TheStreet.com Q4 2008 Earnings Call Transcript

Feb.19.09 | About: TheStreet, Inc. (TST)

TheStreet.com (TSCM) Q4 2008 Earnings Call February 19, 2009 4:30 PM ET

Executives

Rebecca Updegraph - Investor Relations

Thomas Clarke - Chairman and Chief Executive Officer

Eric Ashman - Chief Financial Officer

Analysts

Michael Moskoff - MRM Capital

Clark Wong – Needham & Company

Operator

Ladies and gentlemen, welcome to the fourth quarter 2008 TheStreet.com earnings conference call. My name is [Tanya] and I will be your coordinator for today. (Operator Instructions)

I would now like to turn the presentation over to your host for today's call, Rebecca Updegraph, head of Investor Relations. Ms. Updegraph, please proceed.

Rebecca Updegraph

Thanks, Tanya. I'm just going to read a boilerplate statement and turn it over to our CEO.

Some of the statements made on this earnings call not related to historical facts may be deemed to be forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. Such forward-looking statements, which may concern TheStreet.com's financial performance as well as its strategic and operational plans, are subject to risks and uncertainties that could cause actual results to differ. The company undertakes no duty to update any such statements. The risks and uncertainties are described in the company's SEC filings, which are on file with the SEC and available at its website, www.SEC.gov. Additional information will also be set forth in TheStreet.com's annual report on Form 10-K for the year ended December 31, 2008, which will be filed with the SEC in the near future.

I now turn the call over to Tom Clarke, TheStreet.com's Chief Executive Officer. Tom?

Thomas Clarke

Thank you, Becky. Good afternoon and welcome to our fourth quarter and full year 2008 earnings call.

Joining me on the call is our CFO, Eric Ashman. Following our usual format, I will review our fourth quarter operating performance and our near-term outlook and plans. Eric will then review in detail our first quarter and full year financial performance.

To say the economic environment today is challenging would clearly be an understatement. Nobody's calling the bottom yet, visibility is extremely limited, and both our advertising and subscription revenue lines are under pressure. I would like to provide some insight on the initiatives that we have executed that will enable us to weather the storm and leave us well positioned for the turnaround when - not if - it occurs.

It is not surprising that in this environment we felt significant pressure on our revenue and profitability which was reflected in our fourth quarter financial results. With revenue down 17% from year ago levels, we have and will continue to streamline our costs to more accurately reflect the current revenue environment. During the course of 2008 we reduced our headcount by 11%, and in the fourth quarter we reduced our operating expense from the third quarter by 6%. In real dollar terms, we took almost $1 million out of our cost structure during the fourth quarter, which would yield a $4 million annual reduction.

As we enter 2009 I see the difficult market environment continuing, with indications that the typical downward seasonality for ad spending we usually see in Q1 versus Q4 will be worse. I also see the pressure on the subscriber base likely to continue, as many investors have headed to the sidelines, waiting for a more positive market environment. Sweeping job reductions in the financial and other sectors further reduce the pool of interested consumers.

Therefore, we will manage our cost structure to this new reality and make the necessary changes in as expedient a manner as possible to reach our targeted goal of free cash flow neutral until the operating environment improves.

While things are certainly tough in the traditional revenue streams we've relied upon, there are some new monetization opportunities that we do see in TheStreet.com world. Dollars are available when directly attributable to order flow and, to a lesser extent, new account acquisition. Think of this as a move towards more performance-based advertising models. TheStreet.com audience represents an ideal target for these dollars. An additional source of performance-based advertising dollars, primarily available via TheStreet.com free site, is the marketing of other paid newsletters, which we have just begun to implement.

In looking at our other properties, especially MainStreet and BankingMyWay, the addition of GMs to these properties with specific P&L responsibilities has certainly accelerated the level of activity. Each site continues to make ongoing improvements to the user interface, features and site navigation, as well as improved content sets. BankingMyWay continues to expand its performance marketplace with savings and lending products, credit card offerings, insurance and credit products. These centers have proven to be attractive to advertisers on a CPM basis as well as providing a pay-per-performance revenue stream.

As these new properties continue to grow, the larger portals have shown increasing interest in publishing their content. MainStreet and BankingMyWay content can now be found with some level of regularity on major portals such as AOL.

Over the past several conference calls you have heard us continuously speak about the following themes - diversified revenue streams, broader content sets, including personal finance, scalability and leverage, and a strong balance sheet. Let me take a moment to talk about each.

Diversified revenue streams. It has always been our belief that diversification of revenue models will provide the company with the organizational levers to be used in periods of economic turmoil. While arguably in this environment many of our revenue streams will remain challenged, we are seeing some positive signs developing, in particular on the advertising side. While display advertising based on CPMs is one of the first areas to come under pressure, the revenue from performance-based advertising across a network of sites has steadily increased. While still only about 10% of our advertising stream in the fourth quarter, we expect this to increase over the next few quarters.

This is not to say that display advertising will not play an important role going forward. The highly targeted nature of the entire TheStreet.com audience, coupled with the money focus across all the properties, will still allow for pricing power for select advertisers in these categories.

On the subscription side, we now find ourselves buffeted by challenges with respect to both subscriber acquisition and retention. While our product lineup remains strong, we will be adding some additional offerings in areas where interest remains very high, including ETFs, technical analysis, and municipal bonds. In addition, the one initiative we have seen that is working is the bundling of products. With this in mind, we'll soon be launching the Chairman's Club product, which will have all of TheStreet.com offerings under one umbrella price.

Broader content sets. Our strategic decision a few years ago to further expand our content sets to include a fully array of personal finance information and application to complement our equity focus will continue to be foundations we build upon. With the launch of MainStreet and BankingMyWay and our relationship with Geezeo, TheStreet.com today provides users with the information they need across the entire personal finance space in one convenient network. In addition, we continue to add best of breed services such as INSWEB, ReputationDefender, and [Money Owl] to allow those interested to take action, further bolstering our performance revenue stream.

The breadth and focus of the network, combined with its linkage to TheStreet.com website, [inaudible] an effective traffic efficiency model as well as revenue generation opportunities on both the traditional display and performance-based models.

Leverage has been a continuous theme. It applies to everything we try to do related to revenue and the ability to direct the traffic flows to the revenue opportunities yielding the greatest ROI. Implied in the ROI is content cost efficiencies from both the product [producing] ones [inaudible] mantra to produce the content in a less-expensive manner. One benefit of the economic turmoil we have seen is that the cost of content production continues to fall.

From a macro perspective, the sites are beginning to merge to a place for all things money while maintaining separate personalities. The implications of the shift are quite positive. Content production costs are mitigated, content utility is maximized, and traffic is optimized. Even more importantly, revenue can be maximized as traffic can be directed to those areas with the highest current prevailing advertising rates. The benefits of a similar user interface on both BankingMyWay and MainStreet, a common marketplace, and combined content areas are substantial and will be the basis of a new structural formula for the firm going forward.

As you all know from personal experience, one characteristic of winners in this economy is having cash. Consumers and businesses with cash are in a much stronger position. As I stated before, TheStreet.com, with $76 million in cash and no debt, is clearly in a good position in the current environment.

While costs are a central focus of the company, performance is equally important. Expense and delivery intersect at the employee level. In today's environment, it is critical for companies to hold their employees accountable. This means reasonable base pay, bonuses that truly reflect performance, and the ability for the company to dismiss employees when performance lags without it being a lottery win.

Toward that end, the company has taken a comprehensive look at its compensation costs and incentive structure. This review is all-encompassing, including the executive level, as evidenced by the 8-K filing the company made earlier today. The company is in the process of revising the terms of employment for its executives from the CEO on down. As the existing agreements vary in terms, this is an ongoing process, but one that the company believes is critical to complete to compete effectively in today's highly competitive marketplace.

Our focus for 2009 is very clear. We will remain vigilant regarding our cost structure and will adjust expenses to conform to the new revenue environment we find ourselves operating in. This will include a review of everything we do as it is possible to get more for less for both the goods and services we purchase as well as for the human capital available today. And we will be opportunistic in leveraging our strong cash position to take advantage of any strategic opportunities we may find.

There is no doubt we find ourselves in challenging times. In some ways they bring different challenges than we saw back in 2000 - 2001. While we again find ourselves reducing overhead, challenging business models, and rethinking strategic paths, it is important to remember that business cycles are just that - cycles. We will continue to solidify the broader content offerings and optimize multiple revenue streams across them.

While I have no crystal ball to predict the bottom - or, for that matter, a top - I can predict that we will remain focused on conserving cash and will emerge from the cycle positioned well for future growth.

Now I'd like to turn it over to Eric, who will give you more detail on our financial performance.

Eric Ashman

Thanks, Tom.

The story of 2008 was one of integration of acquisitions, investments in the redesign of TheStreet.com, and the development of MainStreet and BankingMyWay, along with the economic turmoil that ultimately resulted in far less return on these investments than we had originally anticipated. Profitability suffered in 2008 and 2009 will be another challenging year.

The story of 2009 is one of maximizing efficiencies of our network of properties to further reduce expenses, while continuing to build upon the momentum of new revenue models, primarily ones that are performance-based, to diversify our revenue base further and deliver opportunities for renewed growth in this environment.

Even within the context of the environment last year, we delivered $71.9 million in total revenue, a 10% increase over 2007. And even as we increased our capital expenditures in 2008 by 13% to $5.6 million to complete the redesign of TheStreet.com and development of MainStreet and BankingMyWay, we produced $3 million in free cash flow. Our adjusted EBITDA for the year was $11.4 million, and we produced a full year adjusted EBITDA margin of 15.9%.

We produced record traffic in 2008, delivering 7.4 million average monthly unique visitors throughout the year, an increase of 29%. And our RPM of $26.65 was 43% higher than the RPM we delivered in 2007.

These results demonstrate progress as we continue to develop a network of websites that can deliver content to an audience interested in the topic of money and how it impacts their lives. Having said that, the economic environment had an impact on our profitability and margins in 2008. This requires that we balance cost control with targeted investments, protecting our balance sheet while ensuring we fully develop our opportunities for future growth.

I now want to review our Q4 results in detail.

Total revenue for the fourth quarter was $16.5 million, a decrease of 17% from revenue of $19.9 million reported for the fourth quarter of 2007 and down 1% sequentially. Marketing Services, which includes advertising and the interactive Marketing Services business of Promotion.com, totaled $6.6 million for the quarter, a decrease of 30% over Marketing Services revenue of $9.5 million recorded for the same period last year.

With respect to our advertising business, the trends we saw developing in the third quarter continued to impact our business in the fourth quarter. Many campaigns were delayed, significantly reduced in size and scope or canceled outright. Even with respect to our long-standing financial advertisers, we saw little to no incremental spend throughout the quarter as campaigns ran at lower levels with tightly focused targeting. We continue to see downward pressure on effective CPMs and lower sell-through rates on our IAB standard advertising inventory.

During the quarter we delivered advertising revenue totaling $5.3 million, a decrease of 21% over the $6.8 million in the prior year. Fourth quarter advertising revenue from nonfinancial advertisers was down 44% year-over-year and represented 40% of total advertising revenue, down from the 52% of total ad revenue in the fourth quarter of 2007. Our endemic financial advertisers held up better, and they have proven to be an important base of support for this part of our business. Having said that, advertising revenue from financial advertisers was down 8% year-over-year.

Traffic across our network of sites remains strong, reflecting the growing interest and increasing breadth of content that we provide. We had a record 8.1 million average monthly unique visitors in the quarter, [inaudible] 215 million page views, and delivered an RPM of $25.

We had two pieces of encouraging news from our Promotions.com business in the quarter. First, Promotions.com executed a master services agreement with Hasbro, a worldwide maker of children's and family leisure products. The agreement includes support for a number of different web-based initiatives, including global promotions and web development projects. It was a significant win that we expect to make a meaningful contribution to the business in 2009.

Promotions also delivered revenue of $1.3 million in the quarter, up from the $1 million we delivered in Q3. Of course, this is still far short of the $2.7 million recorded in the quarter a year ago, but delivering sequential revenue growth in this environment was an important early indicator as to the impact of sales initiatives launched earlier in the year.

Turning to Paid Services, which includes subscription, syndication, licensing and information services revenue, total Paid Services revenue was $9.9 million for the quarter, a decrease of 5% over the fourth quarter of 2007. Our subscription business continues to be impacted by the performance of the stock market and sharp losses in the financial and other sectors, both of which served to reduce the pool of potential customers for our subscription services.

Subscription revenue from TheStreet.com's subscription business was $7.3 million, down 11% from last year. Subscription bookings totaled $6.7 million, a decrease of 15% from the $7.9 million we booked in the fourth quarter of last year, and the number of subscribers decreased by 9% to approximately 78,000.

Deferred revenue reflects revenue associated with our various businesses, including our subscription services business, RateWatch and Promotions.com, which we will recognize in future periods. We had total deferred revenue of $15.3 million at the end of the quarter, a 6% decrease from the prior year. Deferred revenue specifically related to TheStreet.com's subscription products decreased 9% to $10.8 million from $11.9 million at the end of the fourth quarter of last year.

We continue to roll out new products and services that might be best suited for this environment, and we continue to take action that we believe might improve the prospects for this business in 2009. This includes the addition of Colin Gillis as our Director of Research earlier this year and our increased participation in conferences that target active investors who subscribe to these services. With that, we believe 2009 will prove to be another challenging year for the subscription business.

Syndication, licensing and information services revenue, which includes revenue from the RateWatch business acquired in November of 2007, totaled $2.6 million for the current quarter, an increase of 37% over the same period last year.

Net income was impacted by a non-cash impairment charge of $2.3 million in the fourth quarter. $500,000 of this charge was related to the write-off of the Smart Portfolio trade name, which was acquired in December 2000 as a part of our acquisition of Smart Portfolio, a web-based provider of financial news, commentary and information. Having integrated the services into our various offerings, we make little use of the Smart Portfolio trade name today and the remaining newsletter with the Smart Portfolio name is no longer actively marketed.

We also recorded a non-cash impairment charge of $1.8 million related to intangible assets recorded as a part of the acquisition of Promotions.com in 2007, specifically, values assigned to their client list at the time of the acquisition, as well as non-compete agreements negotiated as part of the employment of certain key employees. As we have discussed in past calls, the Promotions.com business has been adversely affected by our use of key resources in early 2008 on internal projects, as well as the economic downturn. This in turn lowered financial results for 2008 below our original forecast, as well as impacted our near-term forecast for this business to an extent that an impairment charge was appropriate.

We incurred a net loss attributable to common stockholders for the fourth quarter of 2008 of $2.4 million or a loss of $0.08 per fully diluted share.

In 2008 we took a number of steps to reduce expenses. We reduced our headcount by 11%, bringing the year end headcount down to 310 employees as compared to the 349 employees we had at the end of 2007. Headcount reductions were made across our business. We also deferred salary increases throughout the company for 2009, and we eliminated the 2008 bonus for all employees.

Not all of our actions were about reducing costs. We continue to invest in both MainStreet and BankingMyWay. In the fourth quarter of 2008 we appointed new general managers for both properties, invested in a significant redesign of MainStreet.com, and launched new features and functionality on BankingMyWay. Net of these investments, total fourth quarter operating expense decreased 6% sequentially, allowing us to deliver an adjusted EBITDA margin of 10.9%, up 4 points sequentially against revenue that was down 1%.

In the fourth quarter, adjusted EBITDA excluding stock compensation expense and the noncash impairment charge was $1.8 million, a decrease of 69% from adjusted EBITDA or $5.8 million for the fourth quarter of 2007 and up 55% sequentially.

Given our current expectations for 2009, we believe further cost reductions will be required to deliver on our goal of maintaining a free cash flow neutral position for the year. Our 2009 capital plan, which is approximately 40% lower than our 2008 plan, reflects our focus on utilizing out cash on high priority strategic initiatives that have an acceptable short-term ROI. We are confident that the synergies we continue to develop across our network of properties will support our ongoing efforts to ensure that our cost base remains in line with our expectations for revenue in future periods.

Finally, we ended the year with $76.4 million in cash and marketable securities and no bank debt. This quarter the company completed its third year of quarterly dividends of $0.025 per share.

And with that, I will turn the call back to Tom.

Thomas Clarke

Thanks, Eric. Why don't we open it up for questions at this time?

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) Your first question comes from Michael Moskoff - MRM Capital.

Michael Moskoff - MRM Capital

Can you go through the advertisers? Last quarter you had 16 new advertisers. How many did you have this quarter, if any?

Thomas Clarke

We had, let's see, 24 new advertisers this quarter.

Michael Moskoff - MRM Capital

And total, how many are there? I believe last quarter you -

Thomas Clarke

Total advertisers, probably somewhere around 92.

Michael Moskoff - MRM Capital

And the monthly renewal percentage rate versus annual rates, when you gave the sub numbers?

Thomas Clarke

When we look at that - let me just pull it up for you so I don't tell you - the renewal rate for the annual basis was about 61% and on a monthly basis we were about 89%.

Michael Moskoff - MRM Capital

The subscription business actually from last quarter, I guess year-over-year, you guys use a year-over-year thing, but from last quarter it did okay, I mean, it held in there.

Thomas Clarke

Well, it did, Mike. I mean, you know, what we're seeing - in my comments I think we addressed it a little bit - is while the product performance still is good against some of the benchmarks that we operate against, one of the things we're finding - a couple things happen is when people call up and they're either not renewing a product, a lot of it is because they unfortunately either lost their job or are not in a position to continue to pay, so part of the economic environment is certainly playing into that.

It held up probably as good as we could expect, and I think if we get any kind of positive trend in the market, I have no doubt that some of the new things we're going to put in place will be at least received positively. Whether people can go back into the market that quickly is really the question we don't know.

Michael Moskoff - MRM Capital

Regarding the TCW investment back in November of '07, in the press release it talked about where they received dividends at the same rate as the underlying common shares and also have a onetime liquidation preference. Can you expound on that?

Thomas Clarke

It's TCV and the way you just described it is accurate. What they do have is they do receive dividends as if they were a common shareholder and the liquidation preference is one-time, so it's nothing more than that.

Michael Moskoff - MRM Capital

Well, I mean, can they - what does that mean in English as far as can they ask for their money?

Thomas Clarke

They can't ask for their money. It means that if the company was to be liquidated for some reason, they would get their $55 million back before anybody else would get their money. That's the onetime liquidation preference.

Michael Moskoff - MRM Capital

And regarding liquidity, you guys have obviously a ton of cash. Last quarter in the press release you guys said that the interest income that you derived was 1.71%. Obviously, with yields being disheveled, what was it this quarter, number one, and what are you invested in to derive whatever that number is?

Eric Ashman

In the fourth quarter the yield was less than a percentage point, so we had taken a very protective position with respect to most of our cash. A lot of it was moved into Treasuries for a period of time in Q4, and so we earned an effective yield on our cash of somewhere around 0.7% - 0.8%.

We have since in Q1 shifted some of that investment back into higher-yielding assets. Having said that, we're not expecting a yield any greater than 1% or 1.5%, certainly in this environment.

Michael Moskoff - MRM Capital

And higher yielding would be - what specifically would you be talking about?

Eric Ashman

Some high-quality corporate paper to the extent it's available. And again, [most of] the rest of the cash being in federally backed securities.

Michael Moskoff - MRM Capital

And obviously the maturity of these getting 1% - 1.5% is probably less than a year or two years, whatever?

Eric Ashman

Yes. We can go up to a two to three-year term. Most of the things that we're doing are in the one to twoyear timeframe.

Michael Moskoff - MRM Capital

Amazing that we're talking about this for 1% - 1.5%. Have you guys thought about, now that the stock is getting close to almost 9/11 levels of '01 - '02, what have you, of maybe either A) raising your dividend, B) buying back some stock? I know you want to be conservative about your money, but you do have a good amount of money and the stock is just -

Thomas Clarke

Yes, Mike, it continues to be a high topic of conversation at our Board level and, you know, in the upcoming Board meeting it will be addressed again. So it continues to be something that we constantly look at.

Michael Moskoff - MRM Capital

Okay. Because, you know, getting a dime at $2.50 is almost 4% and it's only costing you about, what, $3.5 - $4 million if you count the -

Thomas Clarke

Yes. It's running about $3.5 million a year.

Michael Moskoff - MRM Capital

And I think, you know, it's almost more people are even more inclined to get dividends than buyback, and, you know, you double the dividend so you're paying $8 million, you now have a 7% or 8% yield on a $2 to $2.50 stock. If that doesn't catch people's interest, I don't know what would. But just a suggestion.

Operator

(Operator Instructions) Your next question comes from Clark Wong – Needham & Company.

Clark Wong – Needham & Company

I guess you guys generated a negative cash flow from operations for the first time and negative free cash flow. I was just wondering where was the kind of stumbling block. Was it because revenues dropped off faster than expected or were you less able to cut costs as quickly as you had hoped during the quarter?

Eric Ashman

I think it would be less about cutting costs and more about the revenue side. It was the deceleration of revenue in the quarter. You always have a little bit of an imbalance between third and fourth quarter anyway. Fourth quarter is typically a lighter cash flow quarter if only because you're actually coming off of collections from Q3. But certainly between the deceleration in revenue in late Q3 and early Q4, that will have an impact on those things.

Certainly the cash, the expense reductions that we did throughout the quarter will help as we turn into 2009, and it certainly helps us line up against that goal of free cash flow neutral for the year.

Clark Wong - Needham & Company

And I guess you guys are - I think you mentioned in the release that you guys expect conditions to worsen in the first half of the year. I'm just wondering have steps already been taken to kind of ensure that we do get free cash flow positive results in the first half at least?

Thomas Clarke

You know, it's ongoing. I mean, I think we're in an environment that I think everyone would agree is pretty volatile, so this is an ongoing process. We adjust on the fly as we see things that are either moving in one direction [inaudible]. So it'll be ongoing for us. I mean, I think we've stated pretty clearly that in as expedient a manner as possible we will address any imbalance we think we see between what we perceive to be our revenue opportunity and what our costs are. So we are very, very focused on that [inaudible].

Clark Wong - Needham & Company

And just wondering, BankingMyWay, I was just wondering, how much advertiser interest has there been in that site and where is the interest coming from particularly and have the recent rate cuts and mortgage rate declines helped you out?

Eric Ashman

Well, it has. I mean, actually the interest has picked up quite a bit and if you're on the site you'll notice that we've got more advertising running on that site in the first six weeks than we had for much of last year, so the demand has picked up significantly, particularly with the improvements and the changes that have been made since we put new leadership in place for that site.

We're seeing demand primarily around deposits in interest-type banking products rather than mortgage products. We are seeing some activity in mortgage products in the performance-based advertising, but on the CPM side where we're seeing the greatest demand right now is primarily around consumer banking products, interest in checking and those type of products.

Clark Wong - Needham & Company

And in terms of the Chairman's Club product you guys are rolling out, what's the price point on that?

Thomas Clarke

We haven't released the price point yet, but I will tell you it'll be the highest price point we've had by a significant multiple.

Clark Wong - Needham & Company

So it'd be several times - I think you guys are $300 something?

Thomas Clarke

The highest priced product right now is over $1,000, so it's a multiple of that.

Operator

(Operator Instructions) Your next question comes from Michael Moskoff - MRM Capital.

Michael Moskoff - MRM Capital

Did you guys say that the Chairman's Club is going to cover every single subscription?

Thomas Clarke

It'll cover every subscription product that TheStreet.com produces. We have one or two products, Mike, if you heard in our prepared remarks that we were talking about that we would be marketing, some other newsletters. If we can get an arrangement with those people, they may be part of the Chairman's Club. But for sure everything that TheStreet.com produces will be there.

Michael Moskoff - MRM Capital

And what is going on, you talked a lot about MainStreet.com last quarter. Can you talk about that at all and what you're seeing and what have you?

Thomas Clarke

Sure. I mean, as you can imagine in the environment that we're in, any type of personal finance information related to either where do you go to negotiate better leases or where do you put your money or what do you do if you get fired or how do you handle health benefits, any of the personal finance topics, obviously, are of great interest at this point, and we're seeing significant traffic to start to go to the site. For us it's about modernization and I think we're starting to, with some of the products we put in there, the performance-based [inaudible], we're starting to see much better monetization there.

So I think that one thing we also said is this content now, whereas TheStreet.com content is always found on a lot of the large portals, we now have arrangements in place where the MainStreet content will also find its way into these portals, which will be good traffic drivers for us. It'll give us other extension of monetization opportunities that we didn't have before.

So all in all, I think where we thought this was going is proving out, and I think if we could get a better environment on the advertising side, I think we'll be able to figure out a monetization element for it.

Michael Moskoff - MRM Capital

So the drop in cash from last quarter to this quarter was what, approximately $3.5 million?

Eric Ashman

That's correct, yes, about that.

Michael Moskoff - MRM Capital

And are you saying solely it's because of top line?

Eric Ashman

Well, you know, it's a function of a couple of things. Remember, free cash flow is simply a function of operating cash and capital plan and certainly part of that is capital spend as well in the quarter. And then aside from that you've got things like the dividend that gets paid out in the quarter and so on.

Fourth quarter is generally a bit weaker than the third quarter because it's reflective of the activity per quarter, but as we turn into 2009, the action that we took that we mentioned in the call, expenses went down 6% sequentially in the fourth quarter, is reflective of the action that we have been taking throughout 2008, and our goal is to continue to do the things that we need to do to ensure that ultimately that free cash flow number for '09 is controlled better.

Operator

(Operator Instructions) And there are no further questions at this time. This concludes the question-and-answer session. I would now like to turn the call over to Tom Clarke for closing remarks.

Thomas Clarke

Well, thank you, and thank you for your questions.

You know, I think it's easy during this uncertain economic environment to really dwell on the unfairness of what we call the external economic factors. I think we all know times are tough. I think I'm here to say we've been through these tough times before with a lot less in the way of resources.

I think TheStreet.com today is a network of financial personal finance sites that covers a wide spectrum from paid financial newsletters to free business equity analysis to personal finance to a financial product marketplace. We've done the hard part. We've got over 7 million unique visitors who are educated, wealthy, coming to the network each month and they consume more and more content. And I think as they consume it we're going to monetize it either on the paid subscription side or to a high CPM or to display or to a CPA scenario.

So I think our mission is really simple and more important today than ever. You know, we're a place for people to go for all their financial needs from information to action. I think what we need to do is 2009 is really going to be about execution. It's going to be about blocking and tackling at the simplest level. We're going to leverage the declining costs of goods and services into our company, and we'll improve our operating efficiencies.

Eric and I and the rest of the management team remain extremely focused on costs and we'll certainly right-size our cost structure to make sure we're operating in the current economic environment.

So I just wanted to say thank you again for joining us on the call, and if anyone's got any questions, always feel free to e-mail us and we'll take care of it. Thank you.

Operator

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the presentation. You may now disconnect and have a great day.

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