Double Digit Growth Continues in 2015
- 11.9% Revenue Growth, 13.0% Reis Services EBITDA Growth and 23.5% Growth in Income from Continuing Operations Among Quarterly Highlights -
NEW YORK, April 30, 2015 (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, 2015.
Consolidated subscription revenue was $11,130,778 for the three months ended March 31, 2015, as compared to $9,946,045 for the three months ended March 31, 2014, an increase of 11.9%. This is the Company's 20th consecutive quarterly increase in revenue over the prior year's corresponding quarter. All of the Company's revenue growth has been organically generated.
Reis Services EBITDA was $4,594,000 during the first quarter of 2015, an increase of $528,000, or 13.0%, over the first quarter 2014 amount of $4,066,000. This is the Company's 18th consecutive quarterly increase in Reis Services EBITDA over the prior year's corresponding quarter. The Reis Services EBITDA margins were 41.3% and 40.9% for the three months ended March 31, 2015 and 2014, respectively. Management uses 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 below for definitions and reconciliations of income from continuing operations to EBITDA and Adjusted EBITDA for the Reis Services segment and on a consolidated basis).
Reis's CEO, Lloyd Lynford, stated, "Consistency and strong growth have become Reis's hallmarks. Our launch of student housing coverage and property-level investment analyses over the next few weeks, the great strides we have made toward introducing coverage of the affordable housing and medical office sectors in 2016, and the dramatic expansion of our sales comparable offering, will sustain Reis's strong financial future."
Income from continuing operations was $1,293,370, or $0.12 per basic share and $0.11 per diluted share, for the three months ended March 31, 2015. This is a 23.5% increase over income from continuing operations for the three months ended March 31, 2014 of $1,046,980, or $0.10 per basic share and $0.09 per diluted share.
Net income was $1,222,016, or $0.11 per basic share and $0.10 per diluted share, for the three months ended March 31, 2015. This is an 82.6% increase over the reported net income for the three months ended March 31, 2014 of $669,102, or $0.06 per basic and diluted share.
Financial and Operational Highlights
The following are recent financial and operational highlights for Reis:
- revenue growth was 11.9% in the first quarter of 2015 over the 2014 first quarter, and represents the 20th consecutive quarterly increase in subscription revenue over the prior year's corresponding quarter;
- Reis Services EBITDA growth was 13.0% in the first quarter of 2015 over the 2014 comparable period and represents the 18th consecutive quarterly increase in Reis Services EBITDA over the prior year's corresponding quarter;
- consolidated Adjusted EBITDA was $3,881,000 for the first quarter of 2015 (see reconciliations below), an increase of 15.6% over the first quarter of 2014 with margin expansion to 34.9% from 33.8%;
- Reis SE renewal rates for the trailing twelve months ended March 31, 2015 were 88% overall and 90% for institutional subscribers;
- deferred revenue ($21,317,000), Aggregate Revenue Under Contract ($46,541,000) and the forward twelve month component of Aggregate Revenue Under Contract ($30,906,000) continue to demonstrate strong visibility into our future revenue;
- during the first quarter of 2015, we declared and paid a quarterly dividend to shareholders of $0.14 per share, or $1,582,000 in the aggregate, an increase of $0.03 per share, or 27.3%, over quarterly dividend payments in 2014;
- net cash generation of $3,621,000 in the quarter (a 20.4% increase over the December 31, 2014 cash balance, or an increase of a $0.31 per common share), bringing our cash balance to $21,366,000 at March 31, 2015;
- expanded coverage in February 2015 by 53 metropolitan markets on the seniors housing sector, bringing our coverage in the seniors housing asset class to 110 markets; and
- finalizing finishing touches on the expected May 2015 launch of coverage on the Student Housing sector, our eighth property type.
2015 Revenue Performance
All of the Company's revenue is generated by the Reis Services segment. Reis Services revenue increased by approximately $1,185,000, or 11.9%, from the first quarter of 2014 to the first quarter of 2015. The revenue increase over the corresponding prior quarterly period is the 20th consecutive quarterly increase in revenue over the prior year's quarter. In addition, revenue increased by approximately $405,000, or 3.8%, from the fourth quarter of 2014 to the first quarter of 2015. In general, revenue increases in 2015 primarily reflect additional new Reis SE business and price increases on renewals. The revenue growth experienced by the Company reflects not just a single strong quarter, but also the momentum created by sustained contract growth during 2014 and into 2015. The Company continues to post record bookings performance with respect to the dollar value of contracts. Fiscal 2014, as well as the fourth quarter of 2014, represented an unprecedented volume of contract signings. The Company's prior modest decline in the trailing twelve month renewal rates was reversed in the first quarter of 2015. After falling to 87% overall and 89% for institutional subscribers as of December 31, 2014, the Company's trailing twelve month renewal rate, as of March 31, 2015, increased to 88% overall and to 90% for institutional subscribers. The decline in the renewal rates during 2014 (the trailing twelve month renewal rate was 91% overall and 93% for institutional subscribers at March 31, 2014) reflected the Company's decision to be more aggressive on renewal pricing, particularly in instances where customer usage levels were significantly greater than what was initially estimated as annual usage for that customer. The Company continues this policy in 2015, believing that aligning client report consumption with appropriate annual fees, while remaining respectful of subscriber need for Reis information, is more important in the long-term, than a modest decline in the current renewal rate. Also, based upon past experience, management believes that many non-renewing customers ultimately renew with Reis as their information and analytic needs may not be fully addressed by competitive offerings.
The Company'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 and 2014 was not an exception to that trend. The first quarter 2015 revenue growth rate was impacted by the effect on revenue from multi-year contracts. As described in the "Management Summary" section of Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2014, as filed with the SEC on March 5, 2015, multi-year contracts can influence our growth rates.
Based upon several factors, including historical and anticipated report consumption, our account managers determine whether Reis and a subscriber are best served by an annual or multi-year commitment. Over approximately the past three years, in order to increase the predictability of fees from our subscribers and Reis's own revenue and cash flow, we have made a concerted effort to encourage multi-year contracts when appropriate, with terms of two or three years, and in some cases, four years. The average life of multi-year contracts signed in each of the last three years (2012, 2013 and 2014) was approximately 2.2 years. There are significant benefits to adopting and expanding our program, on a selective basis, of lengthening the duration of client contracts, including locking in recurring revenue for longer periods, thereby increasing the predictability of our renewal rates and future revenues. From an operational perspective, multi-year contracts free up account management resources to focus on subscribers requiring a higher level of attention and upselling opportunities across our account base. Finally, multi-year deals also insulate us from competitive pressures and increase the likeliness that Reis data and analytics will become embedded in the work flow of our clients.
In accordance with GAAP, our revenue recognition policy is to record revenue ratably over the life of a subscriber contract. Therefore, any increases in the price of the subscription after the first year of a multi-year contract are considered in the total amount being straight-lined over the contract term. If pricing steps are built in on and after the first anniversary of a multi-year contract, there will be increasing cash flow from the contract, but no growth in revenue during the subsequent years under that contract. At the beginning of the first quarter of 2015, there were approximately 240 institutions signed to multi-year contracts, including many of our largest subscribers. With the currently experienced first quarter renewals on multi-year contracts which expired and were renewed in that period, and the anticipated renewal of additional multi-year contracts originally signed in 2013, and in years prior, coming up for renewal later in 2015, we expect that our revenue growth will increase on a quarterly basis over the course of the year to arrive at an annual growth rate in the low to mid teens for 2015.
Deferred Revenue and Aggregate Revenue Under Contract
Two additional metrics management utilizes are deferred revenue and Aggregate Revenue Under Contract. Analyzing these amounts can provide additional insight into Reis Services's future 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, 2015 and 2014, respectively. A comparison of these balances at March 31 of each year is more meaningful than a comparison to the December 31, 2014 balances, as a greater percentage of renewals occur in the fourth quarter of each year and would distort the analysis.
|Deferred revenue (GAAP basis)||$ 21,317,000||$ 19,251,000|
|Amounts under non-cancellable contracts for which the Company does not yet have the contractual right to bill at the period end (A)||25,224,000||20,838,000|
|Aggregate Revenue Under Contract||$ 46,541,000||$ 40,089,000|
|(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, 2015 was approximately $30,906,000 related to amounts under contract for the forward twelve month period through March 31, 2016. The remainder reflects amounts under contract beyond March 31, 2016. The forward twelve month Aggregate Revenue Under Contract amount is approximately 72.7% of revenue on a trailing twelve month basis at March 31, 2015 of approximately $42,520,000. For comparison purposes, at March 31, 2014, the forward twelve month Aggregate Revenue Under Contract was $27,009,000 and approximately 74.1% of revenue.
Both deferred revenue and Aggregate Revenue Under Contract are influenced by: (1) the timing and dollar value of contracts signed and billed; (2) the quantity and timing of contracts that are multi-year; and (3) the impact of recording revenue ratably over the life of a multi-year contract, which moderates the effect of price increases after the first year.
2015 Reis Services EBITDA Performance
Reis Services EBITDA for the three months ended March 31, 2015 was $4,594,000, an increase of $528,000, or 13.0%, over the first quarter 2014 amount. The Reis Services EBITDA increase over the corresponding prior quarterly period is the 18th consecutive quarterly increase in Reis Services EBITDA over the prior year's quarter. On a consecutive quarter basis, Reis Services EBITDA increased $184,000, or 4.2%, from the fourth quarter of 2014 to the first quarter of 2015. These increases were primarily derived from the increases in revenue, as described above. Operating expenses also continued to grow at an 11.2% pace over the 2014 first quarter, the net effect of which resulted in the Reis Services EBITDA margin of 41.3% for the three months ended March 31, 2015, slightly greater than the reported Reis Services EBITDA margins of 40.9% in the 2014 comparable period.
Investment in our business remains a priority. Our employee headcount in the sales and operational groups is expected to increase in 2015 and we expect to accelerate our marketing initiatives that were set in place in the latter part of 2014. These are sound investments that will further differentiate Reis in the world of U.S. commercial real estate market information providers. These continuing investments may cause temporary declines in our EBITDA margins in certain quarters during 2015, but we believe that any declines will be short term as we expect that these investments will result in additional revenue opportunities for Reis in the future.
Reconciliations of Income from Continuing Operations to EBITDA and Adjusted EBITDA
We define EBITDA as earnings (income (loss) from continuing operations) before interest, taxes, depreciation and amortization. We define Adjusted EBITDA 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 supplemental financial measures to be considered in addition to the reported GAAP basis financial information which may 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. However, 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. EBITDA and Adjusted EBITDA are presented both for the Reis Services segment 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 for making 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 segment. 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 (loss), income from continuing operations, operating income, or any other measure for determining operating performance that is calculated in accordance with GAAP. 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, 2015
|Reis Services||Other (A)||Consolidated|
|Income from continuing operations||$ 1,293|
|Income tax expense||794|
|Income (loss) before income taxes and discontinued operations||$ 3,248||$ (1,161)||2,087|
|Depreciation and amortization expense||1,325||2||1,327|
|Interest expense (income), net||21||—||21|
|Stock based compensation expense||—||446||446|
|Adjusted EBITDA||$ 4,594||$ (713)||$ 3,881|
| Reconciliation of Income from Continuing Operations to EBITDA and |
Adjusted EBITDA for the Three Months Ended March 31, 2014
|Reis Services||Other (A)||Consolidated|
|Income from continuing operations||$ 1,047|
|Income tax expense||605|
|Income (loss) before income taxes and discontinued operations||$ 2,798||$ (1,146)||1,652|
|Depreciation and amortization expense||1,243||2||1,245|
|Interest expense (income), net||25||—||25|
|Stock based compensation expense, net||—||435||435|
|Adjusted EBITDA||$ 4,066||$ (709)||$ 3,357|
| Reconciliation of Income from Continuing Operations to EBITDA and |
Adjusted EBITDA for the Three Months Ended December 31, 2014
|Reis Services||Other (A)||Consolidated|
|Income from continuing operations||$ 1,524|
|Income tax expense||768|
|Income (loss) before income taxes and discontinued operations||$ 3,073||$ (781)||2,292|
|Depreciation and amortization expense||1,315||2||1,317|
|Interest expense (income), net||22||—||22|
|Stock based compensation expense, net||—||258||258|
|Adjusted EBITDA||$ 4,410||$ (521)||$ 3,889|
|(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.|
The loss from discontinued operations was $71,000 and $378,000 for the three months ended March 31, 2015 and 2014, respectively. The losses in the 2015 and 2014 periods primarily reflected legal and professional fees of $118,000 and $613,000, respectively, in connection with our recovery efforts (related to the 2012 Gold Peak settlement of $17,000,000), offset by income tax benefits of $47,000 and $235,000, respectively.
Future cash flows from discontinued operations are expected to be solely comprised of expenditures incurred as part of our cash recovery efforts from insurance companies and other potentially responsible parties and, to the extent that we are successful in these efforts, cash inflows from any future recoveries; however, there can be no assurance that the Company will recover any amounts in the short or long term.
Investor Conference Call
The Company will host a conference call on Thursday, April 30, 2015, 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 2015 results and other matters.
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 34404842, or "Reis." A replay of the conference call will be available from shortly after the conference call through midnight (EDT) on May 2, 2015 by dialing (855) 859-2056 from inside the U.S. or Canada or (404) 537-3406 from outside the U.S. and Canada, and referring to the conference ID: 34404842, or "Reis". An audio webcast of the conference call will also be available on Reis's website at investor.reis.com/events.cfm and will remain on the website for a period of time following the call.
Reis provides commercial real estate market information and analytical tools to real estate professionals 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, flex/research & development, self storage and seniors housing 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.
The Company's product portfolio features: Reis SE, its flagship delivery platform aimed at larger and mid-sized enterprises; ReisReports, aimed at prosumers and smaller enterprises; and Mobiuss Portfolio CRE, or Mobiuss, aimed primarily at risk managers and credit administrators at banks and non-bank lending institutions. It is through these products that Reis 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 asset and portfolio evaluations. Depending on the product or level of entitlement, users have access to market trends and forecasts 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, equity investors and service providers. 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, margins, 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 business prospects, potential acquisitions, sources and uses of cash, revenue, expenses, margins, income (loss) from continuing or discontinued operations, 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:
- lower than expected revenues and other performance measures such as income from continuing operations, EBITDA and Adjusted EBITDA;
- 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;
- inability to access adequate capital to fund operations and investments in our business;
- 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; and
- the risk factors listed under "Item 1A. Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2014, and in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2015, each filed with the Securities and Exchange Commission ("SEC"), including the "Risk Factors" section of these filings, and the Company's other filings with the SEC available at the SEC's website (www.sec.gov).
You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date of this 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 release or to reflect the occurrence of unanticipated events.
|REIS, INC. AND SUBSIDIARIES|
|CONSOLIDATED BALANCE SHEETS|
| March 31, |
|December 31, 2014|
|Cash and cash equivalents||$ 21,366,162||$ 17,745,077|
|Restricted cash and investments||212,756||212,625|
|Accounts receivable, net||5,772,020||12,627,063|
|Prepaid and other assets||3,675,274||4,164,320|
|Assets attributable to discontinued operations||3,500||3,500|
|Total current assets||31,029,712||34,752,585|
|Furniture, fixtures and equipment, net of accumulated depreciation of $2,219,319 and $2,158,647, respectively||803,360||850,866|
|Intangible assets, net of accumulated amortization of $34,810,936 and $33,589,746, respectively||14,542,409||14,681,410|
|Deferred tax asset, non-current portion, net||18,935,737||18,638,737|
|Total assets||$ 120,254,232||$ 123,888,043|
|LIABILITIES AND STOCKHOLDERS' EQUITY|
|Current portion of debt||$ —||$ —|
|Accrued expenses and other liabilities||2,577,188||4,170,687|
|Liabilities attributable to discontinued operations||344,038||299,025|
|Total current liabilities||24,238,007||27,354,999|
|Other long-term liabilities||374,919||419,638|
|Commitments and contingencies|
|Common stock, $0.02 par value per share, 101,000,000 shares authorized, 11,228,905 and 11,156,571 shares issued and outstanding, respectively||224,578||223,131|
|Additional paid in capital||105,491,879||105,605,803|
|Retained earnings (deficit)||(10,075,151)||(9,715,528)|
|Total stockholders' equity||95,641,306||96,113,406|
|Total liabilities and stockholders' equity||$ 120,254,232||$ 123,888,043|
|REIS, INC. AND SUBSIDIARIES|
|CONSOLIDATED STATEMENTS OF OPERATIONS|
| || For the Three Months Ended |
|Subscription revenue||$ 11,130,778||$ 9,946,045|
|Cost of sales of subscription revenue||2,185,440||1,916,345|
|Sales and marketing||2,653,014||2,552,020|
|General and administrative expenses||3,321,076||3,037,442|
|Total operating expenses||6,836,844||6,352,565|
|Other income (expenses):|
|Interest and other income||7,089||3,058|
|Total other income (expenses)||(21,124)||(25,155)|
|Income before income taxes and discontinued operations||2,087,370||1,651,980|
|Income tax expense||794,000||605,000|
|Income from continuing operations||1,293,370||1,046,980|
|(Loss) from discontinued operations, net of income tax (benefit) of $(47,000) and $(235,000), respectively||(71,354)||(377,878)|
|Net income||$ 1,222,016||$ 669,102|
|Per share amounts – basic:|
|Income from continuing operations||$ 0.12||$ 0.10|
|Net income||$ 0.11||$ 0.06|
|Per share amounts – diluted:|
|Income from continuing operations||$ 0.11||$ 0.09|
|Net income||$ 0.10||$ 0.06|
|Weighted average number of common shares outstanding:|
|Dividends declared per common share||$ 0.14||$ —|
CONTACT: Press Contact: Mark P. Cantaluppi Vice President, Chief Financial Officer Reis, Inc. (212) 921-1122