TSC Posts Loss; Continuing Operations Income Surges

The firm takes a $2.4 million charge for shuttering its brokerage and research unit.
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Updated from 7:47 a.m. EDT

TheStreet.com's

(TSCM)

second-quarter loss widened significantly from a year earlier, reflecting the cost of shutting down its stock brokerage and research unit.

Income from continuing operations, however, rose 30% from the second quarter of 2004 to $1.7 million, or 7 cents a share, boosted by higher advertising revenue and expense-controls in electronic publishing. Traffic to its Web sites is up sharply from a year ago, the company said.

TheStreet.com, which publishes this Web site and provides online financial commentary, analysis and news, lost $2.3 million, or 9 cents a share, in the June quarter, compared with a loss of $130,000, or 1 cent a share, a year ago. Net revenue was $7.8 million in the latest quarter, down from $7.9 million a year ago.

The company lost $900,000 on net revenue of $7.8 million in the first quarter of 2005.

Discontinued operations accounted for an overall loss of $3.9 million, or 16 cents a share, in the latest quarter, reflecting a charge of $2.4 million to close the Independent Research Group and a loss of $1.5 million from the unit's operations. The three-year-old subsidiary was closed in late June. The company noted that 25% to 30% of the disposal charge were noncash writedowns.

As for its announcement in January that it is exploring strategic alternatives with a consultant, Allen & Co. -- including a possible sale -- the company's chief executive, Tom Clarke, offered no new developments on a conference call with analysts. He did say the closing of IRG gives "some clarity to our financial situation."

Clarke stressed the company's positive cash position.

"We are not burning through cash," Clarke said. "We are throwing off cash, which means we could end up being an acquirer."

He also said there was a possibility the company could start paying a dividend.

"At some point, maybe we could pay a dividend to shareholders because we are sitting on a lot of cash," he said.

TheStreet.com generated cash flow of $1.1 million in the second quarter and its total cash and investments totaled $29.6 million at June 30, up 4% from the end of the first quarter, when the company had a cash burn of $3.6 million.

The electronic publishing business, which has turned a profit in five straight quarters, generated cash flow of $2.7 million in the most recent quarter, up from $2.2 million a year earlier.

In the second quarter, advertising revenue rose 10% from a year ago to $2.1 million, while subscription revenue fell 6% to $5.3 million. Subscription bookings were $6.6 million, up 7% from the second quarter of 2004, while deferred revenue rose 6% to $9.1 million, its highest level in the company's history.

On the cost side, second-quarter operating expenses were $6.3 million compared with $6.7 million a year ago and $7.0 million in the first quarter of 2005.

According to the company, the number of unique visitors to TheStreet.com network rose 27% in the first half of 2005 compared with a year earlier, while the number of subscribers to its premium services rose by 4.3% during the second quarter.

Clarke said some of these achievements could be attributed to the recent success of Jim Cramer's new CNBC show,

Mad Money

, as well as his daily radio show.

"As the show becomes more of a must-see, more and more people come to our site to find out what he's writing and talking about," Clarke said. He noted that TheStreet.com is in the final stages of negotiations with Cramer about his role at the company (Cramer helped found the company and remains its largest shareholder).

"I can tell you that Jim is not going anywhere," he said.