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Juno Reports Record Fourth Quarter and Annual Results - Juno Online Services, Inc

Edge: Work-Group Computing Report, Jan 17, 2000

Juno Online Services, Inc. (NASDAQ: JWEB), a leading national provider of Internet-related services, reported record revenues of $52.0 million for the year, and $18.1 million for the quarter, ended December 31, 1999, more than double the revenues reported for the corresponding periods in 1998. The company also reported its first profit before subscriber acquisition expenses in the fourth quarter.

Annual revenues for 1999 grew by 140% over those reported for 1998. Fourth quarter revenues grew by 126% over revenues recorded in the fourth quarter of 1998, and 38% sequentially over those recorded in the third quarter of 1999. Juno derives revenue from subscription fees it charges for its premium services, from the sale of advertising, and from various forms of electronic commerce.

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The subscriber base for Juno's billable premium services grew to 550,000 as of December 31, 1999 -- more than double the 270,000 recorded as of the end of 2Q99, and 38% higher than the total as of the end of the third quarter. A total of 2.96 million active subscribers used Juno's free and billable services during the fourth quarter of 1999.

In December 1999, Juno announced the expansion of its free basic service to include full Internet access. Using the latest version of Juno's software (version 4.0), any of Juno's millions of basic service subscribers may now access not only e-mail, but also the World Wide Web, for free. Anyone using an older version of the Juno software can upgrade to version 4.0 by downloading a copy for free from Juno's Web site, www.juno.com, or by requesting a copy on CD-ROM by calling 1-800-TRY-JUNO (1-800-879-5866). Juno also announced the launch of a pilot test of its new broadband service, Juno Express, in selected markets.

Commenting on the results released Tuesday, Charles Ardai, Juno's president and chief executive officer, said, "Achieving profitability before subscriber acquisition expenses three quarters sooner than we had expected caps off a great year for Juno. Over the coming year, we see enormous opportunity for growth as millions of new users come onto the Internet for the first time. As the first Internet access provider to offer both free basic and billable premium services, we believe Juno is in an excellent position to take advantage of this opportunity."

Billable service revenues rose 50% to $13.0 million in the fourth quarter of 1999, as compared with the $8.7 million reported in the third quarter. This revenue increase reflects the accelerated growth of Juno's premium service subscriber base during the second half of 1999.

Advertising and transaction fee revenues increased to $4.3 million in the fourth quarter, up approximately 29% sequentially from $3.4 million in the third quarter. This increase was primarily attributable to continued growth in the revenues generated by Juno's strategic marketing alliances.

For the fourth consecutive quarter, cost of revenues improved as a percentage of total revenues, to 59.5% in the quarter ended December 31, 1999, as compared with 78.3% in the year-ago quarter. Billable services costs improved in relation to revenues as economies of scale were achieved in member service operations and as the company's average telecommunications rates continued to decline. The cost of advertising and transaction fees improved as a percentage of related revenues largely due to declines in telecommunications rates and efficiencies associated with larger average contract sizes.

The expansion of Juno's free basic service to include full Internet access occurred on December 20, 1999, and accordingly did not have a significant impact on operating results in the fourth quarter.

Subscriber acquisition expenses were $16.0 million in the fourth quarter, yielding an effective net acquisition cost of $107 per billable service subscriber. This cost, which Juno's management believes to compare favorably with prevailing industry averages, reflects the benefit of Juno's multi-tiered service strategy: subscribers who are not yet ready to use or pay for premium features can begin with Juno's free basic service, then migrate to one of Juno's premium services when they are ready to do so by responding to advertisements shown (at a relatively low cost to the company) within the interface they are already using. Juno's blended subscriber acquisition cost is the result of a combination of such low-cost internal migrations with higher-cost external marketing through channels such as direct mail, television, and radio.

On a per-share basis, Juno reported a net loss of ($0.45) for the quarter (an amount approximating the subscriber acquisition expense for that period) and a pro forma net loss per share of ($1.84) for the year ended December 31, 1999. Before subscriber acquisition expenses, Juno reported a profit of $275,000 for the fourth quarter, culminating a series of consistent quarterly improvements over the past year -- from losses before subscriber acquisition expenses of ($4.1) million in Q1 to ($3.3) million in Q2, then to ($1.1) million in Q3.

Technology Industry

Juno Reports Record Fourth Quarter and Annual Results - Juno Online Services, Inc

Edge: Work-Group Computing Report, Jan 17, 2000

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