Reis Announces Third Quarter 2014 Results

Revenue Grows 19.2%; Income from Continuing Operations Up 60.4%

— New Customer Acquisition Driving Quarterly and Year-to-Date Performance —

NEW YORK, Oct. 29, 2014 (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 third quarter ended September 30, 2014.

Consolidated revenue, which is comprised entirely of subscription revenue generated by the Company's Reis Services segment, was $10,468,941 for the three months ended September 30, 2014, as compared to $8,780,212 for the three months ended September 30, 2013, an increase of 19.2%. This is the Company's 18^th consecutive quarterly increase in subscription revenue over the prior year's corresponding quarter. For the nine months ended September 30, 2014, subscription revenue was $30,609,361 as compared to $25,512,849 for the nine months ended September 30, 2013, an increase of 20.0%. All of the Company's revenue growth has been organically generated.

Income from continuing operations grew 60.4% in the three months ended September 30, 2014 to $1,130,388, or $0.10 per basic and diluted share. For the three months ended September 30, 2013, the Company had income from continuing operations of $704,898, or $0.06 per basic share and $0.05 per diluted share. For the nine months ended September 30, 2014, income from continuing operations grew 89.8% to $3,091,906, or $0.28 per basic share and $0.27 per diluted share, as compared to $1,628,960, or $0.15 per basic share and $0.14 per diluted share for the nine months ended September 30, 2013.

Net income, on a consolidated basis, grew 66.4% in the three months ended September 30, 2014 to $1,080,101, or $0.10 per basic share and $0.09 per diluted share. For the three months ended September 30, 2013, the Company had net income of $648,951, or $0.06 per basic share and $0.05 per diluted share. For the nine months ended September 30, 2014, the Company's net income grew 85.9% to $2,571,002, or $0.23 per basic share and $0.22 per diluted share, as compared to $1,383,091, or $0.13 per basic share and $0.12 per diluted share for the nine months ended September 30, 2013.

Reis Services EBITDA (which is earnings (defined as income (loss) from continuing operations) before interest, taxes, depreciation and amortization) was $4,285,000 during the three months ended September 30, 2014, an increase of $606,000, or growth of 16.5%, over the three months ended September 30, 2013 amount of $3,679,000. This is the Company's 16^th consecutive quarterly increase in Reis Services EBITDA over the prior year's corresponding quarter. The Reis Services EBITDA margins were 40.9% and 41.9% for the three months ended September 30, 2014 and 2013, respectively. For the nine months ended September 30, 2014 and 2013, Reis Services EBITDA was $12,442,000 and $10,519,000, respectively, an increase of $1,923,000, or growth of 18.3%. The Reis Services EBITDA margins were 40.6% and 41.2% for the nine months ended September 30, 2014 and 2013, 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 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, "Reis goes from strength to strength. Our outstanding revenue and EBITDA results speak for themselves, but what requires emphasis is our never-ending dialogue with the market. Only through responding quickly and comprehensively to the needs of our clients and prospects is it possible for us to sustain the type of growth that we have posted in recent years. Strong execution and the consistent introduction of new markets and property types continue to be the cornerstones of Reis's successful business model."

Quarterly Highlights

Following are recent financial and operational highlights for Reis:

• revenue growth was 19.2% in the third quarter of 2014 over the 2013 third quarter, an acceleration from the third quarter of 2013 over 2012 growth rate of 12.2% and the 18^th consecutive quarterly increase in subscription revenue over the prior year's corresponding quarter;
• year to date revenue growth was 20.0% for the nine months ended September 30, 2014;
• Reis Services EBITDA growth was 16.5% in the third quarter of 2014 over 2013, an acceleration from the third quarter of 2013 over 2012 growth rate of 14.0% and the 16^th consecutive quarterly increase in Reis Services EBITDA over the prior year's corresponding quarter;
• year to date Reis Services EBITDA growth was 18.3% for the nine months ended September 30, 2014;
• consolidated Adjusted EBITDA was $3,673,000 for the third quarter of 2014 (see reconciliations below), growth of 31.0% over the third quarter of 2013, with a margin of 35.1%;
• year to date consolidated Adjusted EBITDA was $10,436,000, growth of 28.4% over the comparable 2013 period, with a margin of 34.1%;
• Reis SE renewal rates for the trailing twelve months ended September 30, 2014 were 88% overall and 90% for institutional subscribers;
• deferred revenue ($18,188,000), Aggregate Revenue Under Contract ($40,707,000) and the forward twelve month component of Aggregate Revenue Under Contract ($27,318,000) continued to demonstrate a strong revenue base and visibility into our future revenue;
• declared and paid quarterly dividends to shareholders of $0.11 per share during each of the second and third quarters of 2014, or $2,462,000 in the aggregate;
• generated net cash of $5,838,000 in the nine months of 2014 (after investing $2,965,000 in our databases and websites and utilizing $2,462,000 for dividends), bringing our cash balance to $16,398,000 at September 30, 2014; and
• maintained the cash balance at approximately $16,400,000 from June 30, 2014 to September 30, 2014 while meeting all operational cost and obligations in addition to paying an aggregate dividend of $1,233,000 in September 2014.

Critical Metrics: Revenue; Deferred Revenue; Aggregate Revenue Under Contract; and EBITDA

Reis Services's revenue increased by approximately $1,689,000, or 19.2%, from the third quarter of 2013 to the third quarter of 2014 and increased approximately $5,097,000, or 20.0%, from the nine months ended September 30, 2013 to the 2014 comparable nine month period. The revenue increase over the corresponding prior quarterly period is the 18th consecutive quarterly increase in subscription revenue over the prior year's quarter. In addition, revenue increased by approximately $275,000, or 2.7%, from the second quarter of 2014 to the third quarter of 2014. In general, these revenue increases in 2014 reflect: (1) additional new Reis SE business; (2) revenue growth from Mobiuss; and (3) revenue growth from ReisReports. The Company's revenue growth reflects not just a single strong quarter, but also the momentum created by sustained contract growth during 2013 and through the first three quarters of 2014. The Company continues to post record bookings performance with respect to both the number and dollar value of contracts. Fiscal 2013, as well as the fourth quarter of 2013, represented unprecedented contract signings, surpassed again by 2014's year to date and third quarter results. The Company was able to achieve the revenue growth rates reported above while its renewal rates have been modestly trending lower over the past few quarters. The Company's overall renewal rates were 88% and 91% for the trailing twelve months ended September 30, 2014 and 2013, respectively (for institutional subscribers, the renewal rates were 90% and 92% for the trailing twelve months ended September 30, 2014 and 2013, respectively). The decline in the renewal rates reflects the Company's decision to be more aggressive on renewal pricing, particularly in instances where customer usage levels are significantly greater than what was initially estimated as annual usage for that customer. The Company believes 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. 

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 September 30, 2014 and 2013, respectively. A comparison of these balances at September 30 of each year is more meaningful than a comparison to the December 31, 2013 balances, as a greater percentage of renewals occur in the fourth quarter of each year and would distort the analysis.

Included in Aggregate Revenue Under Contract at September 30, 2014 was approximately $27,318,000 related to amounts under contract for the forward twelve month period through September 30, 2015. The remainder reflects amounts under contract beyond September 30, 2015. The forward twelve month Aggregate Revenue Under Contract amount is 68.6% of revenue on a trailing twelve month basis at September 30, 2014 of approximately $39,818,000. For comparison purposes, at September 30, 2013, the forward twelve month Aggregate Revenue Under Contract of $24,096,000 was 70.7% of revenue on a trailing twelve month basis at September 30, 2013.   

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. The then-record new business and contract signings in 2013, exceeded by the historic level of new business contracted during the nine months ended September 30, 2014 and the increased number of multi-year contracts signed in 2014, has had a significant positive impact on our reported amounts of deferred revenue and Aggregate Revenue Under Contract at September 30, 2014.

Reis Services EBITDA for the three months ended September 30, 2014 was $4,285,000, an increase of $606,000, or 16.5%, over the third quarter 2013 amount. The EBITDA increase over the corresponding prior quarterly period is the 16^th consecutive quarterly increase in EBITDA over the prior year's quarter. For the nine months ended September 30, 2014, Reis Services EBITDA was $12,442,000, an increase of $1,923,000, or 18.3%, over the comparable 2013 nine month period. On a consecutive quarter basis, Reis Services EBITDA increased $194,000, or 4.7%, from the second quarter of 2014 to the third quarter of 2014. These increases were primarily derived from the increases in revenue, as described above. Operating expenses also continued to grow, the net effect of which resulted in the Reis Services EBITDA margins of 40.9% and 40.6% for the three and nine months ended September 30, 2014, respectively as compared to 41.9% and 41.2% in the 2013 comparable periods. The reduction in the margins was the result of increased personnel related costs and our investment in maintaining our databases and new marketing initiatives.

Investment in our business remains a priority. This includes the development of new products and functionality, introducing new, or expanding existing databases, adding resources to grow our customer base and generate more revenue. Accordingly, we continue to hire in many departments, including in sales (both new business and account management) as well as in operations, including our data collection departments. With a growing head count, the Company leased additional space in the third quarter of 2013. The impact of this additional expense began in the fourth quarter of 2013. Separately, as Reis's business continues to grow, we are devoting additional resources to expand our sales pipeline through marketing efforts and sales force expansion. Collectively, the effects of increased personnel costs and our investment and marketing initiatives have resulted in margin reductions to the levels for the three and nine months ended September 30, 2014, reported above. The expectation for spending in the remainder of 2014 and into 2015 may result in margins for future quarters being at or below the 40.9% Reis Services EBITDA margin we reported for the third quarter of 2014.

Reconciliations of Income from Continuing Operations to EBITDA and Adjusted EBITDA (Segment and Consolidated)

We define EBITDA as earnings (defined as 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 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 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 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 (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:

(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 exclude the impact of discontinued operations.

Discontinued Operations

The loss from discontinued operations was $50,000 and $56,000 for the three months ended September 30, 2014 and 2013, respectively and $521,000 and $246,000 for the nine months ended September 30, 2014 and 2013, respectively. The losses in the 2014 and 2013 periods primarily reflected legal and professional fees in connection with our recovery efforts (related to the 2012 Gold Peak settlement of $17,000,000), in excess of any recoveries, and is net of any tax benefit. During the three and nine months ended September 30, 2014, the Company recovered $10,000 and $26,000, respectively and during the nine months ended September 30, 2013, the Company recovered $80,000. No recoveries occurred during the three months ended September 30, 2013.

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 Wednesday, October 29, 2014, 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 third quarter 2014 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 24150090, or "Reis." A replay of the conference call will be available from shortly after the conference call through midnight (EDT) on October 31, 2014 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: 24150090, or "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 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.

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, 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, 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;
• 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, 2013, and in our quarterly report on Form 10-Q for the quarter ended September 30, 2014, 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.