TSCM Thestreet.Com, Inc. (MM)

TheStreet.com, Inc. (Nasdaq: TSCM; http://www.thestreet.com), a leading digital financial media company, today reported financial results for the first quarter of 2010.

“Our results for the first quarter underscore the strong growth and momentum of our core businesses,” said Daryl Otte, the Company’s Chief Executive Officer. “Aggregate bookings for our subscription services and RateWatch businesses grew for the sixth consecutive quarter, rising 18% year-over-year and resulting in the best quarter of bookings since the first quarter of 2008. Bookings are the precursor to premium services revenue, and the growth of bookings in recent quarters has led us to report our first year-over-year growth in premium services revenue since the third quarter of 2008. This achievement is all the more gratifying since our premium services revenue in the prior period had an additional $0.5 million of revenue received as a result of the now-ended global research legal settlement.

“Since early last year, we have been placing intense focus on expanding the scale and profitability of our premium services businesses. We are glad these efforts already have been yielding strong results and we look forward to continuing our focus on this area.

“We also are pleased to report a 20% increase in advertising revenue – which excludes the revenue from a divested marketing services business – as compared to the prior year period, although we’d note that the first quarter of 2009 was a particularly difficult quarter for that business in light of the severe dislocation of the economy at the time. Our sites, already one of the top networks in our content vertical, have been taking a greater share of mind of our audience, as demonstrated by the fact that our rankings within our peer set(1), as measured by comScore, Inc., have been strengthening. Of the top 15 sites in comScore’s Business/Finance – News/Research category, based upon average monthly total unique visitors during the first quarter of 2010, our network of sites ranked 9th in terms of average daily visitors, total pages viewed, total visits and total minutes spent on site; 7th in terms of average minutes per visit; 8th in terms of average visits per visitor and 12th in terms of total unique visitors. Most of those rankings are one spot higher than we last reported.

“We continue our focus on growing our quality traffic, both to increase our advertising revenue and to provide additional inventory for cost-effective marketing of our premium services products. We expect to benefit from the ongoing secular shift of advertising dollars towards digital media, as well as to benefit from any cyclical strengthening of the advertising market.

“Our Adjusted EBITDA(2) for the first quarter of 2010, $0.6 million, compares favorably to the prior year period, which was $(1.1) million inclusive of our former Promotions.com subsidiary, which we divested in December 2009, and $(0.1) million excluding the impact of Promotions.com.

“Our balance of cash and cash equivalents, restricted cash and marketable securities at March 31, 2010 remained a healthy $81.7 million. This reflects a small decline from December 31, 2009, as the $1.4 million spent on dividends, capital expenditures and treasury stock as a result of stock withholding in connection with vesting of employee restricted stock units, exceeded the $0.5 million cash we generated from operations. We anticipate generating positive free cash flow throughout the year.

“We feel that the key to our success is that we are a leading and distinctive voice among financial media organizations, producing a rich well of proprietary content that we effectively monetize: every month, we produce over 2,500 articles and 400 videos by a team of 95 authors working both in our newsroom and through a well-developed network of active investing practitioners. This high quality, unique content allows us to attract high-value subscribers and an affluent and engaged audience, which in turn attracts advertisers seeking to connect with this coveted audience. We feel these great assets, the momentum in our businesses, and our strong balance sheet, position us well for continued success and opportunity,” Mr. Otte concluded.

Financial Highlights of First Quarter 2010

Note – the 2009 results discussed below are as reported in the Form 10-Q/A for the quarter ended March 31, 2009, with certain immaterial revisions to correct for certain items

The Company recorded revenue of $13.5 million in the first quarter of 2010, flat as compared to the first quarter of 2009. Premium services revenue increased 2%, to $9.7 million, as compared to the prior year period. The Company’s advertising revenue, which excludes the Company’s former Promotions.com subsidiary (which subsidiary the Company sold in December 2009, as previously disclosed) increased 20%, to $3.8 million, as compared to the first quarter of 2009. These increases were offset by the absence of revenue in the first quarter of 2010 from Promotions.com.

Operating expenses in the first quarter of 2010 were $15.1 million, a reduction of 65% as compared to $43.4 million in the prior year period. Operating expenses in the prior year period included restructuring and other charges of $2.0 million and asset impairment charges of $24.1 million; the current period did not include any such charges. The Company had a net loss of $(1.4) million in the first quarter of 2010, as compared to a net loss of $(46.0) million in the prior year period. The prior year period net loss included a $16.5 million provision for income taxes; the current period did not include such a provision. The Company reported basic and diluted net loss per share attributable to common stockholders of $(0.05) and $(0.05), respectively, in the first quarter of 2010, as compared with $(1.51) and $(1.51), respectively, in the prior year period. Adjusted EBITDA for the first quarter of 2010 was $0.6 million, as compared to $(1.1) million for the prior year period.

As previously disclosed, the Company sold its Promotions.com subsidiary in December 2009. Excluding the impact of Promotions.com from 2009 results, the Company’s operating results for the first quarter of 2010 as compared to the prior year period were: (i) revenue of $13.5 million, an increase of 7% from $12.7 million in the first quarter of 2009; (ii) operating expenses of $15.1 million, a reduction of 64% as compared to $41.5 million in the prior year period (as noted above, operating expenses in the first quarter of 2009 included restructuring and other charges of $2.0 million and asset impairment charges of $24.1 million); (iii) net loss of $(1.4) million, as compared to a net loss of $(44.9) million in the first quarter of 2009 (as noted above, net loss in the first quarter of 2009 included a provision for income taxes of $16.5 million); and (iv) Adjusted EBITDA of $0.6 million, as compared to $(0.1) million in the prior year period.

TheStreet.com will conduct a conference call Wednesday, May 5, 2010, at 4:30 p.m. EDT to discuss these preliminary results. To participate in the call, dial (866) 770-7129 (domestic) or (617) 213-8067 (international). The passcode for the call is 13839355.

To access the Web cast of the call please visit:

http://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 http://www.thestreet.com.

(1) Our peer set per comScore, Inc., an independent web measurement company, are the sites in comScore’s Business/Finance – News/Research category. comScore reported three-month average numbers for the first quarter of 2010 for 187 web properties in this category.

(2) 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 (unaudited)

 

For the Three Months EndedMarch 31,

  2010     2009   Net revenue: Premium services $ 9,694,582 $ 9,507,441 Marketing services   3,805,775     3,993,022   Total net revenue   13,500,357     13,500,463     Operating expense: Cost of services 6,369,662 8,245,710 Sales and marketing 3,245,557 2,976,907 General and administrative 4,436,275 4,541,678 Depreciation and amortization 1,044,433 1,470,737 Impairment charges - 24,137,069 Restructuring and other charges   -     1,984,529   Total operating expense   15,095,927     43,356,630   Operating loss (1,595,570 ) (29,856,167 ) Net interest income 176,595 230,137 Other income   20,374     153,677   Loss from continuing operations before income taxes (1,398,601 ) (29,472,353 ) Provision for Income taxes   -     (16,515,077 ) Loss from continuing operations   (1,398,601 )   (45,987,430 ) Discontinued operations: (Loss) income from discontinued operations   (18,943 )   925   Net loss (1,417,544 ) (45,986,505 ) Preferred stock cash dividends   96,424     96,424   Net loss attributable to common stockholders $ (1,513,968 ) $ (46,082,929 )   Basic net (loss) income per share: Loss from continuing operations $ (0.05 ) $ (1.51 ) (Loss) income from discontinued operations (0.00 ) 0.00 Preferred stock dividends   (0.00 )   (0.00 ) Net loss attributable to common stockholders $ (0.05 ) $ (1.51 )   Diluted net (loss) income per share: Loss from continuing operations $ (0.05 ) $ (1.51 ) (Loss) income from discontinued operations (0.00 ) 0.00 Preferred stock dividends   (0.00 )   (0.00 ) Net loss attributable to common stockholders $ (0.05 ) $ (1.51 )   Weighted average basic shares outstanding   31,496,139     30,495,300   Weighted average diluted shares outstanding   31,496,139     30,495,300         THESTREET.COM, INC. CONSOLIDATED BALANCE SHEETS   ASSETS March 31, 2010 December 31, 2009 (unaudited) (audited) Current Assets: Cash and cash equivalents $ 28,235,568 $ 60,542,494 Marketable securities 14,411,320 2,812,400 Accounts receivable, net of allowance for doubtful accounts of $230,454 at March 31, 2010 and $276,668 at December 31, 2009 4,608,700 5,963,209 Other receivables 2,787,079 2,774,898 Prepaid expenses and other current assets   1,765,715     1,691,038   Total current assets 51,808,382 73,784,039   Property and equipment, net of accumulated depreciation and amortization of $13,617,005 at March 31, 2010 and $13,263,460 at December 31, 2009 7,211,893 7,493,020 Marketable securities 37,312,425 17,515,687 Long term investment 555,000 555,000 Other assets 163,577 167,477 Goodwill 24,286,616 24,286,616 Other intangibles, net 7,851,368 8,210,105 Restricted cash   1,702,079     1,702,079   Total assets $ 130,891,340   $ 133,714,023     LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable $ 2,110,635 $ 2,164,809 Accrued expenses 4,704,753 7,894,136 Deferred revenue 18,826,107 17,306,737 Other current liabilities 130,041 132,682 Liabilities of discontinued operations   223,478     223,165   Total current liabilities 25,995,014 27,721,529 Deferred tax liability 288,000 288,000 Other liabilities   1,588,873     1,230,591   Total liabilities   27,871,887     29,240,120     Stockholders' Equity: Preferred stock; $0.01 par value; 10,000,000 shares authorized; 5,500 shares issued and outstanding at March 31, 2010 and December 31, 2009; the aggregate liquidation preference totals $55,000,000 as of March 31, 2010 and December 31, 2009 55 55 Common stock; $0.01 par value; 100,000,000 shares authorized; 37,652,035 shares issued and 31,548,827 shares outstanding at March 31, 2010, and 37,246,362 shares issued and 31,164,628 shares outstanding at December 31, 2009 376,520 372,464 Additional paid-in capital 271,702,340 271,715,956 Accumulated other comprehensive income 371,335 344,372 Treasury stock at cost; 6,103,208 shares at March 31, 2010 and 6,081,734 shares at December 31, 2009 (10,466,261 ) (10,411,952 ) Accumulated deficit   (158,964,536 )   (157,546,992 ) Total stockholders' equity   103,019,453     104,473,903     Total liabilities and stockholders' equity $ 130,891,340   $ 133,714,023         THESTREET.COM, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)   For the Three Months Ended March 31,   2010     2009   Cash Flows from Operating Activities: Net loss

$

(1,417,544 ) $ (45,986,505 ) Loss (income) from discontinued operations   18,943     (925 ) Loss from continuing operations (1,398,601 ) (45,987,430 ) Adjustments to reconcile loss from continuing operations to net cash provided by operating activities: Stock-based compensation expense 591,191 1,243,613 Provision for doubtful accounts (41,295 ) 72,858 Depreciation and amortization 1,044,433 1,470,737 Valuation allowance on deferred taxes - 16,404,790 Impairment charges - 24,137,069 Restructuring and other charges - 428,868 Deferred rent 343,913 352,320 Gain on disposal of equipment (20,600 ) - Changes in operating assets and liabilities: Accounts receivable 1,395,804 3,935,057 Other receivables 8,619 112,375 Prepaid expenses and other current assets (74,679 ) (26,789 ) Other assets - (14,821 ) Accounts payable (54,174 ) 650,508 Accrued expenses (2,856,383 ) 1,600,411 Deferred revenue 1,519,370 809,280 Other current liabilities (3,439 ) 165,628 Other liabilities   15,167     (15,877 ) Net cash provided by continuing operations 469,326 5,338,597 Net cash used in discontinued operations   (18,630 )   (2,576 ) Net cash provided by operating activities   450,696     5,336,021     Cash Flows from Investing Activities: Purchase of marketable securities (35,800,533 ) (11,491,614 ) Sale of marketable securities 4,431,838 - Capital expenditures (423,367 ) (647,948 ) Proceeds from the sale of fixed assets   22,500     -   Net cash used in investing activities   (31,769,562 )   (12,139,562 )   Cash Flows from Financing Activities: Cash dividends paid on common stock (837,327 ) (787,271 ) Cash dividends paid on preferred stock (96,424 ) (96,424 ) Purchase of treasury stock   (54,309 )   (230,287 ) Net cash used in financing activities   (988,060 )   (1,113,982 ) Net decrease in cash and cash equivalents (32,306,926 ) (7,917,523 ) Cash and cash equivalents, beginning of period   60,542,494     72,441,294   Cash and cash equivalents, end of period $ 28,235,568   $ 64,523,771    

Supplemental disclosures of cash flow information:

  Cash payments made for interest $ 1,478   $ 2,446   Cash payments made for income taxes $ -   $ 146,658             THESTREET.COM, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)   For the Three Months Ended March 31,   2010     2009   Promotions.com Pro Forma Revenue: Premium services $ 9,694,582 $ 9,507,441 $ 99 $ 9,507,342 Marketing services   3,805,775     3,993,022     829,197     3,163,825   Total net revenue   13,500,357     13,500,463     829,296     12,671,167     Operating expense: Cost of services 6,369,662 8,245,710 968,492 7,277,218 Sales and marketing 3,245,557 2,976,907 239,634 2,737,273 General and administrative 4,436,275 4,541,678 677,202 3,864,476 Depreciation and amortization 1,044,433 1,470,737 - 1,470,737 Asset impairments - 24,137,069 - 24,137,069 Restructuring and other charges   -     1,984,529     -     1,984,529   Total operating expense   15,095,927     43,356,630     1,885,328     41,471,302   Operating loss (1,595,570 ) (29,856,167 ) (1,056,032 ) (28,800,135 ) Net interest income 176,595 230,137 - 230,137 Other income   20,374     153,677     -     153,677   Loss from continuing operations before income taxes (1,398,601 ) (29,472,353 ) (1,056,032 ) (28,416,321 ) Provision for Income taxes   -     (16,515,077 )   -     (16,515,077 ) Loss from continuing operations   (1,398,601 )   (45,987,430 )   (1,056,032 )   (44,931,398 ) Discontinued operations: (Loss) Income from discontinued operations   (18,943 )   925     -     925   Net loss (1,417,544 ) (45,986,505 ) (1,056,032 ) (44,930,473 ) Preferred stock cash dividends   96,424     96,424     -     96,424   Net loss attributable to common stockholders $ (1,513,968 ) $ (46,082,929 ) $ (1,056,032 ) $ (45,026,897 )   Net loss $ (1,417,544 ) $ (45,986,505 ) $ (1,056,032 ) $ (44,930,473 ) Net interest income (176,595 ) (230,137 ) - (230,137 ) Provision for Income taxes - 16,404,790 - 16,404,790 Depreciation and amortization   1,044,433     1,470,737     -     1,470,737   EBITDA (549,706 ) (28,341,115 ) (1,056,032 ) (27,285,083 ) Noncash compensation 591,191 1,243,613 4,986 1,238,627 Asset impairments - 24,137,069 - 24,137,069 Restructuring and other charges - 1,984,529 - 1,984,529 Other income (20,374 ) (153,677 ) - (153,677 ) One-time transaction costs   544,911     -     -     -   Adjusted EBITDA $ 566,022   $ (1,129,581 ) $ (1,051,046 ) $ (78,535 )