Reis, Inc. Announces Fourth Quarter and Year End 2013 Results

NEW YORK, March 6, 2014 (GLOBE NEWSWIRE) -- Reis, Inc. (Nasdaq:REIS) ("Reis" or the "Company"), a leading provider of commercial real estate market information and analytical tools, announced the following financial results.

Subscription revenue was $9,208,239 for the three months ended December 31, 2013, as compared to $8,581,486 for the three months ended December 31, 2012, a 7.3% organic growth rate. Our fourth quarter growth is the 15^th consecutive quarterly increase in revenue over the prior year's corresponding quarter. On a pro forma basis (excluding incremental revenue from a custom project in 2012), revenue grew 12.9% in the fourth quarter of 2013 over 2012.

For the year ended December 31, 2013, subscription revenue was $34,721,088, as compared to $31,228,644 for the year ended December 31, 2012, an 11.2% organic growth rate. On a pro forma basis (excluding incremental revenue from a custom project in 2012), annual revenue grew 13.2% year over year. Our 2013 annual revenue marks the fourth consecutive year of revenue growth, the third consecutive year of double digit annual revenue growth and growth in 11 of the last 12 years dating back to the launch of our online services in 2001.

Income from continuing operations was $16,304,471, or $1.49 per basic share and $1.42 per diluted share, for the three months ended December 31, 2013. For the three months ended December 31, 2012, the Company had income from continuing operations of $6,519,082, or $0.61 per basic share and $0.58 per diluted share. For the year ended December 31, 2013, income from continuing operations was $17,933,431, or $1.65 per basic share and $1.57 per diluted share. Income from continuing operations was $8,013,330 for the year ended December 31, 2012, or $0.75 per basic share and $0.73 per diluted share.

On a consolidated basis, the Company had net income of $16,213,851, or $1.49 per basic share and $1.41 per diluted share, for the three months ended December 31, 2013. For the three months ended December 31, 2012, the Company had net income of $7,066,535, or $0.66 per basic share and $0.63 per diluted share. For the year ended December 31, 2013, the Company had net income of $17,596,942 or $1.62 per basic share and $1.54 per diluted share. The Company had a net loss of $(4,283,582) for the year ended December 31, 2012, or $(0.40) per basic share and $(0.39) per diluted share.

Income from continuing operations and net income were positively impacted in both the fourth quarter and annual 2013 periods by a $15.2 million reduction in the valuation allowance related to the Company's deferred tax assets. The consolidated net loss for the year ended December 31, 2012 was negatively impacted by a net $12,296,912 loss from discontinued operations resulting from the litigation related to the Company's former Gold Peak condominium development project, offset by a net tax benefit of $5,427,000, primarily from the reduction in the valuation allowance against a portion of the Company's deferred tax assets.

Reis's CEO, Lloyd Lynford, stated, "Reis's record financial performance during 2013 continues a long-standing trend: consistent innovation and the disciplined introduction of quality products that keeps our renewal rate above 90% while strengthening our competitive position in acquiring new clients. Constant enhancements to our products, technology platform and our expanding sales force, continue to deliver double-digit revenue and EBITDA growth while providing superior decision support to our subscribers. The upcoming launch of our senior housing coverage in May, and consistent enhancement to our Mobiuss portfolio analytics product represent promising developments for 2014 with respect to sustaining our financial trajectory."

Reis Services EBITDA (earnings before interest, taxes, depreciation and amortization) was $3,788,000 during the fourth quarter of 2013, an increase of $245,000, or 6.9%, compared to $3,543,000 during the fourth quarter 2012. The EBITDA margins were 41.1% and 41.3% for the three months ended December 31, 2013 and 2012, respectively. For the years ended December 31, 2013 and 2012, Reis Services EBITDA was $14,307,000 and $12,762,000, respectively, representing growth of $1,545,000, or 12.1%. The EBITDA margins were 41.2% and 40.9% for the respective annual periods. On a pro forma basis, EBITDA grew 21.6% in the fourth quarter of 2013 over 2012 and 17.3% year over year.

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 Reconciliations of Income from Continuing Operations to EBITDA and Adjusted EBITDA below for the Reis Services segment and on a consolidated basis). Also, a description of the pro forma presentation of revenue and EBITDA is included below.

Financial and Operational Highlights

Following are recent financial and operational highlights for Reis:

• revenue growth was 7.3% in the fourth quarter of 2013 over the fourth quarter of 2012 (or 12.9% on a pro forma basis, as more fully described below), the 15^th consecutive quarterly increase in revenue over the prior year's corresponding quarter;
• annual revenue growth was 11.2% in 2013 over 2012 (or 13.2% on a pro forma basis, also as described below);
• Reis Services EBITDA growth was 6.9% in the fourth quarter of 2013 over the 2012 comparable period (or 21.6% on a pro forma basis), the 13^th consecutive quarterly increase in EBITDA over the prior year's corresponding quarter;
• Reis Services annual EBITDA growth was 12.1% in 2013 over 2012 (or 17.3% on a pro forma basis);
• Reis SE renewal rates for the trailing twelve months ended December 31, 2013 were 91% overall and 93% for institutional subscribers;
• Subscribers to Reis SE grew 17.8% in 2013 to 994 at December 31, 2013 (compared to 844 subscribers at December 31, 2012);
• new business and total contract signings were at all-time highs in the fourth quarter and year of 2013;
• deferred revenue ($20,284,000), Aggregate Revenue Under Contract ($40,330,000) and the forward twelve month component of Aggregate Revenue Under Contract ($27,338,000), each respectively the largest balances we have posted for these metrics, continue to demonstrate strong visibility into our future revenue;
• cash generation of $5,599,000 in the twelve months, brought our cash balance to $10,560,000 at December 31, 2013;
• continued to invest in our business as we spent an aggregate of $4,051,000 on our web sites and databases to further differentiate us from competitors;
• further enhanced the value proposition for our subscribers with the November 1, 2013 publication of "Executive Briefings," narrative reports on over 2,800 metropolitan areas and submarkets, which during the fall of 2013 became our second most popular among out suite of reports; and
• we are preparing for our May 2014 launch of senior housing/congregate care, our seventh property type, which represents a major competitive advantage in the market place.

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

Reis Services's revenue increased by approximately $628,000, or 7.3%, from the fourth quarter of 2012 to the fourth quarter of 2013 and $3,492,000, or 11.2%, for the year ended December 31, 2013 over the comparable 2012 annual period. The revenue increase over the corresponding prior quarterly period is the 15^th consecutive quarterly increase in revenue over the prior year's quarter. In addition, revenue increased by approximately $429,000, or 4.9%, from the third quarter of 2013 to the fourth quarter of 2013. In general, these revenue increases reflect: (1) additional new Reis SE business; (2) revenue growth from ReisReports; and (3) revenue from Mobiuss in the 2013 periods. The Company's revenue growth reflects not just a single strong revenue quarter, but also the momentum created by sustained contract growth during 2012 and throughout 2013. In 2013, the Company had its best booking year and the fourth quarter was the best booking quarter in Reis's history. The Company's overall renewal rate remained at 91% for the trailing twelve months ended December 31, 2013 and 2012 (for institutional subscribers, the renewal rates were 93% both at December 31, 2013 and 2012, respectively). Total Reis SE subscribers increased to 994 at December 31, 2013 from 844 subscribers at December 31, 2012.

As we disclosed in prior filings including the Company's 2012 Annual Report filed on Form 10-K and its quarterly reports filed during 2013, revenue in the fourth quarter and annual 2012 periods included incremental revenue from one specific custom project of $427,000 and $569,000, respectively. Excluding this custom project from our 2012 reported revenue would result, on a pro forma basis, in revenue growth of 12.9% in the fourth quarter of 2013 over 2012 and 13.2% for the 2013 annual period over the 2012 annual period (in contrast with our reported growth rates of 7.3% and 11.2%, respectively). Pro forma revenue growth was 16.8% in the fourth quarter of 2012 over 2011 and 12.8% for the 2012 annual period over the 2011 annual period (in contrast with our reported amounts of growth of 23.0% and 14.9%, respectively).

Reis's revenue model is based primarily on annual subscriptions that are paid in accordance with contractual billing terms. Reis recognizes revenue from its contracts on a ratable basis; for example, one-twelfth of the value of a one-year contract is recognized monthly. Therefore, increases in the dollar value of new contracts are spread evenly over the life of a contract, thereby moderating an immediate impact on revenue. Historically, the largest percentage of our contracts are executed in the fourth quarter of each year.

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 December 31, 2013 and 2012, respectively.

Included in Aggregate Revenue Under Contract at December 31, 2013 was approximately $27,338,000 related to amounts under contract for the forward twelve month period through December 31, 2014. The remainder reflects amounts under contract beyond December 31, 2014. The forward twelve month Aggregate Revenue Under Contract amount is approximately 79% of revenue on a trailing twelve month basis at December 31, 2013. For comparison purposes, at December 31, 2012 and 2011, the forward twelve month Aggregate Revenue Under Contract was $23,947,000 and $20,064,000, respectively, and as a percentage of that year's revenue was approximately 77% and 74%, respectively.   

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. Coupled with record new business and contract signings in 2013, the Company continued to sign new multi-year contracts.

EBITDA for the three months ended December 31, 2013 was $3,788,000, an increase of $245,000, or 6.9%, over the fourth quarter 2012 amount and increased $1,545,000, or 12.1%, in the year ended December 31, 2013 over the comparable 2012 annual period. On a consecutive quarter basis, EBITDA increased $109,000, or 3.0%, from the third quarter of 2013 to the fourth quarter of 2013. These increases were primarily derived from the corresponding increases in revenue, as described above. Operating expenses also continued to grow, but at a slower pace than revenue growth, the net effect of which resulted in the Reis Services EBITDA margins of 41.1% and 41.2% for the three months and year ended December 31, 2013 consistent with the 41.3% and 40.9% reported amounts in the 2012 comparable periods.

EBITDA in the fourth quarter and annual 2012 periods was similarly impacted from the aforementioned incremental custom work. Excluding only that incremental custom revenue from our reported 2012 EBITDA, would result, on a pro forma basis, in EBITDA growth of 21.6% in the fourth quarter of 2013 over 2012 and 17.3% for the 2013 annual period over the 2012 annual period (in contrast with our reported growth rates of 6.9% and 12.1%, respectively). The pro forma EBITDA growth was 13.4% in the fourth quarter of 2012 over 2011 and 12.5% for the 2012 annual period over the 2011 annual period (in contrast with our reported amounts of growth of 28.9% and 17.8%, respectively).

Reinvestment in our business remains a priority, including developing new products and functionality, expanding our databases or adding resources to grow our customer base. 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 expect to devote additional resources to expand our sales pipeline through marketing efforts and sales force expansion. This additional spending may reduce our margins in 2014 below the 41.2% Reis Services EBITDA margin we reported for the 2013 annual period.

Reconciliations of Income from Continuing Operations to EBITDA and Adjusted EBITDA

EBITDA is earnings (defined as income (loss) from continuing operations) before interest, taxes, depreciation and amortization. Adjusted EBITDA is earnings before interest, taxes, depreciation, amortization and stock based compensation. Although EBITDA and Adjusted EBITDA are not measures of performance calculated in accordance with GAAP, senior management uses EBITDA and Adjusted EBITDA to measure operational and management performance. Management believes that EBITDA and Adjusted EBITDA are appropriate metrics that may be used by investors as supplemental financial measures to be considered in addition to the reported GAAP basis financial information to assist investors in evaluating and understanding: (1) the performance of the Reis Services segment, the primary business of the Company and (2) the Company's continuing consolidated results, from year to year or period to period, as applicable. Further, these measures provide the reader with the ability to understand our operational performance while isolating non-cash charges, such as depreciation and amortization expenses, as well as other non-operating items, such as interest income, interest expense and income taxes and, in the case of Adjusted EBITDA, isolates non-cash charges for stock based compensation. Management also believes that disclosing EBITDA and Adjusted EBITDA will provide better comparability to other companies in the information services sector. EBITDA and Adjusted EBITDA are presented both for the Reis Services business and on a consolidated basis.  We believe that these metrics, for Reis Services, provide the reader with valuable information for evaluating the financial performance of the core Reis Services business, excluding public company costs, and to make assessments about the intrinsic value of that stand-alone business to a potential acquirer.  Management primarily monitors and measures its performance, and is compensated, based on the results of the Reis Services business. EBITDA and Adjusted EBITDA, on a consolidated basis, allow the reader to make assessments about the current trading value of the Company's common stock, including expenses related to operating as a public company.  However, investors should not consider these measures in isolation or as substitutes for net income (loss), income from continuing operations, operating income, or any other measure for determining operating performance that is calculated in accordance with GAAP. In addition, because EBITDA and Adjusted EBITDA are not calculated in accordance with GAAP, they may not necessarily be comparable to similarly titled measures employed by other companies. Reconciliations of EBITDA and Adjusted EBITDA to the most comparable GAAP financial measure, income from continuing operations, follow for each identified period on a segment basis (including the Reis Services segment), as well as on a consolidated basis:

Discontinued Operations

In the three and twelve months ended December 31, 2013, the loss from discontinued operations, net of taxes, was $91,000 and $336,000, respectively, including the benefit of $80,000 of insurance recoveries in June 2013. The fourth quarter and year are net of a $230,000 income tax benefit. The losses from discontinued operations in 2013 are primarily legal and professional fees in connection with our recovery efforts related to the 2012 Gold Peak settlement. The consolidated net loss for the year ended December 31, 2012 was primarily the result of the $12.3 million loss from discontinued operations, net of taxes, which included a net $11.6 million charge, plus other costs, related to the March 2012 jury verdict and subsequently negotiated June 2012 settlement of the litigation related to the Company's former Gold Peak condominium development project.

Future cash flows from discontinued operations will 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 additional amounts in the short or long-term.

Income Taxes

The Company has aggregate Federal, state and local NOL carryforwards aggregating approximately $66,006,000 at December 31, 2013.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The net deferred tax asset was approximately $23,789,000 and $9,622,000 at December 31, 2013 and 2012, respectively, of which $2,472,000 and $1,065,000 is reflected as a net current asset in prepaid and other assets and $21,317,000 and $8,557,000 is reflected separately as a net non-current asset in the accompanying consolidated balance sheets, respectively. The significant portion of the deferred tax items primarily relate to: (1) NOL carryforwards; (2) Federal AMT credit carryforwards; (3) stock based compensation; and (4) liability reserves, all as they relate to deferred tax assets; and (5) the deferred tax liability resulting from the intangible assets recorded at the time of the Merger.

During the year ended December 31, 2013, the net income tax benefit from continuing operations of $13,670,000 included the aggregate deferred Federal, Federal AMT, state and local income tax benefit of $15,217,000 as a result of the release of the remaining valuation allowance against the Company's deferred tax assets, offset by a current state and local tax provision of $164,000, current Federal AMT of $53,000, deferred Federal, Federal AMT, state and local tax expenses aggregating $1,238,000 and a provision related to the excess tax benefit from stock based compensation of $92,000. During the year ended December 31, 2012, the net income tax benefit from continuing operations of $5,427,000 included the aggregate deferred Federal, state and local income tax benefit of $5,614,000 as a result of the partial release of the valuation allowance against certain deferred tax assets, offset by current state and local tax expense of $187,000 arising from the changes in that year of the Company's treatment of NOLs reflected on certain state and local tax returns. In the fourth quarters of 2013 and 2012, the Company reduced the valuation allowance recorded against a portion of its NOL carryforwards. The decisions to reduce the valuation allowance in each period was made after management determined, based on an assessment of continuing operations, profitability and forecasts of future taxable income, that these deferred tax assets would be realized. 

Investor Conference Call

The Company will host a conference call on Thursday, March 6, 2014, at 11:00 AM (EST). This call is for the benefit of existing and prospective stockholders, stock analysts, and other interested parties to discuss the fourth quarter and annual 2013 results and other matters. The Company has a policy of not providing quarterly or annual guidance.

The dial-in number from inside the U.S. or Canada for this teleconference is (877) 390-5537. The dial-in number for outside the U.S. and Canada is (760) 666-3763 . The conference ID is 7794154 or "Reis." A replay of the conference call will be available from shortly after the conference call through midnight (EST) on March 8, 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: 7794154 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 and self storage 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:

• revenues and other performance measures such as income from continuing operations, EBITDA and Adjusted EBITDA may be lower than expected;
• inability to retain and increase the Company's subscriber base;
• inability to execute properly on new products and services, or failure of subscribers to accept these products and services;
• 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" of our annual report on Form 10-K.

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.