TheStreet, Inc. (TST)

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TheStreet (TST)

Q3 2012 Earnings Call

November 08, 2012 4:30 pm ET

Executives

Erica L. Mannion - President

Elisabeth H. DeMarse - Chairman, Chief Executive Officer and President

Thomas J. Etergino - Chief Financial Officer and Executive Vice President

Analysts

Michael Mauskopf

Presentation

Operator

Good day, ladies and gentlemen, and welcome to TheStreet's Third Quarter 2012 Earnings Conference Call. This call is being webcast live on the Investor Relations section of the TheStreet's website at www.t.st. This call is the property of TheStreet, and any recordings, reproduction or transmission of this call without the expressed written consent of the TheStreet is strictly prohibited. As a reminder, today's call is being recorded. You may listen to the webcast replay of this call by going to the Investor Relations section of TheStreet's website.

I will now like to turn the call over to Erica Mannion of Sapphire Investor Relations, Investor Relations for TheStreet. Please go ahead.

Erica L. Mannion

Good afternoon. Thank you for joining us to discuss TheStreet's financial and operating results for the third quarter of 2012. With me today are Elisabeth Demarse, Chair, President and Chief Executive Officer; and Tom Etergino, Executive Vice President and Chief Financial Officer.

Today, Elisabeth will review the third quarter results and provide color on industry dynamics. Tom will then review the third quarter financial results. All statements made on this call, other than statements of historical facts, are deemed to be 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. 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, further development or otherwise. You may obtain copies of the company's filings with the SEC at the commission's website at www.sec.gov. Additional information related to matters discussed today also will be set forth in the company's quarterly report on Form 10-Q for the third quarter of 2012, which the company expects to file shortly.

Now I will turn the call over to Elisabeth Demarse.

Elisabeth H. DeMarse

Thank you, Erica, and good afternoon. As we announced in our press release today, revenues for the third quarter was $11.6 million, a decrease of 19% compared to the third quarter of 2011 and a decrease of 7% compared to last quarter. I'll review our strategy and then move into a brief discussion of financial detail and provide a progress update on 2 segments of our business.

TheStreet has a leading position providing news and analysis covering the retail sector of the financial services industry, primarily serving professionals and individual investors. We're fortunate to have 2 revenue drivers, Advertising in our Media business and Subscriptions in our Newsletter and Rate-Watch businesses. With the acquisition of The Deal, we've added a third revenue and growth driver, an institutional Subscription business.

As part of the M&A program I put in place when I joined TheStreet in March, we closed our first acquisition, The Deal, in mid-September. The Deal marquee customer base of approximately 40,000 institutional professionals provide us with higher renewal rates, predictable revenue and attractive margin. We believe we are a deep cyclical trough for the M&A business with M&A volumes hitting multiyear lows this year. The stock market is near multiyear highs, and when the stock market goes up, M&A activity is sure to follow. We are looking for a wave of M&A to increase revenues for The Deal and grow into new emerging category such as hedge funds.

At The Deal's current revenue and cost structure, we expect this acquisition to be accretive to adjusted EBITDA in 2013. Our intent is to leverage the content creation and marketing resources of The Deal and TheStreet, with a specific focus on time-sensitive information associated with change of control transactions such as restructuring, auctions and other M&A activity to create new revenue opportunities for the combined company at incremental costs.

We are also looking at additional bolt-on acquisitions in the institutional market that will further drive revenue and margin at The Deal. As for integrating The Deal into TheStreet, it has been efficient and flawless without the surprises that normally happen with acquisitions. The Deal's sales forces are already out marketing and selling 2 of TheStreet's products, ChatOnTheStreet and Options profit.

Moving on to an overview of our Q3 financial performance is another transition quarter for our company. We continue to make significant progress on the expense side illustrated by a sequential decline of 8% and a 23% decline compared to the same period last year, and ongoing operating expenses, excluding The Deal. Revenue growth remains challenged as Media business was down again this quarter and our Subscription business up slightly from the prior quarter.

As we communicated on past calls, our revenue is highly dependent on Advertising by marketers, who want to reach our audience and subscribers who read our investment newsletters. Both of these businesses continue to be challenged. Online media is challenged to compress CPMs and rapid migration to mobile. Paid subscriptions are down due to the fact that where we are in the economic cycle.

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