Updated from 7:29 a.m. EST
posted its second quarterly profit Thursday, driven by steady gains in advertising revenue and a much-improved sales contribution from its securities research and brokerage unit. The quarter also benefited from the sale of an investment that previously had been written off.
TheStreet.com, which publishes this Web site and provides online financial commentary, analysis, news and independent research, earned $730,000, or 3 cents a share, in the quarter, up from $154,000, or 1 cent a share, a year earlier. Revenue rose 29% from a year ago to $9.5 million in 2004's final quarter.
In the third quarter of 2004, the company lost $1.2 million, or 5 cents a share, on revenue of $8.7 million.
By segment, fourth-quarter subscription revenue was $5.6 million, up 10% from a year ago; advertising revenue was $2.0 million, up 20% from a year ago; and commission revenue from Independent Research Group LLC was $1.5 million, well over four times the year-ago amount.
The stock was unchanged at $4.50 Thursday afternoon.
"Our record fourth-quarter profit of more than $730,000, of which the electronic publishing segment contributed $2.2 million in profit, validates the strength of the company's core fundamentals," CFO Lisa A. Mogensen said in a statement.
Cash flow in the latest fourth quarter was $1.1 million, reversing a year-ago cash burn of $100,000.
Expenses rose 22% from a year ago to $8.9 million. Expenses were cut by $500,000 in the latest quarter from the sale of the company's investment in BusinessNet Online Information on Dec. 13. The company bought the stake in 1999 and previously had written it off as fully impaired.
For the full year, TheStreet.com narrowed its loss 46% over 2003 to $2.2 million, or 9 cents a share, on a 35% jump in revenue to $35.2 million. The company produced cash flow of $3.6 million for the year, reversing a 2003 cash burn of $600,000.
"Our core electronic publishing segment contributed $3.6 million in earnings for the full year," CEO Thomas J. Clarke Jr. said in a statement. "Our subscription and advertising revenue streams posted year-over-year gains of 21% and 26%, respectively, while commission revenue at our securities research and brokerage segment increased $3.7 million, or 456%, to $4.5 million."
Deferred revenue was $7.3 million in the quarter, a 7% increase over the same quarter last year and a decrease of 9% from last quarter.
"We will continue to focus on proprietary content creation with new product launches as we look to meet the demands of a more diversified investing universe," Clarke said. "We expect to continue to see positive growth trajectories in both the electronic publishing and the securities research and brokerage segments of our business."
In a conference call Thursday, Clarke said he expects recent strength in the advertising market to grow and benefit the company's electronic publishing segment. He also said changes to Social Security could create more demand for
Clarke acknowledged that earnings would have been greater without IRG, but he said the proprietary research business represents an opportunity to take advantage of various trends in this space, such as bigger research firms focusing on larger-cap stocks. He also cited the growing popularity of hedge funds, which make up a significant portion of IRG's client base.
"The business has two different segments, but in the long-term they will complement each other," he said.
Clarke also said he has no updates about the company's recent hiring of Allen & Co., the investment bank helping TheStreet.com explore alternatives such as a sale, acquisition or merger.