formal comments, I would like to remind you that in our financial earnings announcement released yesterday, and also on this call, Jupitermedia is providing specific forward-looking statements, including guidance related to our expectations of future financial performance. Any forward-looking statements made as part of our call today are subject to risk and uncertainties that could cause actual or predicted results to differ materially. These risks are outlined in our earnings announcement, as well as in our SEC filings, including our most recently filed 10-K, which can be obtained from the SEC website or directly from our Investor Relations website. Alan.

Alan M. Meckler

Thank you, Chris, and in terms of Chris Baudouin’s participation in reading that statement, and of course he later on will give more details on the financial side, this will be the last quarter that Chris will be reporting to you. As many of you know, through the end of the year, Chris will be with us but he has resigned effective the end of the year. We will miss him.

Our third quarter numbers certainly are disappointing. We made progress in many areas, areas which portend good results for our company in coming quarters. I will elaborate on this progress in a moment. However, the quarter also held a negative surprise to management, and since having a public company today that provides guidance, negative surprises are never good, and will almost always outweigh any progress made in the quarter.

I will not specifically reiterate our numbers, as Chris Baudouin will be delving into that, and of course, through our press release, most of you on the phone no doubt have our numbers for the quarter.

The negative surprise mentioned was a softness with our distributor sales of approximately $1.1 million, compared to quarter two ’06. Certainly there were some other little negatives in there that added up to about $2 million, but the big surprise to us was in this weakness in the distributor sales.

We have nearly 320 distributors worldwide, and we did not expect such softness, and of course had guided and budgeted for a higher result. Unfortunately, the softness did not become apparent to management until very late in the financial reporting process -- in other words, even beyond the end of the quarter, due to low to no visibility of distribution trends until several weeks or more after any given month concludes.

I would like to reiterate also that even with this information in hand, but of course after the quarter had ended, it has never been our practice to revise financial guidance between earnings releases, other than for material acquisitions or divestitures. But getting back to the October surprise, or November surprise, I should say, we did not know the actual reasons for the distribution softness. Obviously we are dealing with 320 different organizations.

We polled not all of them, but some of them, some of the larger ones around the world in anticipation of this call. Most did report that they had a weak quarter and could not give us an explanation. Also, unfortunately, we do not know if this condition would continue or will continue in the present quarter, nor do we know what would happen in this part of our business for 2007.

Therefore, since it is not an area that we literally control, and with that very limited visibility, we are forced to take a very conservative approach to projecting distribution results for the foreseeable future. It could be higher, it could be lower, but we have never had any problem in this area before.

Ultimately, we are hopeful that we will have much better results on the distribution front than what we are presently projecting for the fourth quarter.

I want to turn to what I think were positive results for a company that has undergone significant change and that is continuing to build to the future.

Sales bookings made by our U.S.A. and Canadian direct sales team in quarter three 2006 increased 15% on an annualized basis over the second quarter of 2006, and 19% over quarter three 2005. This is an excellent and positive trend for the company, since it was direct sales -- these specific types of direct sales, I want to emphasize that -- that caused the negativity for our company in its report for the second quarter of this year.

We believe we have turned the corner in this area of sales due to the success of our new search engine, which only launched in July, and the increased recognition of Jupiter Images as a major source for image buyers and the contributions now being made by that sales team that we have built up.

I am sure many of you remember that we believe that we were one quarter too early in our last phone call with you, in hiring additional sales people in quarter one and quarter two of 2006, because our search engine was not ready for the marketplace. Obviously, we appear to have successfully solved this quarter two problem and look for solid sales results going into 2007 from our direct sales force.

The sales force is responsible for about one-third of our images revenue, and we are building out similar direct sales forces and strategies in Australia, England, Germany, France, and now recently with the acquisition we made in Spain.

These are properties or areas that we control versus, I want to make sure again you understand the distribution problem that we had. These are our direct sales.

We are starting to see solid growth now where we had made these investments abroad. We believe we have an excellent chance to show top- and bottom-line growth with these international direct sales forces now.

Turning to EBITDA, while not extraordinary and excluding the non-cash stock option expense, EBITDA increased from $8.2 million for quarter two 2006 to $8.5 million for quarter three 2006, due to reduced operating expenses, which we had indicated we would start showing investors, which reflect the progress that we made during quarter three 2006 and the continuing integration of our many recent acquisitions.

Our quarter three 2006 EBITDA includes approximately $300,000 of one-time charges for prospective acquisitions that were not consummated in the quarter.

Turning to operating margins, even though we did not hit that top line, image operation margins improved from 33.8% to 35.2%, which we think is a good omen for the future. Online media margins improved from 33.6% to 39.3%.

On the balance sheet, the deferred revenue increased from $11.9 million at the end of 2005 to $13.3 million at the end of Q3 2006, a 16% annualized increase, due in part to the growth of Jupiter Images Unlimited and other subscription offerings.

Some other points -- during the present quarter, we will close our announced binding deal to own 90% of the micropayment site known as stockexpert.com. As many of you probably remember, we made an equity investment of 49.7% in January of this year, and now obviously before year-end, we will now own 90% of this operation. This also includes the community site know as sxc.hu, or Stock Exchange, which now has well over 900,000 members and adds approximately 15,000 a week.

Stockexpert.com has had little to no marketing investment in its less than one year of existence, but this is about to change as we get control of the operation. We believe that this operation can grow significantly in 2007.

Now, I wanted to turn to online media before we open up to questions. We had our normal seasonal weakness for this division in quarter three, but it was not apparent through our numbers that it was actually a little weaker than we had thought. It was actually -- we budgeted in our guidance about $500,000 to $600,000 higher than what the sales were. So while if you compare previous years, it looks good, we actually were disappointed in the number.

Overall, online media is off a bit for sales in 2006, and could continue to be so through the end of the year. However, this is more a result of our not investing over the last three years in this operation, in this division, in technology, et cetera. A little bit of normal organic growth in acquisitions if in fact this was our only business, which essentially it was until three years ago.

We do not believe there is any inherent problem with the division that a little fine-tuning will not solve. Therefore, we are in the midst of adding several dimensions to this division, including two new trade shows which will launch in May and June of next year. The first one being called Business IT Alignment, which will be in Boston in May, and we will have more detail shortly, and another new show called Web Video Summit, which will be in San Jose, California in June.

We will also be launching companion websites for these two new trade shows, and you can also expect other websites to be launched that would not necessarily be aligned with companion trade shows. We are very excited by what we see as an opportunity in these areas and in the growth that we think we can regenerate to the online media division.

We are also redesigning portions of our major websites and have possible pending acquisitions coming, nothing of significance in dollars, but things that we think we can buy relatively inexpensively and leverage.

Therefore, we believe that at some point in 2007, investors will see significant growth restored to this valuable B2B network.

Certainly I am happy to take your questions after Chris Baudouin reads you some more details about our financials.

Christopher J. Baudouin

Thanks, Alan. Before I begin, I want to highlight that due to the sales of our Jupiter Research and Jupiter Events businesses, the results of Jupiter Research and Events are shown as discontinued operations in our financial statements. Prior period information has been restated to show these businesses as discontinued operations.

Alan has already touched on the revenue issues. I am not going to rehash those.

Operator?

Operator

Yes, sir. Please stand by, one moment. My apologies for the technical difficulties. Please continue.

Alan M. Meckler

Is everybody still online, do you think?

Operator

Yes, sir, everyone is still online.

Alan M. Meckler

I guess this is what happens when you do not reach top-line revenue, you have problems with your phone system.

Christopher J. Baudouin

Alan covered a lot of the revenue issues already. I am not going to rehash the numbers that are there. Cost of revenues as a percentage of revenues, or cost of revenues remained consistent from Q2 at 35%. Advertising, promotion and selling decreased in Q3 2006 from Q2, due primarily to a reduction in sales personnel and lower advertising for our Jupiter Images brand.

As noted in our press release, on January 1st of this year we began expensing stock-based compensation. Non-cash stock-based compensation expense was $1.2 million for the quarter, and $2.9 million for the nine months ended 9-30-06.

Income taxes or provision for taxes was $1.3 million during the quarter. The effective rate was 56%, which was abnormally high due to the non-deductible expenses associated with incentive stock options. We are modeling a rate of 46% for the fourth quarter.

Turning to the balance sheet, we had cash of $10.3 million and debt of $64.3 million at September 30th. Our DSOs were 65 days at the end of the quarter.

As we look forward to guidance for the fourth quarter, we expect revenues to be in the range of $33 million to $34 million, and diluted EPS to be approximately $0.06 per share. This EPS estimate does not include non-cash stock-based compensation expenses. The impact of these expenses is expected to reduce earnings per share by $0.02 for the fourth quarter.

I would like to remind everyone that this guidance reflects preliminary estimates for depreciation and amortization related to certain of our acquisitions, and these are subject to change pending final appraisals and review by our auditors.

From an EBITDA perspective, including non-cash stock-based compensation, we are expecting approximately $9 million for the fourth quarter, which would be an increase from the $8.5 million after the third quarter, and fully diluted shares are estimated to be 35.9 million shares for the fourth quarter. Alan.

Alan M. Meckler

Thank you, Chris, and again, thank you for eight wonderful years working together. We have been through a lot of things and again, we will miss you, but I know you are moving on to some things that you want to do.

With that, we are happy to take your questions.

Question-and-Answer Session

Operator

(Operator Instructions)

We will take our first question from Kit Spring from Stifel Nicolaus.

Kit Spring - Stifel Nicolaus

Good morning. When we look at the fourth quarter guidance, should we expect the normal seasonal up-tick sequentially in online media? If so, does that imply a sequential decline in online images?

Then, just another question -- do you think, given the weakness you have seen and the changes in the industry, whether it makes sense to explore strategic options, or is this the wrong time to think about selling? Thank you.

Alan M. Meckler

The online media, I alluded to the fact that we, through the end of ’06, expect weakness. It will be up somewhat but we are in our guidance indicating that we will be somewhat flat to the third quarter.

That could change, because this is again a business that has very, very poor visibility, not more than a week or two weeks out, in most cases. But because of the holiday coming in December and where we are, we are feeling the effects of not investing in this business, which we are going to change for 2007. I hope I have answered that.

As to the second question, we like to think of ourselves as the company that is always strategically looking out, not just weeks and months but years. Certainly in terms of operations, our recent investments in music and several other areas, like in Japan and other places are certainly costing this company money right now, but we will continue to invest in them.

We are a public company and we have no poison pills. I am the largest stockholder. We are technically always for sale because that is what we owe to our stockholders, but we do not seek that out.

Kit Spring - Stifel Nicolaus

Thank you.

Operator

We will next take a question from the site of Fred Searby with JP Morgan. Go ahead, please.

Fred Searby - JP Morgan

Thank you. A couple questions. One, could you give us some sense here on pricing trends, where you think they are going? Royalty-free in the U.S. has been one of the much vetted and controversial. Do you think there is going to be pricing decreases in royalty free next year, or potentially even ongoing pricing strength in light of what looks like a slowing market?

Secondly, could you talk about stockexpert.com, the kind of growth you are seeing there and micropayments generally, and whether it is cannibalizing or additive or whatever your view? Any updated data points on what is happening in terms of micropayment’s impact on the royalty-free market? Thank you.

Alan M. Meckler

In terms of the first question, we have not discounted in any greater proportion than any other year in business. Others have discounted at greater proportions than we have.

We as a whole have not been affected that way. However, we have been adding more subscription businesses. For example, our Jupiter Images unlimited, which is growing very rapidly, does offer our highest level of royalty-free images, close to 500,000 of them, wholly owned.

If you amortize obviously off of a subscription what the yield would be in a royalty-free image, yes, I guess in that sense, prices come down. But we are different in many respects from obviously Getty or Corbis because we rely even more so on subscription. I do think that royalty-free is going to be affected by subscription, but we like to think that we are the leader in that and that we would be the beneficiary. I tend to think that more and more royalty-free is going to move to various forms of subscriptions, so that is how I would answer that question.

If you need further detail, please let me now.

As to your second question, stockexpert, obviously we have not been running that business. We were only an investor. We still are not running the business because we do not technically own it, although we do have a binding deal. I would anticipate either late next week or the week after Thanksgiving that we would consummate the move to the 90% position.

That business essentially was created in January, or a little before January of this year. It now runs at over a $1 million run-rate. We think it can grow much faster without serious investment, but obviously that is quite interesting, when I think the total promotion costs that went into the business to date is about $5,000.

It is growing primarily off of search engine results and word of mouth. That is a powerful little model there. We are certainly not pinning our growth on that, but even if it doubled or tripled or quadrupled, that would be significant for sure. It would have some modest impact, but for us, we look at the micropayment business as a necessary part of the way we have tiered our sales versus our competitors. That is, if there was a stairway, we believe each one of those stairs, we have something pricing wise, package wise to appeal to any aspect of the market.

As far as I am concerned, micropayment is just another one of those steps. If one step or another step becomes more important over the period of a year, fine, or in the future, but we believe we have the bases covered to handle all eventualities.

Fred Searby - JP Morgan

Thank you.

Operator

We will next move to the site of Matthew Troy. Go ahead, please.

Matthew Troy - Citigroup

Good morning. I had a question about the lack of visibility into your distribution partners. I was wondering if you could help me. What can you do there? What are you doing there? Has this made you rethink how heavily you want to lean on distribution? I think you intimated that it was a two-thirds/one-third split. Will that change over time? I am just wondering what you can do to manage away from this kind of volatility going forward.

Alan M. Meckler

The distribution business, and I want to make it very clear to everybody what we are talking about here, these are third party organizations around the world, there are a few in the United States, that sell our images. It does represent a little over 20% of our business as we are presently constituted this year, so it is an important part of the business.

Unfortunately, since we do not -- we have no control, absolutely no control other than limiting or giving images to these parties. They are honest companies, but the nature of the business and the nature of the beast is that it takes several weeks after a month is over to know what the month was. Certainly we are definitely going to press a lot more aggressively now, because quite frankly, this business had been staid over the last -- first of all, let me back-track again.

We have only been in this business about 18 months, so we do not have a huge portfolio of experience here. But it has never come up in any quarter. We have seen modest growth, actually, in virtually every quarter since we have been in the distribution business. Then, all of a sudden, we took this big step backwards.

I am not ready to suggest that it is all over here. I am presuming it was just an aberration, but we will certainly try to press these organizations for results earlier.

The problem is you are talking about 320 of them, and maybe what we have to do is reevaluate the actual number. Maybe it is too many to handle, but again, it is something that really only in the last six or seven or eight working days were we aware of, and its major impact. We obviously have to pay more attention to it.

Matthew Troy - Citigroup

Okay, but does it make sense, or has your thinking change about potentially bringing some of these under the Jupiter umbrella?

Alan M. Meckler

Let me tell you what I think is happening. I know what is happening to a degree, but also what I think this may portend, as you know, we sort of created the concept of the importance of owning images. Obviously what we have been doing, not -- we certainly did not know this result was going to happen -- we have through acquisition acquired operations in a variety of countries. Heretofore, we have been investing heavily to integrate those and bring them into a profitable mode, and we are seeing actually October, November have been very strong in terms of the results that are starting to come in there after our investing and hard work on the parts of the managers in some of those countries.

This is very similar, actually, to when we talked to you last quarter, when we saw as we went into the quarter that we were presently in that we could see that the direct sales in the U.S. were starting to pick up, and now we are seeing that in our foreign operations.

It starts to become perhaps more logical to expand what we have done. We have recently moved into Spain and we think we purchased a gem of an operation there. You might see us get a little more aggressive there to control the situation, particularly in countries where business is large enough to warrant making that investment in time and dollars and what not.

But what I do think could be happening, and I am not sure, it is obviously a website, regardless of the language, but can be seen by anyone in the world. It does not matter where they are. What we could be seeing, and I am not saying this. I am not sending out an S.O.S. to people who are in the distribution business, but one might have to be concerned being a pure distributor and not an owner, because at a certain point, the disintermediation factor starts to take hold. It is quite possible that what we may be seeing is greater direct sales, which would be good for us. We are not trying to put anyone out of business here, mind you, but this is something that could be happening.

I just cannot answer it right now. It could be the Internet that is causing this. What we would hope, of course, is that our high-quality images will lead to people ordering directly off of our websites versus going through third parties, but I cannot make that conclusion. I think I need another quarter or two quarters to answer that question.

Matthew Troy - Citigroup

Thank you, and just one last question in terms of strategic alternatives. The stock obviously reacting negatively today. Could you just refresh us in terms of, I know you have a lot of things going on in terms of investing for the franchise long-term, but prioritizing uses of cash, is a more aggressive share repurchase something you are contemplating right now? What are the criteria you use to evaluate that decision? Thanks, Alan.

Alan M. Meckler

If I understood that correctly, you are asking if we would repurchase shares?

Matthew Troy - Citigroup

Yes.

Alan M. Meckler

No, I think at this point, the way we are constituted with our cash flows, we are in very good shape. We still have a significant borrowing power off of our revolver and credit line. That would be a very low priority. I would still use cash as we have been. The recent deal in Spain was done out of our cash. The deal to close stockexpert will be used without borrowing.

I still feel that we serve stockholders, and I am the largest stockholder, I still feel that we perform the best service for any stockholder by continuing to buy assets.

Matthew Troy - Citigroup

Got it. Thank you again, and Chris, thank you for your time and help.

Operator

(Operator Instructions)

We will now to the site of Joe Maxa. Go ahead, please.

Joe Maxa - Dougherty & Company

Thank you. On the distribution side, were you seeing weakness all quarter long, or was that something that came up in the last month, Alan?

Alan M. Meckler

I must say that with all the things that we do here, it was one area that we were not eyeballing, because it was sort of was always rock solid and you did not really have to think about it. It did not really become apparent in terms of doing -- until we did the double and triple check to get to the point where we could put out the numbers yesterday afternoon.

It was about six or seven working days ago that we had this problem. Certainly we could have done better. Now we will be watching it closer, but it was -- if we looked at the different parts of our business, our direct sales, our distribution sales, our subscription sales, our licensing, it was probably the last thing we would be looking at.

Joe Maxa - Dougherty & Company

It sounds like you are not exactly sure why it was weak, but is there a geographical breakdown where you saw weakness in one area more than another?

Alan M. Meckler

It was across the board.

Joe Maxa - Dougherty & Company

Across the board? Okay.

Alan M. Meckler

Across the board, and a I said, in an informal poll, certainly not scientific, we got that feedback from going to 20 or 30 of the 300-plus that we have to find out that they had a weak quarter. Now, as I say, I do not know if that is an ongoing situation or it was a one quarter situation.

Joe Maxa - Dougherty & Company

Just to refresh our memory, could you give us your ballpark breakdown of revenue from the different areas you just mentioned -- direct, distribution, licensed?

Alan M. Meckler

I am going to turn that over to Chris Cardell.

Christopher S. Cardell

Direct sales, and this again is fairly rough, but for the image business, direct sales for North America is about a third of the business. What we would call the online frictionless sales are about a quarter of the business. The distribution that Alan is describing here is a little less than a quarter of the business, and the remainder, which is I guess if you do the math, about 15% or so, would be both the direct sales operations in the U.K., France, Germany, Australia, and then a small percentage for licensing.

Joe Maxa - Dougherty & Company

Okay. All right, that’s good. I guess I will leave it at that. Thank you.

Operator

(Operator Instructions)

We will next go to the site of Jeff Shelton. Go ahead, please.

Jeff Shelton - Natexis Bleichroeder, Inc.

Thank you. In talking with the distributors in the foul-up, was there any sense that the weakness was related to your portfolios versus others which may have seen some strength, or if it was across the board?

Alan M. Meckler

I believe it was across the board. That would make sense because we, in our direct sales offices, actually did quite well.

Jeff Shelton - Natexis Bleichroeder, Inc.

Have you gotten October reports yet from these guys?

Alan M. Meckler

No.

Jeff Shelton - Natexis Bleichroeder, Inc.

Looking at fourth quarter, assuming sort of flattish numbers for the total online images, and assuming that let’s say distribution does not get any better, that really implies not much growth, if any, on your single image sales, and actually probably --

Alan M. Meckler

The reason why we have done that is obviously we have lost some credibility here whatever we put out in guidance, so we may as well take it down, and I can agree with that. But don’t forget it is a big holiday period, and it would be not prudent of us to take any kind of a bullish stance there, so hopefully we will surprise people, but we decided that discretion is the better part of valour in terms of the disappointment that we have had here and in the last quarter.

Christopher S. Cardell

Just to add to that, on a sequential basis, you are correct. We are implying very little, if any, growth for the fourth quarter versus the third quarter. Typically there is some seasonal down-turn with December being a lower month for sales. If we were to look at the fourth quarter of 2006 compared to the fourth quarter of 2005, there should be reasonable growth on a year-over-year basis, which is a better way to look at the progress.

Jeff Shelton - Natexis Bleichroeder, Inc.

What are your expectations then with this updated guidance for organic growth in ’06?

Christopher S. Cardell

On a sequential basis, as we just discussed here, it is essentially flat. On a year-over-year basis, it is probably going to be in the range of 10%.

Jeff Shelton - Natexis Bleichroeder, Inc.

Last question, you had 12-month rolling forward guidance introduced last quarter. I assume that is no longer enforced. Is that correct?

Christopher S. Cardell

That is correct.

Jeff Shelton - Natexis Bleichroeder, Inc.

All right. Thank you.

Operator

We will now move on to the site of [Herman Wun]. Go ahead, please.

Herman Wun

Thanks, guys. Just a quick question, obviously you guys put out guidance that is essentially a little bit flat. I guess it is a little bit of a follow-up question to the earlier question. Given that you are seeing deteriorating trends on your distribution business side, and assuming things do not improve, does that assume an acceleration in your core U.S. sales? What kind of trends are you seeing in your subscription and micropayment types of sales in the October/November timeframe?

Second of all, if you could remind us, you guys invested in a lot of different areas to grow the company, including the micropayment area and improving subscriptions, or buying more wholly-owned images. What do you prioritize those areas? Thank you.

Alan M. Meckler

In terms of the first question, I would suggest that we do not have concrete information, so I can only speculate, but I have theorized earlier in the call to another question that we are in very good position. If distributors are going to have problems, we believe direct sales will increase. We cannot absolutely answer our growth in direct sales. Had that come at the detriment to the distributors? It could very well be. After all, we are now stronger in France, stronger in Germany, stronger in England, stronger in Australia and now soon stronger in Spain. Obviously we have become, in Canada and the United States, much stronger as well.

It could very well be that we are taking business from the distributors. That is one of the things that we do not have that type of information, although again I am not trying to hurt anybody. I would rather we get the business than lose it to somebody else. My guess is that may be happening, but it is too early to tell.

In terms of the investments that we have made, yes, I would suggest that on an annualized basis, probably $0.08 to $0.10 has been invested per share in operations that are not making any money right now, but we are investing in subscription sites in Japan, in building out our online music business, our Flash area, our stock footage business. I still contend that we are making the right moves and the right investments for the long-term.

In terms of the micropayment, we are making a further investment. I believe that is going to pay off in spades as well. But again, as I said last quarter, I make no apologies. I apologize that we did not meet our numbers. I am hurt more than anybody else, financially, that is. I take it personally that we do not do well. When I was in school, I liked to do well, and in business, I like to do well.

Overall though, I believe the long-term trends here, which I am not talking about years and years. I just think we had one problem in one area, essentially, that we are building a very important digital content hub.

That, by the way, is another investment we are making, which I alluded to last quarter. Our Home Depot approach to being able to offer everything. That is probably about 13 months away. We are going to continue to push very aggressively to do what we set out to do over a year ago.

Herman Wun

Just one last follow-up. I think you talked about $1.1 million was due to the softness of the distributor sales. I was wondering if you could elaborate on some of the other negatives that drove it up to the $2 million that you guys --

Alan M. Meckler

I actually did mention that. About $500,00 to $600,00 came from online media, and France, we missed our numbers in France by a little over $300,000.

I would add that France, over the last six weeks, has shown marked improvement and is now boiling along in a very positive way.

Operator

(Operator Instructions)

We will now move on to the site of Vineet Sharma. Go ahead, please.

Vineet Sharma - Deutsche Bank

Yes, good morning. I am an investor, and I have been watching your stock a couple of years now. It seems that the stock was up about $20 and above, and it has come down to $6 today. That is about a 70%-odd drop in the pricing. It seems like you guys have been investing in expanding for the future, but what is the outline for a turnaround, as far as the business goes, and the investment starts to pay off? Could you speak to that from an investor as well as with the other institutional investors that you have?

Alan M. Meckler

Certainly. I think I touched on that, particularly with the last question. I would also remind you that we were $0.96 not too long ago, either. It depends when you come in, depending on your range of pricing and where you invested.

I have seen it all. Over seven years, we have been $0.96 and we have been $72. When we started in the image space in the summer of 2003, we were $2. Today, we are $6, and we have been higher.

We do not sit here looking at the stock price. We are building what we believe is making the right moves and building out the company. We certainly, as I said in the last quarter, would give an investor, who is a short-term investor, a bumpy ride. Overall though, I am the largest stockholder. I do not take these things lightly. If I was just trying to build for quarterly numbers, I would not have made a lot of investments that we have made, because I do believe that in the long-term, both as a large holder myself and for other holders, that this will all pay off.

Operator

(Operator Instructions)

It appears we have no further questions at this time, sir.

Alan M. Meckler

Thank you very much. We look forward to seeing you next quarter.

Operator

Ladies and gentlemen, this does conclude today’s teleconference. You may disconnect at this time.

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Source: Jupitermedia Q3 2006 Earnings Call Transcript
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