TheStreet.com, Inc. Q1 2006 Earnings Conference Call Transcript (TSCM)

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TheStreet.com, Inc. (TSCM)

Q1 2006 Earnings Conference Call

April 25th 2006, 11:00 AM EST

Executives

Tina Lewis - IR

Tom Clarke - Chairman and CEO

Rich Broitman - Controller

Analysts

Matt Boyd - Aragon Global

Michael Moncroft - MRM Capital - Analyst

Frank Gristina - Avondale Partners - Analyst

Kevin Foley - Reese

Joseph Garner - Emerald Asset Management

Robert Hale - Gabelli & Company

Clive Polin - NTCSI

Andrew Sol - E-stoppers Creek Management

Andy Curita - Pebble Hill

Ashok Ahuja - ICOR

Operator

Good morning and welcome, everyone to TheStreet.com first quarter 2006 earnings release conference call. (Operator Instructions) It is now my pleasure to turn the floor over to your host, Tina Lewis. Ma’am, you may begin your conference.

Tina Lewis

Thank you. Some of the statements made on this earnings call not related to historical facts may be deemed to be forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. Such forward-looking statements, which may concern TheStreet.com’s financial performance as well as its strategic and operational plans are subject to risks and uncertainties that could cause actual results to differ. The Company undertakes no duty to update any such statements.

The risks and uncertainties are described in the Company’s SEC filings which are on file with the SEC and available at its website at www.sec.gov. Additional information will also be set forth in TheStreet.com’s Annual Report on Form 10-K for the fiscal year ended December 31st, 2005, which will be filed with the SEC in the near future.

I now turn the call over to Thomas Clarke, TheStreet.com’s Chairman and Chief Executive Officer. Tom.

Tom Clarke

Thanks, Tina. Good morning, and thanks for joining us today to review our first quarter financial results. Unlike previous calls, today I will be handling the majority of the call myself, as the search for a new CFO continues and Jim Lonergan is on holiday.

As I mentioned on our last call, we entered the year with a lot of momentum, and I am extremely pleased that our strong results have exceeded our expectations. With strong business execution on our strategic plan, including margin improvement, I like the robust condition the Company is in.

We ended the first quarter with net revenue of $11.1 million, an increase of 43% over the first quarter of 2005 and an increase of 12% from last quarter. Subscription revenue for the first quarter of 2006 was $7.6 million, a 41% increase over the same period of last year of $5.4 million and a 17% improvement from last quarter's $6.5 million.

We booked subscription orders of $10.1 million during the quarter, our highest quarterly bookings ever. This represented an increase of 70% over the same period last year of $6 million, an increase of 44% from last quarter's $7.1 million, which had been our previous high.

Our total number of subscribers was approximately 100,000 up 46% over last year's 68,500 and up 58% over last quarter's 86,900. The average annual revenue per subscriber was $326 in the first quarter. This is an increase of 4% from the $313 we reported in both the first quarter of 2005 and last quarter.

Our deferred revenue, again primarily subscription sales that will be recognized as revenue over the next 12 months of $12.5 million was up 58% over last year's $7.9 million and up 26% from last quarter's $9.9 million.

Advertising revenue for the first quarter of 2006 totaled $3.2 million, a 54% increase over last year's $2.1 million and a 1% sequential increase. This is the highest advertising total for a first quarter in the Company's history, beating the previous high of $2.6 million in the first quarter of 2000 by 24%.

The trends that we saw in 2005 in our mix of advertisers has continued in the first quarter of 2006. Non-broker advertising has continued to increase as a percentage of total advertising revenue as we expand our advertiser base to focus more on technology, auto, retail and travel advertisers. For the first quarter of 2006, we experienced a 104% increase in non-broker advertising over the same period last year, and a 5% sequential increase.

Our first quarter operating expenses of $8.9 million were up 27% from last year's $7.0 million and up 4%, or $0.3 million, from last quarter's $8.5 million level. Corporate Services was $4.1 million, an increase of $1.2 million or 43% over the same period last year of $2.9 million and $0.3 million, or 9% higher than the fourth quarter total of $3.8 million. This sequential increase was driven primarily by higher compensation due to the addition of four editorial employees, and higher revenue share payments directly related to higher revenue. The year-over-year increase was driven by the lack of allocations to our discontinued brokerage business, higher compensation -- mostly due to increased head count -- and non-cash compensation related to the expensing of stock options, increased revenue share payments related to higher revenue and higher editorial costs.

Sales and marketing expense was $2.1 million, an increase of $0.2 million or 8% over the same period from last year of $2 million and up $0.4 million or 23% over the fourth quarter total of $1.7 million. The sequential increase was driven primarily by marketing costs to promote our services on other sites, ad serving costs due to increased revenue and increased credit card processing fees due to higher bookings. The year-over-year increase was driven by higher credit card processing fees related to higher bookings, combined with higher ad serving costs.

General and administrative expense for the first quarter of 2006 totaled $2.4 million, up $0.4 million or 22% over the same period last year of $1.9 million and down $0.4 million or 15% over last quarter's total of $2.8 million. The sequential decrease is directly related to reduced legal and consulting fees incurred last quarter due both to strategic transaction-related work and the evaluation and implementation of the early adoption of FAS-123R to expense stock options.

The year-over-year increase was driven by higher compensation costs resulting primarily from the lack of allocations to our discontinued brokerage business, non-cash compensation related to the expensing of stock options and higher incentive compensation accruals.

As we spoke about in the past, one of our goals was to accelerate revenue with improved margins. I am happy to report that our net operating margin for Q106 was 21% compared to 11% last year and 15% last quarter. Our first quarter pre-tax income from continuing operations was $2.6 million, or $0.10 per share. This is a $1.7 million or 169% improvement to the $1.1 million or $0.04 per share for the same period of 2005 and a $0.9 million improvement from last quarter's $1.7 million or $0.07 per share.

Loss from discontinued operations was $6,000 as compared to a loss of $1.8 million in the same period last year when IRG Research was still operating. Again, IRG Research was shut down in June 2005.

Total first quarter net income was $2.6 million. This was a $3.4 million improvement from a net loss of $0.9 million for the same period last year, and a $0.8 million or 46% improvement from a net income of $1.8 million last quarter.

Our cash, restricted cash and short-term investment position stood at $39.8 million at the end of the first quarter. This represents a 40% improvement over the same period last year, and a 17% sequential improvement. Our total cash flow for the quarter was $5.8 million, a $9.4 million improvement over last year's first quarter cash burn of $3.6 million and a $3.3 million improvement over last quarter's cash flow of $2.5 million.

As you can see from the continued growth in revenue and profitability, we continue to invest our resources wisely in key growth initiatives during the quarter.

Let me now share with you some of our operational highlights for the quarter. During the first quarter the Company continued to build community within its websites. In January we launched interactive weblogs, or blogs, on Real Money, one of our paid subscription services, to promote a stronger sense of community and create user-generated content. We also expanded our free newsletters, which allow our readers to come to our site through a doorway they feel comfortable with, and enter an area of their specific interest.

These initiatives have produced immediate results. During the quarter, Real Money page views increased 45% over the year ago quarter, attributable to the launch of blogs in January. The Company is now in the process of adding additional blogs on Real Money, and are considering adding blogs on its free site to extend our community-building initiative.

We continue to expand on our distribution partners to penetrate new markets and deepen our presence in existing ones. Several new distribution agreements were signed with firms such as eNews, Congu, Alpha Trade, Market Browser and Investor/Silicon Investor that we expect will be additional traffic drivers in the future.

One of the Company's goals is to deliver content any way investors want to receive it. The Company continues to increase the amount of video content it makes available, and now it offers nine channels with multiple advertising sponsors.

Our launch in Q4 of podcasting Jim Cramer's Real Money radio show is starting to pay dividends, as seen by the growing number of subscribers to our podcast. The podcast has consistently been rated number one or number two in iTunes top business downloads of the day, and it remains in the top 100 subscribed to podcasts for all of iTunes.

In addition, we are rated the number seven most-subscribed to podcast on Yahoo! The Company makes money from these podcasts through the sale of advertisements.

On March 6, Jim Cramer's Real Money began airing on select CBS radio stations nationally, in a newly formed radio deal with CBS Radio and syndicated Westwood One. In addition to the following eight CBS Radio stations located in New York, Los Angeles, Chicago, Houston, Detroit, Baltimore, Pittsburgh and Portland, Oregon we have also maintained many of our former affiliates in various other markets. In total, the show is heard in eight of the top U.S. rated Arbitron DMA market.

The current Real Money station list is now standing at 67 affiliates. Real Money Market Minutes are also being syndicated by Westwood One and are currently on 64 stations nationally.

Our content continues to win awards. The media industry newsletter, or MIN, named TheStreet.com's Options Alerts as the winner of its 2006 Best Email Newsletter Award. TheStreet.com's Options Alerts is a paid subscription email service that identifies investment opportunities in the options market. TheStreet.com's Options Alerts is written by Steve Smith, the former seat-holding member of the Chicago Board of Trade and the Chicago Board of Options Exchange and a regular contributor to Real Money, TheStreet.com's paid subscription website. This year's citation is the sixth the Company has received in the past five years.

The Society of American Business Editors and Writers awarded their 2006 Best in Business Award in the column category to TheStreet.com for the Five Dumbest Things on Wall Street This Week. Penned by Companies' editor Colin Barr, the Five Dumbest Things on Wall Street This Week has become TheStreet.com's most-read column. With writing humor and crisp, descriptive writing, Barr definitely examines the foibles of Wall Street and Corporate America. The Five Dumbest Things on Wall Street combines the primary elements that make TheStreet.com a destination for savvy consumers of financial news and commentary, stringent analysis, independent opinions and a unique voice. This honor is the third SABEW award the Company has received in the past three years.

On February 21, 2006 TheStreet.com announced that its Board of Directors had declared the Company's first quarterly cash dividend, payable to all shareholders of record at the close of business on March 10, 2006. The cash dividend of $0.025 per share was paid on March 31, 2006.

Now let's look at our strategic goals for 2006. Looking ahead, we expect the momentum we have built the past few quarters to continue. We are operationally focused on driving profitable revenue growth with our multiple revenue lines. As a multimedia company delivering content via online, radio, video and podcast media we remain focused on improving our gross profit margin.

We are looking to expand the scope of our services to include all segments of the investment community, from novice to professional. In addition to our news and commentary, we will continue to produce directional content and also look to expand our investor education capabilities, essentially taking someone from introductory finance 101 to a paid subscription service.

We believe it is critical that we continue to expand our relationships with our readers. Our recent introduction of interactive blogs is a major initiative in this area. We will continue these initiatives in 2006, with additional free newsletters and blogs that are more interactive and diverse.

All of these enhancements and additions are based on feedback from our readers and subscribers, and we will continue to utilize their feedback in building TheStreet.com community. We are continuing to expand our distribution partners to penetrate new markets and deepen our presence in existing ones. As a content creator and with a content warehouse from which others can choose the content they desire, we are uniquely positioned to grow our footprint in the financial landscape. We will also be looking to enhance our video, podcasting and mobile initiatives during the year. Our goal is to be able to deliver content any way investors want to receive it.

From our Company's inception in 1996, our readers and competitors have looked to TheStreet.com as the leader in financial content and its presentation and distribution on the web. We will continue this leadership in 2006 as we focus on welcoming novice investors into a community that is both comfortable and exciting for them. We will look to expand our sites and services to educate novice investors and work with them to achieve their financial goals by finding or creating a service that is right for them.

As you have heard, we exceeded both our financial and operational goals for the quarter, and look to build upon this for the rest of the year. I would like to thank you for listening to our call. With me now is Rich Broitman, our controller, who will assist me in answering any questions you have. I open it up to any questions.

Question-and-Answer Session

Operator

Thank you. (Operator instructions) Your first question comes from Matt Boyd - Aragon Global.

Matt Boyd - Aragon Global

Hi, Tom. Congratulations.

Tom Clarke

Thanks, Matt.

Matt Boyd - Aragon Global

I was wondering if you could provide a little bit more color on why ARPU increased to $326 in the first quarter?

Tom Clarke

Well I think, Matt as you know, in a subscription business there are times that you run different promotional products at different times of the year to try to generate interest in the product. When you launch a subscription service, that is typically what happens. So therefore, in the following year we are not running the same discounts to basically get people to sign up, so therefore when they renew, they renew more at a full price.

In addition, a lot of our directional products are priced higher than other products such as Real Money so as they continue to grow, that helps the ARPU move up.

Matt Boyd - Aragon Global

So this upselling, you believe, will continue to offset the addition of somewhat lower-paying subscribers?

Tom Clarke

Well Matt, essentially I am looking for any subscriber to come on. Do I think that we have the opportunity to continue to increase that as we launch new services and products? Yes. But in essence, as you and I have spoke many times, one of the things that when you look at our subscription business the metrics that are important to focus on is the number of net new subscribers in a quarter, which in this quarter was 1301, and to look at our deferred revenue which will be revenue we recognize over the course of the year, which was up to $12.5 million. So I think we have tremendous growth and we really look forward to continuing those trends.

Matt Boyd - Aragon Global

Great, thanks a lot.

Tom Clarke

You're welcome.

Operator

Our next question comes from Michael Moncroft - MRM Capital.

Michael Moncroft - MRM Capital

You guys did a great job, number one. Let me ask you this question -- the total advertisers, you had 85 last quarter. What do you have now?

Tom Clarke

Number of advertisers, last quarter we had 70. This quarter we had 69.

Michael Moncroft - MRM Capital

Okay -- I had 85 and then 63 from the quarter before.

Tom Clarke

63 in the third quarter would have been correct.

Michael Moncroft - MRM Capital

So you had 69 this quarter, 70 last quarter?

Tom Clarke

Correct.

Michael Moncroft - MRM Capital

And your shares went up over 1 million, a lot of stock options given, new employees?

Tom Clarke

It wasn't the awardance of stock options, it was the exercise of options that had previously been given years ago that were coming up for expiration.

Michael Moncroft - MRM Capital

Okay. Let me ask you this question. From the standpoint of valuation, your metrics were just wonderful, the best they have ever been. Except for maybe one analyst covering the stock, there seems to be a lack of coverage. With the dividend that you guys have since distributed, the cash going up, the earnings going up, the outlook is great, valuation seems to be phenomenal, especially apples-to-apples, other names out there. Is there any reason why there is a lack of analyst coverage? Obviously there are institutional guys that have been buying this stock, including myself. Can you just elaborate on that? I am just curious, because it is just a wonderful story and it continues to get better.

Tom Clarke

Well first of all, thanks for that. I am thinking maybe you should be our IR director for a couple of quarters, here. Mike, this is always hard when a CEO talks about this, because we all want to get as much coverage as we can and we all feel -- I personally feel the same valuation disconnect that you mentioned. I really believe the lack of coverage for us has to do with the fact that when we had the IRG Business, that basically anybody who was covering us at that time went away because they felt that IRG was in some ways, a competitive business.

I would have thought that the closure of IRG in June of last year would have given the opportunity for a couple of analysts to come on and I would hope that is still the case. I think it was a wait and see attitude, because from what I heard from people that I talk to, they wanted to see what the third quarter was. So we delivered the third quarter. Then when we got to the fourth quarter they wanted to make sure that we didn't -- the cost of closing down IRG was accurately displayed in our financials, which if you remember last quarter, it was to almost within $100,000.

So I am hoping now that the deliverance of this, what we would consider to be an exceptional quarter, will wake others up into the space and show them that we are going to be around and we are going to be a force to be reckoned with. I am on the same page, wavelength as you are, and I am just hoping that it is going to happen.

Michael Moncroft - MRM Capital

One last question. Regarding Cramer's show, how did it do this quarter versus last quarter as far as ratings or amount of people watching?

Tom Clarke

The publicly released statistics from CNBC are still showing that the show is growing quite dramatically and it remains probably their fastest growing show. So sequentially it was up.

Michael Moncroft - MRM Capital

Thanks.

Tom Clarke

You're welcome.

Operator

Our next question comes from Frank Gristina - Avondale Partners.

Frank Gristina - Avondale Partners

Thanks, Tom. Nice quarter. As the one analyst covering the Company, it is a pleasure. A message to the institutions, feel free to call me anytime. Also, I think the fundamentals on your stock, you don't necessarily need more coverage, but with that said, let me ask a couple of questions.

You mentioned that the revenue per subscriber went up and we addressed that. You also added a lot of net new subscribers. Are you seeing your churn dropping off as we get into a more exciting individual investor environment? Can you comment on your churn? Is that what is driving the net additions higher?

Tom Clarke

First of all, thanks for your comments, Frank. Let me at least publicly say I very much thank you for your support and the continued support you've given us. It goes back to that -- we did add a lot of subscribers, and we added subscribers in some of our directional products, Break Out Stocks, Stocks under 10, products that have a little bit higher price point than a Real Money. So that was part of it.

As for the churn, we are seeing a little bit less but the numbers are pretty consistent with what we have seen. Our annual renewal rate was up a little bit, so that helped a little bit on a month where we've pretty much stayed consistent between the 89%, 90% monthly renewal rate. So it really wasn't that.

I think it is really more that -- and we talked about this a couple of quarters ago as we were looking at the trends we were seeing, it is more and more individuals are getting involved with the market to increase their financial intelligence. I think they are looking for help. We happen to be one of the very few places that are willing to give directional content and actually put our picks out there for public display. I think that is a trend that is out there, a lot of people are now finding us.

A lot of it is, some of the distribution deals we've signed over time are really starting to come to fruition. As I've mentioned in the past, it usually takes us a quarter to get these things implemented and up and running and really functioning in a way that is beneficial for us. I think it is the convergence of a couple of things that are happening. I can't really say that it is any one of the things that is driving it more than another.

Frank Gristina - Avondale Partners

Well without giving the information to your competitors, the distribution deal -- is it a portal that is driving it? Is it a traditional news service? Can you give us an idea of what works in terms of distribution deals?

Tom Clarke

Frank, it is a combination of all. We are actually seeing it from a lot of different places, including radio. As we said last quarter, I thought that the new deal with CBS would be a driver of traffic for us and fortunately, that has transpired exactly as we mapped it out. As we continue to gain more affiliates around the country, we see that to be a good barometer of things going forward.

Frank Gristina - Avondale Partners

Great. Switching gears to advertising. You had a huge spike in page views, and I think you mentioned in the press release and on the call that it was a function of the blog feature behind Real Money. That on the surface drives down your revenue per 1,000 page views. It seems like it would be a huge opportunity. What is your take on advertisers and their willingness to advertise within these blogs? Or is that even a possibility, to advertise within the blog behind the premium wall?

Tom Clarke

Well one of the things that makes us a little bit unique and one of the things that people always want to talk about is they always want to try to pit the subscription business against the advertising business, and not really give it the synergies that exists.

The fact of the matter is that the advertising business and the subscription business are really very complementary, because as we drive traffic, that traffic also helps drive more subscriptions. So if you just look at the page view numbers and unique visitors going up and say, this is a healthy advertising business; sure. Those are the metrics that the advertisers are looking at to look at the advertising business. But in essence, that helps our subscription business in a big way.

Yes, we are looking to add ads into the blogs. We have been one of the few paid subscription sites, Real Money does carry advertising on it. The nice thing about that, Frank, is the fact that we know a lot about the subscribers of Real Money. It is not like on a free site where you may not know where they are or who they are or where they are coming from. We know a lot about our subscribers and we have a very high demographic for those individuals. It puts us in a unique place, and we think we can get a premium for the advertisers to be in that area.

All of those things. There isn't a place on the site that we are not going to look to. We put ads in the podcasts, we are doing it on all of our video, we are getting a lot of sponsors for that as advertisers want more and more video content. So we think we've positioned ourselves pretty nicely going forward.

Frank Gristina - Avondale Partners

Great, I'll hop back into queue.

Tom Clarke

Okay, thanks.

Operator

Our next question comes from Kevin Foley - Reese.

Kevin Foley - Reese

Hi Tom, how are you?

Tom Clarke

Good, Kevin how are you?

Kevin Foley - Reese

Good. I want to better understand the seasonality of ad revenues versus subscription revenues. Can you talk a little bit about that?

Tom Clarke

Kevin, you know it is an interesting -- and I am glad you brought it up because traditionally or historically, when you look at the seasonality on the ad business, your first and your third quarters are your weakest. Your second quarter is one of the strongest and your fourth quarter is really the strongest advertising quarter. That has been historically for us going back probably since our inception.

So if you really look at it, our performance in the first quarter, which matched what we did in the fourth quarter, is really a barometer of how strong our advertising business is this year.

Back in the third quarter, when it was the first time since 1999 that we weren't sequentially down from the second quarter, we said on the call that we thought the seasonality in the advertising business, especially for us, was kind of waning. I think first quarter again, our performance now demonstrates that that is probably true. I don't know that we will see a lot of seasonality but we should have a pretty good second quarter because historically, that has been a stronger quarter than our first quarter.

And on the subscription side, the quarter where we probably see a little bit of the fall off will be the third quarter, and again that is because really vacations, you are looking at July/August where a lot of people are away and not as focused on their portfolio as you've seen in the past.

So if we do have any seasonality in the subscription business, it will probably be in that third quarter.

Kevin Foley - Reese

Okay. How about in terms of number of ad sales?

Tom Clarke

We increased it by a couple. We've got 10 in the ad sales department in total, and you consider seven of those to be selling. Again, the two areas I said last call going into this year that we would look to hire, would be editorial and ad sales and I view both of those as revenue producers. So consistent with what we told you, that is what we did. We will look to add a couple of more as the year continues.

Kevin Foley - Reese

So you've added a couple during the first quarter here?

Tom Clarke

Correct.

Kevin Foley - Reese

Okay. How about in terms of, you have the strong bookings and subscriptions. Can you give a little more color into products that were driving that?

Tom Clarke

It is really, the products driving it probably will come as no surprise. They are directional products, meaning products where we are telling people when and where and how to get in and out of stocks that we have on our, what I call recommended list or product list.

The other product that has done extremely well in this environment is Real Money. Real Money has been our foundation product, it was a flagship product for us when we started the firm. It would be back in 2000 when I split the business and basically went to a subscription business. Real Money was the product we had. That also had a great resurgence in the quarter, and I think part of that is because we offer a variety of different opinions on Real Money, and the fact is that is for the unsophisticated investor, that could be your research department because there are very few companies if you went in our search and put a ticker in and wanted to find some analysis about a company, we would have it. I think that message is now getting out into the general consumer audience and I think that is helping us.

Kevin Foley - Reese

So is Real Money, 40% or 50% of bookings?

Tom Clarke

No, I wouldn't say Real Money was 40% of bookings. There wasn't any one product that was 40% to 50% of the bookings. It was really a combination of three or four products being probably 85% of the bookings.

Kevin Foley - Reese

Three or four products are 85%?

Tom Clarke

Yes.

Kevin Foley - Reese

How about, if I look at the operating expenses in the most recent quarter, as you start to distance yourself from all of the other business or start to get a sense of what the run rate is on the core business now, is that -- you look at sales and marketing, G&A, is that a fair level of where we should be? The run rate on these?

Tom Clarke

I think so.

Kevin Foley - Reese

Okay. And how about in terms of the gross margin? How much more do you think you have there?

Tom Clarke

I think rather than get into very specifics, I can tell you that our goal is to continue to increase the gross margin. Very interesting look at the gross margin, just the way we have it -- hold on one second. If you look at the gross profit margin for the quarter, it was basically 63%. In a total essentially flat from last year, or up 1% from last quarter of 62%, but you have to remember we had IRG in the mix last year. So if you really were to add back the costs allocated last year to IRG and really deduct the impact of stock options to really look at things on a case-by-case basis, gross profit margin would have increased to 64% as compared to last year's 60% and last quarter's 63%. So we are moving that number now.

If you made the same comparison on the operating margin, if you add back the costs that were allocated, we were up 21% as compared to 11% last year. But if you add back all of that other stuff, our operating income margin would have increased to 24% as compared to last year's 3% and last quarter's 18%.

So we think that there is a lot of leverage in the business as we move this forward. Our goal, Kevin, is really to drive this as much as possible. I don't want to really give you specifics, but I can tell you that it is one of our top strategic objectives for this year.

Kevin Foley - Reese

Okay. I may have missed this, but did you guys say what the stock comp expense was for the quarter?

Tom Clarke

You mean the option expense?

Kevin Foley - Reese

Yes.

Tom Clarke

It was about $349,000.

Kevin Foley - Reese

$349,000.

Tom Clarke

Correct.

Kevin Foley - Reese

And that is spread out amongst a couple different line items, or is that?

Tom Clarke

Yes, the stock option expense, some of it is in cost of services, some of it is in sales and marketing. The majority of it -- let's say half of it -- is in G&A.

Kevin Foley - Reese

Okay. Final question is, can you give us a little more color on the search for a new CFO?

Tom Clarke

Sure. We are deep into the process, as I mentioned last time, I am looking for someone with some very unique characteristics to really be a business partner and to join me in taking this business to the next level. We are deep into the process. I would say by the next quarter we will have the right person in place.

Kevin Foley - Reese

So you think by the end of June is a realistic goal to have someone in place?

Tom Clarke

Absolutely.

Kevin Foley - Reese

Thank you.

Tom Clarke

Thank you.

Operator

Our next question comes from Joseph Garner - Emerald Asset Management.

Joseph Garner - Emerald Asset Management

Good morning, Tom.

Tom Clarke

Hi Joe, how are you?

Joseph Garner - Emerald Asset Management

I am great. A couple questions for you. It would seem like this is the kind of business where the advertising dollars would follow the eyeballs, and you guys have had more than a couple quarters here where you have shown the page views and the unique users growing at a very, very impressive rate. I am wondering if you could talk a little bit about how you see the ad pipelines forming, both in terms of traditional ads and what you are seeing in terms of rich media and video type of ads coming your way. How that looks for you as you go forward?

Tom Clarke

Certainly. I think you bring up a good point. We have had tremendous page view growth and unique visitor growth. Joe, typically there is a little bit of a lag because again, when we are dealing with the advertisers, now that the traffic pattern is up and we have more breadth and depth that is a discussion we will have with the advertisers now; almost hindsight to the quarter in the sense that now we can say, well look, it is up at this level and we can take on more campaigns and stuff like that. That's good for us.

We are seeing a tremendous demand for rich media, especially with video and podcasts. Frankly, we could probably increase or double our video type of production and certainly find a sponsor for it, so that is one of the areas that we made a big push on in the first quarter. We will continue to do that. We've hired someone just to run the video production process for us with a singular focus to really be able to monetize that going forward.

You know, we think our ad pipeline looks good. You know, as I said, when we looked at the first quarter number that we delivered, and again attribute to the people here who work in the ad sales crew, is that we were a little bit up from the fourth quarter, which has traditionally been the strongest quarter that we have in any year of the company.

What I can tell you is the trends that we saw coming into the quarter are the same trends we’re seeing leaving the quarter, and we think the ad pipeline for the year is going to be quite good.

Joseph Garner - Emerald Asset Management

Based on your comments you had earlier regarding seasonality, would you then expect the ad business to be stronger then in the second quarter from where you were in the first quarter.

Tom Clarke

I would say that I expect it to be much stronger than where it was a year ago. I think that in comparison to the first quarter, I think the trends we’re seeing are pretty positive. I don’t know that it will get to that level, but I think it will be very strong.

Joseph Garner - Emerald Asset Management

If you could also talk a little bit about the non-financial content that you’ve been adding to the website, what kind of traffic you’ve been seeing there and what kind of opportunity you see in that area.

Tom Clarke

Well, the biggest opportunity again is on the advertising side. The advertisers love the idea that we’re bringing in kind of non-financial content, credit to the whole editorial group for creating a section on our site called “The Good Life”, which is where we’re putting most of the non-financial content. All I can tell you is that we’ve got more demand from advertisers than we have content at this point, and that’s something we’ll look to rectify in the coming quarters.

Joseph Garner - Emerald Asset Management

Very good. Congratulations.

Tom Clarke

Thank you, Joe, appreciate it.

Operator

Thank you. Our next question comes from Robert Haley of Gabelli & Co.

Robert Haley - Gabelli & Co.

Hi, thanks for the question. You covered most of it, actually. Could you just talk about, it sounds like in advertising, you’re seeing high demand. What sort of pricing environment are you seeing? Or is the growth mostly volume-driven? Thanks.

Tom Clarke

Thanks for the question. I think it’s a combination of both. It’s volume-driven, and one of the things we have to focus on is the fact that as we are traditionally as you look in our history, you can see that most of our advertising was from the brokerage firms. Now we’re getting a lot of the non-financial advertisers come in, but they come in with much larger campaigns, but again that means that we’re competing with many other sites for that campaign, so in a sense, I think a lot of it is volume-drive.

If I had to break it out, I would say 60% is volume and 40% is price, if I was to look at it.

Robert Haley - Gabelli & Co.

Okay, thanks.

Tom Clarke

You’re welcome.

Operator

Thank you. Our next question comes from Clive Polin, of NTCSI.

Clive Polin - NTCSI

Good morning. Just a couple of questions. The first on the cash line, the cash went up over $6 million and you’ve indicated cash flow was $5.8 million, but there’s really not a breakdown there. I was wondering if you could help us understand in that cash flow figure, what part of that was from options, stock options?

Tom Clarke

It was about $3 million that was from the exercise of stock options.

Clive Polin - NTCSI

Okay. I think some confusion out there kind of relating to the success of Mad Money and how that drives traffic to obviously the site. Could you help us understand where that fits in? I know there’s a lot of other areas that drive traffic and business, obviously, but I think there is maybe some confusion over the size of business that’s driven from Mad Money. If you could help us understand that a little bit better. I know it’s probably a bit subjective.

Tom Clarke

Let me just make sure I answer the question, to answer what you’re really asking. Are you asking for kind of the amount of traffic that’s driven by Mad Money as opposed to our other kind of traffic drivers, where it is in the hierarchy of things?

Clive Polin - NTCSI

Yes, exactly.

Tom Clarke

Okay, well, first of all, I think it’s a good question and if there is confusion out there, I’m glad you’re asking because if you are asking, I’m sure 50 other people are asking the same thing.

Clive Polin - NTCSI

Well, I think there’s just in general a lot of concern about that being a very substantial part of the business, and it’s a controversial show, and what have you, so that’s why I asked.

Tom Clarke

Well, I think controversy has always been around TheStreet.com, so we appreciate that.

You know, in the hierarchy of traffic drivers, it is certainly not within the top three or four that we have. We have traffic drivers that are much more significant to driving direct traffic to TheStreet.com’s sites other than Mad Money. In fact, I would put Mad Money behind Jim’s radio program, because that’s a more intimate, kind of educational type of show where people have tremendous feedback and it’s more, since it’s a TheStreet.com show, it’s more directly related to the TheStreet.com.

However, I think what Jim’s Mad Money TV show does do, and probably this is where it would be in the highest ranking of things, it creates awareness of what’s going on in the market. It’s taking people who maybe have been sitting on the sidelines or not interested in the market and is creating interest in the market.

Again, the show has different elements for different types of investors, but in essence, I think the biggest benefit that the TheStreet.com gets for it is the awareness that Jim is creating so that if you really want to know what Jim is thinking about, you probably do a Google search on him and you find out that he writes for TheStreet.com. You might find out that he runs a charitable trust for TheStreet.com where you can get his picks before he does them on, both on the buy and the sell.

So I think it’s number one in creating awareness that there’s somebody out there who’s willing to talk about the market. It creates excitement in the market. For a long period of time, I think that was lacking. If you go back and you think about a few years ago and investment clubs, there were 600,000 investment clubs in the country, and that number, when everything blew up, went down to the high three’s. I think that’s starting to come back now, and I think those are the things that the online brokers are seeing now, Ameritrade or E-trade, you know, we’re probably more following the trends that they’re seeing that there’s more trading and more activity, and I think Mad Money is a creator of that type of excitement.

Clive Polin - NTCSI

I think that the world in general has a love-hate relationship with him, and when I discuss this company with other people, it’s “Oh my God, it’s Jim Cramer” you know, and they don’t really understand the make-up of your business, as to a less sophisticated investor. I mean, the folks on this call obviously have a better understanding of that, but I do think that is an issue with some of the less sophisticated investors.

Anyway, great quarter.

Tom Clarke

Thank you, and I think you make a valid point. And to tell you the truth, as long as Jim is either loved or hated, that’s good for our business.

Clive Polin - NTCSI

Oh no, I agree.

Tom Clarke

When people start not caring, that’s when it doesn’t become beneficial, but thanks for your comments. I appreciate it.

Operator

Thank you. Our next question is coming from Andrew Sol of E-stoppers Creek Management.

Andrew Sol - E-stoppers Creek Management

Good morning. Thanks for taking my call. I had a few questions. The first one, there has been some stories about the consumer product companies, the large consumer product companies -- I won’t mention any names on this call -- that they sort of spend a lot less than the national average in terms of what advertising goes on for the web. I’m just curious, are you guys seeing any movement to your site on those types of advertisers? Or any interest or movement by those types of advertisers?

Tom Clarke

I think the trend that you’ve indicated is correct. We’re starting to see a little bit of it. We may be, even with our great [page hit] growth and unique visitor growth, we still may be a little bit small for some of the big consumer product guys, but where we are seeing it is in the luxury good makers. You know, car companies, watches, clothing, that kind of stuff, we are seeing more of an interest in what we have to offer. I think we’re still a little bit -- we’re not there on the big consumer product companies yet, but certainly the trend is moving in that direction.

Andrew Sol - E-stoppers Creek Management

Okay, and the second question I had was, in looking at the popularity of Jim Cramer’s show, is the company looking towards developing any sort of either broadcast type television show or cable television show where it can be the direct recipient of ad dollars, as opposed to being sort of a derivative receiver of ad dollars because of the Mad Money program on CNBC.

Tom Clarke

Yes, the answer is yes. We firmly believe that as an organization and the breadth and the depth of the contributors and the employees of this company, to create a kind of news organization that could support a TV program or anything like that, we think that’s certainly something we’re doing in.

You know, one of the things we’re starting to look at more seriously now is kind of hour-on-the-hour video that kind of does that in a way that’s cost-effective for us. If we can then take that and we have a radio program already, a one-hour nationally syndicated program, if we can expand upon that and move into some of these other areas, it’s certainly things we’re looking at now. We believe that we’ve got the capability to do it.

Andrew Sol - E-stoppers Creek Management

Okay, and my last question, and then I’ll hop off, regarding share repurchases. You know, there seems to be a misperception about this company, and this company and you guys are doing a terrific job, do you think it might be in the interest of your long-term shareholders to first step up a buyback here and take advantage of that mispricing, or perceived mispricing?

Tom Clarke

Well, first of all, thanks for your comments. I appreciate that. You know, that’s a discussion we have in internally all the time. We opted not to do it in the first quarter. We opted for a dividend as a reward for a lot of our shareholders. It’s a discussion we have all the time as our cash balance continues to balloon. It’s out there. We think there are a lot of things that we want to do this year as we’ve come through a period of a lot of questions about the company and stuff like that, now that we’re very solidly entrenched with a business model we believe is right for the times that we’re in. We are going to consider that, but we’re also going to consider some other things to really start expanding the business, so again, it’s a discussion item we have, and I think we’ll continue to look at it.

If there becomes a disparity, I mean, if you think about it now, you know, we’re at about a -- Rich, what are we at in terms of cash and stock?

Richard Broitman

Stock buyback?

Tom Clarke

No, how much cash per share do we have on there, in the books right now?

Richard Broitman

About a buck-and-a-half.

Tom Clarke

Yes, you know, if you think about it, you know, if you think about where our pricing is right now, we’re sitting on a $1.50 in cash per share, it becomes more compelling. So if that number continues to go up and the disparity in The Street doesn’t recognize where we are, then that will be something we’ll certainly act upon.

Andrew Sol - E-stoppers Creek Management

Okay, great, thanks so much, Tom, and great quarter.

Tom Clarke

Thank you very much, appreciate it.

Operator

Thank you. Our next question comes from Andy Curita of Pebble Hill.

Andy Curita - Pebble Hill

Hey, Tom, great quarter. Tom, I was wondering about the average revenue per subscriber. You’re at $3.13 the quarter before, and it came up to $3.26, or something like that. I mean, is that representative of where it ends the quarter, or would you say it ends the quarter at a different level?

Tom Clarke

I’m not sure I understand the question.

Andy Curita - Pebble Hill

What was the average revenue as you exited the quarter per subscriber?

Tom Clarke

I mean, that’s what it is when we end the quarter.

Andy Curita - Pebble Hill

I was using an average of the subscribers, so I’m just wondering if there’s room for it to go upward from here.

Tom Clarke

Sure, yeah, I believe there’s room to go upward. Again, you know, it’s a -- and I’m not hesitating in answering. A couple of people have asked on this call about that. I’m not trying to be hesitant. The difficulty in trying to really estimate where it goes is I don’t know what the mix of the products are going to be, and I don’t know if we introduce another subscription product and we want to get that off the blocks by offering a little bit of discount, that might take it down.

So do I think there’s an opportunity for us to do it? Yes. One of the things we have not done in the past to a large degree is bundling of services. I think that we have a lot of services that fit different investment styles, so if you’re really looking for a -- I mean, the name itself, stocks under 10, if you’re looking for a highly volatile but high possible return kind of investment and you want to invest in stocks that are under $10, we have that. If you’re looking for break-out stocks, you know, more up the chain a little bit, we have that. We’ve got Action Alerts portfolio, so the mix of the products is really going to give us that revenue per subscriber.

I think that as we move forward, I really don’t know what the mix is, and for me, as long as we’re adding net subscribers per quarter, I’ll take the number wherever it is.

Andy Curita - Pebble Hill

Okay, great, thank you.

Tom Clarke

Thanks, Andy.

Operator

Thank you. Our next question is from Ashok Ahuja of ICOR.

Ashok Ahuja - ICOR

Hi, my questions have been answered, but congratulations. Great job again, and the future seems to look very good. In terms of the discrepancy in the stock price, hopefully today is already beginning to correct that, and it should continue to correct. Congrats again.

Tom Clarke

Thank you very much.

Operator

Mr. Clarke, there appear to be no further questions. I will now turn the floor back to you.

Tom Clarke

Thank you. Well, first of all, I want to thank everyone for participating in the call. I appreciate all your questions, and keep an eye on us, because things are looking good for us. Thank you again.

Operator

That concludes today’s TheStreet.com’s First Quarter 2006 Earnings Release conference call. You may now disconnect.

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