Uh-oh. This is gonna be bad.
Years of experience deciphering PR-ese have taught me that this is the appropriate reaction to an "earnings" release that leads off with a line like: "Company Achieves Record Revenue as Network Expansion Accelerates." I added the emphasis, because as I just mentioned, TheStreet.com's
Well, how much did it earn?
At first glance, it earned a lot. Q3 earnings came in at a hefty $0.67 per share -- up sixfold from last year's Q3. That's better than the 41% at Morningstar
Without that tax credit, the firm would have grown its per-share profits a mere 18% on 24% revenue growth -- implying both stock dilution and a deteriorating profit margin. And actual cash profits looked even worse. The company generated just $0.8 million in free cash flow for the quarter -- its worst showing since September 2005.
Also disconcertingly, revenue growth during Q3 slowed from the pace set in the first half of 2007. While a deceleration from 25% to 24% may not sound like much, it really is. Remember: TheStreet.com bought itself a new subsidiary during Q3, and this acquisition brought with it $2.3 million in revenue, post-acquisition. Back out that inorganic growth, and you'll see that organic revenue growth was a mere 6% last quarter. (Ouch.)
And how much did it spend?
I'll say one thing for the TheStreet.com -- these guys aren't stingy. Unable to grow much on its own, the firm continued to pay up to buy other people's growth. In addition to the $20.7 million spent to acquire Corsis, it paid $25 million for "Bankers Financial Products Corp ... a provider of the best bank rates online" -- a claim with which I suspect Bankrate.com
Fortunately, not everything costs money. TheStreet.com hooked up with Viacom's
Now there's an idea.