NEW YORK, May 09, 2017 (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, 2017.
Financial Highlights
Total revenue was $12.1 million for the three months ended March 31, 2017, which included subscription revenue of $11.6 million and other revenue of $0.5 million. Total revenue in the first quarter of 2016 was $12.8 million, which included $11.4 million of subscription revenue and $1.4 million of other revenue. While other revenue declined $0.8 million from a significant custom database deliverable in the 2016 period, subscription revenue in 2017’s first quarter grew 1.3% over the 2016 first quarter and grew 2.1% over the fourth quarter of 2016 to the highest level of subscription revenue in Reis’s history. The growth in subscription revenue was primarily attributable to improvement in our trailing twelve month renewal rates and continued strong new business.
Net income was $0.5 million, or $0.05 per diluted share, for the three months ended March 31, 2017 as compared to net income of $1.6 million, or $0.14 per diluted share, for the three months ended March 31, 2016.
Reis Services EBITDA was $3.3 million during the first quarter of 2017, a decline from the first quarter 2016 reported amount of $5.4 million. The Reis Services EBITDA margins were 27.1% and 42.0% for the three months ended March 31, 2017 and 2016, respectively (see the “Supplemental Financial Information and Reconciliations from GAAP to Non-GAAP Metrics” section at the end of this earnings release for a definition and reconciliations of net income to EBITDA and Adjusted EBITDA for the Reis Services segment and on a consolidated basis).
Consolidated Adjusted EBITDA was $2.6 million during the first quarter of 2017, a decline from the first quarter 2016 reported amount of $4.6 million. The consolidated Adjusted EBITDA margins were 21.3% and 36.1% for the three months ended March 31, 2017 and 2016, respectively.
The decreases in the first quarter 2017 net income, Reis Services EBITDA and consolidated Adjusted EBITDA have been impacted by the $0.7 million decline in total revenue (all of which resulted from higher other revenue in the 2016 period, as referred to above), coupled with an increase in operating expenses in 2017 over the corresponding 2016 period. The 18.7% increase in Reis Services operating expenses was planned and resulted from the hiring of sales and operational personnel throughout 2016 and the expected increase in rent related costs over the first quarter of 2016.
Reis’s CEO, Lloyd Lynford, stated, “Reis had a very impressive first quarter. As expected, our subscription revenue growth rate has strengthened, a trend which will further accelerate during the second half of 2017 as a result of improving renewal rates and the adoption of our new products. I am pleased to see our quarterly renewal rate, including price increases, reach 93.7% for the first quarter of 2017, a key factor in our sequential quarterly subscription revenue growth of 2.1%. In addition, our deferred revenue and aggregate revenue under contract increased 8.6% and 6.3%, respectively, over last year’s first quarter. Our “Every Comp, Everywhere” campaign with respect to our comparable sales product and our Affordable Housing module continue to distinguish the Reis offering from competitors. With our last difficult comparable reporting quarter behind us, we are confident that the resurgence in our financial performance will become apparent and reward all of Reis’s stakeholders. We have made the critical investments necessary to generate sustained growth.”
“The Reis business continues to generate significant cash,” further commented Mr. Lynford, “providing us the financial flexibility to invest in our products, pay dividends and strategically repurchase shares. In the first quarter of 2017 we spent over $1.5 million to repurchase 78,440 shares, and we remain opportunistic buyers.”
Product Highlights
Two of the biggest expected contributors to sales growth throughout 2017 will come from our recently expanded affordable housing database and the ongoing enhancements to our sales transaction database.
In August 2016, Reis introduced its ninth property type, affordable housing, with information on 176 counties in 45 metropolitan areas. Reis is the first and only provider of market information on the growing affordable housing sector. This initial coverage launch was followed by our February 2017 expansion of coverage of this property type to include information on 256 counties in 110 metropolitan areas. Our sales force made significant inroads in the fourth quarter of 2016 and the first quarter of 2017 selling this sector to existing banking customers and directly to affordable housing investors, and will focus on building upon those successes for the remainder of 2017.
A larger revenue opportunity relates to the September 2016 expansion of Reis’s commercial real estate sales transactions database which now includes virtually all U.S. markets and property types, regardless of geography or sector. The new offering is already appealing to mortgage and property originators and underwriters, brokers and appraisers, tax assessors, and any other real estate professionals seeking the most comprehensive database of CRE transactions to source deals, search for related business, or conduct due diligence. Reis’s sales transactions database includes key structural data points, including, but not limited to, address, land use code, parcel number and lot size, in addition to key transactional data points, such as buyer and seller name, sale price, sale date, deed reference, and financing details when available, as well as other critical data points and licensed photographs. We believe that these enhancements, coupled with the inclusion of land transactions in this database in 2017, will result in increased new sales opportunities in 2017 and a product that can be highly competitive and take market share from our competitors in this several hundred-million-dollar market.
Balance Sheet, Liquidity and Other Metrics
Following are balance sheet, liquidity and other metrics reported by the Company as of March 31, 2017:
- cash at March 31, 2017 was $21.5 million;
- investments in the Company’s website and database intangible assets aggregated $2.1 million for the quarter ended March 31, 2017 from our continuing strategy of providing more granular data at the property level;
- dividends declared and paid quarterly to shareholders during the first quarter ended March 31, 2017 aggregated $1.97 million, or a rate of $0.17 per share for the quarter;
- repurchases of the Company’s common stock during the first quarter of 2017 aggregated $1.5 million, for the purchase of 78,440 shares at an average price of $19.21 per share, leaving approximately $2.35 million available on our existing program to purchase additional shares in the future;
- deferred revenue ($24.2 million), Aggregate Revenue Under Contract ($48.1 million) (see the “Supplemental Financial Information and Reconciliations from GAAP to Non-GAAP Metrics” section at the end of this earnings release for a definition and reconciliations of deferred revenue to Aggregate Revenue Under Contract) and the forward twelve-month component of Aggregate Revenue Under Contract ($33.3 million) at March 31, 2017 each continue to demonstrate strong visibility into future revenue; and
- for the trailing twelve months ended March 31, 2017, the Company’s base renewal rate (renewal rate, excluding price increases) was 83.4% and the renewal rate, including price increases, was 86.5%. These rates are improved from the reported trailing twelve month rates at December 31, 2016 of 81.6% for our base renewal rate and 85.7% for the renewal rate, including price increases.
Additional Information
This press release should be read in conjunction with the quarterly report on Form 10-Q for the quarter ended March 31, 2017, which was filed with the Securities and Exchange Commission (“SEC”) on May 9, 2017. In addition, see the “Supplemental Financial Information and Reconciliations from GAAP to Non-GAAP Metrics” section at the end of this earnings release for a definition and reconciliations of net income to EBITDA and Adjusted EBITDA for the Reis Services segment and on a consolidated basis, as well as for other information.
Investor Conference Call
The Company will host a conference call on Tuesday, May 9, 2017, 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 2017 results, management’s outlook for 2017 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 13595213, or “Reis.” A replay of the conference call will be available from shortly after the conference call through 2:00 PM (EDT) on May 14, 2017 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: 13595213, 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.
About Reis
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, student housing and affordable 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 Reis Portfolio CRE, and other portfolio support products and services, 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.
For more information regarding Reis’s products and services, visit www.reis.com and www.reisreports.com
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, net income, cash flows, renewal rates, 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 (as defined herein); 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;
- competition;
- 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, 2016, which was filed with the Securities and Exchange Commission (“SEC”) on March 9, 2017, 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.
Supplemental Financial Information and Reconciliations from GAAP to Non-GAAP Metrics
| REIS, INC. AND SUBSIDIARIES | ||||||||
| CONSOLIDATED BALANCE SHEETS | ||||||||
| March 31, 2017 | December 31, 2016 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 21,535,980 | $ | 21,490,586 | ||||
| Accounts receivable, net | 8,787,005 | 10,743,505 | ||||||
| Prepaid and other assets | 1,089,171 | 792,991 | ||||||
| Total current assets | 31,412,156 | 33,027,082 | ||||||
| Furniture, fixtures and equipment, net of accumulated depreciation of $1,318,748 and $1,082,793, respectively | 5,320,129 | 5,260,443 | ||||||
| Intangible assets, net of accumulated amortization of $43,534,020 and $41,861,561, respectively | 18,378,463 | 17,922,282 | ||||||
| Deferred tax asset, net | 18,073,768 | 16,814,737 | ||||||
| Goodwill | 54,824,648 | 54,824,648 | ||||||
| Other assets | 278,300 | 295,349 | ||||||
| Total assets | $ | 128,287,464 | $ | 128,144,541 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Current portion of debt | $ | — | $ | — | ||||
| Accrued expenses and other liabilities | 3,528,359 | 4,031,444 | ||||||
| Deferred revenue | 24,182,323 | 25,031,100 | ||||||
| Total current liabilities | 27,710,682 | 29,062,544 | ||||||
| Other long-term liabilities | 2,533,295 | 1,902,081 | ||||||
| Total liabilities | 30,243,977 | 30,964,625 | ||||||
| Commitments and contingencies | ||||||||
| Stockholders’ equity: | ||||||||
| Common stock, $0.02 par value per share, 101,000,000 shares authorized, 11,534,753 and 11,272,150 shares issued and outstanding, respectively | 230,695 | 225,443 | ||||||
| Additional paid in capital | 109,289,158 | 107,668,599 | ||||||
| Retained earnings (deficit) | (11,476,366 | ) | (10,714,126 | ) | ||||
| Total stockholders’ equity | 98,043,487 | 97,179,916 | ||||||
| Total liabilities and stockholders’ equity | $ | 128,287,464 | $ | 128,144,541 | ||||
| REIS, INC. AND SUBSIDIARIES | ||||||||
| CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||
| (Unaudited) | ||||||||
| For the Three Months Ended March 31, | ||||||||
| 2017 | 2016 | |||||||
| Revenue: | ||||||||
| Subscription revenue | $ | 11,579,362 | $ | 11,427,979 | ||||
| Other revenue | 546,592 | 1,395,773 | ||||||
| Total revenue | 12,125,954 | 12,823,752 | ||||||
| Cost of sales | 3,366,351 | 2,461,571 | ||||||
| Gross profit | 8,759,603 | 10,362,181 | ||||||
| Operating expenses: | ||||||||
| Sales and marketing | 3,328,048 | 2,667,992 | ||||||
| Product development | 1,166,671 | 1,005,284 | ||||||
| General and administrative expenses | 4,120,484 | 4,084,711 | ||||||
| Total operating expenses | 8,615,203 | 7,757,987 | ||||||
| Other income (expenses): | ||||||||
| Interest and other income | 576 | 8,256 | ||||||
| Interest expense | (32,234 | ) | (21,325 | ) | ||||
| Total other income (expenses) | (31,658 | ) | (13,069 | ) | ||||
| Income before income taxes | 112,742 | 2,591,125 | ||||||
| Income tax (benefit) expense | (422,000 | ) | 987,000 | |||||
| Net income | $ | 534,742 | $ | 1,604,125 | ||||
| Net income per common share: | ||||||||
| Basic | $ | 0.05 | $ | 0.14 | ||||
| Diluted | $ | 0.05 | $ | 0.14 | ||||
| Weighted average number of common shares outstanding: | ||||||||
| Basic | 11,447,309 | 11,283,752 | ||||||
| Diluted | 11,776,375 | 11,725,806 | ||||||
| Dividends declared per common share | $ | 0.17 | $ | 0.17 | ||||
Revenue Comparisons
In order to provide insight into 2017 and 2016 relative performance, we have disaggregated total revenue into two components: “Subscription” and “Other.” Other revenue specifically includes revenue related to contracts for one-time custom data deliverables and one-time fees for settlements of previous unauthorized usage of Reis data. The following tables present subscription revenue, other revenue and total revenue for the three months ended March 31, 2017 and 2016.
| (amounts in thousands, excluding percentages) | ||||||||||||||||||||||||
| For the Three Months Ended March 31, | ||||||||||||||||||||||||
| 2017 | 2016 | Variance | ||||||||||||||||||||||
| $ | % of Total | $ | % of Total | $ | % | |||||||||||||||||||
| Subscription revenue | $ | 11,579 | 95.5 | % | $ | 11,428 | 89.1 | % | $ | 151 | 1.3 | % | ||||||||||||
| Other revenue (A) | 547 | 4.5 | % | 1,396 | 10.9 | % | (849 | ) | (60.8 | )% | ||||||||||||||
| Total revenue | $ | 12,126 | 100.0 | % | $ | 12,824 | 100.0 | % | $ | (698 | ) | (5.4 | )% | |||||||||||
| (A) | Other revenue includes non-subscription revenue comprised of (1) non-subscription custom data deliverables and (2) one- time settlements. | |||||||||||||||||||||||
Reconciliations of Net Income to EBITDA and Adjusted EBITDA
We define EBITDA as earnings (net income) 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 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), 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, net income, 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 Net Income to EBITDA and Adjusted EBITDA for the Three Months Ended March 31, 2017 | By Segment | ||||||||||||
| Reis Services | Other (A) | Consolidated | |||||||||||
| Net income | $ | 535 | |||||||||||
| Income tax (benefit) | (422 | ) | |||||||||||
| Income (loss) before income taxes | $ | 1,349 | $ | (1,236 | ) | 113 | |||||||
| Add back: | |||||||||||||
| Depreciation and amortization expense | 1,908 | — | 1,908 | ||||||||||
| Interest expense (income), net | 32 | — | 32 | ||||||||||
| EBITDA | 3,289 | (1,236 | ) | 2,053 | |||||||||
| Add back: | |||||||||||||
| Stock based compensation expense, net | — | 535 | 535 | ||||||||||
| Adjusted EBITDA | $ | 3,289 | $ | (701 | ) | $ | 2,588 | ||||||
| Reconciliation of Net Income to EBITDA and Adjusted EBITDA for the Three Months Ended March 31, 2016 | By Segment | ||||||||||
| Reis Services | Other (A) | Consolidated | |||||||||
| Net income | $ | 1,604 | |||||||||
| Income tax expense | 987 | ||||||||||
| Income (loss) before income taxes | $ | 3,880 | $ | (1,289 | ) | 2,591 | |||||
| Add back: | |||||||||||
| Depreciation and amortization expense | 1,489 | 2 | 1,491 | ||||||||
| Interest expense (income), net | 13 | — | 13 | ||||||||
| EBITDA | 5,382 | (1,287 | ) | 4,095 | |||||||
| Add back: | |||||||||||
| Stock based compensation expense, net | — | 534 | 534 | ||||||||
| Adjusted EBITDA | $ | 5,382 | $ | (753 | ) | $ | 4,629 | ||||
| (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. |
Deferred Revenue and Aggregate Revenue Under Contract
Two balance-sheet based 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. Aggregate Revenue Under Contract is the sum of deferred revenue and future revenue under non-cancellable contracts for which we do not yet have the contractual right to bill and excludes any future revenues expected to be derived from subscribers currently being billed on a monthly basis.
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. At any given date, both deferred revenue and Aggregate Revenue Under Contract can be either positively or negatively 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. The following table reconciles deferred revenue to Aggregate Revenue Under Contract at March 31, 2017 and 2016, respectively. A comparison of these balances at March 31 of each year is more meaningful than a comparison to the December 31, 2016 balances, as a greater percentage of renewals occur in the fourth quarter of each year and would distort the analysis.
| March 31, | |||||||
| 2017 | 2016 | ||||||
| Deferred revenue (GAAP basis) | $ | 24,182,000 | $ | 22,268,000 | |||
| Amounts under non-cancellable contracts for which the Company does not yet have the contractual right to bill at the period end (A) | 23,944,000 | 22,994,000 | |||||
| Aggregate Revenue Under Contract | $ | 48,126,000 | $ | 45,262,000 | |||
| (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, 2017 was approximately $33,331,000 related to amounts under contract for the forward twelve month period through March 31, 2018. The remainder reflects amounts under contract beyond March 31, 2018. The forward twelve month Aggregate Revenue Under Contract amount is approximately 71.2% of total revenue on a trailing twelve month basis at March 31, 2017 of approximately $46,832,000. For comparison purposes, at March 31, 2016, the forward twelve month Aggregate Revenue Under Contract was $31,486,000 and approximately 59.9% of total revenue.