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Executives

Erica L. Mannion – Investor Relations, Sapphire Investor Relations, LLC

Elisabeth H. DeMarse – Chairman, President, Chief Executive Officer

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

Analysts

Michael Moskoff – MRM Capital

Mohammed Aman – Dean Capital Management

TheStreet.com, Inc. (TST) The Deal Acquisition Call September 12, 2012 8:00 AM ET

Operator

Welcome to TheStreet Conference Call. This call is being webcast live on the Investor Relations section of TheStreet website at www.t.st. This call is the property of TheStreet, and any recording, reproduction or transmission of this call without the express written consent of TheStreet is strictly prohibited. As a reminder, today’s call is being recorded. You may listen to a webcast replay of this call by going to the Investor Relations section of TheStreet’s website.

I would now like to turn the call over to Erica Mannion of Sapphire Investor Relations, Investor Relations for TheStreet.

Erica L. Mannion

Good morning. Thank you for joining us to discuss TheStreet’s acquisition of the deal. With me today, Elisabeth DeMarse, Chair, President and Chief Executive Officer, and Tom Etergino, Executive Vice President and Chief Financial Officer. Management will discuss the announcement made today, and then open the call up for questions regarding the acquisition.

All statements on this call, other than statements of historical facts, are deemed to be forward-looking statements, as that term is defined in the Private Securities Litigation Reform Act of 1995.

Such forward-looking statements are subject to risks and uncertainties, including those described in the company's filings with the SEC that could cause actual results to differ materially from those reflected in the forward-looking statements.

Although the company believes that the expectations reflected in the forward-looking statements are reasonable, the company cannot guarantee future results or occurrences. The company disclaims any obligation to update these forward-looking statements, whether as a result of new information, future developments or otherwise. You may obtain copies of the company's filings with the SEC at www.sec.gov.

Now, I will turn the call over to Elisabeth DeMarse.

Elisabeth H. DeMarse

Thank you, Erica, and good morning. Thank you all for taking time to join us today. During our second quarter conference call; I discussed our acquisition program for evaluating opportunities to grow our business. We are happy to announce our first acquisition. We purchased The Deal for $5.8 million in cash, and closed on the transaction last night.

The Deal provides sophisticated coverage of The Deal economy through The Daily Deal, The Deal Pipeline, thedeal.com website, the annual Deal economy event, and The Deal Magazine.

The Deal pipeline is the first transaction information service created for organizations seeking to generate deal flow, improve client intelligence and enhance market knowledge. It provides full access to 100-plus pieces of proprietary commentary, analysis and data produced every day by The Deal’s editors and journalists, and can be customized based on each clients’ job function, their deal focus and their workflow, and as delivered up straight to mobile devices or existing corporate platforms.

We at TheStreet have a leadership position providing news and analysis covering the retail sector of the financial services industry primarily serving professionals and individual investors. Our revenue is highly dependent on advertising by marketers who want to reach our audience, and retail subscribers who read our investment newsletters.

Both of these business models are currently challenged, online media due to compressed CPMs and the rapid migration to mobile and paid retail subscriptions due to where we are in the economic cycle, and the retail investors’ current sentiment regarding the markets. But we are committed to growing both our advertising-supported media business, and our subscription business.

We’ve been looking for ways to leverage our expertise particularly in subscription businesses. This acquisition jumpstarts our efforts by expanding our institutional investor offerings. While we started to dip our toe into the institutional market over the past year, with the acquisition of The Deal we will immerse ourselves in this market.

The Deal is a natural extension of the most successful portion of our business, Subscription Services. The Deal’s marquee customer base of 40,000 professionals, including senior-level bankers, law firm partners, private equity partners and hedge fund notables who provides with higher renewable rates, predictable revenues and attractive margins.

We believe we are in a deep cyclical trough for the M&A business, with M&A volume hitting multi-year lows this year. The stock market recently hit multi-year highs, and when the stock market goes up M&A activity is sure to file it. We are looking for a wave of M&A to increase revenues for The Deal, and make this an extremely profitable acquisition for TheStreet.

Even in the meantime, as M&A activity is still slow to come back, this acquisition is still immediately accretive. We intend to leverage the content-creation and marketing resources of The Deal and TheStreet with a specific focus on the time sensitive information associated with change of control transactions such as restructurings, auctions, and other mergers and acquisition activity; to create new revenue opportunities for the combined company at minimal incremental costs.

Specifically, we plan to incorporate TheStreet’s buy-side newsroom content into The Deal pipelines dataset in order to accelerate sales to hedge funds. We will add our Chat-on-the-Street product to the product sold by The Deal pipelines enterprise sales force. We will market The Deal Pipeline across the entire network of TheStreet, creating a substantial increase in qualified leads for The Deal pipeline and we will offer content-rich marketing opportunities such as webinars to current customers of TheStreet.

The Deal’s customers have been telling them that they would like to see more weekly packages of content and anyone prefer not to receive print. We will be responding by selecting thought provoking articles on a weekly basis delivering them via digital newsletter and discounting them on monthly print magazine. We also plan to organize that content into a dedicated section on the website. In addition, we will be expanding distribution of The Deal’s successful journal called Corporate Control Alert to all users of The Deal pipeline as well as that in lead tables and creating a digital version.

The Deal pipelines experience to productive sale force provides a platform for continued expansion of subscription products to financial services companies. This can be developed either through a consolidation of small independent information services or through the development of new products based on our Chat-on-the-Street platform, which will allow TheStreet sales force to concentrate on sales to advertising clients.

With that, I will now hand the call over to Tom Etergino.

Thomas J. Etergino

Thank you, Elisabeth. And thank you all for joining our call on such short notice. As Elisabeth said, we are extremely pleased to announce our first acquisition, an acquisition that will really help us jumpstart our institutional business while leveraging our expertise in subscription business models.

As Elisabeth stated, we paid $5.8 million in cash for the deal. After taking certain actions around closing the print operations and redundancies, we expect the transaction to be accretive to our 2013 adjusted EBITDA. The results will be reported as part of our subscription services revenue.

As the majority of The Deal’s revenue is subscription based, I’d like to highlight an important accounting rule that will affect our GAAP financial results for the next 12 months. The GAAP concept relates to the recognition of revenue for subscription sales consummated part of the acquisition data, i.e. bookings that were made prior to our close.

GAAP attributes a portion of the related deferred revenue balances to two actions: one, sales of the product; and two, fulfillment of the product.

In purchase accounting, deferred revenue associated with the sales effort will be eliminated while only the portion related to the fulfillment action will be recognized as revenue for these pre-closing deferred revenue balances. As a result of this treatment, there will be a difference between our GAAP and pro forma revenue results for the next 12 months with the impact declining in each quarter.

With that, I’d like to ask the operator to open up the line for questions.

Question-and-Answer Session

Operator

Thank you, sir. (Operator Instructions) Our first question comes from the line of Michael Moskoff from MRM Capital.

Michael Moskoff – MRM Capital

Hi, guys.

Thomas J. Etergino

Hi, Mike.

Michael Moskoff – MRM Capital

How much revenues does the deal have?

Thomas J. Etergino

So on a – for the trailing 12 months, excluding the print, it was over $10 million.

Michael Moskoff – MRM Capital

Okay. And how accretive, can you quantify how much accretive it will be?

Thomas J. Etergino

We are not going to quantify that today. We still have a lot of actions to take. We are still working through it. It will be a…

Elisabeth H. DeMarse

I think it’s essentially immediately accretive in terms of our cash flow once we absorb them into our infrastructure. So it’s an infrastructure play for sure. And then it’s just going to take a little bit of time so to speak to get through the pipeline and show up in terms of as a full income statement.

Michael Moskoff – MRM Capital

As far as the synergies, it seems like obviously you are going more institutional based on your comments and based what’s I guess can transpire markets on the retail side, what have you, and you can qualify that if you like. But are you going to be focusing, is this deal going to be focused surely or pretty much on the institutional side, and is that where your focus is going to be versus the subscription retail side. And if you could also talk about how your bookings have been for this quarter versus last quarter?

Elisabeth H. DeMarse

Yeah. So I’m getting a big shake of the head from Tom here. So we can’t talk about the quarter yet, I think that we know the subscription business, I think I still got number of times, it just has this great visibility, durability, great margins. and so, when we thought about doing more in subscription, we’re just with this incredible, secular, position with the business condition and the retail investor.

And so we just kind of take it up a notch to the wealthy investor and to the hedge fund world. And I think there’s a big Venn diagram of people that we can address with perhaps some of our retail products, but also we are very anxious to push our very popular channel, TheStreet opportunity through this direct sales force. So you got to think about it that we are very much buying or attract direct sales force that will give us a chance to have conversations at the hedge fund community levels.

Michael Moskoff – MRM Capital

Okay. because, yeah I saw the channel on TheStreet, which used to, and it’s a great product. And so…

Elisabeth H. DeMarse

It is a great product.

Michael Moskoff – MRM Capital

It appears then you’re going to go more towards obviously the institutional world. But you’re…

Elisabeth H. DeMarse

We won’t do it all, it’s just that we need to have a certain number of (inaudible) store. And so yeah, I mean things get secular, things get cyclical, and so it just gives us a very strong foundation to again feel different conditions.

Michael Moskoff – MRM Capital

Okay. Thank you so much.

Operator

Thank you. and our next question comes from the line of Mohammed Aman from Dean Capital Management.

Mohammed Aman – Dean Capital Management

Well, good morning.

Elisabeth H. DeMarse

Good morning.

Mohammed Aman – Dean Capital Management

Many investors are feeling a bit uneasy about the lack of providing a range or a feeling for the potential restructuring costs. could you add more color on that aspect?

Thomas J. Etergino

So this is Tom. Yeah, we’re not going to quantify right now, but I’ll just tell you, give you a little more flavor. So over the next couple of quarters, we expect to incur acquisition related and restructuring charges associated with this.

the restructuring charges will primarily be centered around the consolidation of combined company’s office space, some severance charges, primarily related to the print magazine and the realization about the redundant costs. And I think that, the two companies are, yeah, the cultures are very similar, and we expect that we will be able to largely integrate the company by the end of this year.

Mohammed Aman – Dean Capital Management

Got you. At closing, can you share with us how many employees The Deal had?

Elisabeth H. DeMarse

I think that’s been public.

Thomas J. Etergino

Yeah, it is.

Elisabeth H. DeMarse

I think that’s been published. I think they’re publishing 120.

Mohammed Aman – Dean Capital Management

120, all right.

Elisabeth H. DeMarse

My analyst is shaking his head. So you can’t take it to the back.

Mohammed Aman – Dean Capital Management

All right. I will look it up, that’s handy.

Elisabeth H. DeMarse

Yeah.

Mohammed Aman – Dean Capital Management

And one last question to Tom.

Thomas J. Etergino

Yeah.

Mohammed Aman – Dean Capital Management

You had mentioned the specifics or the special GAAP treatment of certain.

Thomas J. Etergino

Yeah.

Mohammed Aman – Dean Capital Management

I’m not sure if I got everything you said, but my initial understanding is that this said GAAP treatment will actually boost EBITDA for the first year?

Thomas J. Etergino

No. The revenue will be lower on a GAAP basis on a pro forma basis, because GAAP requires you to basically take out of your revenue recognition or your deferred revenue that’s on the balance sheet, the portion that was related to the sales effort that happened prior to us purchasing the company.

Mohammed Aman – Dean Capital Management

That will actually boost EBITDA the first year?

Thomas J. Etergino

No. On a pro forma basis, EBITDA will be higher than on a GAAP basis for the first year.

Mohammed Aman – Dean Capital Management

So that’s what I meant. so on the first year, EBITDA, it will boost it on the first year, because of the lack of inclusion of certain costs and the revenues?

Thomas J. Etergino

No.

Elisabeth H. DeMarse

Yeah.

Thomas J. Etergino

No, revenue will be lower on a GAAP basis therefore GAAP adjusted EBITDA will be lower than a pro forma adjusted EBITDA.

Mohammed Aman – Dean Capital Management

All right, sounds good. All right, thanks.

Operator

Thank you. And our next question comes from the line of Michael Mauskopf from MRM Capital.

Michael Moskoff – MRM Capital

Regarding the shortages, how much dollar will you be expending in cash-wise in addition to the 5.8 million?

Thomas J. Etergino

Mike, we’re still working through all of the charges we’re going to be taking and so we’re not prepared to give a range right now.

Michael Moskoff – MRM Capital

You can’t give it, okay. No range, whatsoever?

Thomas J. Etergino

No, Q3 is kind of right on our heels here. I’ll give you better visibility for the full year 2012 in the Q3 earnings.

Elisabeth H. DeMarse

I mean I just want to say we’re betting on the growth in print, which is the Deal Pipeline. We’re taking the biggest cost out of the company, which is the print. We have these two businesses the print magazines, The Deal Pipeline database, a very excellent newsroom that we’re just putting our foot on the gas. We’re accelerating the transition of the print magazine to virtual. And that’s quite simply what we’re doing. So the strongest part of our business is our subscription business, and The Deal Pipeline is very much placed to our strength. I think our competitors would love to, would kill to have a business like that. So, we’re very excited and I do think it’s been a, it will take a while for the two to get through the pipe on in terms of GAAP versus pro forma.

But we’re certainly interested in making it – I think it is instantly accretive in terms of the cash-flow on the pro forma business, so…

Michael Moskoff – MRM Capital

You said a 120 people right now, when you close the print how many people will be left approximately?

Elisabeth H. DeMarse

We’re not publishing that.

Michael Moskoff – MRM Capital

Okay. But you’ll have an idea when the next quarter comes out probably.

Thomas J. Etergino

We will be publishing a total headcount for the entire company.

Michael Moskoff – MRM Capital

Okay. And when are you guys coming out with the numbers for the next quarter, Q3?

Thomas J. Etergino

Early November.

Michael Moskoff – MRM Capital

Early November. Okay, thank you.

Operator

Thank you. And I have no further questions at this time. I would like to turn the conference back for any concluding remarks.

Elisabeth H. DeMarse

Yeah, so our thesis says that there are businesses that are in the process of trying to evolve from the print to the Internet and we can take those businesses here at TheStreet and really step on the gas.

It’s an interesting time, there is the Internet media business, it is really the offline dollars, traditional dimes to mobile pennies. But if you have solid information that helps investors make money you can get paid for that and you can have a very healthy revenue engine with very high margins.

What’s really interesting about The Deal Pipeline is that this business was started like three years ago and it grew one of, during one of the worst secular declines and M&A activity around. I mean, we’re not, Lehman Brothers was only 2009.

So, we are very excited about the way The Deal Pipeline is been growing, about the quality of the product. I personally sat on a number of the customer calls to channel check, the enthusiasm, the retention rates, the renewal rates for the products. I mean, it’s one of these things people can’t, once they get it, they can’t live without it and we hope to really step on the gas and put pedal to the metal and it’s gets more of that.

But I want to thank all of you for coming in such short notice to our conference call. We’re real excited, its two excellent newsrooms getting together and just the quality of the product it’s fantastic and we’re going to use that, we’re going to continue that and it’s really a strength to strength match up. Thank you.

Operator

Ladies and gentlemen, thank you for your participation in today’s conference. This does conclude the program and you may now disconnect. Everyone have a good day.

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