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Ads Drive TheStreet.com Profit

It records a big jump in net income. Shares rise.
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Updated from 10:59 a.m. EST

TheStreet.com

(TSCM)

said Thursday that its fourth-quarter net income more than doubled from the year-earlier period on strong advertising revenue.

Shares of the online provider of financial commentary, analysis, news and ratings recently were trading up 76 cents, or 7.3%, to $11.16.

The company, publisher of this Web site, reported net income of $4 million, a 125% increase over $1.8 million for the year-ago period on net revenue of $14.4 million, a 44% increase from $10 million from 2005. Earnings per share were 14 cents, doubled from 7 cents in the year-earlier period.

"In the fourth quarter we made solid progress within our strategy of increasing the Company's advertising-based revenue by delivering more content initiatives such as TheStreet.com TV and TheStreet.com Ratings on our free site," said Thomas J. Clarke, Jr., chairman and chief executive of TheStreet.com.

Fourth-quarter advertising revenue reached $4.8 million, a 49% increase over the $3.2 million recorded in the fourth quarter of 2005. Fourth-quarter subscription revenue was $8.8 million, a 36% increase over the $6.5 million recorded in the fourth quarter of 2005.

Cash, restricted cash and marketable securities stood at $46.6 million, and cash per share stood at $1.67 as of year-end. TheStreet.com has no long-term debt.

For the full year 2006, net revenue totaled $50.9 million, an increase of 51% from $33.7 million in 2005. Net income was $12.9 million, compared to net income of $200,000 in 2005. Net income from continuing operations for the year was $12.8 million, an increase of 123% from $5.8 million in 2005.

Earnings per basic and diluted share for 2006 were 48 cents a share and 47 cents a share, respectively, compared to a penny per share for 2005. Earnings per basic and diluted share from continuing operations in 2006 were 48 cents a share and 47 cents a share, respectively, compared to 23 cents a share and 22 cents a share for 2005.

For the full year 2006, net revenue grew 51%, driven by advertising, subscription and syndication, or other revenue, which grew 62%, 45% and 67%, respectively. The company said it had 880 million page views in 2006, an increase of 80% from 2005. Average monthly unique visitors grew to 4.4 million for the year, a 46% increase from last year.

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Excluding the cash impact of the acquisition of Weiss Ratings in the third quarter of 2006, TheStreet.com generated $15.7 million in cash flow vs. $1.9 million in 2005.

Operating margin increased from 14.5% in 2005 to 21.7% in 2006, while gross margin increased from 62.3% in 2005 to 63.7% in 2006.

On a conference call with analysts, Clarke said TheStreet.com is focused on growing its advertising business, which enjoys higher profit margins than its subscription side. Last year, the company added to its ad sales staff, as well as its editorial staff, in areas like video production and personal finance.

Clarke said investors should view TheStreet.com's overall profit margins as a "baseline" for what could be achieved in 2007, but noted that the company's efforts to grow its business could stunt further margin expansion this year. He said the company is looking at expanding in areas like financial tools and planners.

"We always want to increase margins, but if there was a way we could grow the business in a land-grab acquisition in a way that would keep margins flat, we'll use our discretion in evaluating those opportunities," Clarke said.

The company didn't provide specific guidance for the coming year.

When questioned about the company's plans for its cash pile, Clarke said the company's board is always considering options like increasing its 2.5-cent dividend payment or repurchasing shares, but he stressed that TheStreet.com is currently focused on growth.

"We want to grow this business in a very significant way," said Clarke.

As for Jim Cramer, a co-founder of TheStreet.com and the star of

CNBC

's show "Mad Money," Clarke said investors could expect a signed contract that would clarify Cramer's ongoing relationship with the company around the middle of 2007 or in the third quarter.

Cramer is widely viewed as the public face of TheStreet.com, and Clarke said the company's Web sites are a main source of information for his growing audience.

"If you really want to know what Jim is thinking, you're going to find that information on TheStreet.com -- not on 'Mad Money,'" Clarke said.