Posts Surge in Subscription Revenue

Online financial publisher also reports a first-quarter loss as it invests in stock-research and brokerage subsidiary.
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reported a 40% increase in net revenue as subscription sales surged in the first quarter. But the company, which reported its first-ever profit in last year's fourth-quarter, posted a narrow loss in the latest quarter as it invested in long-term business opportunities.

A leading provider of financial news and analysis, as well as independent equity research, posted a loss of $1.6 million, or 6 cents a share, for the quarter ended March 31. That was an improvement over the year-earlier first-quarter loss of $2.1 million, or 9 cents a share. The company earned a profit of $154,000, or 1 cent a share, in the fourth quarter.

Company officials said the first-quarter results reflect an investment of $1.6 million for staffing, trading capabilities and general infrastructure for the Independent Research Group LLC (IRG). The wholly owned subsidiary, which now includes an in-house trading desk and 10 analysts covering 36 companies, expects to be self-funding in 2005.'s total first-quarter expenses were $9.6 million, up 22% from a year earlier and up 31% from the fourth quarter of 2003.

Company officials described the first quarter as one of the strongest in the company's history. Net revenue was $7.9 million, up 40% over the year-earlier quarter, and up 7% from the fourth quarter of last year. Deferred revenue, which represents subscription bookings that will be recognized in future quarters, stood at $8.1 million, up 21% from a year earlier and up 19% from the prior quarter.

The company's total number of subscribers rose 20% from a year earlier to more than 74,000. The average annual revenue per subscriber reached $303, an increase of 14% from a year earlier.

"Our first-quarter revenue surpassed even our expectations," said Lisa A. Mogenson, chief financial officer. She also noted that total cash flow for the quarter was $1.5 million, an improvement from cash-burn rates of $1.1 million a year earlier and $90,000 in the prior quarter. The company ended the first quarter with a cash balance of $29.9 million and no bank debt.

Responding to a question during a conference call on Thursday, company officials noted that they recorded a one-time contractual charge of $135,000 in the first quarter related to the departure of an employee.

"We look at the performance that we're getting for the amount of compensation we're giving somebody, and frankly we

didn't feel that the return on investment in that relationship was worth it for us," said chairman and chief executive officer Thomas J. Clarke Jr. "We think that decision will be margin enhancing for us as we look forward."

The company's first-quarter subscription revenue was $5.4 million, up 27% from a year earlier. Subscription bookings were $6.7 million, up 22% from a year ago, and advertising revenue was $1.4 million, up 19%. The company reported first-quarter commission revenue of $700,000, more than double the level of last year's fourth quarter.

Clients renewed their subscriptions at a monthly and annual rate of 90% and 70%, respectively, said Mogenson. The firm also said it plans to sell several more subscription offerings over the next few months. Unique visitors to the site averaged 2.1 million a month during first quarter, while page views averaged 109 million.

Clarke said the company is well positioned for long-term growth. "We have been building upon our strategy of creating sustainable, long-term growth for our shareholders, and I'm very pleased that the company exhibited strong growth by most every measure. With both our electronic publishing and securities research and brokerage segments reporting significant revenue growth, we are well positioned for a strong performance in 2004."

Shares of were down 17 cents, or nearly 4%, to $4.28 in afternoon trading on Thursday.