Q4 2013 Earnings Call
March 06, 2014 11:00 am ET
Lloyd Lynford - Chief Executive Officer, President and Director
Mark P. Cantaluppi - Chief Financial Officer, Principal Accounting Officer and Vice President
Ian Corydon - B. Riley Caris, Research Division
Brett Huff - Stephens Inc., Research Division
Ross Taylor - Somerset Capital Advisers LLC
Good day, ladies and gentlemen. Thank you for standing by, and welcome to the Reis, Inc. Fourth Quarter 2013 Financial Results Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded.
I would now like to turn the conference to our host, Mr. Lloyd Lynford. Sir, you may begin.
Thank you. Good morning. This is Lloyd Lynford, President, CEO of Reis. Joining me on our fourth quarter 2013 conference call are Jonathan Garfield, Co-Founder and Executive Vice President; Bill Sander, President and COO of Reis Services; Mark Cantaluppi, Chief -- Reis' Chief Financial Officer, and other members of Reis' senior management team.
First, I need to provide our legal disclaimer. Today’s comments may include forward-looking statements, which involve a number of risks and uncertainties, and are based on currently available information and current management outlook or expectations. Actual results may differ materially from those in the forward-looking statements.
In addition, we do not plan to update any forward-looking statements to reflect subsequent events or circumstances or if our expectations change. For more information relating to the risks and uncertainties involved in our forward-looking statements and the company, generally, please see the risk factors and forward-looking statements section of our recent filings with the SEC, including our latest Form 10-K.
This call is being broadcast live over the Internet and will be available for replay for a period of time following the call. A link to the webcast to this call, as well as information on the replay, is available at www.reis.com/events.
Our earnings press release and Form 10-K, both issued earlier today, can also be found at the Investor Relations portion of our website.
Today's call will include my comments on Reis' financial results and our most recent product enhancements and strategic initiatives. I will then ask Mark to review our financial performance for the 2013 fourth quarter and year. After Mark's comments, we will open the telephone lines for your questions.
I'm pleased to report that Reis continued its track record of outstanding performance during the fourth quarter and for all of fiscal 2013. We extended our string of revenue growth over the prior year's corresponding quarter to 15 consecutive quarters and EBITDA growth to 13 quarters. Records were set for the full year, the second half of the year and the fourth quarter, with respect to contracts, revenue and EBITDA.
Other financial metrics, including cash generation and the growth of our aggregate revenue under contract, also are eloquent testimony of the success of our business model and brand.
The adoption of Reis' products, not only by industry leaders, as is documented by our 91% overall renewal rate, but also increasingly by smaller enterprises is sustaining our robust pace of new customer acquisition and superior financial results.
For fiscal 2013, revenue grew by 11.2%, and on a pro forma basis, by 13.2%. As we have discussed in our 10-Qs, press releases and our 2012 and 2013 10-Ks, during 2012, as required under GAAP, we released actual revenue from deferred revenue for one specific custom project that supported the initial development of a custom database and product launch. In fact, Reis' pro forma revenue growth during fiscal 2013 represents an acceleration of 2012 pro forma growth rate of 12.8%.
During the fourth quarter, Reis' revenues grew by 7.3% over the fourth quarter of 2013 (sic) . On a pro forma basis, adjusting for the impact of last year's onetime revenues, our revenue growth was even higher at 12.9%.
Reis Services EBITDA performance was similarly impressive, totaling just over $14.3 million for the year, and almost $3.8 million in the fourth quarter. These levels translated into percentage gains of 12.1% for 2013 and a 6.9% rise over the fourth quarter of 2012.
On a pro forma basis, EBITDA grew by 21.6% in the fourth quarter over 2012's corresponding period, and 17.3% for fiscal 2013.
Reis Services pro forma EBITDA growth during 2013 also represents an acceleration over 2012. In fact, last year's 17.3% growth in pro forma EBITDA, is well above 2012's 12.5% level.
I should also note that our EBITDA margins remained strong at just over 41%, both for the quarter and the full year.
Reis' record performance with respect to contracts, revenue, deferred revenue, as well as EBITDA and our EBITDA margin all provide evidence of the soundness of our business model; which, as I have articulated in the past, is to create an ever-widening competitive separation between Reis' suite of products and value proposition and those of other data vendors. We've created that separation by moving forward on several fronts over the last 5 years, especially with respect to adding geographic coverage and new property types, as well as by launching significant new analytic capability, most notably our Mobiuss CRE product, together with Opera Solutions.
Our strategy is largely influenced by the guidance provided by Reis' subscriber base. It is through constant dialogue and feedback from our users that we determine our development priorities. For example, clients have long relied upon Reis' rent and vacancy forecast when making buy, sell and hold decisions in the nation's top markets and submarkets. Today, as we see both transaction volume and capital flows increasing in most commercial real estate sectors, these same investors are now telling us that they are more likely to consider opportunities in smaller metropolitan markets. To support the changing investment objectives of our subscribers, specifically assisting them in analyzing supply and demand trends and evaluation. Last month, Reis expanded its 5-year rent and vacancy forecast for all of its metropolitan markets, submarkets and sectors that we monitor, including the smallest of our metropolitan markets.
Our product improvements do not stop at material enhancements to our existing coverage. We also regularly introduce whole new sectors that are attracting investor interest. Thus, on May 1, Reis will launch coverage of the senior housing market, our seventh property type. With demographic trends indicating that the nation's senior population is growing at a significantly faster pace than the national average, there is a burdening interest in senior housing as an asset class.
For 57 U.S. markets, Reis will offer rent comps, sales comps, construction comps and market and submarket reports covering the 4 primary types of senior housing facilities: independent living; assisted living; memory care; and skilled nursing.
Moreover, we are currently determining the next property type that we will be introducing. In the coming quarters, I will discuss further what will become the eighth major property type that will receive Reis' rigorous and unparalleled market coverage.
Again, the relentless introduction of new and specialty property type adds incrementally to the competitive advantage that Reis enjoys in the marketplace.
During last quarter's call, I reported that Reis had recently launched executive briefing reports at the submarket level, bringing the total number of these written summaries of essential market conditions to more than 2,800.
A brief refresher. For every major market and submarket across the 5 primary property types, Reis now offers an information pack executive briefing that greatly reduces workloads for subscribers by providing concise narrative summaries of critical supply, demand and price trends in global markets and submarkets. In speaking with our subscribers, we have learned that Reis' Executive Briefings are easily integrated into acquisition and due diligence reports, pitch books and are highly valued by buyers, sellers and underwriters.
When I last spoke to you in early November, I did not yet have the results of our 6-week trial, during which we gave our clients free reign to download as many of these reports as they wanted. I'm pleased to report that these Executive Briefings immediately became the second most popular ReisReport. Among our many successful product launches, Executive Briefings rank at the very top, and we consider it to be evidence that our product development efforts are in tune with client needs.
We continue to use Executive Briefings to distinguish ourselves from our competitors. Executive Briefings are being made available as an optional add-on module, and we have had success in selling this capability both to existing clients and prospects since December.
In the coming quarters, we will extend our Executive Briefings series to other Reis information and analytics. We are convinced that no other competitive vendor has the structured and long-term time series data, which is prerequisite to generating such valuable narrative analysis.
Let me provide you with a brief update on our Mobiuss CRE product. As we expected, in the fourth quarter, we signed significant new banking and government-sponsored entity clients for Mobiuss, our web-based portfolio analytics solution developed in partnership with Opera Solutions, a leading provider of big data and predictive analytics. These new contracts, as I also noted on previous calls, will generate revenue during fiscal 2014 and beyond.
Also in the fourth quarter, a prominent national accounting and consulting firm carefully examined the Mobiuss technology to validate its underlying commercial real estate credit models. We are proud to have received this important validation of Mobiuss as it is a significant benchmark for potential clients, considering adoption of the platform to support their mission-critical, risk monitoring and credit-related systems.
The regulatory environment and increased emphasis on low-level analytics as a best practice have continued to generate strong interest in Mobiuss, particularly since the platform supports stress testing requirements issued by the Federal Reserve and other regulators.
As a result of all of these factors, the Mobiuss sales pipeline continues to grow, and we are optimistic that this product will make a greater contribution to Reis' growth in 2014.
A brief update on ReisReports. The product posted solid growth during 2013, and continued to make a meaningful contribution to our overall performance. Our push marketing campaigns and enhancements to the product's website were largely responsible for the improved ReisReports performance. We are continuing to add resources for our small business product to address the unmet demand for market information by consumers and small- to medium-sized enterprises.
We remain focused on the cornerstone principles of our business plan. Our sustained growth results from Reis' commitment to developing and launching must have market information and analytics on a tightly disciplined timeline and budget. We are consistently reinvesting in our business and putting additional systems between Reis' products and those of our competitors. In fact, in our view, Reis is the only national provider of real estate market information and analytics that remains exclusively devoted to building the databases, market reports and investment analytics to support superior decision-making.
We are not distracted by the coming real estate marketplace, a listing service or by chasing advertising revenues. It is our firm belief that Reis' products are the foundation supporting commercial real estate investment decisions, including capital allocation and risk monitoring by industry leaders. Reis' business model is predicated on the assumptions that debt and equity investors are becoming increasingly sophisticated, with respect to market and property type granularity and the analytics required to commit and monitor capital.
Reis' financial and market performance over the last few years suggest that fulfilling the information and analytical needs of real estate investors represent a significant growth opportunity on its own, and merits laser-like attention without the distraction of the multiple and disjointed business models of our competitors.
Management is committed to making the investments and implementing strategies that have, and will continue to yield substantial returns for all Reis stakeholders. There is much work to be done in the world of market information and analytics. There's much growth to be realized and value to be attained.
Let me now turn the call over to Mark Cantaluppi.
Mark P. Cantaluppi
Thank you, Lloyd. Good morning, everyone. The results I will be presenting this morning are more fully described in the financial results press release and in the Form 10-K we issued earlier today.
In the fourth quarter of 2013, subscription revenue generated by the Reis Services segment aggregated $9,209,000, an increase of $628,000 or 7.3% over the fourth quarter 2012 revenue of $8,581,000.
For the year ended December 31, 2013, subscription revenue aggregated $34,721,000, an increase of $3,492,000, or 11.2% over the 2012 annual period of $31,229,000.
Income from continuing operations for the fourth quarter of 2013 was $16,304,000 or $1.49 per basic share and $1.42 per diluted share, an increase over the fourth quarter of 2012 reported amounts of $6,519,000, or $0.61 per basic share and $0.58 per diluted share.
For the current year, income from continuing operations was $17,933,000 or $1.65 per basic share and $1.57 per diluted share, an increase over the 2012 annual period reported amounts of $8,013,000, or $0.75 per basic share and $0.73 per diluted share.
The company had consolidated net income of $16,214,000 in the fourth quarter of 2013, or $1.49 per basic share and $1.41 per diluted share. Whereas the fourth quarter 2012 had net income of $7,066,000 or $0.66 per basic share and $0.63 per diluted share.
For the current year, the company had consolidated net income of $17,597,000 in 2013 or $1.62 per basic share and $1.54 per diluted share, whereas the company had a consolidated net loss of $4,284,000 or losses of $0.40 per basic share and $0.39 per diluted share in the 2012 annual period.
In the fourth quarter of 2013 management determined, based upon a formal evaluation of the company's future prospects and the expectation of generating taxable income into the foreseeable future, that the $15.2 million valuation allowance we had against our deferred tax asset was unnecessary, and that the company would be able to utilize all of its deferred tax assets in the future. As such, we reversed the valuation allowance, which has a significant positive impact on our reported income from continuing operations and net income in the fourth quarter and year ended December 31, 2013.
In 2012, we reversed a portion of the valuation allowance against our deferred tax assets of approximately $5.6 million. This had a positive impact on income from continuing operations in the fourth quarter and year 2012, but its impact on net income in the prior year was entirely overshadowed by the losses incurred related to our discontinued operating activities in 2012.
Management utilizes and monitors performance measures such as revenue, deferred revenue, aggregate revenue under contract, EBITDA and adjusted EBITDA. EBITDA is earnings before interest, taxes, depreciation and amortization expense. Adjusted EBITDA is EBITDA before expenses related to noncash stock-based compensation. Please take note that the cautionary language included in the MD&A of our Annual Report on Form 10-K and in our earnings release both issued earlier today about the use of EBITDA, adjusted EBITDA and aggregate revenue under contract as non-GAAP measures, and the reconciliations of income from continuing operations to EBITDA and adjusted EBITDA for the respective periods and deferred revenue to aggregate revenue under contract as of the respective balance sheet dates. These cautionary statements and reconciliations also apply to Lloyd's earlier comments on these metrics.
Reis Services revenue for the 2013 fourth quarter is the 15th consecutive quarterly increase in revenue over the prior year's corresponding quarter. The increase in revenue over the 2012 comparable period was 7.3% over the 2012 fourth quarter, and 11.2% over the 2012 annual period. Revenue also grew $429,000 or 4.9% on a consecutive quarter basis, third quarter '13 to fourth quarter 2013.
The 2013 revenue growth reflects new Reis SE business, revenue growth from ReisReports and revenue from our Mobiuss product. These results reflect not just the single strong quarter, but the continued momentum created from sustained contract growth in 2012 and throughout 2013.
Subscriber count for Reis SE grew 17.8%, reaching 994 enterprises at December 31. Our renewal rates remained strong. For the year ended December 31, these rates were 91% overall and 93% for our institutional customers.
The revenue in the fourth quarter of 2012 included incremental revenue from one specific custom project of $427,000 in the quarter and $569,000 in the 2012 annual period. And there was no comparable custom project in the 2013 period. So excluding this custom project from the fourth quarter 2012 reported revenue would result on a pro forma basis in revenue growth of 12.9% in the fourth quarter of '13 and revenue growth of 13.2% for the year ended December 31, 2013 over the respective comparable 2012 periods, in contrast with our reported revenue growth of 7.3% and 11.2%, respectively.
In our prior year-end December 31, 2012 Form 10-K, our subsequently filed 2013 quarterly reports, as well as our earnings call and prior press releases, we included disclosures and commentary regarding the impact of the incremental revenues in the fourth quarter and annual 2012 on revenue and EBITDA growth rates.
Regarding EBITDA. In our press release, as well as in the MD&A section of our 10-K, we have provided and will continue to provide information on EBITDA and adjusted EBITDA, both for the Reis Services business and a consolidated basis. We believe that these metrics for Reis Services provide you, the financial statement reader, with valuable information for evaluating the financial performance of the core Reis Services business, excluding public company costs, and to make assessments about the intrinsic value of that standalone business to a potential acquirer.
Management primarily monitors and measures its performance based on the results of the Reis Services business.
EBITDA and adjusted EBITDA on a consolidated basis, including the expenses of running our public company and excluding discontinued operations, which is disclosed in our press release and in our 10-K, provides the reader additional information to make assessments about the current trading value of the company's common stock.
EBITDA of Reis Services for the 3 months ended December 31, 2013 was $3,788,000 an increase of $245,000 or 6.9% over the fourth quarter 2012 amount. For the year-end December 31, 2013, EBITDA of Reis Services was $14,307,000 an increase of $1,545,000 or 12.1% over the 2012 annual period.
The fourth quarter was the 13th consecutive quarterly increase in Reis Services' EBITDA over the prior year's corresponding quarter.
The EBITDA increases are predominantly influenced by the revenue growth that I described earlier.
Our operating expenses also continue to grow, but at a pace that resulted in EBITDA margins at the 41% level for the Reis Services segments.
EBITDA of Reis Services in 2012 was similarly impacted from the incremental custom revenue. If we consider the pro forma adjustments to revenue of $427,000 in the fourth quarter and $569,000 in the 2012 annual period I mentioned a few moments ago, reported Reis Services EBITDA would result in growth of 21.6% in the fourth quarter 2013, and 17.3% for the 2013 annual period over the respective 2012 periods, in contrast with our reported EBITDA growth of 6.9% and 12.1%, respectively.
Adjusted EBITDA on a consolidated basis was $3,211,000 and $11,337,000 for the fourth quarter and year ended December 31, 2013, growth of 14.5% and 13.7%, respectively.
The adjusted EBITDA margin, on a consolidated basis, was 34.9% and 32.7% for the fourth quarter and annual 2012 periods, an improvement over the 2012 margins of 32.7% and 31.9%, respectively. Reinvestment in our business remains a priority, whether it is developing new products and functionality, introducing new or expanding existing databases, or adding resources to grow our customer base and generate more revenue. Accordingly, we continue to hire in many departments, including in sales, both new business and account management, as well as in our operations including our data collection departments.
As Reis' business continues to grow, we expect to devote additional resources to expand our sales pipeline through marketing efforts and sales force expansion. This additional spending may reduce our margins in 2014 below the 41% reserve to EBITDA margins we have recorded for 2013 today.
Following are some consolidated balance sheet statistics as of December 31. Total consolidated assets aggregated $118 million. Cash and cash equivalents at December 31 aggregated $10.6 million. We have increased our cash by $5.6 million since last December. This cash accumulation has occurred as we continue to invest in our databases on our websites, investing nearly $4.1 million during the trailing 12 months and without any borrowings.
Customer receivables, net of allowances, aggregated $11.4 million at December 31. This is the largest AR balance we have ever reported on the balance sheet. But I'm pleased to say that we have collected in excess of 80% of that balance as of earlier this week. Our bad debt expense was miniscule at $20,000 for the year.
I spoke earlier about the income tax benefit recorded in 2013 and the impact it had on our net income and income from continuing operations. Again, this arose from the reversal of the entire valuation allowance previously reported against our deferred tax assets.
At December 31, 2013, we're reporting aggregate, current and deferred tax assets of $23.8 million. I think the impact of the statement I just made deserves some additional color. Based upon our current assessment, with this level of DTA, we should not be a federal income tax payer for the rest of this decade. We will, however, be responsible for federal AMT taxes, as well as certain state income taxes and taxes on capital.
Total liability has aggregated $25 million, of which deferred revenue was $20.3 million. Aggregate revenue under contract, which is deferred revenue plus future revenue under noncancelable contracts for which we do not yet have the contractual right to bill, was $40.3 million at December 31, 2013, an improvement over our then historic high reported 1 year ago of $36.4 million.
Reis' strong levels of deferred revenue and aggregate revenue under contract continue to provide the company with a predictable, but growing base of actual revenues to be recognized in the future. Of the $40.3 million of aggregate revenue under contract, approximately $27.3 million or 79% of the 2013 annual revenue relates to amounts under contract for the forward 12-month period through December 31, 2014.
Stockholders' equity was $92.9 million at December 31. The company had approximately 10.9 million common shares outstanding, of which our directors and senior management beneficially own approximately 25%.
We were very pleased with our 2013 financial results. We have made great strides in strengthening our balance sheet with over $10 million of cash on hand, strong receivable collectibility, tax assets which will significantly limit our cash tax exposures, the availability of $10 million of debt if necessary, and deferred revenue and aggregate revenue under contract at all-time highs. We believe we are well-positioned for exciting results in 2014.
So this concludes my comments on the financial results for Reis' fourth quarter and year ended 2013. At this time, I would like to open the call for questions.
[Operator Instructions] And our first question comes from Ian Corydon from B. Riley & Company.
Ian Corydon - B. Riley Caris, Research Division
Mark, I'm wondering if you can give us a sense for the magnitude of the growth investments expected this year versus what you put in place last year, and if there's any difference between how those get allocated between headcount or investments in new databases, et cetera?
Mark P. Cantaluppi
Sure, Ian. Like I said earlier, we had invested about $4.1 million in 2013 related to our websites and databases. On top of that, during the year we saw our headcount grow. I think we ended the year 2013 with headcount about 210 employees. Our expectations are that we're going to continue to grow our headcount. Like I said, not just in operations, but as well as in our sales efforts, too. My expectation with regards to website and database costs for 2014 would be we'll definitely spend more than what we spent in 2013. So that $4.1 million, I could easily see that grow to somewhere between $4.5 million and maybe even $5 million during the year.
Ian Corydon - B. Riley Caris, Research Division
Got it, that's helpful. And Lloyd, you mentioned that a consulting firm evaluated Mobiuss during the quarter. What was the purpose of that? And could consulting firms become a channel through which you sell Mobiuss?
Yes. And actually they have in the past been very effective channels of these types of products for us. Well, sometimes financial institutions need to benchmark and prove to regulators that they have systems and sometimes, senior management that they have systems in place that are adequately monitoring and measuring capital at risk and allocation. So they want to benchmark the actual losses that an institution has suffered, versus what the model might have predicted, back testing, if you will, and those types of things. So a lot of the credit modeling is done, as I've mentioned on previous calls, a lot of credit models in Mobiuss have been developed by Opera Solutions, very talented in that regard. But as it was a product that was just being launched in early 2013, one major financial institution which subsequently purchased Mobiuss wanted to let a major U.S. accounting firm go through the credit model and validate the -- both the probabilities of default, loss given default, the expected losses, all the critical metrics that come out of the system like this were just so. And so we passed that with flying colors and that of course, has been quite useful in our dialogue with subsequent customers.
Ian Corydon - B. Riley Caris, Research Division
Got it. And you mentioned a new property type coming after senior housing. Do you have a timeline for that release?
Typically, what happens is -- during the course of the year we're building up 3 to 4 quarters of data, because we like to populate the product with 3 to 4 quarters of data when we release it. So -- I mean, my expectations would be something similar next to the first quarter of next year. I mean, if this year goes on, we'll triage that. I mean, part of that depends upon how large the inventory is that we're tracking. I would say, probably anywhere from -- in the first 4 months of next year.
Ian Corydon - B. Riley Caris, Research Division
Got it. And last question is on the investment that Google made in auction.com announced this week. Do you see any implications for the commercial real estate information services industry overall from that?
I do. A lot had happened this week. The week got started with CoStar's acquisition of Apartments.com, which is really in more of a listing service than it is an analytical firm. But then it was followed, I think it was yesterday, by an investment, as you just mentioned, by Google into auction.com, which is more a platform in which buyers and sellers not only meet, but actually transact. And I think that there is a convergence going -- I think there are multiple convergences going on, whether we want to call it a roll-up or not, I'm not quite sure. But there are certainly multiple convergences going on across property types and across functionality, and across market -- marketplaces and analytics. If you go back even a few years, there would be a classic debate, a chicken and egg debate, which came first: a marketplace, whether it be a sufficient number of transactions that you could glean analytics that might subsequently help investors do more transactions, or did you need to have market information first so that investors could engage in price discovery to actually consummate transactions? I think what you're seeing, Ian, in the last few days is the barriers between those classic approaches breaking down. And enterprises are getting sufficient technology and skill and bringing capital to bear and say, "You know what, there are assets out there that we can bring together that already have marketplace technology, that have listing technology, that have analytical and market information and price discovery technology. And we can bring it all together, and it can be a very, very potent combination." So I don't know if that answers your question, but that is how I view it.
Our next question comes from Brett Huff of Stephens Inc.
Brett Huff - Stephens Inc., Research Division
A couple of questions. I missed the first, maybe 5 or 7 minutes of the call, so I apologize if you went over this. But can you talk a little bit more about the Mobiuss product? Kind of, who is -- are the folks who are buying it now kind of the folks you thought who would buy it, and how is that trending? I don't know if you gave sort of number of folks you sold. And give us a sense of how is the price point relative to some of your other products. And then maybe, just give us an update on ReisReports, the geographies you're covering and the product types that you're covering now.
Yes. We did go over this. So I'll do kind of an abbreviated...
Brett Huff - Stephens Inc., Research Division
That's okay. But I'll give you an abbreviated update on both of those. So Mobiuss CRE, as I said, performed pretty much as we expected. And in terms of previous quarterly calls, we did have multiple significant contracts in the fourth quarter of the year. The types of institutions that we've been focusing on and where we've been successful are banks. I would say, mid- to large-sized banks and a major government sponsoring entity. So those are the kinds of players that we've been selling to. We didn't give specific sales statistics, just mentioned that we had multiple major wins in the fourth quarter, that given the nature of the contractor recognized rapidly during 2014 and beyond, and therefore, go from being contract of being actual booked revenue next year. So that's a -- that product is very powerful. We obviously have a very large install base of banks and other financial institutions who were using Reis information to originate loans. So now, to impose, if you will, the Mobiuss CRE technology on top of that Reis SE system to monitor loans that are in the portfolio and do things like expected loss, probability of default type of calculation, it's a very powerful offering. So I guess, that will be my very quick Mobiuss update. I spoke a little bit to the ReisReports. We had a very solid year with respect to ReisReports in terms of both its growth and its contribution to the overall company-wide growth. I talked a little bit about the success -- what we believe are the attributes that are driving that success, primarily our push content marketing, improvements to the website with respect to navigation and search engine optimization and different things that we have been doing to the -- to website. And we just continue to believe, as we go further this year and put some additional resources against it, that they continuing to localize the strategy to -- meaning, to push content in the individual markets to investors and individual markets. We even further meet what we believe to be the unmet demand by prosumers and small- to medium-sized enterprises for this type of Reis information, but perhaps, in the teacup side, rather than in the big mug.
And our final question comes from Ross Taylor of Somerset Capital.
Ross Taylor - Somerset Capital Advisers LLC
Lloyd, your answer to Ian's question, basically left me with a feeling that data is the centerpiece of any of these initiatives, whether -- whomever is manufacturing or making the new product, which seems to put you guys absolutely in the sweet spot for the success of any of these new types of products that are out there. So you comment on -- am I right in that read? And also what kind of market potential do you -- I mean, obviously, it's early days, but what are we talking about? And what kind of pricing potential? Because you know I've had the conversation, but I at times wonder if you are underpricing your services and if in the hands of a larger organization, they might find it easier to get substantially more revenue out of the data and the information you guys provide.
Okay. Well, first of all, I agree 110% with your opening premise that it is the data -- highly granular building level of data that drives the value proposition of all of these products and services. We believe that, that is -- how do I say this? Of all of our 4 competencies, perhaps our greatest competency is in building property level databases. So when you see, for example, the introduction of senior housing on May 1, and you saw me talk about the granularity of assisted living and skilled nurse living and memory care, it's that kind of -- it's that kind of granularity that speaks to both debt and equity investors in those types of properties. When you saw us introduce self storage now, I guess, 2 years ago, you didn't just see us put a self storage. You saw us really go out and understand that the distinction between unit cube size -- unit cubes, whether it was 10x10 or 10x15 or 10x20, whether it was refrigerated or non-refrigerated, and breaking all of that data down became the key distinguishing factor between that becoming a successful product or just, kind of, a nice-to-have product. So our belief is whether we look to do student housing, whether we look to do medical office buildings, there's a lot of interested in medical office buildings, there are -- whether it's data centers, where, frankly, the sale of electricity becomes the key attribute to a successful data center, it's very important to have a core competency at the firm that says, "We have the real estate expertise and the database expertise to break these property types down into attributes that are meaningful to cash flow analysis on behalf of investors. So that's probably more than you wanted to know in terms of -- but it just shows the degree to which I concur with your basic premise. And that's why we, year after year, are adding these property types and also adding additional geography because we feel that filling out that matrix, if you will, of property types by geography, putting up top forecasts, going out because people are using these in cash flow models -- the data and cash flow models, this is all part of it. And we look at this relative to the competitive landscape. And we say, "We don't really see anybody else doing this." We see other very successful companies, and everybody understands what I'm talking about and who I'm talking about. And congratulations to them for their success in becoming a diversified media company, with multiple revenue models, whether that's ad-based model, whether it's listing service, whether it's subscription, whether it's a little bit of data. But we believe that if you're really going to be successful in this business in a sustained, long-term way, it starts with the data. And then on top of that, you can begin to build the analytics as a value-added proposition. I think I answered your question, whether we would be more effective or less effective in the hands of a large institution is, obviously, a very large question, but depends on the type of institution. Many -- the answer is, we could be. It would upon the nature of their product mix. It would depend upon the nature of their customer base. Obviously, one tried and true methodology is to integrate more data into the sales bag -- salesman's bag, who's selling debt equity information, currency and commodity information. That said, it has to be done carefully because you compete for shelf space, if you will, in the mind of the sales force. So the answer is, yes. Categorically, yes. But our belief is that we can drive very substantial growth for a very substantial period of time, and we have the luxury building kind of the cash that we're building and the growth that we're enjoying to make that decision at the appropriate time. Sorry to drone on, Ross, I just want to -- you ask a lot of good questions there, and I wanted to unpack them a little.
Ross Taylor - Somerset Capital Advisers LLC
Never a problem. You mentioned cash and building of cash. Obviously, you have a business that doesn't need a tremendous amount of cash to continue to not only operate, but also to grow, effectively. So over what time horizon do you look at that cash on the balance sheet and as it grows and say, "We really need to start to think about doing something with it rather than just accumulating it."
Mark P. Cantaluppi
Ross, it's Mark. I mean clearly, one of the key objectives in 2013 was to get the balance sheet back to a better position and a position of strength. Moving back to the $10 million cash balance provides us with a lot more flexibility and gives us a good starting point moving into 2014. I say this all the time. I said it on the call, I'll say it again: Reinvesting in the business is our #1 priority. And we'll continue to do that. But now, as we continue to move forward, I said our collection on our IRR has been really strong. We're going to really consider what is the next step to do with our cash, whether it is some type of additional reinvestment or using our cash in some type of capital way by returning it to stockholders in the form of, maybe, additional stock repurchases or maybe in the form of a dividend policy. Listen, this is a nice problem for us to have to start to think about. I look forward to having the dialogues with our Board with regards to recommendations and uses of our cash in 2014.
Yes. I actually favor good Mark said. I think, it was -- maybe, it was just psychological, but building back up and breaking the $10 million cash balance barrier with no debt was where we thought we'd be. It's where we ended up being and so we're really pleased and poised. As we move into '14, Mark has pointed out in the past that the first quarter of the year is a strong portion of the year for cash collection. So we can look forward to some -- accruing some additional cash. And again, it is, it's like having -- for baseball fans, it's like having the problem of having too much starting pitching. So we're evaluating that problem right now and trying to think what are some of the best uses of capital.
That concludes our Q&A session. I'd like to turn it back over to Mr. Lynford for closing remarks.
Thanks, all who listened and participated on our call today. And as always, Mark and I are available to speak to current and prospective shareholders of Reis and we'd be happy to answer your questions within the parameters regarding selective disclosure. Our next call is expected to be in early May to announce and discuss our first quarter 2014 results. We appreciate your continuing support of Reis. Thank you all, and have a good day.
Ladies and gentlemen, this does conclude today's conference. Thank you for your attendance. You may now disconnect. Have a great day.
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