TheStreet.com, Inc. Reports Second Quarter 2010 Results

Revenue from ongoing subscription and advertising businesses up 8% over last year

NEW YORK, Aug 04, 2010 (BUSINESS WIRE) -- TheStreet.com, Inc. (Nasdaq: TSCM; www.thestreet.com), a leading digital financial media company, today reported financial results for the second quarter of 2010.

"TheStreet's revenue from ongoing subscription services and advertising increased 8% in the second quarter of 2010 versus a year ago," said Daryl Otte, the Company's Chief Executive Officer. "Our advertising revenue grew 6% year-over-year. We were pleased to see ad growth in a quarter in which the financial markets experienced a significant decline and many investors appear to have stepped back. This growth affirms the value of our vertical publishing model centered on professionally created and curated content, to create a 'must read' site for our passionate user base and a 'must buy' for our core group of premier advertisers seeking to reach that engaged and prized audience.

"Our subscription services revenue grew by 9% year-over-year, to the highest level in seven quarters. Subscription bookings increased 1% compared to prior year period, a slower rate of growth than we experienced in the last few quarters. We believe the lower growth rate this quarter resulted from a slowdown in new account acquisition for our equity based services after the 'flash crash' of May 6th, as our churn rate remained virtually unchanged from the prior quarter's low level.

"As we've described previously, we've been active both in building multiple channels of distribution for our content and services and in diversifying our offerings to enhance their usefulness in various market sentiments. We feel the value of our efforts was demonstrated this past quarter in which we recorded more bookings in a challenging quarter for the financial markets (in which the S&P 500 declined 12%) than we did in the prior year period, when the market was soaring (in which the S&P 500 gained 15%).

"The centerpiece of our portfolio evolution was the launch of our new OptionsProfits service, late in the quarter. OptionsProfits provides more than 50 actionable trading ideas each week from a dozen well-known industry professionals, bringing professional-grade market insight to retail investors at excellent value and with a fresh, Web 2.0 platform and interface. We are pleased with the broad support we've seen for the service from subscribers, sponsors, distribution partners and other industry participants, and we intend to launch additional products around specific trading styles and investment products going forward," said Mr. Otte.

The Company reported Adjusted EBITDA(1) for the quarter of $0.9 million, as compared to $1.9 million in the prior year quarter, and $2.6 million in the prior year quarter excluding the impact of the Company's former Promotions.com subsidiary, which was divested in December 2009. "Our bottom line reflects the substantial investment we've been making in the past couple of quarters to grow and add long-term value to our business. This investment primarily consists of costs for additional staff (headcount increased by 25 year over year, excluding Promotions.com, 20 of which were added in sales and marketing functions), commissions and marketing expenses, as well as investment in technology and product development. We also note that Adjusted EBITDA in the prior year period reflected an additional $0.4 million of revenue received as a result of the global research legal settlement that wound down in July 2009 (the year-over-year impact of which will be smaller in the third quarter and disappear thereafter) ," Mr. Otte said.

The Company ended the quarter with cash and cash equivalents, restricted cash and marketable securities of $82.6 million, an increase of $1.0 million as compared to March 31, 2010. The increase is primarily due to the Company's $0.4 million of operating cash flow and receipt of $2.1 million in cash related to the sale of certain non-core assets, offset in part by $0.5 million on capital expenditures and $0.9 million in dividends.

"I'd also like to highlight the continued enhancements we have been making to our board and management team. Early in the quarter we added Vivek Shah to our Board of Directors, and today we announced the hiring of Thomas Etergino as Chief Financial Officer. Vivek, the Chief Executive Officer of Ziff Davis, Inc., adds a wealth of financial media and digital media experience to our Board, before his role at Ziff Davis having run Time Inc.'s Fortune/Money group and served as head of Time Inc.'s digital group for news, business and sports. And Tom, who will start in a few weeks, will add significant strength to our team, having vast experience as a CFO and senior financial executive in both public and private companies focused on paid subscription and digital media businesses. I'm excited that we have now put in place what we feel is the right strategy and the right team to execute against that strategy,"Mr. Otte concluded.

Financial Highlights of Second Quarter 2010

The Company recorded revenue of $14.7 million in the second quarter of 2010, a decrease of 2% as compared to the second quarter of 2009, which prior period included $1.0 million of revenue from the Company's former Promotions.com subsidiary; excluding Promotions.com, the Company's revenue grew 5% in the second quarter of 2010 as compared to the 2009 period. The Company's premium services revenue increased 4% as compared to the prior year period, reflecting a 9%, or $0.7 million, increase in subscription services revenue, offset in part by a $0.4 million reduction in revenue from the global research legal settlement. The Company's advertising revenue, which excludes the Company's former Promotions.com subsidiary, increased 6% as compared to the second quarter of 2009. Including Promotions.com in the prior year period, the Company's marketing services revenue declined 13% in the second quarter of 2010 as compared to the second quarter of 2009.

Operating expenses in the second quarter of 2010 were $15.2 million, flat when compared to the prior year period. Operating expenses in the quarter ended June 30, 2010 reflect a gain of $1.3 million related to the sale of certain non-core assets, offset in part by an asset impairment charge of $0.6 million related to a minority investment. Operating expenses in the prior year period included restructuring and other charges of $0.6 million. Operating expenses in the prior year period excluding the impact of Promotions.com were $13.5 million. The Company had a net loss of $0.3 million in the second quarter of 2010, as compared to net income of $0.3 million in the prior year period. The Company reported basic and diluted net loss per share attributable to common stockholders of $(0.01) and $(0.01), respectively, in the second quarter of 2010, as compared with $0.01 and $0.01, respectively, in the prior year period. Adjusted EBITDA for the second quarter of 2010 was $0.9 million, as compared to $1.9 million in the prior year quarter, and $2.6 million in the prior year quarter excluding the impact of Promotions.com (the prior year period Adjusted EBITDA figures reflect a reclassification of $0.1 million of certain franchise tax expenses from income tax expense to general and administrative expense, offset in part by a reclassification of $30,000 of certain one-time transaction costs).

TheStreet.com will conduct a conference call Wednesday, August 4, 2010, at 5:00 p.m. EDT to discuss these preliminary results. To participate in the call, dial (866) 730-5767 (domestic) or (857) 350-1591 (international). The passcode for the call is 60148069.

To access the Web cast of the call please visit:

www.thestreet.com/investor-relations/index.html?detailInclude=IROL-IRhome

(Due to its length, this URL may need to be copied/pasted into your Internet browser's address field. Remove the extra space if one exists.)

About TheStreet.com

TheStreet.com is a leading digital financial media company. The Company's network includes the following properties: TheStreet, RealMoney, Stockpickr, BankingMyWay, MainStreet and Rate-Watch. For more information and to get stock quotes and business news, visit www.thestreet.com.

(1) To supplement the Company's financial statements presented in accordance with generally accepted accounting principles ("GAAP"), TheStreet.com, Inc. uses non-GAAP measures of certain components of financial performance, including "EBITDA", "Adjusted EBITDA" and "free cash flow." EBITDA is adjusted from results based on GAAP to exclude interest, income taxes, depreciation and amortization. This non-GAAP measure is provided to enhance investors' overall understanding of the Company's current financial performance and its prospects for the future. Specifically, the Company believes that the non-GAAP EBITDA results are an important indicator of the operational strength of the Company's business and provide an indication of the Company's ability to service debt and fund capital expenditures. EBITDA eliminates the uneven effect of considerable amounts of noncash depreciation of tangible assets and amortization of certain intangible assets that were recognized in business combinations. Adjusted EBITDA further eliminates the impact of noncash stock compensation and impairment expenses, restructuring charges and other non-standard one-time charges. A limitation of these measures, however, is that they do not reflect the periodic costs of certain capitalized tangible and intangible assets used in generating revenues in the Company's businesses. Management evaluates the investments in such tangible and intangible assets through other financial measures, such as capital expenditure budgets and investment spending levels. "Free cash flow" means net income (loss) plus non-cash expenses less changes in working capital and capital expenditures. The Company believes that this non-GAAP financial measure is an important indicator of the Company's financial results because it gives investors a view of the Company's ability to generate cash.

The above information with respect to Promotions.com is presented as a non-GAAP measure for illustrative purposes regarding the disposition of the Company's Promotions.com subsidiary and is not meant to represent a reflection of the operating activities of the Promotions.com subsidiary as if it was on a fully stand-alone basis. Promotions.com was a legal subsidiary of the Company whose activities were part of the combined results of the Company. Historically, Promotions.com was not considered an operating segment and management did not measure and maintain certain separate discrete financial information for Promotions.com, including cash flows for its activities.

The above measures should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for, or superior to, GAAP results. The non-GAAP measure included in this press release has been reconciled to the nearest GAAP measure.

All statements contained in this press release other than statements of historical facts are deemed forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to risks and uncertainties, including those described in the Company's filings with the Securities and Exchange Commission, that could cause actual results to differ materially from those reflected in the forward-looking statements. All forward-looking statements contained herein are made as of the date of this press release. Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee future results or occurrences. The Company disclaims any obligation to update these forward-looking statements, whether as a result of new information, future developments or otherwise.

 
THESTREET.COM, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
 
 
    For the Three Months Ended June 30,   For the Six Months Ended June 30,
      2010       2009       2010       2009  
Net revenue:                
Premium services   $ 9,825,151     $ 9,428,936     $ 19,519,733     $ 18,936,377  
Marketing services     4,838,526       5,563,305       8,644,301       9,556,326  
Total net revenue     14,663,677       14,992,241       28,164,034       28,492,703  
                 
Operating expense:                
Cost of services     6,136,579       7,264,697       12,506,241       15,510,407  
Sales and marketing     3,841,663       2,785,929       7,087,220       5,762,836  
General and administrative     4,917,894       3,430,233       9,354,169       7,971,911  
Depreciation and amortization     1,094,526       1,207,710       2,138,959       2,678,447  
Asset impairments     555,000       -       555,000       24,137,069  
Restructuring and other charges     -       574,281       -       2,558,810  
Gain on disposition of assets     (1,318,607 )     -       (1,318,607 )     -  
Total operating expense     15,227,055       15,262,850       30,322,982       58,619,480  
Operating loss     (563,378 )     (270,609 )     (2,158,948 )     (30,126,777 )
Net interest income     225,810       359,417       402,405       589,554  
Gain on sales of marketable securities     -       260,746       -       260,746  
Other income     -       -       20,374       153,677  
(Loss) income from continuing operations before income taxes     (337,568 )     349,554       (1,736,169 )     (29,122,800 )
Provision for income taxes     -       -       -       (16,515,077 )
(Loss) income from continuing operations     (337,568 )     349,554       (1,736,169 )     (45,637,877 )
Discontinued operations:                
Loss from discontinued operations     (2,230 )     (9,532 )     (21,173 )     (8,607 )
Net (loss) income     (339,798 )     340,022       (1,757,342 )     (45,646,484 )
Preferred stock cash dividends     96,424       96,424       192,848       192,848  
Net (loss) income attributable to common stockholders   $ (436,222 )   $ 243,598     $ (1,950,190 )   $ (45,839,332 )
                 
Basic net (loss) income per share:                
(Loss) income from continuing operations   $ (0.01 )   $ 0.01     $ (0.05 )   $ (1.49 )
Loss from discontinued operations     (0.00 )     (0.00 )     (0.00 )     (0.00 )
Net (loss) income     (0.01 )     0.01       (0.05 )     (1.49 )
Preferred stock dividends     (0.00 )     (0.00 )     (0.01 )     (0.01 )
Net (loss) income attributable to common stockholders   $ (0.01 )   $ 0.01     $ (0.06 )   $ (1.50 )
                 
Diluted net (loss) income per share:                
(Loss) income from continuing operations   $ (0.01 )   $ 0.01     $ (0.05 )   $ (1.49 )
Loss from discontinued operations     (0.00 )     (0.00 )     (0.00 )     (0.00 )
Net (loss) income     (0.01 )     0.01       (0.05 )     (1.49 )
Preferred stock dividends     (0.00 )     (0.00 )     (0.01 )     (0.01 )
Net (loss) income attributable to common stockholders   $ (0.01 )   $ 0.01     $ (0.06 )   $ (1.50 )
                 
Weighted average basic shares outstanding     31,560,668       30,620,349       31,528,581       30,558,170  
Weighted average diluted shares outstanding     31,560,668       30,620,349       31,528,581       30,558,170  
 
THESTREET.COM, INC.
CONSOLIDATED BALANCE SHEETS
         
ASSETS   June 30, 2010   December 31, 2009
Current Assets:        
Cash and cash equivalents   $ 18,929,537     $ 60,542,494  
Marketable securities     19,231,644       2,812,400  
Accounts receivable, net of allowance for doubtful        
accounts of $245,118 at June 30, 2010 and $276,668 at        
December 31, 2009     5,178,623       5,963,209  
Other receivables     1,921,608       2,774,898  
Prepaid expenses and other current assets     2,729,578       1,691,038  
Total current assets     47,990,990       73,784,039  
         
Property and equipment, net of accumulated depreciation        
and amortization of $12,792,457 at June 30, 2010        
and $13,263,460 at December 31, 2009     6,984,126       7,493,020  
Marketable securities     42,775,624       17,515,687  
Long term investment     -       555,000  
Other assets     149,295       167,477  
Goodwill     24,057,616       24,286,616  
Other intangibles, net     7,400,342       8,210,105  
Restricted cash     1,702,079       1,702,079  
Total assets   $ 131,060,072     $ 133,714,023  
         
LIABILITIES AND STOCKHOLDERS' EQUITY        
Current Liabilities:        
Accounts payable   $ 1,769,798     $ 2,164,809  
Accrued expenses     6,081,906       7,894,136  
Deferred revenue     18,480,757       17,306,737  
Other current liabilities     65,478       132,682  
Liabilities of discontinued operations     223,253       223,165  
Total current liabilities     26,621,192       27,721,529  
Deferred tax liability     288,000       288,000  
Other liabilities     1,932,797       1,230,591  
Total liabilities     28,841,989       29,240,120  
         
Stockholders' Equity:        
Preferred stock; $0.01 par value; 10,000,000 shares        
authorized; 5,500 shares issued and 5,500 shares        
outstanding at June 30, 2010 and December 31, 2009;        
the aggregate liquidation preference totals $55,000,000 as of        
June 30, 2010 and December 31, 2009     55       55  
Common stock; $0.01 par value; 100,000,000 shares        
authorized; 37,720,405 shares issued and 31,617,197        
shares outstanding at June 30, 2010, and 37,246,362        
shares issued and 31,164,628 shares outstanding at        
December 31, 2009     377,204       372,464  
Additional paid-in capital     271,398,678       271,715,956  
Accumulated other comprehensive income     212,741       344,372  
Treasury stock at cost; 6,103,208 shares at June 30, 2010        
and 6,081,734 shares at December 31, 2009     (10,466,261 )     (10,411,952 )
Accumulated deficit     (159,304,334 )     (157,546,992 )
Total stockholders' equity     102,218,083       104,473,903  
         
Total liabilities and stockholders' equity   $ 131,060,072     $ 133,714,023  
 
THESTREET.COM, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
           
      For the Six Months Ended June 30,
        2010       2009  
Cash Flows from Operating Activities:          
Net loss     $ (1,757,342 )   $ (45,646,484 )
Loss from discontinued operations       21,173       8,607  
Loss from continuing operations       (1,736,169 )     (45,637,877 )
Adjustments to reconcile income from continuing operations      
to net cash provided by operating activities:          
Stock-based compensation expense       1,218,747       1,585,594  
Provision for doubtful accounts       5,403       84,683  
Depreciation and amortization       2,138,959       2,678,447  
Valuation allowance on deferred taxes       -       16,404,790  
Impairment charges       555,000       24,137,069  
Restructuring and other charges       -       428,868  
Deferred rent       687,826       627,969  
Gain on disposal of equipment       (20,600 )     -  
Gain on disposition of assets       (1,318,607 )     -  
Changes in operating assets and liabilities:          
Accounts receivable       779,183       3,707,244  
Other receivables       50,351       99,834  
Prepaid expenses and other current assets       (1,073,694 )     (563,028 )
Other assets       10,118       (3,544 )
Accounts payable       (393,619 )     1,565,588  
Accrued expenses       (1,497,251 )     2,290,726  
Deferred revenue       1,537,947       1,510,331  
Other current liabilities       (67,991 )     181,853  
Other liabilities       15,167       (29,034 )
Net cash provided by continuing operations       890,770       9,069,513  
Net cash used in discontinued operations       (21,085 )     (2,577 )
Net cash provided by operating activities       869,685       9,066,936  
           
Cash Flows from Investing Activities:          
Purchase of marketable securities      

(92,297,898

)     (24,137,379 )
Sale of marketable securities      

50,487,087

      9,391,912  
Capital expenditures      

(948,378

)     (1,346,946 )
Sale of Promotions.com      

802,939

      -  
Proceeds from the disposition of assets      

1,348,902

     
Proceeds from the sale of fixed assets      

43,300

      -  
Net cash used in investing activities       (40,564,048.00 )     (16,092,413 )
           
Cash Flows from Financing Activities:          
Cash dividends paid on common stock       (1,671,437 )     (1,581,082 )
Cash dividends paid on preferred stock       (192,848 )     (192,848 )
Purchase of treasury stock       (54,309 )     (230,287 )
Net cash used in financing activities       (1,918,594 )     (2,004,217 )
Net decrease in cash and cash equivalents       (41,612,957 )     (9,029,694 )
Cash and cash equivalents, beginning of period       60,542,494       72,441,294  
Cash and cash equivalents, end of period     $ 18,929,537     $ 63,411,600  
           

Supplemental disclosures of cash flow information:

         
Cash payments made for interest     $ 1,668     $ 4,583  
Cash payments made for income taxes     $ -     $ 85,000  
 
THESTREET.COM, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
                 
                 
    For the Three Months Ended June 30,   2 Quarter 2009   2 Quarter 2009
      2010       2009     Promotions.com   Pro Forma
Net revenue:                
Premium services   $ 9,825,151     $ 9,428,936     $ -     $ 9,428,936  
Marketing services     4,838,526       5,563,305       995,590       4,567,715  
Total net revenue     14,663,677       14,992,241       995,590       13,996,651  
                 
Operating expense:                
Cost of services     6,136,579       7,264,697       1,076,817       6,187,880  
Sales and marketing     3,841,663       2,785,929       248,806       2,537,123  
General and administrative     4,917,894       3,430,233       387,474       3,042,759  
Depreciation and amortization     1,094,526       1,207,710       -       1,207,710  
Asset impairments     555,000       -       -       -  
Restructuring and other charges     -       574,281       -       574,281  
Gain on disposition of assets     (1,318,607 )     -       -       -  
Total operating expense     15,227,055       15,262,850       1,713,097       13,549,753  
Operating loss     (563,378 )     (270,609 )     (717,507 )     446,898  
Net interest income     225,810       359,417       -       359,417  
Gain on sales of marketable securities     -       260,746       -       260,746  
(Loss) income from continuing operations before income taxes     (337,568 )     349,554       (717,507 )     1,067,061  
Provision for income taxes     -       -       -       -  
(Loss) income from continuing operations     (337,568 )     349,554       (717,507 )     1,067,061  
Discontinued operations:                
Loss from discontinued operations     (2,230 )     (9,532 )     -       (9,532 )
Net (loss) income     (339,798 )     340,022       (717,507 )     1,057,529  
Preferred stock cash dividends     96,424       96,424       -       96,424  
Net (loss) income attributable to common stockholders   $ (436,222 )   $ 243,598     $ (717,507 )   $ 961,105  
                 
Net (loss) income   $ (339,798 )   $ 340,022     $ (717,507 )   $ 1,057,529  
Net interest income     (225,810 )     (359,417 )     -       (359,417 )
Gain on sales of marketable securities     -       (260,746 )     -       (260,746 )
Provision for Income taxes     -       -       -       -  
Depreciation and amortization     1,094,526       1,207,710       -       1,207,710  
EBITDA     528,918       927,569       (717,507 )     1,645,076  
Noncash compensation     627,556       341,981       3,546       338,435  
Asset impairments     555,000       -       -       -  
Restructuring and other charges     -       574,281       -       574,281  
Gain on disposition of assets     (1,318,607 )     -       -       -  
One-time transaction costs     538,168       30,000       -       30,000  
Adjusted EBITDA   $ 931,035     $ 1,873,831     $ (713,961 )   $ 2,587,792  
 
THESTREET.COM, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
                 
                 
    For the Six Months Ended June 30,   Year to Date 2009   Year to Date 2009
      2010       2009     Promotions.com   Pro Forma
Net revenue:                
Premium services   $ 19,519,733     $ 18,936,377     $ 99     $ 18,936,278  
Marketing services     8,644,301       9,556,326       1,824,787       7,731,539  
Total net revenue     28,164,034       28,492,703       1,824,886       26,667,817  
                 
Operating expense:                
Cost of services     12,506,241       15,510,407       2,045,309       13,465,098  
Sales and marketing     7,087,220       5,762,836       488,439       5,274,397  
General and administrative     9,354,169       7,971,911       1,064,677       6,907,234  
Depreciation and amortization     2,138,959       2,678,447       -       2,678,447  
Asset impairments     555,000       24,137,069       -       24,137,069  
Restructuring and other charges     -       2,558,810       -       2,558,810  
Gain on disposition of assets     (1,318,607 )     -       -       -  
Total operating expense     30,322,982       58,619,480       3,598,425       55,021,055  
Operating loss     (2,158,948 )     (30,126,777 )     (1,773,539 )     (28,353,238 )
Net interest income     402,405       589,554       -       589,554  
Gain on sales of marketable securities     -       260,746       -       260,746  
Other income     20,374       153,677       -       153,677  
(Loss) income from continuing operations before income taxes     (1,736,169 )     (29,122,800 )     (1,773,539 )     (27,349,261 )
Provision for income taxes     -       (16,515,077 )     -       (16,515,077 )
(Loss) income from continuing operations     (1,736,169 )     (45,637,877 )     (1,773,539 )     (43,864,338 )
Discontinued operations:                
Loss from discontinued operations     (21,173 )     (8,607 )     -       (8,607 )
Net (loss) income     (1,757,342 )     (45,646,484 )     (1,773,539 )     (43,872,945 )
Preferred stock cash dividends     192,848       192,848       -       192,848  
Net (loss) income attributable to common stockholders   $ (1,950,190 )   $ (45,839,332 )   $ (1,773,539 )   $ (44,065,793 )
                 
Net (loss) income   $ (1,757,342 )   $ (45,646,484 )   $ (1,773,539 )   $ (43,872,945 )
Net interest income     (402,405 )     (589,554 )     -       (589,554 )
Gain on sales of marketable securities     -       (260,746 )     -       (260,746 )
Provision for Income taxes     -       16,404,790       -       16,404,790  
Depreciation and amortization     2,138,959       2,678,447       -       2,678,447  
EBITDA     (20,788 )     (27,413,547 )     (1,773,539 )     (25,640,008 )
Noncash compensation     1,218,747       1,585,594       8,532       1,577,062  
Asset impairments     555,000       24,137,069       -       24,137,069  
Restructuring and other charges     -       2,558,810       -       2,558,810  
Gain on disposition of assets     (1,318,607 )     -       -       -  
Other income     (20,374 )     (153,677 )     -       (153,677 )
One-time transaction costs     1,083,078       30,000       -       30,000  
Adjusted EBITDA   $ 1,497,056     $ 744,249     $ (1,765,007 )   $ 2,509,256  

SOURCE: TheStreet.com, Inc.

TheStreet.com, Inc.
Gregory Barton, 212-321-5484
IR@thestreet.com

 



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