Summary
SUMMARYThe following prospectus summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information, including our consolidated financial statements and notes thereto, appearing elsewhere in this prospectus. This summary does not contain all of the information that you should consider before investing in our common stock. You should read the entire prospectus carefully, including the Risk Factors beginning on page 7.
The Active Network, Inc.
We are the leading provider of application services that reduce the cost and complexity of managing, organizing and promoting participatory sports and activities, and a leading provider of marketing services to reach active lifestyle consumers.
Our application services, encompassed in the Active Technology Suite™, are used by event organizers, park and recreation department administrators and amateur sports league administrators to provide online registration transaction processing and data management, enhance marketing and promotion capabilities, and improve the management of facilities and membership. We believe we have the largest customer base in our industry, a customer base that includes organizers of over 7,000 events, 600 park and recreation departments, and 2,500 leagues and camps. Representative customers include the LaSalle Bank Chicago Marathon, the New York City Park and Recreation Department, and Little League organizations around the United States. We also operate eteamz.com, our team and league web-portal, on which approximately 1.5 million teams have been registered since 2000.
Our marketing services group creates integrated online and field marketing campaigns to reach active lifestyle consumers. Our industry access and relationships enable us to target consumers by activity, age, gender and geography as well as other detailed demographics. Our online marketing services include online advertising and targeted e-mail newsletter promotions. Our field marketing services include event promotions, sponsorships and sample placements. Representative marketing services customers include Nestle, Nike, PepsiCo Beverages and Foods, Procter & Gamble, and Unilever.
We generate application services revenues from a combination of online registration convenience fees and license and maintenance fees for our fully-hosted, partially-hosted or client-server applications. For our marketing services, we generate revenues from fees charged for customized marketing campaigns.
From 2000 to 2003, our total revenues have grown at a compound annual growth rate of 131% from $1.2 million to $15.1 million. We believe that we have been able to compete successfully and grow revenues as a result of our ability to deliver comprehensive solutions that produce meaningful results for our customers. Our focus on the participatory sports and activities market has allowed us to create services specifically tailored for this industry. We incurred net losses of $33.9 million, $7.2 million and $1.3 million in 2001, 2002 and 2003, respectively, and expect to continue to incur operating losses through at least the end of 2004. As of December 31, 2003, our accumulated deficit was $76.0 million.
Based on an April 2004 study by the Leisure Intelligence Group, which encompassed the 12 months ended March 2004, 62% of American households registered for a community activity requiring a fee. The study reported that Americans paid fees for over 110 million registrations for individual and team-based sports leagues and events, over 115 million registrations for park and recreation activities and memberships, over 20 million registrations for camps and over 115 million registrations for continuing education classes. The Leisure Intelligence Group study estimates total registration fees associated with these sports and activities to be over $33 billion. Currently, most of these organized activities use paper-based processing for registration, data collection and data management. The study also estimates that less than 2% of registration fees collected for participatory sports and activities are currently collected through online transaction processing.
We expect participatory sports and activities organizers to increasingly adopt online services due to the cost-efficiency, convenience, improved accuracy and enhanced management flexibility of such services. Further, participants are expecting and demanding that organizers provide online registration. A 2002 National Sports Network Survey reported that 80% of all athletes surveyed would use online registration, if offered.
The market for promotional marketing services, such as event marketing and online advertising, is growing, and marketers are increasingly migrating from traditional media to non-traditional media advertising. According to a 2004 survey published in Promo Magazine, event marketing spending grew 32% from $115 billion in 2001 to $152 billion in 2003. The survey also reported that, from 2001 to 2003, spending on event marketing grew from 25.7% to 32.6% of total annual spending for marketing activities, representing the largest gain in market share of any segment. According to a 2002 Jupiter Research report, online advertising is expected to increase from $5.6 billion in 2002 to $14.0 billion in 2007.
We seek to capitalize on and promote the migration towards online management of participatory sports and activities, and strengthen our position as the leading provider of application services to this industry. Further, we intend to capitalize on our industry access and relationships to provide targeted marketing services directed at active lifestyle consumers. To achieve our goal, we intend to:
Expand our Application Services Customer Base We believe the low penetration of online solutions in our market provides a large potential customer base for our application services. We intend to capitalize on this opportunity to grow our customer base by increasing our sales staff and marketing efforts. We have demonstrated an ability to grow our customer base. As evidence, from 2000 to 2003, our customers under contract grew at a compound annual growth rate of over 30%.
Increase Online Registration by Event and Activity Participants We seek to increase the percentage of our customers’ participants using online registration to enroll in events and activities. We believe there is significant opportunity for growth within our existing customer base to increase online registration by their participants. In 2003, only approximately 15% of our customers’ participants registered online for events and activities. To increase participant usage of online registration services, we provide our customers with training, relevant content to attract participants to their websites, and an array of tools aimed at promoting online registration. Online registration use by participants in our customers’ events and activities has increased as organizers continue to use our application services over a sustained period of time. On average, 10% of participants use online registration in the first year that an organizer uses our services. By the fourth year, this online registration use typically grows to 30%. Certain events and activities have achieved online registration usage as high as 80% in year four.
Increase Breadth of Application Services Sold to Our Existing Customer Base We intend to continue to sell additional revenue generating application services to our existing customers to help enable them to streamline their management processes. These additional services include membership management, activity registration, facility reservation, website publishing tools and communication services. We believe meaningful opportunities exist to sell these additional services to that portion of our customer base that is not currently utilizing the full range of services that we offer. For example, currently less than 10% of the approximately 20,000 leagues on our eteamz.com web-portal use additional services beyond website publishing.
Continue to Enhance our Comprehensive Application Services Offerings We intend to strengthen our market position by continuing to develop comprehensive, tailored solutions with increased functionality and features for our customers. Over the past three years, we have developed and introduced application services for activity registration, facility reservation, and membership to serve our park and recreation customers. We have also added modules for fundraising, real-time event tracking and merchandising to our application services offerings. In addition, we have created customized desktop roster management, registration and advanced website publishing for league administrators, and have developed multiple applications to automate, streamline and scale back-office operations.
Expand our Marketing Services Business We intend to continue to leverage our participatory sports and activities industry access and relationships to grow our marketing services business. From 2000 to 2003, our marketing services revenues grew at a compound annual growth rate of 136% from $0.4 million to $5.6 million. We believe we offer consumer brand companies a valuable set of resources to reach active lifestyle consumers. These resources include a registered user base of over four million active lifestyle consumers, a database of 30,000 participatory sports and activities organizers, a searchable participatory sports calendar containing over 50,000 events and activities, and a team and league web-portal with 165 million page views and 7 million unique visitors in the first quarter of 2004. As we grow our customer base of events, park and recreation departments, and amateur sports leagues and the usage of our web-portal, we continue to enhance our ability to offer extensive and targeted online and field marketing campaigns.
Pursue Strategic Acquisitions We will pursue acquisitions that further strengthen our market position, broaden our customer base and enhance our capabilities. Since 2000, we have completed six acquisitions. We believe we have a successful track record of integrating operations, enhancing revenues and streamlining the cost structure of the businesses we have acquired.
In April 2004, we purchased substantially all of the assets of Do It Sports, a provider of online registration services and technology for real-time, race-day data services and results, for $0.4 million in cash and the assumption of certain liabilities. Do It Sports has represented that the liabilities assumed, when reduced by cash and receivables, do not exceed $1.9 million. In addition, in July of 2005, we will pay Do It Sports up to $3.3 million, subject to the achievement of certain milestones, in cash or, at our election, shares of common stock. The results of Do It Sports will be included in our consolidated financial statements beginning on April 14, 2004.
We were originally incorporated in California in October 1998 as Racegate.com, Inc. and became a Delaware corporation through a stock exchange agreement in July 1999. In May 2001, we changed our name to The Active Network, Inc. Our principal executive offices are located at 1020 Prospect Street, Suite 250, La Jolla, California 92037, and our telephone number is (858) 551-9916. Our corporate website address is theactivenetwork.com. Information contained on our website is not a prospectus and does not constitute part of this prospectus.
The number of shares of common stock to be outstanding immediately after this offering is based on 161,718,471 common shares outstanding as of December 31, 2003.
Except as otherwise indicated, all information in this prospectus assumes:
The number of outstanding shares of common stock as of December 31, 2003 excludes:
The following summary consolidated financial data should be read in conjunction with our consolidated financial statements and notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations and Selected Consolidated Financial Data included elsewhere in this prospectus. Unless otherwise noted, the following information does not give effect to the conversion of our outstanding preferred stock into common stock.