TheStreet (TST)

Q2 2011 Earnings Call

August 03, 2011 4:30 pm ET

Executives

Daryl Otte - Chief Executive Officer and Director

Thomas Etergino - Chief Financial Officer

Paul Cox - Sapphire Investor Relations

Analysts

Michael Moskoff - MRM Capital

Unknown Analyst -

Presentation

Operator

Welcome to TheStreet's Second Quarter of 2011 Earnings Conference Call. This call is being webcast live on the Investor Relations section of TheStreet's website at www.t.st. This call is property of TheStreet and any recording, reproduction or transmission of this call without the expressed written consent of TheStreet is strictly prohibited. As a reminder, today's call is being recorded. You may listen to our webcast replay of this call by going to the Investor Relations section of TheStreet's website.

I would like to turn the call over to Paul Cox of Sapphire Investor Relations, TheStreet.

Paul Cox

Good afternoon. Thank you for joining us to discuss TheStreet's Financial and Operating Results for the Second Quarter of 2011. With me today are Daryl Otte, Chief Executive Officer; and Tom Etergino, Executive Vice President and Chief Executive Officer. Today Daryl will begin with an overview of the second quarter's progress and achievements as well as an overview of the company's strategy. And Tom will review Q2 financial results.

All statements made 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 Securities and Exchange Commission, 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 the commission's website, www.sec.gov. Any additional information related to matters discussed today, also will be set forth in the company's quarterly report on Form 10-Q for the second quarter of 2011, which the company expects to file shortly.

Now, I will turn the call over to Daryl Otte.

Daryl Otte

Thanks, Paul. Welcome to our Second Quarter of 2011 Earnings Call. As you will have seen from earnings release, we recorded a solid second quarter results despite the choppy conditions in our market.

For the quarter, we recorded $15 million of revenue for our continuing businesses, the highest it has been in 11 quarters. The company's adjusted EBITDA and operating cash flow positive for the quarter and the year to date, showing good operating leverage.

On the call today, I will provide an overview of how we see the market conditions and our performance given those market conditions. I will also share with you some of the milestones we achieved over the past 3 months and reiterate our strategy. Then, Tom will review, in detail, our financial results with an emphasis on the operating leverage of the business and provide a perspective on our long-term business model.

Our year-on-year growth rates moderated in Q2 compared to those in Q1, as uncertainty in the global financial markets increased, and advertisers and investors became more cautious as the quarter progressed. The caution was reflected in weakening indicators of retail interest in the investing sector as evidenced by data from comScore on the consolidated number of unique visitors to the vertical, Google keyword search volumes in our category and data on retail trading volumes at our advertising comps.

While our business was not immune, our top line metrics fared better than these data would predict. We attribute this improvement to the rollout of our strategy and the payoff in the investments in our business initiated late into Q2 2010 and into the second half of that year.

We have a number of key proof points in traffic development, marketing services and premium services which demonstrated this progress and we will highlight some of them for you today.

First, with respect to traffic. The size of the audience of our network of sites grew 33%, year-over-year, according to our internal measurement, showing demand preference for our content and the improved content distribution capabilities we are building.

In June 2011, we entered the top 10 comScore rankings in our category, up 2 ranking points compared to the same period last year. We showed very strong engagement figures as well, near the top among our competitors.

We attribute this to the investments we made in human capital, technology and distribution over the past year. We believe that increasing the size and quality of the audience visiting our network is the single most important factor in developing long-term revenue momentum for both subscription and advertising revenue.

There were 3 main drivers to improve distribution this quarter.

One, strong natural search content discovery. Visits to our site via this channel were up 50% in the quarter versus last year. Two, the rollout of our white-labeled business news, markets coverage and wealth management content service. We now power over 50 horizontal content sites. And three, additions to the ranks of the distribution partner sites we work with.

Also, while not yet moving our overall results materially, our new mobile offerings are achieving good adoption and usage rates. That covers traffic.

Now with respect to Marketing Services. Advertising grew in the quarter but was a little flat from above than the rate of growth to the size of our audience. This is to be expected in any market condition due to the customized nature of our advertising sales strategies. As we sell through a direct sales force at high rates and all-through networks, it naturally takes time for the market to absorb our new inventory. Moderated rate of growth in advertising revenue in Q2 reflects the mood in the broad financial industry and, to some extent, of our economy.

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