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Executives

Chaela Volpe - IR

Tom Clarke - Chairman, CEO

Eric Ashman - CFO

Analysts

Mark May - Needham & Co.

Richard Fetyko - MCF

Michael Moskoff - MRM Capital

Bill Lennan - Broadpoint

George Grose - American Capital Partners

Brian Murphy - Sidoti & Company

TheStreet.com (TSCM) Q3 2007 Earnings Call November 5, 1969 3:00 AM ET

Operator

Welcome to TheStreet.com third quarter 2007 earningsconference call. (Operator Instructions) I would now like to turn the call over to Ms. Chaela Volpe, InvestorRelations Manager.

Chaela Volpe

Thank you. Some ofthe statements made on this earnings call not related to historical facts maybe deemed to be forward-looking statements, as that term is defined in thePrivate Securities Litigation Reform Act of 1995. Such forward-lookingstatements, which may concern TheStreet.com's financial performance as well asits strategic and operational plans, are subject to risks and uncertaintiesthat could cause actual results to differ. The company undertakes no duty toupdate any such statements.

The risks and uncertainties are described in the company'sSEC filings, which are on file with the SEC and available at its website at www.sec.gov.Additional information will also be set forth in TheStreet.com's quarterlyreport on Form 10-Q for the quarterly period ended September 30, 2007, which will be filed with theSEC in the near future.

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

Tom Clarke

Thank you, Chaela.Good morning and thank you for joining us to review our third-quarter 2007financial results. On the call today is Eric Ashman, our Chief FinancialOfficer. Eric will provide an in-depth look at our financials after I give youan update on our strategic initiatives.

This was a very exciting quarter at TheStreet.com. We arepleased to report that overall, we had a record-breaking quarter in terms ofboth financials and traffic metrics. We reported total revenue of $16.1million, a 24% year-over-year increase and a new quarterly high for the company.

Net income, excluding the impact of a non-cash income taxbenefit, was $3.8 million, an increase of 22% over the same period last year,and we delivered $0.13 earnings per diluted share. Eric will give more color onthis in a few moments since, as you know, there were many moving pieces thisquarter.

In terms of traffic, we are pleased to report that ouraverage monthly unique visitors reached 6.3 million and we had 321 million pageviews in the quarter. This trend is precisely what we had hoped for moving intoQ4, the heaviest advertising quarter of the year. Building on this momentum, weare well-poised for the fourth quarter and beyond.

This past quarter, we carried out initiatives quickly andaggressively toward fulfilling our mission to broaden our content and reach aswe move forward in our strategy to become the premier online money destination.As I have said on our last conference call, our intention is to use accretiveacquisitions as a means to facilitate these plans.

This past quarter began with the acquisition ofPromotions.com on August 2nd, moved forward with a series of managementadditions designed to better integrate and strengthen our position for futuregrowth and ended with the launch of our first mobile initiative with QuattroWireless. We then moved quickly in the fourth quarter with the acquisition ofBankingMyWay and RateWatch, which we announced last Friday, November 2.

As a reminder, Promotions.com is an interactive marketingservices business and leading provider of online promotional marketing servicesto some of the world's largest brands and publishers. Promotions.com developsand deploys online tools and services that leverage and provide value-add tomedia campaigns by increasing awareness, engagement and activation. Theirintegration to our business moved very quickly in the quarter, as campaignssuch as Glenfiddich Scotch, Delta and Citibank benefited from the creativeinsights delivered by the Promotions staff.

As mentioned on the August 2 conference call where wediscussed the Promotions.com acquisition, the company can grow independently ofTheStreet.com. It has been working with existing clients such as McDonald's,where it is responsible for the online portion of the Monopoly promotion, oneof the largest and most successful online campaigns ever launched.Promotions.com has recently secured some new high profile clients such as ShellOil for the promotion of its Gunk-Free online instant win game and Conde Nastfor its wired home product information catalog.

In the third quarter, moving into Q4, we made two strategicadditions to our management team. We reached a point where the level of growthtaking place at the company required us to bring in new talent with a specificexpert skill set. In September, we appointed Kurt Tietjen as SVP of Operations,and in October we appointed Erika Faust as SVP of Marketing.

Kurt is an operations management executive with more than 20years of experience managing online media operations, and Erika has more than tenyears of marketing experience in the online and digital video space, bothretail and advertising supported. Both have extensive experience successfullyguiding companies through business model transitions and into the next phase ofdevelopment and profitability, and we are pleased to have them on board tosupport and accelerate our strategy.

One example of our expansion occurred on October 24 when weannounced that we had launched mobile.TheStreet.com, developed and powered byQuattro Wireless with AT&T as our launch sponsor. This exciting initiativeallowed us to expand distribution and create exclusive sponsorshipopportunities and an additional innovative advertising solution foradvertisers. The offering provides TheStreet.com's most in demand, real timecontent to mobile devices, including content from the categories Life andMoney, Opinion, Most Read Stories, Small Business and Market Updates.

Turning to BankingMyWay and RateWatch, I indicated on thePromotions.com conference call back in August that our next acquisition wouldhave more of a content focus, and our acquisition of BankingMyWay.com andRateWatch certainly fulfilled that objective. The type of data provided byBankingMyWay.com creates a call to action for consumers, and will allow us toparticipate in the hyperlink advertising model that's popular within theindustry.

It also gives us the opportunity to marry our content withthe high-margin data they possess, ultimately allowing us to increase ouroperating margins. This recent acquisition is a perfect complement to theupcoming launch of MainStreet.com in the first quarter of ‘08.

This past quarter also saw many business highlights invarious areas. First, to increase TheStreet.com brand awareness and to drivetraffic to our network, we entered into a content-sharing relationship with AOLto include certain posts by Jim Cramer on AOL's Money and Finance andBloggingStocks.com web pages. Stories and analysis from TheStreet.com are alsofeatured on AOL's welcome page in the form of articles, slideshows and video,in addition to links to other TheStreet.com content.

Next, Stockpickr! became the first financial socialnetworking site to surpass 100,000 user-generated portfolios. The site has alsofurthered its integration with TheStreet.com by launching an alert service forall stocks in one's portfolio by sending an e-mail notice when that particularstock is mentioned in a number of areas, such as unusual option activity, anyanalyst upgrade or downgrade, any mention on a 52-week high or low list, or anymention in any of TheStreet.com videos.

Lastly, our work on the redesign of TheStreet.com website,the redesign of Stockpickr.com and the launch of MainStreet.com all remain onschedule.

Now, let me turn it over to Eric for a detailed review ofour financial performance.

Eric Ashman

Thanks, Tom. Let's start by reviewing the top line results.This quarter, we delivered total revenue of $16.1 million, an increase of 24%over the third quarter of 2006 and the highest quarterly revenue total in ourhistory. Adjusted EBITDA, excluding stock compensation expense totaling$500,000 was $4.5 million, an increase of 32% over the $3.4 million in 2006,exclusive of $500,000 in stock compensation expense.

Net income on a GAAP basis was $19.8 million or $0.67 perdiluted share. Excluding the impact of a non-cash income tax benefit of $16million related to the recognition of a deferred tax asset on a portion of the company'snet operating loss, net income for the third quarter of 2007 was $3.8 million,or $0.13 per diluted share, an increase of 22% over the net income of $3.1million, or $0.11 per share in 2006.

Earnings per diluted share, excluding the impact of deferredtaxes and stock compensation expense, were $0.15 per share, compared to $0.13per diluted share in the third quarter of 2006.

We'll now take a look at revenue in more detail. As wediscussed when we acquired Promotions.com in August, going forward we willreport revenue in two categories: marketing services and paid services.Marketing services revenue, which is comprised of advertising and interactivemarketing services revenue from the recently acquired Promotions.com businesstotaled $6.9 million for the third quarter of 2007, an increase of 85% overmarketing services revenue of $3.7 million for the third quarter of 2006.

We delivered advertising revenue growth of 23% with totaladvertising revenue of $4.6 million for the current quarter, as compared to the$3.7 million in advertising revenue in the prior year.

As the third quarter progressed, very late decisions by someof our financial advertisers to delay their campaigns until the fourth quarterdue to market conditions impacted our total advertising revenue for thequarter. We are pleased to report that these advertisers have come back toTheStreet.com in the fourth quarter, confirming that this was a short-termpullback.

Interactive marketing services revenue from thePromotions.com business totaled $2.3 million in the third quarter for thepartial period of August 2nd, the date of the acquisition, through September30th. Combined, total revenue for marketing services represented 43% of totalrevenue in the third quarter, as compared to 29% in the prior year.

With respect to the ongoing diversification of ouradvertising base, advertising revenue from non-financial advertisers increasedby 97% over the same period last year and represented 49% of total advertisingrevenue in the quarter, an increase from the 30% of total revenue fromnon-financial advertisers in the third quarter of 2006.

We had a record 97 advertisers in the quarter, as comparedto 71 in the prioryear, and our percentage of revenue from the top five advertisers decreased to29% of total advertising revenue, down from 41% in Q3 of 2006. Two of our topfive advertisers in the quarter were non-financial.

We delivered 321 million page views in the third quarter,representing 65% growth over the same period last year. We had 6.3 millionaverage monthly unique visitors, an increase of 53% over the prior year. Aswith last quarter, both of these metrics -- page views and average monthlyunique visitors -- are quarterly records for us.

As I suggested earlier in the call, the market volatility inthe third quarter created something of a Perfect Storm. We saw an explosion ofpage views during the quarter, as readers came to TheStreet.com as a reliablesource of information to help make sense of what was happening in the market.

However, this increase in traffic occurred in what istraditionally the weakest advertising quarter of the year, exacerbated by thedelayed spend of some of our financial advertisers late in the quarter. Thecombination of these two events drove our sellthrough rate down to 78%, and ourrevenue per 1,000 page views down to $14.36, 25% lower than the $19.18 wedelivered in the third quarter of 2006. We believe that the increased marketpenetration and page views will serve us well in the traditionally strongfourth quarter and beyond, and we expect to see a strong RPM number in Q4,based upon current expectations for advertising revenue in the quarter.

Pages services revenue, which is comprised of subscription,syndication and licensing revenues, totaled $9.2 million for the third quarterof 2007, essentially flat when compared to the third quarter of 2006.Subscription revenue totaled $8.3 million for the current quarter, a decreaseof 3% over subscription revenue of $8.6 million in the prior year. Syndicationand licensing revenue totaled $900,000 for the current quarter, an increase of47% over revenue of $600,000 in the prior year.

Looking specifically at TheStreet.com's subscriptionbusiness, excluding the impact of the ratings print business which weoutsourced in Q2, we see some positive trends that reflect the impact of ourefforts throughout this year to address the customer acquisition issue wediscussed last quarter.

Of total deferred revenue of $13.6 million at the end of thequarter, deferred revenue specifically related to TheStreet.com's subscriptionproducts increased to $12.1 million or 4.5%, as compared to the $11.6 millionin deferred revenue on TSC's subscription products at the end of the prioryear. TSC subscription bookings increased by 2.3% to $6.9 million and althoughour number of subscribers decreased by 4% to approximately 86,000 subscribers,our average annual revenue per subscriber increased by 12% to $388, up from$348 per subscriber in the third quarter of last year.

Through our ongoing work with external subscriptionconsultants and the strengthening of our internal subscription marketing team,we have started to see very good ROI on our SEM activities targeted to oursubscription products as well as improvements in key aspects of oursubscription funnels and sign-up flows. We are increasing our SEM spend in Q4in a very targeted fashion, and believe we will continue to see improvement inour customer acquisition rates in Q4 and throughout 2008.

The shift in some of our advertiser spend out of the thirdquarter impacted our gross margin, which was 59.6% as compared to 62.2% in theprior year. We continue to focus on controlling our costs to keep them in linewith our expected financial performance. Total sales, marketing and G&Aexpense was 35.3% of revenue, as compared to 39.9% of revenue in the prioryear, as we continue to leverage our operating cost base as we grow, and ourEBITDA margin increased to 24.6%, up from 22.6% last year.

Turning to the balance sheet, we generated $1.5 million ofcash flow from operations and generated free cash flow of $800,000. Our cashand restricted cash at the end of the third quarter of 2007 totaled $38.9million.

As we have discussed on recent calls, the company has beencarrying a full valuation allowance against our deferred tax asset related tothe $139 million in net operating losses we carried into 2007. Based upon the company'shistory of earnings before taxes over the past nine quarters and an assessmentof the company's expected future results of operations, during the thirdquarter of 2007 the company determined it is more likely than not that it wouldbe able to realize a portion of its NOL carryforward tax assets prior to theirexpiration. As a result, the company released $16 million of its deferred taxasset valuation.

Due to the reversal of the valuation allowance, this amounthas been reflected as a benefit to the current-year tax provision. This was anon-cash income item, and has no impact on our cash paying tax rate, which willcontinue to be 2% for the foreseeable future as our net operating lossescontinue to offset our taxable income.

Finally, the company paid its seventh consecutive quarterlydividend of $0.025 per share in the third quarter of 2007.

I will now turn the call back to Tom.

Tom Clarke

Thanks, Eric. Before I take your questions, I would like toshare with you the growing excitement we all feel at TheStreet.com as wecontinue to broaden our lines of business through both organic growth andaccretive acquisitions. The landscape in which we operate is undergoing rapidchange and consolidation, and we are well-positioned to be a leader of thischange. Stay tuned; more to come.

I would now like to open it up for questions.

Question-and-AnswerSession

Operator

Your first question comes from Mark May - Needham & Co.

Mark May - Needham & Co.

In terms of the unique user and page view stats you gave forthe quarter, was that at all impacted by the Corsis acquisition?

Tom Clarke

No, it was not.

Mark May - Needham & Co.

In terms of the advertising slowdown in the quarter and thepush back, you made a comment that they have returned early in the fourthquarter. Does that imply that you would expect for advertising growth toaccelerate in the fourth quarter versus the 23%, 24% growth that you had in Q3?

Tom Clarke

Just to clarify, Mark, they have come back in the fourthquarter, and it's the fourth quarter and beyond; as you can imagine, some ofthese campaigns range longer than a quarter, depending on when they come backin the fourth quarter. But we would expect an acceleration of the advertisinggrowth rate in the fourth quarter.

Operator

Your next question comes from Richard Fetyko - MCF.

Richard Fetyko - MCF

Just a follow-up onMark's question with regard to the acceleration on year-over-year growth ratein the fourth quarter on the advertising line. Is that with or without theCorsis acquisitions and the other acquisitions? Is that organic?

Eric Ashman

Just looking at organic advertising growth, it willaccelerate over the growth rate that we saw in the third quarter.

Richard Fetyko - MCF

As you become a more and more a complex and broad onlinefinancial media company with multiple web properties, I'm just curious how yoursales process is adjusting? Are you selling across all these properties asseparately, combined? Where are you in that? I would imagine over time you wantto sell them as one buy.

Tom Clarke

That's a great question, Richard. Currently our idea is tosell it across all of the sites, because we think there is a tremendous amountof leverage being able to do that. However, we're very cognizant of the factthat different sites can retain different rates, and this will probably beespecially true with the BankingMyWay acquisition, because we think that whenyou get into the hyperlink situation there, that the rate card on that is goingto be significantly different than what we probably see at TheStreet.com orwhat we see at Stockpickr!. I think MainStreet is yet to be determined. Butultimately, we would like to sell it across the network. We're looking for thecorrect people to put in each of those positions as we move this forward.

Richard Fetyko - MCF

Looking into 2008, you have multiple initiatives that willdrive page views and sales. I'm curious if you could rank them by your currentperspective of what will be the biggest growth drivers and leverage in 2008?

Tom Clarke

It's always hard. I'ma simple guy. As you know, I really only look at a couple of metrics. I look atrevenue growth and EBITDA growth. Those are the things that I focus on, so Itend not to look at any one of these things. But when we look at theinitiatives, we've got a lot of exciting initiatives. The redesign ofStockpickr!, we think, will have an effect for us. We certainly believe thatthe redesign of TheStreet.com, something that hasn't happened in about eightyears, is certainly going to have an effect not only in terms of traffic driveand engagement and activation, but also on behalf of our advertisers, who we'regoing to give them a better experience integrating with our site.

I think you know that we are all extremely excited aboutwhat MainStreet and the potential that MainStreet brings to our organization.We think it's the natural complement to the strategy we have of broadening ourcontent and our reach and the advertising opportunities it has for us. We thinkthat will be a significant one. Equally as excited about RateWatch andBankingMyWay and how that can move in and how we can monetize those sites.

Just going back to what we said on Friday, if you thinkabout the RateWatch business, that business alone is accretive to us. Soanything we can get on the BankingMyWay side will be important. If you thinkabout the rate card on BankingMyWay, we could be under BankRate, but we'd stillbe higher than anything that TheStreet.com has. So when we look at this, it'sreally as we've said in our script here, that you can take our content and youcan marry it with the higher margin offerings that they have, and our overallmargins are going to go up.

We're so excited about all the things, to put anyhierarchical order into any of them, I think, would not be fair. I think that on their own merits, each of themare going to be significant contributors to us.

Richard Fetyko - MCF

With respect to BankingMyWay, do you expect the revenuesfrom that, the incremental revenues as you deploy that content, to be comingfrom the rate tables and the content that will be on MainStreet and otherwebsites that you have or on the BankingMyWay.com itself?

Tom Clarke

I actually think itwill be a combination. I think the majority is going to come from theBankingMyWay site, because it's up and running today and we can make thatintegration seamlessly. I think the secondary place where it will come is fromthe MainStreet site. I think TheStreet.com will always be a driver of traffic,just because of the 6.3 million uniques we have. But in general, I thinkBankingMyWay on its own and MainStreet will be predominant.

One thing not to forget, I think there are tremendoussyndication opportunities associated with the data that's associated with bothRateWatch and BankingMyWay, in terms of tables for newspapers, for otherwebsite services that we could provide and put on other sites to either drivetraffic or just drive revenue. I don'twant to overlook the fact that I think there's a big opportunity there also.

Operator

Your next question comes from Michael Moskoff - MRM Capital.

Michael Moskoff - MRM Capital

Can you tell me or quantify how much advertising wasdeferred from the third quarter into what you now say is coming back?

Tom Clarke

Could I? Sure, Icould give you a number but frankly, we don't want to do that for a lot ofreasons. I can tell you that whenevermoney did get deferred, we certainly have seen it come back in the fourthquarter, so we are feeling really positive about it. It really was, as Ericdescribed, a Perfect Storm scenario with the volatility, especially in August,because in August we saw record traffic and volume rates to TheStreet.com. Thatreally set it up for September, because we saw a tremendous increase in trafficand then you had the market conditions where our financial advertisers werevery late in the quarter, that didn't give us a chance to really recoup it fromthe non-financial advertisers.

But you know me, I'm pretty much a straight-shooter. Wealways tell you how it is. I can tell you it has come back in the fourthquarter.

Michael Moskoff - MRM Capital

So it was thefinancial advertisers that showed the caution that you expressed before?

Tom Clarke

That's correct.

Michael Moskoff - MRM Capital

Did you say, just asclarification, that the unique visitors for this quarter was 3.6 million?

Eric Ashman

6.3 million.

Tom Clarke

Just one thing on the clarification of the financial versusnon-financial. You would have set it out and we would have thought that if thenumbers would have come in where our external expectations were, you would haveseen growth in both the financial and the non-financial category. So it wasthat everybody pulled out from financial. The financial was solid and verygood, and would have been great except for the delay that they put in some oftheir campaigns.

Michael Moskoff - MRM Capital

Is that the reasonwhy you're saying the revenue was the $14.36?

Eric Ashman

Correct.

Tom Clarke

Michael, just to godown that path, just so you understand, even if you just did a straightmathematical formula, let's say the external expectation was 5.1 million, andyou looked at the number of pages we got at 321 million, if you did the math,you would understand with the explosion of the page views you were going to seethat RPM come down anyhow in the quarter. As Eric had mentioned in his script,it will come back in the fourth quarter in a meaningful way.

Michael Moskoff - MRM Capital

As far assubscriptions, you said 86,000 for this quarter?

Tom Clarke

Correct.

Michael Moskoff - MRM Capital

Now last quarter, justfor clarification, you had said 86,000 but I wasn't sure if that 86,000included 5,200 of the Ratings?

Eric Ashman

Last quarter it didnot, so those subscribers came out at the end of the second quarter.

Michael Moskoff - MRM Capital

So just for apples-to-apples,last quarter it was 86,000 minus the 5,200??

Eric Ashman

No. Last quarter was86,000, and the Ratings subscribers were out. We outsourced the Ratings printbusiness in the early part of the second quarter. So that 86,000 subscribers atthe end of Q2 is a clean number. That is simply TheStreet.com subscribers.

Michael Moskoff - MRM Capital

So you had flat subgrowth for this quarter, sequentially?

Eric Ashman

Sequentially, that'scorrect.

Michael Moskoff - MRM Capital

But the revenuenumber went from 379 to 388?

Eric Ashman

That's correct.

Michael Moskoff - MRM Capital

Last but not least, regarding the cash, it went down $11million from last quarter to $38 million. The two acquisitions that you guyscame out with this quarter encompasses about $29.4 million, at least accordingto your press release. Where is the cash going to be after these purchases?

Eric Ashman

As you know, theBankingMyWay/RateWatch acquisition happened after the end of the quarter. So wepaid $16.9 million in cash as part of that deal. Subsequent to thatacquisition, the cash balance will be approximately $22 million.

Michael Moskoff - MRM Capital

Then the otheracquisition occurred prior?

Tom Clarke

That's correct.

Eric Ashman

That's correct. ThePromotions acquisition happened on August 2nd, so the cash impact of that isreflected in this cash balance at the end of the quarter.

Michael Moskoff - MRM Capital

Obviously, when you guys say accretive, you take intoconsideration the interest income that you're not going to be deriving anymore, right?

Eric Ashman

That's correct.

Operator

Your next question comes from Bill Lennan - Broadpoint.

Bill Lennan - Broadpoint

Could you tell us what expenses you recognized from Corsisin the quarter? It would be great if you could tell us cost of revenue,marketing and G&A buckets.

Eric Ashman

To answer your second question first, we're not reportingPromotions as a separate reportable segment so we are not breaking out thedifferent cost of sales, sales and marketing and G&A buckets. When youasked the question with respect to what expenses we recognized related toCorsis, more specifically, what do you mean?

Bill Lennan - Broadpoint

We know that you did $2.3 million in recognized Corsis revenuein the quarter. I'm wondering what expense number goes with that? You broughtin $2.3 million of their revenue. How much of their expenses is in the P&L?

Eric Ashman

Ultimately, I'll goback to the guidance we gave when we first announced the acquisition, which isthat the acquisition itself in the third quarter would not have a materialimpact to the bottom line. The goal when we do any acquisition is to, asquickly as possible, integrate and intertwine the businesses and start toleverage off of each side. That has been particularly true with Promotions.They have taken on a significant amount of creative work for us to augment our internalcreative team, and we've also started to create a tremendous amount of leveragebetween the technology teams.

The reason we do not treat these as separate reportablesegments is because we want that integration to be as thorough and complete aspossible so we can get leverage out of the businesses. So we don't break it outthat way, but the guidance that we provided at the time of the acquisitionstill stands.

Bill Lennan - Broadpoint

Is the $2.3 million a strictly linear number? In otherwords, the deal closed August 2nd. Is $2.3 million approximately two months'worth of revenue? Or is there some lumpiness in there?

Eric Ashman

No, that's about twomonths of revenue. It's very linear within the quarter.

Operator

Your next question comes from George Grose - AmericanCapital Partners.

George Grose - American Capital Partners

Just to dovetail back again on Corsis, if you did $2.3million, it sounds as if the acquisition is generating more revenues that Iguess you had anticipated. Is that due to cross-sell synergies?

Eric Ashman

There's a little bit of that. It certainly performed verywell for us in the quarter. We were certainly happy with the top lineperformance of the business. So certainly, there's some top line synergies. AsTom mentioned, Corsis actually worked with us on a number of campaigns thatrolled off across the site in Q3, and you'll see more of them in Q4.

So that's certainly a part of it in the business, and Tomalso mentioned the type of clients that they are winning and that they have won,including Shell and some others. So the business is performing very well.

George Grose - American Capital Partners

When do you expectthem to be fully integrated?

Eric Ashman

It's an ongoingprocess. We're very pleased with the progress we made in the third quarter. AsI said, they have already been very much involved in creative activity thatwe've done to augment our creative team, and there's been a lot of integrationalready with the technology group. There will be more of that going through thefourth quarter, and it will probably play out into the first and second quarterof next year as we continue to do that. As you know, even before theacquisition, they were very much involved with our business. They're stillfinishing up the development of MainStreet, and they are finishing up theredesign on Stockpickr! as well.

Bill Lennan - Broadpoint

On the advertisingrevenues, the growth in the non-financial advertising revenues, what's behindthe sequential growth there?

Tom Clarke

I think it's reallythe fact that over the last couple of quarters we have continually talked aboutbroadening our reach. I think the 6.3 million uniques gives you the blueprintfor that, where we're reaching a different type of audience, we've got greatdemographics on the site and the non-financial advertisers are havingsuccessful results. I think that's what's really doing it. So they continue tocome back for larger campaigns over time, and that's always a positive for us.

George Grose - American Capital Partners

In terms of thetraffic drivers, can you give us your top five drivers?

Tom Clarke

Again, we are a site that we get a lot of direct trafficcoming through TheStreet.com. So if you said about 40% of the traffic comesdirectly to us, then we've got all our portal and distribution deals wherewe've got traffic. So all of that combined is probably another 40% or so, andthe rest is stuff that comes in through different deals we have. One of thethings we signed up with AOL, so that well help us in the upcoming quarterdrive additional traffic.

George, the one thing you have to remember, and this iswhere the redesign is going to play a large role for us is we get very little,if any, traffic from search. We justweren't set up to do it; our URL structure is not good for that. I think goingforward, that is where low-hanging fruit for us is out there for us to takeadvantage of.

Just compare us to any of the sites or companies you coverand compare our traffic metric from search with them, and I think you're goingto find where, if we're not at the bottom, we're certainly very close to thebottom of traffic there. They typically have numbers that are north of 20%, soit's a big opportunity for us.

George Grose - American Capital Partners

So I guess it lookslike the traffic that you have now is just the beginning here?

Tom Clarke

Correct.

George Grose - American Capital Partners

Lastly here onStockpickr!, it looks like you added 25,000 portfolios in Q3. What is behindthe growth? Also I see you have some advertisers. How are you doing in terms ofmonetizing the site?

Tom Clarke

I think, in terms ofgrowth, again, we continue to be innovative on the Stockpickr! site. One of thethings we launched during the quarter is from TheStreet.com's Ratings business,we actually give any security that's in a portfolio on Stockpickr! a letter grade,so we actually are rating your portfolios now.

One of the things that happened is we've given them anothervery value-enhanced attribute when they are on that site. So that obviously hashelped with the growth of the portfolios.

When you think about the monetization, again, it goes backto a question that was asked earlier about the opportunity for us to selladvertising across the network of sites. One of the things we are doing is wehave ads that we can run across all the sites, and we've got some specificadvertisers who want to be in that community. So we are seeing increasedmonetization for it going forward.

The other thing about traffic, and we mentioned in ourprepared remarks, where if you have a stock in your portfolio and it'smentioned on any of the various lists that we generate from there, like 52-weekhigh or low, or whether it's mentioned in TheStreet.com video or whether it'smentioned in the recap of Jim Cramer's Mad Money, we have a variety ofdifferent places where, if a stock gets mentioned, we can alert you and thenbring you exactly there.

So for those people who are actively involved in the marketand want to see what's being said about their stocks, we make it a veryconvenient place for it to happen.

Operator

Your next question comes from Brian Murphy - Sidoti.

Brian Murphy - Sidoti

Tom, in general, could you tell us if you are seeing anychange in the length of advertiser commitments or the size of ad buys?

Tom Clarke

We have, actually. Ifyou look sequentially, we have seen that the length of the contract hasprobably gone down a little, but not as noticeably as one might expect withsome of the market volatility that you've seen. The size of the buy is actuallystaying pretty fairly constant.

So all in all, it's a very small change from what we hadseen sequentially from the second quarter. Now, we're going into a period thatis the strongest quarter of the year so we expect that those metrics will onlyget better, that they won't deteriorate.

Brian Murphy - Sidoti

Your sales andmarketing expense looks like it decreased pretty significantly sequentially.Can you just give us an update on where the salesforce stands, how many headsdo you have there now? What are your plans for additions, now that you're addingall this content in these various areas?

Tom Clarke

The reason why the expense is down, obviously, is becausethe ad revenue is down. Part of it is that you've got the sales commissionexpense associated with that. If you think about where we are going forward, weobviously are looking to increase the ad sales team. Right now, we're at about14, 15 people. We would love to see that get into the 20 range.

We think, across the network of sites, that we're lookingfor opportunities to really leverage that now and make sure we have the rightpeople for the right site. As we've said earlier, I think when you look at aBankingMyWay, it's got unique opportunities for us. Because what we've seen isthat people do want the information and certainly, when you get to CD rates andstuff like that, where they want the lowest rates. Advertisers love thecompetition, that if you had one site out there that consistently were going toraise levels, the fact that we can be out there and be a counterbalance to thatjust gives us the opportunity. So for us, it's about putting the right ad salesstaff in with that opportunity.

Operator

Your next question comes from Richard Fetyko - MCF.

Richard Fetyko - MCF

Just a follow-up tothat question on the sales force. I'm just wondering what other areas are youlooking to hire, how aggressively? Where do you need to add people at?

Tom Clarke

Well, when we look atthis thing we have, obviously, BankingMyWay. Then when you think about when wehave MainStreet, that's going to give us another opportunity to really drive asizable amount of traffic into an area where we're going to have a lot ofnon-financial advertisers. So in those two areas specifically, we're looking tohire additional people to really be able to focus on that. Whether we singlyhave them focus on that or we have some primary people that again, work withinthe network of sites, we're making that determination over the next couple ofweeks. Since MainStreet is launching in the beginning of the year, we have sometime for that.

But I think again, it's really our collaboration across whatwe call the network at this point, and we think that's where the opportunity isgoing to be; we talk to the same advertisers. It's not like the people whowould be interesting in advertising on BankingMyWay are not people we don'talready know. To some degree, we have relationships with them now. Therelationship may be channeled in a different way, but the fact that we'retalking to those types of companies, from a financial perspective, is going tomake that conversation and dialogue easier for us going forward.

So we think that's where a lot of the leverage is going tobe. What we want to do is consistently do what we've done; hire very smart,aggressive people and put them in a position where they can succeed when wemarry their skill sets with our needs. That's really what we're trying to do.

Richard Fetyko - MCF

What was theheadcount at the end of the quarter? The total headcount for the firm?

Eric Ashman

About 250 people.

Richard Fetyko - MCF

Will the BankingMyWaysite be also based on the Corsis technology platform?

Tom Clarke

Yes. As we move thatforward, they will immediately go onto that platform. Again, consistent withwhat we talked about on our last call, the fact that we can leverage theefficiencies of the technology of any of these sites across a common platform, that'sour plan, and we're going to move that over to that platform as soon aspossible. In fact, that integration has already started.

Operator

Your next question comes from Mark May - Needham & Co.

Mark May - Needham & Co.

If you're fortunate enough to see another spike in trafficlike this in the future, where your sellthrough has gone down, your RPMs havegone down, are you in any better position to maintain your sellthrough with thePromotions.com business, or maybe even BankingMyWay, as you start to work withother types of advertisers that maybe you aren't today? With Promotions.comactively working with McDonald's and others, is that part of the synergy here?

Tom Clarke

Yes, that'sabsolutely part of the synergy. I thank you for bringing it up, because it'sexactly where the thought process that we have had in creating this network ofsites goes. That's one of the reasons why it's important for us to stay focusedon being the premier online destination for money, because that's thecommonality between all the network of sites. The fact of the matter is havingPromotions, having BankingMyWay, should we have had a scenario where we gettremendous amount of traffic surge or market volatility on TheStreet, we nowhave places to really leverage this opportunity for us again, because we'respeaking to the same suite of advertisers. So we think it's going to have atremendous benefit for us going forward.

Operator

At this time, thereare no additional questions in the queue. I would now like to turn the callover to Mr. Tom Clarke for the closing remarks.

Tom Clarke

I want to thankeverybody for being on the call with us today. As I mentioned earlier, we're ina very exciting period for TheStreet and we look forward to having our nextupdate with you at the end of the fourth quarter. Thank you.

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Source: TheStreet.com Q3 2007 Earnings Call Transcript

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