Reis, Inc. Announces First Quarter 2012 Results
Published on Thursday, 03 May 2012 08:49 Written by TradersHuddle Staff
NEW YORK, May 3, 2012 (GLOBE NEWSWIRE) -- Reis, Inc. (Nasdaq:REIS) ("Reis" or the "Company"), a leading provider of commercial real estate market information and analytical tools, announced its financial results and operational achievements for the first quarter ended March 31, 2012.
Consolidated revenue, which is comprised entirely of subscription revenue generated at the Company's Reis Services segment, was $7,298,372 for the three months ended March 31, 2012 as compared to $6,617,368 for the three months ended March 31, 2011, an increase of 10.3%.
Income from continuing operations was $136,379, or $0.01 per basic and diluted share, for the three months ended March 31, 2012. For the three months ended March 31, 2011, the Company had income from continuing operations of $99,529, or $0.01 per basic and diluted share.
On a consolidated basis, the Company had a net loss of $(14,208,876), or $(1.34) per basic share and $(1.29) per diluted share, for the three months ended March 31, 2012. For the three months ended March 31, 2011, the Company had net income of $9,799, or $0.00 per basic and diluted share.
The consolidated net loss for the first quarter of 2012 was negatively impacted by a $14,216,000 charge recorded as of March 31, 2012 in discontinued operations related to the March 13, 2012 jury verdict rendered in the litigation at the Company's former Gold Peak condominium development project (see Discontinued Operations below for additional information related to the Gold Peak litigation).
Reis Services's EBITDA (earnings before interest, taxes, depreciation and amortization) was $2,921,000 during the first quarter of 2012. EBITDA increased $302,000, or 11.5%, over the first quarter of 2011 amount of $2,619,000. The EBITDA margins were 40.0% and 39.6% for the three months ended March 31, 2012 and 2011, respectively. Management uses other metrics, such as EBITDA, to monitor and assess the performance of its operating business, Reis Services, and believes it is helpful to investors in understanding the Reis Services business (see Reconciliations of Income from Continuing Operations to EBITDA and Adjusted EBITDA below for the Reis Services segment and on a consolidated basis).
Financial and Balance Sheet Highlights
Following are recent financial highlights for Reis:
- Growth of subscription revenue by $681,000, or 10.3%, in the first quarter of 2012 over the first quarter of 2011 – the eighth consecutive quarterly revenue increase over the prior year's corresponding quarter – and the Company's first quarter in excess of $7 million;
- Reis Services EBITDA growth of $302,000, or 11.5%, in the first quarter of 2012 over the 2011 first quarter;
- Improvements in our trailing twelve month renewal rates to 92% overall and 94% for institutional customers, up from the March 31, 2011 trailing twelve month renewal rates of 90% and 93%, respectively;
- Consolidated cash of $21,319,000, or $1.99 per share, at March 31, 2012;
- Total debt reduced to $3,794,000 at March 31, 2012 after repayments of $1,897,000 in the quarter; and
- Consolidated net cash (total cash and cash equivalents minus total debt) of $17,525,000, or $1.64 per share, at March 31, 2012, up from $16,462,000, or $1.56 per share, at December 31, 2011.
Lloyd Lynford, Reis's CEO, stated, "Reis's strong performance resulted from a record first quarter for new business, sustained high renewal rates, price increases and contributions from our two most recent growth initiatives: ReisReports, our small business product, and data redistribution arrangements with leading vendors of financial information. Very simply, we are executing on all components of our growth strategy."
Critical Metrics: Revenue; Deferred Revenue; Aggregate Revenue Under Contract; and EBITDA
Reis Services's revenue for the three months ended March 31, 2012 of $7,298,000 was the highest for any quarter in the Company's history. Reis Services's revenue increased by approximately $681,000, or 10.3%, from the first quarter of 2011 to the first quarter of 2012. This revenue increase over the corresponding prior quarterly period is the eighth consecutively quarterly increase in revenue over the prior year's quarter. In addition, revenue increased by approximately $319,000 or 4.6%, from the fourth quarter of 2011 to the first quarter of 2012. In general, these revenue increases reflect: (1) positive improvements in overall renewal rates as the trailing twelve month renewal rate improved to 92% at March 31, 2012 as compared to 90% for the trailing twelve months ended March 31, 2011 (for institutional subscribers, the renewal rates improved to 94% at March 31, 2012 from 93% at March 31, 2011); (2) additional new business; (3) revenue growth from ReisReports; (4) revenue growth from our data redistribution initiatives; and (5) the cumulative impact of the increased volume of contract signings in 2011 and into 2012.
Reis's revenue model is based primarily on annual subscriptions that are paid in accordance with contractual billing terms. Reis recognizes revenue from its contracts on a ratable basis; for example, one-twelfth of the value of a one-year contract is recognized monthly. Therefore, increases in the dollar value of new contracts are spread evenly over the life of a contract, thereby moderating an immediate impact on revenue. Historically, the largest percentage of our contracts are executed in the fourth quarter of each year. As a result, in times of favorable pricing, larger consecutive quarter revenue growth occurs in the fourth and first quarters.
Our contract pricing model is based on actual and projected report consumption; we believe it is generally not as susceptible to economic downturns and personnel reductions at our subscribers as a model based upon individual user licenses. We typically impose contractual restrictions limiting our immediate exposure (during existing contract terms) to revenue reductions due to mergers and consolidations. However, we have been, and we may in the future be impacted by consolidation among our subscribers and potential subscribers, or in the event that subscribers enter bankruptcy or otherwise go out of business.
Two additional metrics management utilizes in understanding the business and future performance are deferred revenue and Aggregate Revenue Under Contract. Analyzing these amounts can provide additional insight into Reis Services's financial performance. Deferred revenue, which is a GAAP basis accounting concept and is reported by the Company on the consolidated balance sheet, represents revenue from annual or longer term contracts for which we have billed and/or received payments from our subscribers related to services we will be providing over the remaining contract period. It does not include future revenue under non-cancellable contracts for which we do not yet have the contractual right to bill; this aggregate number we refer to as Aggregate Revenue Under Contract. Deferred revenue will be recognized as revenue ratably over the remaining life of a contract. The following table reconciles deferred revenue to Aggregate Revenue Under Contract at March 31, 2012 and 2011, respectively. A comparison of these balances at March 31 of each year is more meaningful than a comparison to the December 31, 2011 balances, as a greater percentage of renewals occur in the fourth quarter of each year and would distort the analysis.
|March 31,||Increase||Percentage Increase|
|Deferred revenue (GAAP basis)||$ 14,758,000||$ 13,407,000||$ 1,351,000||10.1%|
|Amounts under non-cancellable contracts for which the Company does not yet have the contractual right to bill at the period end (A)||11,212,000||11,656,000||(444,000)||(3.8)%|
|Aggregate Revenue Under Contract||$ 25,970,000||$ 25,063,000||$ 907,000||3.6%|
|(A) Amounts are billable subsequent to March 31 of each year and represent (i) non-cancellable contracts for subscribers with multi-year subscriptions where the future years are not yet billable, or (ii) subscribers with non-cancellable annual subscriptions with interim billing terms.|
Included in Aggregate Revenue Under Contract at March 31, 2012 was approximately $19,756,000 related to amounts under contract for the forward twelve month period through March 31, 2013. The remainder reflects amounts under contract beyond March 31, 2013. The forward twelve month Aggregate Revenue Under Contract amount is approximately 70.9% of revenue on a trailing twelve month basis at March 31, 2012 of approximately $27,862,000. For comparison purposes, at March 31, 2011, the forward twelve month Aggregate Revenue Under Contract of $18,343,000 was approximately 74.0% of revenue on a trailing twelve month basis at March 31, 2011.
Both deferred revenue and Aggregate Revenue Under Contract are influenced by: (1) the timing and dollar value of contracts signed; (2) the quantity and timing of contracts that are multiyear; and (3) the impact of recording revenue ratably over the life of a contract, which moderates the effect of price increases after the first year. These influences resulted in a 3.6% increase in Aggregate Revenue Under Contract and a 10.1% increase in deferred revenue from March 31, 2011 to March 31, 2012.
EBITDA for the three months ended March 31, 2012 was $2,921,000, an increase of $302,000, or 11.5%, over the first quarter 2011 amount. On a consecutive quarter basis, EBITDA increased $173,000 or 6.3% in the first quarter 2012 over the fourth quarter 2011. These increases were primarily derived by the corresponding increases in revenue, as described above, and maintaining EBITDA margins at approximately 40%.
Reconciliations of Income from Continuing Operations to EBITDA and Adjusted EBITDA
EBITDA is defined as earnings before interest, taxes, depreciation and amortization. Adjusted EBITDA is defined as earnings before interest, taxes, depreciation, amortization and stock based compensation. Although EBITDA and Adjusted EBITDA are not measures of performance calculated in accordance with GAAP, senior management uses EBITDA and Adjusted EBITDA to measure operational and management performance. Management believes that EBITDA and Adjusted EBITDA are appropriate metrics that may be used by investors as supplemental financial measures to be considered in addition to the reported GAAP basis financial information to assist investors in evaluating and understanding (1) the performance of the Reis Services segment, the primary business of the Company and (2) the Company's continuing consolidated results, from year to year or period to period, as applicable. Further, these measures provide the reader with the ability to understand our operational performance while isolating non-cash charges, such as depreciation and amortization expenses, as well as other non-operating items, such as interest income, interest expense and income taxes and, in the case of Adjusted EBITDA, isolates non-cash charges for stock based compensation. Management also believes that disclosing EBITDA and Adjusted EBITDA will provide better comparability to other companies in the information services sector. EBITDA and Adjusted EBITDA are presented both for the Reis Services business and on a consolidated basis. We believe that these metrics, for Reis Services, provide the reader with valuable information for evaluating the financial performance of the core Reis Services business, excluding public company costs, and to make assessments about the intrinsic value of that stand-alone business to a potential acquirer. Management primarily monitors and measures its performance, and is compensated, based on the results of the Reis Services business. EBITDA and Adjusted EBITDA, on a consolidated basis, allow the reader to make assessments about the current trading value of the Company's common stock, including expenses related to operating as a public company. However, investors should not consider these measures in isolation or as substitutes for net income, income from continuing operations, operating income, or any other measure for determining operating performance that is calculated in accordance with GAAP. In addition, because EBITDA and Adjusted EBITDA are not calculated in accordance with GAAP, they may not necessarily be comparable to similarly titled measures employed by other companies. Reconciliations of EBITDA and Adjusted EBITDA to the most comparable GAAP financial measure, income from continuing operations, follow for each identified period on a segment basis (including the Reis Services segment), as well as on a consolidated basis:
(amounts in thousands)
Reconciliation of Income from Continuing Operations to EBITDA and
Adjusted EBITDA for the Three Months Ended March 31, 2012
|Income from continuing operations||$ 136|
|Income tax expense||84|
|Income (loss) before income taxes and discontinued operations||$ 1,528||$ (1,308)||220|
|Depreciation and amortization expense||1,355||1||1,356|
|Interest expense (income), net||38||(1)||37|
|Stock based compensation expense, net||—||546||546|
|Adjusted EBITDA||$ 2,921||$ (762)||$ 2,159|
|Adjusted EBITDA margin – Reis Services and consolidated (B)||40.0%||29.6%|
Reconciliation of Income from Continuing Operations to EBITDA and
Adjusted EBITDA for the Three Months Ended March 31, 2011
|Income from continuing operations||$ 100|
|Income tax expense||—|
|Income (loss) before income taxes and discontinued operations||$ 1,325||$ (1,225)||100|
|Depreciation and amortization expense||1,234||1||1,235|
|Interest expense (income), net||60||(1)||59|
|Stock based compensation expense, net||—||546||546|
|Adjusted EBITDA||$ 2,619||$ (679)||$ 1,940|
|Adjusted EBITDA margin – Reis Services and consolidated (B)||39.6%||29.3%|
|Reconciliation of Income from Continuing Operations to EBITDA and Adjusted EBITDA for the Three Months Ended December 31, 2011||Reis Services||Other (A)||Consolidated|
|Income from continuing operations||$ 4,372|
|Income tax (benefit)||(4,075)|
|Income (loss) before income taxes and discontinued operations||$ 1,370||$ (1,073)||297|
|Depreciation and amortization expense||1,334||2||1,336|
|Interest expense, net||44||—||44|
|Stock based compensation expense, net||—||537||537|
|Adjusted EBITDA||$ 2,748||$ (534)||$ 2,214|
|Adjusted EBITDA margin – Reis Services and consolidated (B)||39.4%||31.7%|
|(A) Includes interest and other income, depreciation expense and general and administrative expenses (including public company related costs) that are not associated with the Reis Services segment. Since the reconciliations start with income from continuing operations, the effects of the discontinued operations (residential development activities) are excluded from these reconciliations for all periods presented.|
|(B) Reflects an adjusted EBITDA margin on the Reis Services segment and on a consolidated basis, both of which excludes the impact of discontinued operations.|
Reis, Inc. and two of its subsidiaries (Gold Peak at Palomino Park, LLC ("GP LLC") and Wellsford Park Highlands Corp. ("WPHC")) were the subject of a suit brought by the homeowners' association at the Company's former 259-unit Gold Peak condominium project outside of Denver, Colorado. This suit was filed in District Court in Douglas County, Colorado on October 19, 2010, seeking monetary damages (not quantified at the time) relating to alleged design and construction defects at the Gold Peak project. Tri-Star Construction, the construction manager/general contractor for the project (not affiliated with Reis) ("Tri-Star") and two former officers of Reis, Inc. (one of whom was also a director) were named as defendants in the suit. In October 2011, experts for the plaintiff delivered a report alleging a cost to repair of approximately $19,000,000. Trial commenced on February 21, 2012 and a jury rendered its verdict on March 13, 2012. The jury found Reis, jointly and severally with GP LLC and the former officers, liable for an aggregate of $18,200,000.
In connection with the development of Gold Peak, the Company purchased a commercial general liability "WRAP" insurance policy from ACE Westchester ("ACE") that covers the Company (including its subsidiaries) and its former officers, Tri-Star and Tri-Star's subcontractors. The Company, upon advice of counsel and based on a reading of the policy, has taken the position that a total of $9,000,000 (and possibly $12,000,000) of coverage is available for this claim. ACE has taken the position that only $3,000,000 of coverage (including defense costs) was provided. The Company has filed suit against ACE, alleging failure to cover this claim, bad faith and other related causes of action. In particular, the Gold Peak litigation could have been settled for $12,000,000 or less prior to the trial; the Company takes the position that ACE is liable for all additional damages stemming from this failure to engage and settle. Additionally, the Company has added claims against multiple additional insurance companies under policies maintained by the Company, co-defendants or others, including Reis's directors' and officers' insurance policy. The Company has also brought separate claims against the architect and a third party inspector engaged at Gold Peak.
As a result of the verdict, the Company recorded an additional charge of $14,216,000 in discontinued operations in the first quarter of 2012, to bring the Company's liability up to the $18,200,000 judgment, plus other costs of approximately $756,000. As of March 31, 2012, the Company, in accordance with the applicable accounting literature, could no longer conclude that $3,000,000 of insurance was probable to be recovered. As of December 31, 2011, based on the best available information at that time, the Company recorded a charge of approximately $4,460,000 in discontinued operations, representing the low end of the Company's expected range of net exposure. This amount reflected an aggregate minimum liability of approximately $7,740,000, less the then minimum expected insurance recovery of $3,000,000 and other previously reserved amounts. These charges are reflected in discontinued operations and negatively impact net income (loss), but do not impact income from continuing operations.
On April 12, 2012, the Company, other defendants and the plaintiff homeowners' association filed various post-trial motions which could result in increases or decreases in the final judgment, a new trial or no change from the jury verdict. Following the court's ruling on these post-trial motions, the Company will have an additional period of time to file an appeal of the judgment. In order to appeal the judgment, the Company will be required to post cash or a bond with the court and may need to obtain additional financing. There can be no assurance that the Company will be able to obtain sufficient financing, on terms favorable to the Company, or at all. If this matter is appealed, a final resolution would likely be deferred into 2013, although the Company may pursue settlement of this matter sooner.
If Reis is required to pay all or substantially all of the judgment, or post significant cash with the court, it would have a material impact on the Company's consolidated financial position and cash flows.
Investor Conference Call
The Company will host a conference call on Thursday, May 3, 2012, at 11:00 AM (EDT). This call is for the benefit of existing and prospective stockholders, stock analysts, and other interested parties to discuss the first quarter 2012 results and other matters. The Company has a policy of not providing quarterly or annual guidance.
The dial-in number from inside the U.S. or Canada for this teleconference is (877) 390-5537. The dial-in number for outside the U.S. and Canada is (760) 666-3763. The conference ID is 76380277 or "Reis". A replay of the conference call will be available from shortly after the conference call through midnight (EDT) on May 17, 2012 by dialing (800) 585-8367 from inside the U.S. or Canada or (404) 537-3406 from outside the U.S. and Canada, and referring to the conference ID: 76380277. An audio webcast of the conference call will also be available on Reis's website at www.reis.com/events and will remain on the website for a period of time following the call.
The Company's primary business is providing commercial real estate market information and analytical tools for its subscribers, through its Reis Services subsidiary. Reis Services, including its predecessors, was founded in 1980. Reis maintains a proprietary database containing detailed information on commercial properties in metropolitan markets and neighborhoods throughout the U.S. The database contains information on apartment, office, retail, warehouse/distribution and flex/research & development properties and is used by real estate investors, lenders and other professionals to make informed buying, selling and financing decisions. In addition, Reis data is used by debt and equity investors to assess, quantify and manage the risks of default and loss associated with individual mortgages, properties, portfolios and real estate backed securities. Reis currently provides its information services to many of the nation's leading lending institutions, equity investors, brokers and appraisers.
Reis, through its flagship institutional product, Reis SE, and through its new small business product, ReisReports, provides online access to a proprietary database of commercial real estate information and analytical tools designed to facilitate debt and equity transactions as well as ongoing evaluations. Depending on the product, users have access to trend and forecast analysis at metropolitan and neighborhood levels throughout the U.S. and/or detailed building-specific information such as rents, vacancy rates, lease terms, property sales, new construction listings and property valuation estimates. Reis's products are designed to meet the demand for timely and accurate information to support the decision-making of property owners, developers, builders, banks and non-bank lenders, and equity investors. These real estate professionals require access to timely information on both the performance and pricing of assets, including detailed data on market transactions, supply, absorption, rents and sale prices. This information is critical to all aspects of valuing assets and financing their acquisition, development and construction.
Cautionary Statement Regarding Forward-Looking Statements
This press release contains "forward-looking statements" within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements may relate to the Company's or management's outlook or expectations for earnings, revenues, expenses, asset quality, or other future financial or business performance, strategies, prospects or expectations, or the impact of legal, regulatory or supervisory matters on our business, operations or performance. Specifically, forward-looking statements may include:
- statements relating to future services and product development of the Reis Services segment;
- statements relating to future business prospects, potential acquisitions, uses of cash, revenue, expenses, income (loss), cash flows, valuation of assets and liabilities and other business metrics of the Company and its businesses, including EBITDA, Adjusted EBITDA and Aggregate Revenue Under Contract; and
- statements preceded by, followed by or that include the words "estimate," "plan," "project," "intend," "expect," "anticipate," "believe," "seek," "target" or similar expressions relating to future periods.
Forward-looking statements reflect management's judgment based on currently available information and involve a number of risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. With respect to these forward-looking statements, management has made certain assumptions. Future performance cannot be assured. Actual results may differ materially from those contemplated by the forward-looking statements. Some factors that could cause actual results to differ include:
- revenues may be lower than expected;
- inability to retain and increase the Company's subscriber base;
- inability to execute properly on new products and services, or failure of subscribers to accept these products and services;
- inability to attract and retain sales and senior management personnel;
- difficulties in protecting the security, confidentiality, integrity and reliability of the Company's data;
- changes in accounting policies or practices;
- legal and regulatory issues;
- the results of pending, threatening or future litigation (including difficulty or inability to finance any adverse judgments, bonding or settlement); and
- the risk factors listed under "Item 1A. Risk Factors" of our annual report on Form 10-K for the year ended December 31, 2011, which was filed with the Securities and Exchange Commission on March 8, 2012.
You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date of this press release. Except as required by law, the Company undertakes no obligation to publicly update or release any revisions to these forward-looking statements to reflect any events or circumstances after the date of this press release or to reflect the occurrence of unanticipated events.
The following financial information should be read in conjunction with Reis's consolidated financial statements and the notes thereto and Management's Discussion and Analysis of Financial Condition and Results of Operations, both of which are included in Reis's quarterly report on Form 10-Q for the quarter ended March 31, 2012, which was filed with the Securities and Exchange Commission on May 3, 2012.
REIS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
|March 31, 2012||December 31, 2011|
|Cash and cash equivalents||$ 21,318,869||$ 22,152,802|
|Restricted cash and investments||215,619||215,405|
|Accounts receivable, net||5,249,225||8,597,464|
|Prepaid and other assets||510,741||625,451|
|Assets attributable to discontinued operations||—||3,000,000|
|Total current assets||27,294,454||34,591,122|
|Furniture, fixtures and equipment, net of accumulated depreciation of $1,621,115 and $1,556,022, respectively||814,700||863,309|
|Intangible assets, net of accumulated amortization of $20,710,377 and $19,437,856, respectively||16,821,195||17,155,195|
|Deferred tax asset, net||3,814,420||3,685,420|
|Total assets||$ 103,646,859||$ 111,218,106|
|LIABILITIES AND STOCKHOLDERS' EQUITY|
|Current portion of Bank Loan||$ 3,793,961||$ 5,690,940|
|Accrued expenses and other liabilities||1,733,439||3,352,445|
|Liability for option cancellations||229,349||240,515|
|Liabilities attributable to discontinued operations||19,374,447||8,048,568|
|Total current liabilities||39,888,968||33,039,319|
|Other long-term liabilities||650,256||668,456|
|Commitments and contingencies|
|Common stock, $0.02 par value per share, 101,000,000 shares authorized, 10,686,293 and 10,570,891 shares issued and outstanding, respectively||213,725||211,417|
|Additional paid in capital||100,481,208||100,677,336|
|Retained earnings (deficit)||(37,587,298)||(23,378,422)|
|Total stockholders' equity||63,107,635||77,510,331|
|Total liabilities and stockholders' equity||$ 103,646,859||$ 111,218,106|
|REIS, INC. AND SUBSIDIARIES|
|CONSOLIDATED STATEMENTS OF OPERATIONS|
For the Three Months Ended
|Subscription revenue||$ 7,298,372||$ 6,617,368|
|Cost of sales of subscription revenue||1,845,714||1,550,384|
|Sales and marketing||1,729,319||1,652,414|
|General and administrative expenses||2,952,268||2,775,805|
|Total operating expenses||5,195,181||4,909,316|
|Other income (expenses):|
|Interest and other income||16,065||20,224|
|Total other income (expenses)||(37,098)||(58,139)|
|Income before income taxes and discontinued operations||220,379||99,529|
|Income tax expense||84,000||—|
|Income from continuing operations||136,379||99,529|
|(Loss) from discontinued operations, net of income tax (benefit) of $(79,000) and $—, respectively||(14,345,255)||(89,730)|
|Net (loss) income||$ (14,208,876)||$ 9,799|
|Per share amounts – basic:|
|Income from continuing operations||$ 0.01||$ 0.01|
|Net (loss) income||$ (1.34)||$ —|
|Per share amounts – diluted:|
|Income from continuing operations||$ 0.01||$ 0.01|
|Net (loss) income||$ (1.29)||$ —|
|Weighted average number of common shares outstanding:|
CONTACT: Press Contact: Mark P. Cantaluppi Vice President, Chief Financial Officer Reis, Inc. (212) 921-1122
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