NEW YORK, May 03, 2016 (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 for the first quarter ended March 31, 2016.
Subscription revenue was $12,824,000 for the three months ended March 31, 2016, growth of 15.2% over the three months ended March 31, 2015 revenue of $11,131,000. This is the Company’s 24th consecutive quarterly increase in subscription revenue over the prior year’s corresponding quarter.
Income from continuing operations grew 24.1% to $1,604,000, or $0.14 per basic and diluted share, for the three months ended March 31, 2016, as compared to $1,293,000, or $0.12 per basic share and $0.11 per diluted share, for the three months ended March 31, 2015.
Reis Services EBITDA was $5,382,000 during the first quarter of 2016, growth of $788,000, or 17.2%, over the first quarter 2015 amount of $4,594,000. This is the Company’s 22nd consecutive quarterly increase in EBITDA over the prior year’s corresponding quarter. The Reis Services EBITDA margins were 42.0% and 41.3% for the three months ended March 31, 2016 and 2015, respectively (see below for a definition and reconciliations of income from continuing operations to EBITDA and Adjusted EBITDA for the Reis Services segment and on a consolidated basis).
Consolidated Adjusted EBITDA was $4,629,000 during the first quarter of 2016, growth of $748,000, or 19.3% over the first quarter of 2015 amount of $3,881,000. The consolidated Adjusted EBITDA margins were 36.1% and 34.9% for the three months ended March 31, 2016 and 2015, respectively.
Reis’s CEO, Lloyd Lynford, stated, “Once again, Reis has delivered another excellent quarter of organic growth. We continue to execute our business plan, which places an emphasis on enhancing individual property records across all sectors and geographies. At the same time, we are on track to introduce in the second quarter an entirely unprecedented suite of state-of-the-art analytical tools for investors who make capital allocation decisions on a daily basis. Reis’s relentless focus on product innovation and excellence is its leading asset.”
Following are recent financial highlights for Reis:
- revenue growth was 15.2% in the first quarter of 2016 over the 2015 first quarter;
- Reis Services EBITDA of $5,382,000 for the first quarter of 2016 (see reconciliations below) grew 17.2% over the 2015 period, with a margin of 42.0%;
- consolidated Adjusted EBITDA of $4,629,000 for the first quarter of 2016 (see reconciliations below) grew 19.3% over the first quarter of 2015, with a margin of 36.1%;
- Reis SE renewal rates for the trailing twelve months ended March 31, 2016 were 86% overall and 88% for institutional subscribers;
- deferred revenue ($22,268,000), Aggregate Revenue Under Contract ($45,262,000) and the forward twelve month component of Aggregate Revenue Under Contract ($31,486,000) at March 31, 2016 each continue to demonstrate strong visibility into future revenue;
- cash was $28,911,000 at March 31, 2016 – Reis generated cash from its operations of $6,075,000 during the quarter;
- continued its investment in its websites and databases with capital expenditures of $2,164,000 in the first quarter of 2016;
- declared and paid a quarterly dividend to shareholders of $0.17 per share in the first quarter of 2016, for an aggregate payment of $1,936,000, which was a $0.03 per share increase over the 2015 quarterly dividend rate (a 21.4% increase); and
- negotiated and closed a three-year revolving credit agreement in January 2016 with increased availability of up to $20,000,000.
Investor Conference Call
The Company will host a conference call on Tuesday, May 3, 2016, 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 2016 results, management’s outlook for 2016 and other matters.
The dial-in number from inside the U.S. and 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 2055781, or “Reis.” A replay of the conference call will be available from shortly after the conference call through 2:00 PM (EDT) on May 6, 2016 by dialing (855) 859-2056 from inside the U.S. and Canada or (404) 537-3406 from outside the U.S. and Canada, and referring to the conference ID: 2055781, and “Reis”. 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.
Information as Reported in the Quarterly Report on Form 10-Q for the Quarter Ended March 31, 2016
2016 Revenue Performance
All of the Company’s revenue is generated by the Reis Services segment. Reis Services revenue increased by approximately $1,693,000, or 15.2%, from the first quarter of 2015 to the first quarter of 2016. In general, the revenue increase in 2016 primarily reflects $1,200,000 of revenue from custom data deliverables for one of our existing Reis SE subscribers, additional new Reis SE business to new customers, revenue from firms and individuals who had been previously gaining unauthorized access to our services and were identified as part of our compliance procedures, sales of new content to existing subscribers and price increases on renewals. Revenue was negatively affected in the quarter by a 200 basis point decline in our trailing twelve month renewal rate.
The Company’s overall trailing twelve month renewal rates as of March 31, 2016 and 2015 were 86% and 88%, respectively (for institutional subscribers, the trailing twelve month renewal rates as of March 31, 2016 and 2015 were 88% and 90%, respectively). On our renewals, we are experiencing mid-single digit increases in renewal pricing. Beginning in 2014, the Company has been 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 has continued this policy throughout 2015 and in the first quarter of 2016, believing that aligning client report consumption and value with appropriate annual fees, while remaining respectful of subscriber need for Reis information, is critical to the Company’s long-term growth and to the protection of the value of its intellectual property. 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 annual and multi-year subscription 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 2015 was not an exception to that trend.
Over the past four 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 was approximately 2.2 years. 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. There are significant benefits, 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 a multi-year contract includes pricing steps on and after the first anniversary, there will be increasing cash flow from the contract, but no growth in revenue during the subsequent years under that contract. At December 31, 2015, approximately one-third of our customers were signed to multi-year contracts, including many of our largest subscribers. The March 31, 2016 reported levels of deferred revenue and Aggregate Revenue Under Contract of $22,268,000 and $45,262,000, respectively, suggest strong financial performance during 2016. However, the effect of having such a significant segment of our subscriber base under multi-year agreements may result in variability in our growth rates.
Deferred Revenue and Aggregate Revenue Under Contract
Two additional metrics management utilizes are deferred revenue and Aggregate Revenue Under Contract. Analyzing these amounts can provide additional insight into Reis Services’s future financial performance. Deferred revenue, which is a GAAP basis accounting concept and is reported by the Company on the consolidated balance sheet, represents revenue from annual or longer term contracts for which we have billed and/or received payments from our subscribers related to services we will be providing over the remaining contract period. It does not include future revenue under non-cancellable contracts for which we do not yet have the contractual right to bill; this aggregate number we refer to as Aggregate Revenue Under Contract. Deferred revenue will be recognized as revenue ratably over the remaining life of a contract for subscriptions, or in the case of future custom reports or projects, will be recognized as revenue upon completion and delivery to the customer, provided no significant Company obligations remain. The following table reconciles deferred revenue to Aggregate Revenue Under Contract at March 31, 2016 and 2015, respectively. A comparison of these balances at March 31 of each year is more meaningful than a comparison to the December 31, 2015 balances, as a greater percentage of renewals occur in the fourth quarter of each year and would distort the analysis.
|Deferred revenue (GAAP basis)||$||22,268,000||$||21,317,000|
|Amounts under non-cancellable contracts for which the Company does not yet have the contractual right to bill at the period end (A)||22,994,000||25,224,000|
|Aggregate Revenue Under Contract||$||45,262,000||$||46,541,000|
(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.
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. Included in Aggregate Revenue Under Contract at March 31, 2016 was approximately $31,486,000 related to amounts under contract for the forward twelve month period through March 31, 2017. The remainder reflects amounts under contract beyond March 31, 2017. The forward twelve month Aggregate Revenue Under Contract amount is approximately 59.9% of revenue on a trailing twelve month basis at March 31, 2016 of approximately $52,583,000 (or 65.6% when adjusted for the impact of $4,586,000 of revenue from certain custom data and portfolio advisory services which was included in the trailing twelve month revenue). For comparison purposes, at March 31, 2015, the forward twelve month Aggregate Revenue Under Contract was $30,906,000 and approximately 72.7% of revenue.
2016 Reis Services EBITDA and Consolidated Adjusted EBITDA Performance
Reis Services EBITDA for the three months ended March 31, 2016 was $5,382,000, an increase of $788,000, or 17.2%, over the first quarter 2015 amount. The increase was primarily derived from the increase in revenue, as described above. Operating expenses grew by 13.8% in the first quarter of 2016 over the 2015 comparable period, an acceleration over the expense growth in the 2015 first quarter over the 2014 comparable quarter of 11.2%. The Reis Services EBITDA margin of 42.0% for the three months ended March 31, 2016 was slightly greater than the reported Reis Services EBITDA margin of 41.3% in the 2015 comparable period.
Consolidated Adjusted EBITDA for the three months ended March 31, 2016 was $4,629,000, an increase of $748,000 or 19.3%, over the first quarter 2015 amount. The increase in Adjusted EBITDA reflects the revenue and Reis Services EBITDA increases discussed above. The consolidated Adjusted EBITDA margin was 36.1% for the first quarter of 2016.
Investment in our business remains a priority. Our employee headcount in the sales and operational groups is expected to increase in 2016 and we expect to accelerate our marketing initiatives that were set in place in the latter part of 2014 and which were being implemented in 2015. These are sound investments that will further differentiate Reis among U.S. commercial real estate market information providers. As stated in the “— Management Summary” section of Item 7. of our annual report on Form 10-K for the year ended December 31, 2015, as filed with the SEC on March 3, 2016, continuing investments and occupancy related costs will negatively impact our annual Reis Services EBITDA and consolidated Adjusted EBITDA growth rates for 2016 and cause temporary declines in our Reis Services EBITDA and consolidated Adjusted EBITDA margins in 2016. Variability in growth rates and margins could occur quarter to quarter in 2016. We believe that any declines will be temporary 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, 2016
|Reis Services||Other (A)||Consolidated|
|Income from continuing operations||$||1,604|
|Income tax expense||987|
|Income (loss) before income taxes and discontinued operations||$||3,880||$||(1,289||)||2,591|
|Depreciation and amortization expense||1,489||2||1,491|
|Interest expense (income), net||13||—||13|
|Stock based compensation expense, net||—||534||534|
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|
(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 are excluded from these reconciliations for all periods presented.
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, seniors housing and student 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 (as defined herein), Adjusted EBITDA (as defined herein) 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, 2015, which was 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, and are 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, |
|Cash and cash equivalents||$||28,910,705||$||28,657,956|
|Restricted cash and investments||212,268||212,268|
|Accounts receivable, net||7,107,240||13,741,169|
|Prepaid and other assets||1,114,240||670,339|
|Total current assets||37,344,453||43,281,732|
|Furniture, fixtures and equipment, net of accumulated depreciation of $2,533,158 and $2,449,985, respectively||1,529,107||804,427|
|Intangible assets, net of accumulated amortization of $40,116,778 and $38,738,292, respectively||16,297,789||15,686,954|
|Deferred tax asset, net||17,689,737||18,429,737|
|LIABILITIES AND STOCKHOLDERS’ EQUITY|
|Current portion of debt||$||—||$||—|
|Accrued expenses and other liabilities||4,197,652||5,898,226|
|Liabilities attributable to discontinued operations||—||145,737|
|Total current liabilities||26,466,048||31,335,462|
|Other long-term liabilities||279,799||284,316|
|Commitments and contingencies|
|Common stock, $0.02 par value per share, 101,000,000 shares authorized, 11,316,326 and 11,256,405 shares issued and outstanding, respectively||226,326||225,128|
|Additional paid in capital||107,136,520||107,102,433|
|Retained earnings (deficit)||(6,080,409||)||(5,748,113||)|
|Total stockholders’ equity||101,282,437||101,579,448|
|Total liabilities and stockholders’ equity||$||128,028,284||$||133,199,226|
|REIS, INC. AND SUBSIDIARIES|
|CONSOLIDATED STATEMENTS OF OPERATIONS|
|For the Three Months Ended|
|Cost of sales of subscription revenue||2,461,571||2,185,440|
|Sales and marketing||2,667,992||2,653,014|
|General and administrative expenses||4,084,711||3,321,076|
|Total operating expenses||7,757,987||6,836,844|
|Other income (expenses):|
|Interest and other income||8,256||7,089|
|Total other income (expenses)||(13,069||)||(21,124||)|
|Income before income taxes and discontinued operations||2,591,125||2,087,370|
|Income tax expense||987,000||794,000|
|Income from continuing operations||1,604,125||1,293,370|
|Loss from discontinued operations, net of income tax expense (benefit) of $— and $(47,000), respectively||—||(71,354||)|
|Per share amounts – basic:|
|Income from continuing operations||$||0.14||$||0.12|
|Per share amounts – diluted:|
|Income from continuing operations||$||0.14||$||0.11|
|Weighted average number of common shares outstanding:|
|Dividends declared per common share||$||0.17||$||0.14|
Press Contact: Mark P. Cantaluppi Vice President, Chief Financial Officer Reis, Inc. (212) 921-1122