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 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:

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) 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