Company Quick10K Filing
Quick10K
Reis
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$21.90 12 $253
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-K 2013-12-31 Annual: 2013-12-31
8-K 2018-10-15 Leave Agreement, M&A, Shareholder Rights, Control, Officers, Amend Bylaw, Other Events, Exhibits
8-K 2018-08-29 Enter Agreement, Amend Bylaw, Other Events, Exhibits
CHHE China Health Industries Holdings 62
IWSY Imageware Systems 59
IMAC IMAC Holdings 34
ASDN Astro Aerospace 11
BZYR Burzynski Research Institute 5
RMSL Remsleep Holdings 0
NEIK Northstar Electronics 0
FOSI Frontier Oilfield Services 0
SCY Scandium International Mining 0
SADDP Saddlebrook Resorts 0
REIS 2018-06-30
Part I. Financial Information
Item 1. Financial Statements.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Item 4. Controls and Procedures.
Part II. Other Information
Item 1. Legal Proceedings.
Item 1A. Risk Factors.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Item 3. Defaults Upon Senior Securities.
Item 4. Mine Safety Disclosures.
Item 5. Other Information.
Item 6. Exhibits.
EX-10.1 d397029dex101.htm
EX-31.1 d397029dex311.htm
EX-31.2 d397029dex312.htm
EX-32.1 d397029dex321.htm

Reis Earnings 2018-06-30

REIS 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 d397029d10q.htm FORM 10-Q Form 10-Q
Table of Contents

 

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2018

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                 to                  .

Commission File Number 001-12917

REIS, INC.

 

(Exact Name of Registrant as Specified in Its Charter)

 

Maryland

    

13-3926898

(State or Other Jurisdiction of Incorporation or Organization)      (I.R.S. Employer Identification No.)

1185 Avenue of the Americas, New York, NY

    

10036

(Address of Principal Executive Offices)      (Zip Code)

(212) 921-1122

 

(Registrant’s Telephone Number, Including Area Code)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.    Yes ☑    No ☐

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files).    Yes ☑    No ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer ☐

       Accelerated filer ☑    Non-accelerated filer ☐    Smaller reporting company ☐
      (Do not check if a smaller reporting company)   
     

Emerging growth company ☐

  

If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes ☐    No ☑

The number of the Registrant’s shares of common stock outstanding was 11,569,692 as of July 31, 2018.

 

 

 


Table of Contents

TABLE OF CONTENTS

 

     Page
Number
 
PART I. FINANCIAL INFORMATION:

 

Item 1.

  Financial Statements   
  Consolidated Balance Sheets at June 30, 2018 (unaudited) and December 31, 2017      3  
  Consolidated Statements of Operations (unaudited) For the Three and Six Months Ended June 30, 2018 and 2017      4  
  Consolidated Statement of Changes in Stockholders’ Equity (unaudited) For the Six Months Ended June 30, 2018      5  
  Consolidated Statements of Cash Flows (unaudited) For the Six Months Ended June 30, 2018 and 2017      6  
  Notes to Consolidated Financial Statements (unaudited)      7  

Item 2.

  Management’s Discussion and Analysis of Financial Condition and Results of Operations      21  

Item 3.

  Quantitative and Qualitative Disclosures About Market Risk      36  

Item 4.

  Controls and Procedures      36  
PART II. OTHER INFORMATION:

 

Item 1.

  Legal Proceedings      37  

Item 1A.

  Risk Factors      37  

Item 2.

  Unregistered Sales of Equity Securities and Use of Proceeds      37  

Item 3.

  Defaults Upon Senior Securities      37  

Item 4.

  Mine Safety Disclosures      37  

Item 5.

  Other Information      38  

Item 6.

  Exhibits      38  

Signatures

     39  

 

2


Table of Contents

Part I. Financial Information

Item 1. Financial Statements.

REIS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

 

            June 30,        
2018
        December 31,    
2017
 
    (Unaudited)        

ASSETS

   

Current assets:

   

Cash and cash equivalents

   $ 15,049,059        $ 19,670,613    

Accounts receivable, net

    9,958,432         9,744,513    

Prepaid and other assets

    839,755         681,039    
 

 

 

   

 

 

 

Total current assets

    25,847,246         30,096,165    

Furniture, fixtures and equipment, net of accumulated depreciation of $2,262,421 and $1,891,684, respectively

    4,477,912         4,919,230    

Intangible assets, net of accumulated amortization of $52,906,758 and $48,892,725, respectively

    19,285,197         19,474,411    

Deferred tax asset, net

    11,683,895         12,072,118    

Goodwill

    54,824,648         54,824,648    

Other assets

    3,238,422         217,161    
 

 

 

   

 

 

 

Total assets

   $ 119,357,320        $ 121,603,733    
 

 

 

   

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

   

Current liabilities:

   

Current portion of debt

   $ —        $ —    

Accrued expenses and other liabilities

    4,825,408         4,149,363    

Deferred revenue

    25,890,104         26,533,983    
 

 

 

   

 

 

 

Total current liabilities

    30,715,512         30,683,346    

Other long-term liabilities

    2,531,017         2,447,037    
 

 

 

   

 

 

 

Total liabilities

    33,246,529         33,130,383    
 

 

 

   

 

 

 

Commitments and contingencies

   

Stockholders’ equity:

   

Common stock, $0.02 par value per share, 101,000,000 shares authorized, 11,569,692 and 11,470,565 shares issued and outstanding, respectively

    231,394         229,411    

Additional paid in capital

    110,560,709         109,361,540    

Retained earnings (deficit)

    (24,681,312)        (21,117,601)   
 

 

 

   

 

 

 

Total stockholders’ equity

    86,110,791         88,473,350    
 

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 119,357,320        $ 121,603,733    
 

 

 

   

 

 

 

See Notes to Consolidated Financial Statements

 

3


Table of Contents

REIS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

          For the Three Months Ended      
June 30,
          For the Six Months Ended      
June 30,
 
    2018     2017     2018     2017  

Revenue:

       

Subscription revenue

   $ 11,520,201        $ 11,429,089        $ 23,077,356        $ 23,008,451    

Other revenue

    463,693         280,131         686,193         826,723    
 

 

 

   

 

 

   

 

 

   

 

 

 

Total revenue

    11,983,894         11,709,220         23,763,549         23,835,174    

Cost of sales

    3,313,992         3,216,079         6,691,355         6,582,430    
 

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

    8,669,902         8,493,141         17,072,194         17,252,744    
 

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses:

       

Sales and marketing

    3,234,762         3,105,068         6,233,321         6,433,116    

Product development

    1,295,001         1,105,627         2,584,043         2,272,298    

General and administrative expenses

    4,692,179         3,712,557         9,171,703         7,833,041    
 

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

    9,221,942         7,923,252         17,989,067         16,538,455    
 

 

 

   

 

 

   

 

 

   

 

 

 

Other income (expenses):

       

Interest and other income (expense)

    (279)        1,126         687         1,702    

Interest expense

    (27,684)        (32,372)        (59,918)        (64,606)   
 

 

 

   

 

 

   

 

 

   

 

 

 

Total other income (expenses)

    (27,963)        (31,246)        (59,231)        (62,904)   
 

 

 

   

 

 

   

 

 

   

 

 

 

(Loss) income before income taxes

    (580,003)        538,643         (976,104)        651,385    

Income tax (benefit) expense

    (121,000)        141,000         (165,000)        (281,000)   
 

 

 

   

 

 

   

 

 

   

 

 

 

Net (loss) income

   $ (459,003)       $ 397,643        $ (811,104)       $ 932,385    
 

 

 

   

 

 

   

 

 

   

 

 

 

Net (loss) income per common share:

       

Basic

   $ (0.04)       $ 0.03       $ (0.07)       $ 0.08    
 

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

   $ (0.04)       $ 0.03        $ (0.07)       $ 0.08    
 

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average number of common shares outstanding:

       

Basic

    11,569,692         11,514,123         11,548,723         11,480,900    
 

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

    11,569,692         11,777,017         11,548,723         11,762,805    
 

 

 

   

 

 

   

 

 

   

 

 

 

Dividends declared per common share

   $ 0.19        $ 0.17        $ 0.38        $ 0.34    
 

 

 

   

 

 

   

 

 

   

 

 

 

See Notes to Consolidated Financial Statements

 

4


Table of Contents

REIS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE SIX MONTHS ENDED JUNE 30, 2018

(Unaudited)

 

                Retained     Total  
    Common Shares     Paid in     Earnings     Stockholders’  
            Shares                   Amount                   Capital                   (Deficit)                     Equity            

Balance, December 31, 2017

    11,470,565        $ 229,411        $ 109,361,540        $ (21,117,601)       $ 88,473,350    

Cumulative effect change in accounting principle (as described in Note 2)

    —         —         —         1,680,319         1,680,319    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance, January 1, 2018

    11,470,565         229,411         109,361,540         (19,437,282)        90,153,669    

Shares issued for vested employee restricted stock units

    101,127         2,023         (2,023)        —         —    

Stock based compensation, net

    —         —         1,236,774         —         1,236,774    

Dividends

    —         —         —         (4,432,926)        (4,432,926)   

Stock repurchases

    (2,000)        (40)        (35,582)        —         (35,622)   

Net (loss)

    —        —         —         (811,104)        (811,104)   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance, June 30, 2018

    11,569,692        $ 231,394        $ 110,560,709        $ (24,681,312)       $ 86,110,791    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

See Notes to Consolidated Financial Statements

 

5


Table of Contents

REIS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

     For the Six Months Ended
June 30,
 
     2018      2017  

CASH FLOWS FROM OPERATING ACTIVITIES:

     

Net (loss) income

   $ (811,104)        $ 932,385     

Adjustments to reconcile to net cash provided by operating activities:

     

Deferred tax (benefit)

     (200,000)          (504,000)    

Depreciation

     510,069           485,763     

Amortization of intangible assets

     4,014,033           3,368,216     

Stock based compensation charges

     1,236,774           1,110,480     

Changes in assets and liabilities:

     

Accounts receivable, net

     (213,919)          1,434,881     

Prepaid and other assets

     (69,505)          90,465     

Accrued expenses and other liabilities

     (57,181)          90,888     

Deferred revenue

     (668,603)          (847,916)    
  

 

 

    

 

 

 

Net cash provided by operating activities

     3,740,564           6,161,162     
  

 

 

    

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

     

Website and database development costs

     (3,824,819)          (4,527,809)    

Furniture, fixtures and equipment additions

     (68,751)          (696,908)    
  

 

 

    

 

 

 

Net cash (used in) investing activities

     (3,893,570)          (5,224,717)    
  

 

 

    

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

     

Dividends

     (4,432,926)          (3,942,474)    

Proceeds from option exercises

     —            2,935,000     

Stock repurchases

     (35,622)          (2,536,955)    
  

 

 

    

 

 

 

Net cash (used in) financing activities

     (4,468,548)          (3,544,429)    
  

 

 

    

 

 

 

Net (decrease) in cash and cash equivalents

     (4,621,554)          (2,607,984)    

Cash and cash equivalents, beginning of period

     19,670,613           21,490,586     
  

 

 

    

 

 

 

Cash and cash equivalents, end of period

   $         15,049,059         $         18,882,602     
  

 

 

    

 

 

 

SUPPLEMENTAL INFORMATION:

     

Cash paid during the period for interest

   $ 25,278         $ 25,278     
  

 

 

    

 

 

 

Cash paid during the period for income taxes

   $ 21,171         $ 189,148     
  

 

 

    

 

 

 

SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

     

Accrual for furniture, fixtures and equipment additions

      $ (96,768)    
     

 

 

 

Disposal of fully depreciated furniture, fixtures and equipment

   $ 139,332        
  

 

 

    

Shares issued for vested employee restricted stock units

   $ 2,023         $ 1,771     
  

 

 

    

 

 

 

Shares issued for option exercises

      $ 5,700     
     

 

 

 

See Notes to Consolidated Financial Statements

 

6


Table of Contents

REIS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1.

Organization and Business

Reis, Inc. is a Maryland corporation. When we refer to “Reis” or the “Company,” we are referring to Reis, Inc. and its consolidated subsidiaries. The Company provides commercial real estate market information and analytical tools to real estate professionals, through its Reis Services subsidiary. For disclosure and financial reporting purposes, this business is referred to as Reis Services. Reis Services, including its predecessors, was founded in 1980.

Reis Services

The Company provides commercial real estate (“CRE”) market information and analytical tools to real estate professionals. Reis maintains a proprietary database of information on all commercial properties in metropolitan markets and neighborhoods throughout the U.S. This information is used by CRE 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. Other products include: 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; and ReisReports, aimed at prosumers and smaller enterprises. 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, property valuation estimates and property level tax information. 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.

 

2.

Summary of Significant Accounting Policies

Basis of Presentation

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Company and its majority-owned and controlled subsidiaries. All inter-company accounts and transactions among the Company and its subsidiaries have been eliminated in consolidation.

Quarterly Reporting

The accompanying consolidated financial statements and notes of the Company have been prepared in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X promulgated by the Securities and Exchange Commission (“SEC”). Accordingly, certain information and footnote disclosures normally included in financial statements prepared under Generally Accepted Accounting Principles in the United States (“GAAP”) have been condensed or omitted pursuant to such rules. In the opinion of management, all adjustments considered necessary for a fair presentation of the Company’s balance sheets, statements of operations, statement of changes in stockholders’ equity and statements of cash flows have been included and are of a normal and recurring nature. These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2017, as filed with the SEC on March 8, 2018. The consolidated statements of operations for the three and six months ended June 30, 2018 and 2017 and the consolidated statements of cash flows for the six months ended June 30, 2018 and 2017 are not necessarily indicative of full year results.

 

7


Table of Contents

REIS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) (continued)

Summary of Significant Accounting Policies (continued)

 

Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates related to the adoption of the new revenue recognition standard (as described below) include the amortization period for capitalized commissions and the allocation of the transaction price when a contract includes multiple performance obligations. See “Recently Adopted Accounting Pronouncements” below and Note 4 for additional information. Actual results could differ from those estimates.

From time to time, the Company has been, is or may in the future be a defendant in various legal actions arising in the normal course of business. The Company records a provision for a liability when it is both probable that a liability has been incurred and the amount of loss can be reasonably estimated. The outcome of any litigation is uncertain; it is possible that a judgment in any legal actions to which the Company is a party, or which are proposed or threatened, will have a material adverse effect on the consolidated financial statements. See Note 11.

New Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Updates (“ASU”) 2014-09, Revenue from Contracts with Customers. On January 1, 2018, the Company adopted the new accounting standard ASC 606, Revenue from Contracts with Customers, ASC 340-40 Other Assets and Deferred CostsContracts with Customers and all the related amendments (collectively, “ASU 2014-09” or the “new standard”) to all contracts using the modified retrospective method. The Company recognized the cumulative effect of initially applying the new standard as an adjustment to the opening balance of retained earnings. The cumulative effect change in accounting principle is reflected on the consolidated statement of changes in stockholders’ equity to reconcile from the previously reported December 31, 2017 balances to the recast amounts after giving effect to ASU 2014-09. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods in accordance with the modified retrospective method.

In addition to modifying the accounting for revenue recognition, the new standard modifies the accounting for certain incremental costs associated with obtaining contracts with customers, such as commissions, which is the most impactful aspect of the new standard on the Company’s accounting. ASU 2014-09 requires these costs to be capitalized and amortized over the estimated life of the asset. Previously, these costs were expensed as incurred. The Company’s incremental costs of obtaining a contract consist of sales commissions and related payroll taxes.

The cumulative effect adjustments resulting from the adoption of the new standard, including income tax implications, as of January 1, 2018 were as follows:

 

     Balance at
December 31, 2017
     Adjustments due to
ASU 2014-09 Adoption
     Balance at
January 1, 2018
 

Balance Sheet

        

Assets

        

Deferred tax asset, net

   $ 12,072,118       $ (588,223)        $ 11,483,895   

Other assets

   $ 217,161       $ 3,110,472       $ 3,327,633   

Total assets

   $         121,603,733         $ 2,522,249         $         124,125,982     

Liabilities

        

Accrued expenses and other liabilities

   $ 4,149,363       $ 683,291       $ 4,832,654   

Deferred revenue

   $ 26,533,983       $ 24,724       $ 26,558,707   

Other long-term liabilities

   $ 2,447,037       $ 133,915       $ 2,580,952     

Total liabilities

   $ 33,130,383         $ 841,930         $ 33,972,313     

Equity

        

Retained earnings (deficit)

   $ (21,117,601)       $ 1,680,319       $ (19,437,282)    

Total stockholders’ equity

   $ 88,473,350         $ 1,680,319         $ 90,153,669     

 

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Table of Contents

REIS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) (continued)

Summary of Significant Accounting Policies (continued)

 

The impact of the new standard on the Company’s consolidated statements of operations and balance sheet as of and for the three and six months ended June 30, 2018 was as follows:

 

    For the Three Months Ended June 30, 2018  
        As Reported          Balances
  Without Adoption of  
ASU 2014-09 (A)
         Effect of Change    
Higher/(Lower)
 

Statement of Operations Data

       

Revenue

       

Subscription revenue

  $ 11,520,201         $ 11,517,939         $ 2,262     

Other revenue

    463,693           478,693           (15,000)    
 

 

 

    

 

 

    

 

 

 

Total revenue

  $ 11,983,894         $ 11,996,632         $ (12,738)    
 

 

 

    

 

 

    

 

 

 

Operating expenses

       

Sales and marketing

  $ 3,234,762         $ 3,128,080         $ 106,682     

(Loss) before income taxes

    (580,003)          (460,583)          (119,420)    

Income tax (benefit)

    (121,000)          (90,000)          (31,000)    
 

 

 

    

 

 

    

 

 

 

Net (loss)

  $ (459,003)        $ (370,583)        $ 88,420     
 

 

 

    

 

 

    

 

 

 

Net (loss) per common share

  $ (0.04)        $ (0.03)       
 

 

 

    

 

 

    
    For the Six Months Ended June 30, 2018  
    As Reported      Balances
Without Adoption of
ASU 2014-09 (A)
     Effect of Change
Higher/(Lower)
 

Statement of Operations Data

       

Revenue

       

Subscription revenue

  $ 23,077,356         $ 23,097,092         $ (19,736)    

Other revenue

    686,193           701,193           (15,000)    
 

 

 

    

 

 

    

 

 

 

Total revenue

  $ 23,763,549         $ 23,798,285         $ (34,736)    
 

 

 

    

 

 

    

 

 

 

Operating expenses

       

Sales and marketing

  $ 6,233,321         $ 6,050,909         $ 182,412     

(Loss) before income taxes

    (976,104)          (758,956)          (217,148)    

Income tax (benefit)

    (165,000)          (109,000)          (56,000)    
 

 

 

    

 

 

    

 

 

 

Net (loss)

  $ (811,104)        $ (649,956)        $ (161,148)    
 

 

 

    

 

 

    

 

 

 

Net (loss) per common share

  $ (0.07)        $ (0.06)       
 

 

 

    

 

 

    
    As of June 30, 2018  
    As reported      Balances
without Adoption of
ASU 2014-09 (A)
     Effect of change
Higher/(Lower)
 

Balance Sheet Data

       

Assets

       

Deferred tax asset, net

  $ 11,683,895         $ 12,211,118         $ (527,223)    

Other assets

  $ 3,238,422         $ 182,382         $ 3,056,040     

Liabilities

       

Accrued expenses and other liabilities

  $ 4,825,408         $ 4,055,961         $ 769,447     

Deferred revenue

  $         25,890,104         $ 25,818,991         $ 71,113     

Other long-term liabilities

  $ 2,531,017         $ 2,355,278         $ 175,739     

Equity

       

Retained earnings (deficit)

  $ (24,681,312)        $ (23,168,794)        $ (1,512,518)    
         

 

(A)

Represents the amounts that would have been reported under GAAP that existed prior to the January 1, 2018 adoption of ASU 2014-09.

 

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Table of Contents

REIS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) (continued)

Summary of Significant Accounting Policies (continued)

 

See Note 4 for additional information regarding the Company’s revenue recognition policies and disclosures.

In January 2017, the FASB issued ASU 2017-01, Business Combinations: Clarifying the Definition of a Business (“ASU 2017-01”). ASU 2017-01 provides criteria to determine when an integrated set of assets and activities (a “set”) is not a business and narrows the definition of the term output so that it is consistent with the description of outputs in ASC 606. The amendments are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017 and early adoption is only permitted for transactions that have not been reported in financial statements that have been issued or made available for issuance. The adoption of ASU 2017-01 by the Company on January 1, 2018 did not have a material impact on its consolidated financial statements and disclosures.

Recently Issued Accounting Pronouncements Not Yet Adopted

In February 2016, the FASB issued ASU 2016-02, Leases, and subsequently issued related amendments to address certain implementation issues. The new guidance requires a lessee to record a right-of-use asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Lessees will classify leases as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The new standard allows for a modified retrospective application with certain practical expedients available and is effective for the Company as of the first quarter of 2019. Entities are allowed to apply the modified retrospective approach either (1) retrospectively to each prior reporting period presented in the financial statements with the cumulative-effect adjustment recognized at the beginning of the earliest comparative period presented (January 1, 2017) or (2) retrospectively at the beginning of the period of adoption (January 1, 2019) through a cumulative-effect adjustment, while continuing to present all prior periods under previous lease accounting guidance. The Company is currently evaluating the impact the pending adoption of the new standard will have on its consolidated financial statements and disclosures and expects the adoption may result in a material increase in assets and liabilities on its consolidated balance sheet due to the recognition of the right-of-use asset and liability for its operating leases.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). ASU 2016-13 replaces the current incurred loss impairment methodology for credit losses with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. ASU 2016-13 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted for fiscal years beginning after December 15, 2018. The Company is currently evaluating the impact the adoption of ASU 2016-13 will have on its consolidated financial statements and disclosures.

 

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REIS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) (continued)

 

3.

Segment Information

The Company is organized into separately managed segments as follows: the Reis Services segment and the Other segment. The following tables present condensed balance sheet and operating data for these segments:

(amounts in thousands)

 

Condensed Balance Sheet Data

June 30, 2018

   Reis
Services
     Other (A)      Consolidated  

Assets

        

Current assets:

        

Cash and cash equivalents

   $ 14,453          $ 596           $ 15,049      

Accounts receivable, net

     9,958            —             9,958      

Prepaid and other assets

     811            29             840      
  

 

 

    

 

 

    

 

 

 

Total current assets

     25,222            625             25,847      

Furniture, fixtures and equipment, net

     4,478            —             4,478      

Intangible assets, net

     19,285            —             19,285      

Deferred tax asset, net

     285            11,399             11,684      

Goodwill

     57,203            (2,378)            54,825      

Other assets

     3,238            —             3,238      
  

 

 

    

 

 

    

 

 

 

Total assets

   $ 109,711          $ 9,646           $ 119,357      
  

 

 

    

 

 

    

 

 

 

Liabilities and stockholders’ equity

        

Current liabilities:

        

Current portion of debt

   $ —          $ —           $ —      

Accrued expenses and other liabilities

     3,753            1,072             4,825      

Deferred revenue

     25,890            —             25,890      
  

 

 

    

 

 

    

 

 

 

Total current liabilities

     29,643            1,072             30,715      

Other long-term liabilities

     2,531            —             2,531      

Deferred tax liability, net

     36,857            (36,857)            —      
  

 

 

    

 

 

    

 

 

 

Total liabilities

     69,031            (35,785)            33,246      

Total stockholders’ equity

     40,680            45,431             86,111      
  

 

 

    

 

 

    

 

 

 

Total liabilities and stockholders’ equity

   $ 109,711          $ 9,646           $ 119,357      
  

 

 

    

 

 

    

 

 

 

Condensed Balance Sheet Data

December 31, 2017

   Reis
Services
     Other (A)      Consolidated  

Assets

        

Current assets:

        

Cash and cash equivalents

   $ 18,990          $ 681           $ 19,671      

Accounts receivable, net

     9,745            —             9,745      

Prepaid and other assets

     502            179             681      
  

 

 

    

 

 

    

 

 

 

Total current assets

     29,237            860             30,097      

Furniture, fixtures and equipment, net

     4,919            —             4,919      

Intangible assets, net

     19,474            —             19,474      

Deferred tax asset, net

     285            11,787             12,072      

Goodwill

     57,203            (2,378)            54,825      

Other assets

     217            —             217      
  

 

 

    

 

 

    

 

 

 

Total assets

   $ 111,335          $ 10,269           $ 121,604      
  

 

 

    

 

 

    

 

 

 

Liabilities and stockholders’ equity

        

Current liabilities:

        

Current portion of debt

   $ —          $ —           $ —      

Accrued expenses and other liabilities

     3,421            729             4,150      

Deferred revenue

     26,534            —             26,534      
  

 

 

    

 

 

    

 

 

 

Total current liabilities

     29,955            729             30,684      

Other long-term liabilities

     2,447            —             2,447      

Deferred tax liability, net

     34,862            (34,862)            —      
  

 

 

    

 

 

    

 

 

 

Total liabilities

     67,264            (34,133)            33,131      

Total stockholders’ equity

     44,071            44,402             88,473      
  

 

 

    

 

 

    

 

 

 

Total liabilities and stockholders’ equity

   $             111,335          $             10,269           $             121,604      
  

 

 

    

 

 

    

 

 

 

 

(A)

Includes cash, other assets and liabilities not specifically attributable to or allocable to the Reis Services segment.

 

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Table of Contents

REIS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) (continued)

Segment Information (continued)

 

   (amounts in thousands)

 

                                                                          

Condensed Operating Data for the

Three Months Ended June 30, 2018

  Reis
Services
    Other (A)     Consolidated  

Revenue:

     

Subscription revenue

  $         11,521         $             —         $         11,521      

Other revenue

    463           —           463      
 

 

 

   

 

 

   

 

 

 

Total revenue

    11,984           —           11,984      

Cost of sales

    3,314           —           3,314      
 

 

 

   

 

 

   

 

 

 

Gross profit

    8,670           —           8,670      

Operating expenses:

     

Sales and marketing

    3,234           —           3,234      

Product development

    1,295           —           1,295      

General and administrative expenses

    2,865           1,828           4,693      
 

 

 

   

 

 

   

 

 

 

Total operating expenses

    7,394           1,828           9,222      

Other income (expenses):

     

Interest and other income

    (1)          1           —      

Interest expense

    (28)          —           (28)     
 

 

 

   

 

 

   

 

 

 

Total other income (expenses)

    (29)          1           (28)     
 

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes

  $ 1,247         $         (1,827)        $ (580)     
 

 

 

   

 

 

   

 

 

 

Condensed Operating Data for the

Three Months Ended June 30, 2017

  Reis
Services
    Other (A)     Consolidated  

Revenue:

     

Subscription revenue

  $                 11,429         $                     —         $                 11,429      

Other revenue

    280           —           280      
 

 

 

   

 

 

   

 

 

 

Total revenue

    11,709           —           11,709      

Cost of sales

    3,216           —           3,216      
 

 

 

   

 

 

   

 

 

 

Gross profit

    8,493           —           8,493      

Operating expenses:

     

Sales and marketing

    3,105           —           3,105      

Product development

    1,106           —           1,106      

General and administrative expenses

    2,728           985           3,713      
 

 

 

   

 

 

   

 

 

 

Total operating expenses

    6,939           985           7,924      

Other income (expenses):

     

Interest and other income

    —           1           1      

Interest expense

    (32)          —           (32)     
 

 

 

   

 

 

   

 

 

 

Total other income (expenses)

    (32)          1           (31)     
 

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes

  $ 1,522         $ (984)        $ 538      
 

 

 

   

 

 

   

 

 

 
       

 

  (A)

Includes interest and other income, depreciation expense and general and administrative expenses that have not been allocated to the Reis Services segment. During the 2018 period, this amount also includes $603,000 related to professional fees incurred related to the Company’s review of strategic alternatives.

 

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Table of Contents

REIS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) (continued)

Segment Information (continued)

 

   (amounts in thousands)

 

                                                                          

Condensed Operating Data for the

Six Months Ended June 30, 2018

  Reis
Services
    Other (A)     Consolidated  

Revenue:

     

Subscription revenue

  $         23,078         $             —         $         23,078      

Other revenue

    686           —           686      
 

 

 

   

 

 

   

 

 

 

Total revenue

    23,764           —           23,764      

Cost of sales

    6,692           —           6,692      
 

 

 

   

 

 

   

 

 

 

Gross profit

    17,072           —           17,072      

Operating expenses:

     

Sales and marketing

    6,233           —           6,233      

Product development

    2,584           —           2,584      

General and administrative expenses

    5,906           3,266           9,172      
 

 

 

   

 

 

   

 

 

 

Total operating expenses

    14,723           3,266           17,989      

Other income (expenses):

     

Interest and other income

    (1)          2           1      

Interest expense

    (60)          —           (60)     
 

 

 

   

 

 

   

 

 

 

Total other income (expenses)

    (61)          2           (59)     
 

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes

  $ 2,288         $ (3,264)       $ (976)     
 

 

 

   

 

 

   

 

 

 

Condensed Operating Data for the

Six Months Ended June 30, 2017

  Reis
Services
    Other (A)     Consolidated  

Revenue:

     

Subscription revenue

  $                 23,008         $                 —         $                 23,008      

Other revenue

    827           —           827      
 

 

 

   

 

 

   

 

 

 

Total revenue

    23,835           —           23,835      

Cost of sales

    6,582           —           6,582      
 

 

 

   

 

 

   

 

 

 

Gross profit

    17,253           —           17,253      

Operating expenses:

     

Sales and marketing

    6,433           —           6,433      

Product development

    2,273           —           2,273      

General and administrative expenses

    5,612           2,221           7,833      
 

 

 

   

 

 

   

 

 

 

Total operating expenses

    14,318           2,221           16,539      

Other income (expenses):

     

Interest and other income

    1           1           2      

Interest expense

    (65)          —           (65)     
 

 

 

   

 

 

   

 

 

 

Total other income (expenses)

    (64)          1           (63)     
 

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes

  $ 2,871         $ (2,220)       $ 651      
 

 

 

   

 

 

   

 

 

 
       

 

  (A)

Includes interest and other income, depreciation expense and general and administrative expenses that have not been allocated to the Reis Services segment. During the 2018 period, this amount also includes $775,000 related to professional fees incurred related to the Company’s review of strategic alternatives.

Reis Services

See Note 1 for a description of Reis Services’s business and products at June 30, 2018.

Concentrations

The Company’s largest individual customer accounted for 5.7% and 3.3% of total revenue for the six months ended June 30, 2018 and 2017, respectively.

 

13


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REIS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) (continued)

Segment Information (continued)

 

The following table presents the accounts receivable balances at June 30, 2018 and December 31, 2017:

 

                                                 
    June 30,
2018
    December 31,
2017
 

Accounts receivable

  $ 10,148,000         $ 9,937,000      

Allowance for doubtful accounts

    (190,000)         (192,000)    
 

 

 

   

 

 

 

Accounts receivable, net

  $ 9,958,000         $ 9,745,000      
 

 

 

   

 

 

 

Sixteen subscribers accounted for an aggregate of approximately 68.9% of Reis Services’s accounts receivable at June 30, 2018, including three subscribers individually in excess of 4.0%, with the largest representing 30.8%. Through July 31, 2018, the Company received payments of approximately $4,903,000, or 48.3%, against the June 30, 2018 accounts receivable balance.

At June 30, 2018, the largest individual subscriber accounted for 13.4% of deferred revenue and 7.3% of aggregate revenue under contract (see Note 4 for further discussion).

 

4.

Revenue

The Company recognizes revenue when it transfers control of promised goods or services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those goods or services. Multiple contracts executed with one customer at or near the same time are combined and accounted for as a single arrangement. Contracts are generally invoiced annually or quarterly at the beginning of the contract term, and the term between invoicing and when payment is due is not significant. A small number of contracts contain variable consideration, which is immaterial. Services are provided “as is” with no rights of return or refund. Sales, value add, and other taxes the Company collects in connection with revenue-producing activities are excluded from revenue. The Company disaggregates revenue by major source: subscription revenue and other revenue. All of the Company’s revenue is included in the Reis Services segment.

Subscription Revenue

The Company’s subscription revenue is derived principally from subscriptions to its web-based services for its Reis SE and Reis Portfolio CRE products and is recognized ratably over the related contractual period as the customer consumes data, simultaneous with Company performance (by providing access to its proprietary database). Contractual terms for subscriptions are typically one year but can be as long as 48 months and are noncancelable. Revenue from ReisReports is recognized monthly as billed for monthly subscribers, or recognized as revenue ratably over the related contractual period for subscriptions in excess of one month. Revenue recognized over time accounted for 96.1% and 97.6% of the Company’s revenue during the three months ended June 30, 2018 and 2017, respectively, and 97.1% and 96.5% during the six months ended June 30, 2018 and 2017, respectively.

Other Revenue

The Company’s other revenue includes non-subscription revenue recognized at a point in time such as (1) non-subscription custom data deliverables or (2) one-time settlements for prior unlicensed usage. Revenue from non-subscription custom data deliverables or projects is recognized upon completion and delivery to the customer, provided that no significant Company obligations remain. Revenue from settlements for prior unlicensed usage is recognized at the time of the collection of the settlement.

Performance Obligations and Contract Balances

The majority of the Company’s contracts include a single performance obligation consisting of a subscription to its web-based services, accounted for as a series of monthly subscription services. From time to time, the Company enters into subscription contracts that also include custom data deliverables or one-time settlements that are capable of being distinct and accounted for as separate performance obligations. Judgment is required to determine whether a promised good or service is considered distinct and accounted for separately. If a contract includes more than one performance obligation, the Company allocates the total transaction price to each performance obligation in an amount based on the estimated relative standalone selling prices of the promised goods or services underlying each performance obligation, which may require significant judgment. Often, an observable standalone selling price for custom data deliverables or one-time settlements is not available. In these instances, the

 

14


Table of Contents

REIS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) (continued)

Revenue (continued)

 

Company estimates the standalone selling price of the subscription, taking into consideration market conditions, type of customer, expected usage, number of users and other factors, and uses the residual method to allocate the transaction price to the other performance obligations.

Revenue allocated to remaining performance obligations represents contracted revenue that has not yet been recognized that the Company also refers to as “Aggregate Revenue Under Contract,” which is the sum of deferred revenue and future revenue under non-cancellable contracts for which the Company does not yet have the contractual right to bill, and excludes any future revenue expected to be derived from subscribers currently being billed on a monthly basis. Deferred revenue, as reported on the consolidated balance sheets, represents revenue from annual or longer term contracts for which the Company has billed and/or received payments from subscribers related to services to be provided over the remaining contract period.

Deferred revenue is recognized as revenue ratably over the remaining life of a contract for subscriptions, or in the case of future custom reports or projects, is 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 June 30, 2018 and December 31, 2017, respectively.

 

                                                 
      June 30, 2018         December 31, 2017    

Deferred revenue (GAAP basis)

  $         25,890,000     $         26,534,000  

Amounts under non-cancellable contracts for which the Company does not yet have the contractual right to bill at the period end (A)

    21,604,000       25,470,000  
 

 

 

   

 

 

 

Aggregate Revenue Under Contract

  $ 47,494,000     $ 52,004,000  
 

 

 

   

 

 

 

 

 

  (A)

Amounts are billable in future periods 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 June 30, 2018 was approximately $33,910,000 related to amounts under contract for the forward twelve-month period through June 30, 2019. The remainder reflects amounts under contract beyond June 30, 2019.

The decrease in the Company’s net deferred revenue balance for the six months ended June 30, 2018 was primarily due to the timing difference between revenue recognized and amounts billed during the period. The decrease in Aggregate Revenue Under Contract during the six months ended June 30, 2018 was due to revenue recognized in the period in excess of contracts booked in the period. During the six months ended June 30, 2018, the Company recognized revenue of $18,581,000 and $20,564,000 that was included in deferred revenue and Aggregate Revenue Under Contract, respectively, at the beginning of the period.

Accounts receivable, net, are recorded at invoiced amounts and do not bear interest. The allowance for doubtful accounts reflects the Company’s assessment of collectibility of outstanding receivables after consideration of the age of a receivable, customer payment history and other current events or economic factors that could affect a customer’s ability to make payments. If a customer does not meet the payment obligations of a contract, any related accounts receivable and deferred revenue are written off at that time and the net amount, after considering any recovery of accounts receivable, is charged to cost of sales.

Contract Costs

The Company’s direct incremental costs of obtaining a contract, which consist of sales commissions and related payroll taxes, are capitalized and amortized over the contract term for renewal contracts or approximately four years for the incremental commission costs associated with acquiring a new customer, if renewals are expected and the renewal commission is not commensurate with the initial commission. Judgment is required in estimating the commission rates used to calculate sales commissions, as the rates may vary throughout the year and in future years based on the achievement of sales quotas and other factors. The period of benefit for commissions on new customer contracts is estimated by taking into consideration the Company’s technology and customer renewal rates, which represents a significant judgment.

Capitalized commissions are included in other assets on the consolidated balance sheet in 2018 and totaled approximately $3,110,000 and $3,056,000 as of January 1, 2018 and June 30, 2018, respectively. During the three and six months ended

 

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REIS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) (continued)

Revenue (continued)

 

June 30, 2018, the Company capitalized additional commissions of $595,000 and $1,092,000, and recorded amortization expense related to capitalized commissions of $583,000 and $1,146,000, respectively, which expense is included in sales and marketing expense in the accompanying consolidated statements of operations.

The Company’s future amortization expense related to the net capitalized commission asset balance at June 30, 2018 follows:

 

For the Year Ended December 31,

  Amount  

2018 (July 1, 2018 to December 31, 2018)

  $         1,021,000  

2019

    1,259,000  

2020

    578,000  

2021

    192,000  

2022

    6,000  
 

 

 

 

Total

  $         3,056,000  
 

 

 

 

Cost of sales of subscription revenue principally consists of salaries and related expenses for the Company’s researchers who collect, analyze and maintain the commercial real estate data that is the basis for the Company’s information services. Additionally, cost of sales includes amortization expense of the database intangible asset. The Company concluded that no other costs it incurs meet the capitalization criteria for costs to fulfill a contract.

 

5.

Intangible Assets

The amount of identified intangible assets, including the respective amounts of accumulated amortization, are as follows:

 

                                                 
    June 30,
2018
    December 31,
2017
 

Database

  $     35,877,000     $     33,538,000  

Accumulated amortization

    (25,840,000     (23,705,000
 

 

 

   

 

 

 

Database, net

    10,037,000       9,833,000  
 

 

 

   

 

 

 

Customer relationships

    14,100,000       14,100,000  

Accumulated amortization

    (10,634,000     (10,182,000
 

 

 

   

 

 

 

Customer relationships, net

    3,466,000       3,918,000  
 

 

 

   

 

 

 

Website

    22,215,000       20,729,000  

Accumulated amortization

    (16,433,000     (15,006,000
 

 

 

   

 

 

 

Website, net

    5,782,000       5,723,000  
 

 

 

   

 

 

 

Intangibles, net

  $ 19,285,000     $ 19,474,000  
 

 

 

   

 

 

 

The Company capitalized approximately $1,141,000 and $1,529,000 during the three months ended June 30, 2018 and 2017, respectively, and approximately $2,339,000 and $2,777,000 during the six months ended June 30, 2018 and 2017, respectively, to the database intangible asset. The Company capitalized approximately $735,000 and $871,000 during the three months ended June 30, 2018 and 2017, respectively, and $1,486,000 and $1,751,000 during the six months ended June 30, 2018 and 2017, respectively, to the website intangible asset.

Amortization expense for intangible assets aggregated approximately $2,008,000 and $4,014,000 for the three and six months ended June 30, 2018, of which approximately $1,085,000 and $2,135,000 related to the database, which is charged to cost of sales, approximately $225,000 and $452,000 related to customer relationships, which is charged to sales and marketing expense and approximately $698,000 and $1,427,000 related to website development, which is charged to product development expense, all in the Reis Services segment. Amortization expense for intangible assets aggregated approximately $1,696,000 and $3,369,000 for the three and six months ended June 30, 2017, of which approximately $917,000 and $1,789,000 related to the database, approximately $231,000 and $462,000 related to customer relationships and approximately $548,000 and $1,118,000 related to website development.

 

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REIS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) (continued)

 

6.

Debt

The Company had no debt outstanding at June 30, 2018 and December 31, 2017.

In October 2012, Reis Services, as borrower, and the Company, as guarantor, entered into a loan and security agreement with Capital One, National Association, as lender (“Capital One”), for a $10,000,000 revolving credit facility (the “2012 Revolver”). The 2012 Revolver had a three-year term scheduled to expire on October 16, 2015; however, the expiration date was extended to January 31, 2016. In January 2016, Reis Services and Capital One executed an amended and restated loan and security agreement for a $20,000,000 revolving credit facility with terms substantially similar to the 2012 Revolver (as amended, the “2016 Revolver,” and collectively with the 2012 Revolver, the “Revolver”). The 2016 Revolver expires on January 28, 2019. Any borrowings on the Revolver bear interest at a rate of LIBOR + 2.00% per annum (for LIBOR loans) or the greater of 1.00% or the bank’s prime rate minus 0.50% per annum (for base rate loans). Capital One charges an unused facility fee of 0.25% per annum. The Revolver is secured by a security interest in substantially all of the tangible and intangible assets of Reis Services, all copyrights of the Company and a pledge by the Company of its membership interests in Reis Services. The Revolver also contains customary affirmative and negative covenants, including minimum financial covenants, as defined in the amended and restated revolving loan credit agreement; all of the covenants were met at June 30, 2018 and December 31, 2017. No borrowings were made on the Revolver during the six months ended June 30, 2018 and during the year ended December 31, 2017.

 

7.

Income Taxes

The components of income tax expense (benefit) are as follows:

 

    For the Three Months Ended
June 30,
    For the Six Months Ended
June 30,
 
    2018     2017     2018     2017  

Current Federal expense

  $             —     $         16,000     $             —     $         35,000  

Current state and local tax expense

    18,000       16,000       35,000       188,000  

Deferred Federal tax (benefit) expense (A)

    (94,000     103,000       (128,000     (370,000

Deferred state and local tax (benefit) expense

    (45,000     6,000       (72,000     (134,000
 

 

 

   

 

 

   

 

 

   

 

 

 

Income tax (benefit) expense (B)

  $ (121,000   $ 141,000     $ (165,000   $ (281,000
 

 

 

   

 

 

   

 

 

   

 

 

 

 

 

  (A)

Includes an alternative minimum tax (“AMT”) deferred (benefit) of $(16,000) and $(35,000) in the three and six months ended June 30, 2017, respectively.

 

  (B)

The income tax (benefit) in the six months ended June 30, 2017 and the lower income tax expense in the three months ended June 30, 2017 resulted from the recognition of a windfall tax benefit on stock options exercised in the six months ended June 30, 2017.

Due to the amount of its net operating loss (“NOL”) and credit carryforwards, the Company does not anticipate paying Federal income taxes for a number of years. The Company expects, in the future, that it will be subject to cash payments for state and local taxes where the Company has established nexus and there are no available NOLs, and for a portion of its state and local income taxes for New York State and New York City due to laws enacted in March 2014 and April 2015, respectively, which limit the amount of existing NOLs which could be used each year.

On December 22, 2017, the Federal government of the United States enacted the U.S. Tax Cuts and Jobs Act (“the Tax Act”) which significantly changed existing U.S. tax laws, including a reduction in the Federal corporate income tax rate from 35% to 21%, repeal of corporate Federal AMT and a refund of certain existing AMT credits over several years, introduction of a capital deduction, limitation of the interest deduction, limitation of the use of net operating losses incurred on or after January 1, 2018 to offset future taxable income, limitation of the deduction for compensation paid to certain executive officers and extensive changes to the U.S. international tax system, as well as other changes. These changes generally took effect on January 1, 2018. The U.S. Treasury department is expected to release regulations implementing the Tax Act and the U.S. tax laws may be further amended in the future. The Company’s Federal net operating losses that have been incurred prior to December 31, 2017 will continue to have a 20-year carryforward limitation applied and will need to be evaluated for recoverability in the future as such. Net operating losses incurred after December 31, 2017 will have an indefinite life, but usage will be limited to 80% of taxable income in any given year. On December 22, 2017, the SEC issued Staff Accounting Bulletin 118 (“SAB 118”), which provides guidance on accounting for tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to finalize the accounting. To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional

 

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REIS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) (continued)

Income Taxes (continued)

 

estimate to be included in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply its current tax accounting on the basis of the provision of the tax laws that were in effect immediately before the enactment of the Tax Act. While the Company was able to make reasonable estimates of the impact of the reduction in the Federal corporate income tax rate, the final impact of the Tax Act may differ from these estimates, including, but not limited to, changes in our interpretations and assumptions, additional guidance that may be issued by the Internal Revenue Service (“IRS”), return to provision differences and state rate adjustments. The Company is continuing to gather additional information to determine the final impact.

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 $11,684,000 and $12,072,000 at June 30, 2018 and December 31, 2017, respectively, all of which was classified as non-current. The significant portion of the deferred tax items relates to deferred tax assets including NOL carryforwards, Federal AMT credit carryforwards and stock based compensation, with the remainder of the deferred tax items relating to liabilities resulting from the intangible assets recorded at the time of the May 2007 merger.

The Company had Federal NOL carryforwards aggregating approximately $37,859,000 at December 31, 2017, as well as significant state and local NOL carryforwards. Approximately $5,140,000 of these Federal NOLs are subject to an annual Internal Revenue Code Section 382 limitation of $2,779,000, whereas the remaining balance of approximately $32,719,000 is not subject to the limitation. The enactment of a 2014 New York State law and a 2015 New York City law limit the amount of existing NOLs which could be used each year in those jurisdictions; however, all such NOLs are expected to be fully utilized in the future.

 

8.

Stockholders’ Equity

On August 30, 2016, the Company’s Board of Directors (the “Board”) authorized a repurchase program of shares of the Company’s common stock up to an aggregate of $5,000,000. Purchases under the program may be made from time to time in the open market or through privately negotiated transactions. Depending on market conditions, financial developments and other factors, these purchases may be commenced or suspended at any time, or from time to time, without prior notice and may be expanded without prior notice. The Company may make purchases pursuant to a trading plan under Securities Exchange Act Rule 10b5-1, permitting open market purchases of common stock during blackout periods.

During the six months ended June 30, 2018, the Company purchased an aggregate of 2,000 shares of common stock, for approximately $36,000, or an average price of $17.81 per share. From the inception of the share repurchase program in August 2016 through June 30, 2018, the Company purchased an aggregate of 238,204 shares of common stock for approximately $4,601,000, or an average price of $19.31 per share. During the three and six months ended June 30, 2017, the Company purchased an aggregate of 54,768 and 133,208 shares of common stock for approximately $1,030,000 and $2,537,000, respectively.

The Company declared and paid a quarterly cash dividend of $0.19 per common share for the first and second quarters of 2018. Dividend payments aggregated approximately $2,217,000 and $4,433,000 for the three and six months ended June 30, 2018, respectively. The Company declared and paid a quarterly cash dividend of $0.17 per common share for the first and second quarters of 2017. Dividend payments aggregated approximately $1,971,000 and $3,942,000 for the three and six months ended June 30, 2017, respectively.

 

9.

Stock Plans and Other Incentives

The Company has adopted certain incentive plans for the purpose of attracting and retaining the Company’s directors, officers and employees by having the ability to issue options, restricted stock units (“RSUs”), or stock awards. Awards granted under the Company’s incentive plans expire ten years from the date of grant and vest over periods ranging generally from three to five years for employees.

 

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REIS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) (continued)

Stock Plans and Other Incentives (continued)

 

Option Awards

The following table presents option activity and other plan data for the six months ended June 30, 2018 and 2017:

 

     For the Six Months Ended June 30,  
     2018      2017  
     Options      Weighted-
Average
Exercise
Price
     Options      Weighted-
Average
Exercise
Price
 

Outstanding at beginning of period

     245,000          $ 8.88        530,000           $ 9.64  

Granted

     —          $        —           $  

Exercised

     —          $        (285,000)          $ (10.30

Forfeited/cancelled/expired

     —          $        —           $  
  

 

 

       

 

 

    

Outstanding at end of period

     245,000          $ 8.88        245,000           $ 8.88  
  

 

 

       

 

 

    

Options exercisable at end of period

           241,000          $             8.72              237,000           $             8.56  
  

 

 

       

 

 

    

RSU Awards

The following table presents the changes in RSUs outstanding for the three months ended June 30, 2018 and 2017:

 

    For the Six Months Ended June 30,  
    2018     2017  

Outstanding at beginning of period

    318,142            281,320       

Granted

    151,281            135,104       

Common stock delivered (A)

    (101,127)           (88,543)      

Forfeited

    (2,212)           (2,810)      
 

 

 

   

 

 

 

Outstanding at end of period

    366,084            325,071       
 

 

 

   

 

 

 

Intrinsic value (B)

  $         7,981,000          $         6,908,000       
 

 

 

   

 

 

 
     

 

          (A)

    In the 2018 and 2017 periods, all of the vested RSUs were issued as shares.

          (B)

    For purposes of this calculation, the Company’s closing stock prices were $21.80 and $21.25 per share on June 30, 2018 and 2017, respectively.

In the six months ended June 30, 2018, an aggregate of 148,005 RSUs were granted to employees, which RSUs vest one-third a year over three years and had a grant date fair value of $17.28 per RSU. In the six months ended June 30, 2017, an aggregate of 131,630 RSUs were granted to employees, which RSUs vest one-third a year over three years and had a grant date fair value of $18.67 per RSU. In each case, the grant date fair value was determined based on the closing stock price of the Company’s common stock on the applicable date of grant and considers the impact of dividend payments. The awards granted to employees in 2018 and 2017 are treated as equity awards and the grant date fair value is charged to compensation expense at the corporate level on a straight-line basis over the vesting periods. Dividends are not paid or accrued on unvested employee RSUs.

During the six months ended June 30, 2018 and 2017, an aggregate of 3,276 RSUs and 3,474 RSUs, respectively, were granted to non-employee directors (with an average grant date fair value of $21.04 and $19.84 per RSU, respectively) related to the equity component of their compensation. In each case, the grant date fair value was determined as of the last trading day of the quarter for which the RSUs were being received as compensation. The RSUs are immediately vested but are not deliverable to the non-employee directors until six months after termination of their service as a director. Dividends are paid on RSUs granted to non-employee directors.

Option and RSU Expense Information

The Company recorded non-cash compensation expense of approximately $632,000 and $575,000, respectively, including $34,500 in each period related to non-employee director equity compensation, for the three months ended June 30, 2018 and 2017, respectively, related to all stock options and RSUs accounted for as equity awards, as a component of general and administrative expenses in the statements of operations. For the six months ended June 30, 2018 and 2017, the Company recorded non-cash compensation expense of approximately $1,237,000 and $1,100,000, respectively, including $69,000 in each period related to non-employee director equity compensation.

 

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REIS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) (continued)

 

10.

Earnings Per Common Share

Basic earnings per common share is computed based upon the weighted average number of common shares outstanding during the period. Diluted earnings per common share is based upon the increased number of common shares that would be outstanding assuming the exercise of dilutive common share options and the consideration of restricted stock awards. The following table details the computation of earnings per common share, basic and diluted:

 

     For the Three Months Ended
June 30,
     For the Six Months Ended
June 30,
 
     2018     2017      2018     2017  

Numerator:

         

Net (loss) income for basic calculation

   $         (459,003)     $           397,643      $         (811,104)     $         932,385  

Adjustments to net (loss) income for the impact of dilutive securities

                         
  

 

 

   

 

 

    

 

 

   

 

 

 

Net (loss) income for dilution calculation

   $ (459,003   $ 397,643      $ (811,104   $ 932,385  
  

 

 

   

 

 

    

 

 

   

 

 

 

Denominator:

         

Weighted average common shares – basic

     11,569,692       11,514,123        11,548,723       11,480,900  

Effect of dilutive securities:

         

RSUs

           122,705              115,458  

Stock options

           140,189              166,447  
  

 

 

   

 

 

    

 

 

   

 

 

 

Weighted average common shares – diluted

     11,569,692       11,777,017        11,548,723       11,762,805  
  

 

 

   

 

 

    

 

 

   

 

 

 

Net (loss) income per common share:

         

Basic

   $ (0.04   $ 0.03      $ (0.07   $ 0.08  
  

 

 

   

 

 

    

 

 

   

 

 

 

Diluted

   $     (0.04)     $         0.03      $     (0.07)     $     0.08  
  

 

 

   

 

 

    

 

 

   

 

 

 

Potentially dilutive securities include all stock-based awards. For the three and six months ended June 30, 2018 and 2017, certain equity awards were antidilutive.

 

11.

Commitments and Contingencies

From time to time, the Company has been, is or may in the future be a defendant in various legal actions arising in the normal course of business. The Company records a provision for a liability when it is both probable that a liability has been incurred and the amount of loss can be reasonably estimated.

The Company is not a party to any litigation that could reasonably be foreseen to be material to the Company.

 

12.

Fair Value of Financial Instruments

At June 30, 2018 and December 31, 2017, the Company’s financial instruments included receivables, payables, accrued expenses, other liabilities and debt. The fair values of these financial instruments were not materially different from their recorded values at June 30, 2018 and December 31, 2017. The Company had no debt outstanding at June 30, 2018 and December 31, 2017. See Note 6 for additional information about the Company’s debt.

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion should be read in conjunction with the consolidated financial statements and notes thereto appearing elsewhere in this quarterly report on Form 10-Q.

Organization and Business

Reis, Inc. is a Maryland corporation. When we refer to “Reis” or the “Company,” we are referring to Reis, Inc. and its consolidated subsidiaries. The Company provides commercial real estate market information and analytical tools to real estate professionals, through its Reis Services subsidiary. For disclosure and financial reporting purposes, this business is referred to as the Reis Services segment. Reis Services, including its predecessors, was founded in 1980.

Business

The Company provides commercial real estate (“CRE”) market information and analytical tools to real estate professionals. Reis maintains a proprietary database of information on all commercial properties in metropolitan markets and neighborhoods throughout the U.S. This information is used by CRE 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.

Reis’s database and analytical tools have historically covered the nine key property types most important to real estate professionals focused on the U.S. CRE market (apartment, office, retail, warehouse/distribution, flex/research & development, self storage, seniors housing, student housing and affordable housing), providing up to 38 years of trend analysis and market forecasts for up to 275 metropolitan markets and thousands of submarkets. With the completion of a multi-year initiative to expand upon this cornerstone asset, Reis now offers market information, transaction data and building insights for all commercial properties throughout the nation, regardless of location, size, or use type. The achievement of “Every Property, Everywhere” positions Reis to serve all CRE professionals and use-cases both within and beyond the Company’s traditional property types and coverage boundaries. In parallel with the development of “Every Property, Everywhere,” the Company has also built a new Application Programming Interface (“API”), a delivery system that embeds Reis’s data (legacy and newly launched) into any client’s and prospect’s internal system, regardless of platform.

Product Overview

The Company’s product portfolio features Reis SE, its flagship delivery platform aimed at larger and mid-sized enterprises. Other products include: 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; and ReisReports, aimed at prosumers and smaller enterprises. 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, property valuation estimates and property level tax information. 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.

Proprietary Databases

Reis develops and maintains three highly curated, proprietary databases which include information on (1) property performance, (2) new construction and (3) sales transactions. The significant characteristics of the Reis databases include:

 

   

Breadth - coverage of all U.S. commercial properties, regardless of property type; historical trends and analytics for nine key investment property types including apartment, office, retail, warehouse/distribution, flex/research & development, self storage, seniors housing, student housing and affordable housing properties;

 

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Geography – coverage of all U.S. commercial properties, regardless of location; for the nine property types, coverage of up to 275 of the largest U.S. metropolitan CRE markets, approximately 7,900 discrete market areas and segments with submarket boundaries proprietary to Reis;

 

   

Depth - captures critical information such as occupancies, rents, rent discounts, tenant improvement allowances, lease terms, expenses, buyer, seller, purchase price, capitalization rate, financing details and other key factors;

 

   

History – up to 38 years of data through multiple cycles of economic/market peaks and troughs; and

 

   

Frequency – market and submarket reports available quarterly, monthly, or for rent comparables in certain sectors, daily, and sales comparables and new construction information updated on daily and weekly schedules.

Reis’s long-standing relationships with thousands of data sources, including building owners, property managers and agents, represent a unique and highly valuable asset that benefits from decades of investment. The Company is recognized by the industry and the business and trade press as the premier source of objective, timely and granular market information, a reputation attributable to two key factors: (1) Reis is viewed as independent as it does not compete as a broker in the listings space; and (2) Reis information is used by owners and managers in the underwriting, due diligence and marketing of properties, mortgages and real estate backed securities at both the single asset and portfolio levels.

The following table lists the number of metropolitan markets for each of the nine primary types of commercial real estate covered by Reis in the property performance database and new construction database:

 

           June 30,              December 31,    
     2018      2017

  Apartment

   275      275

  Office

   190      190

  Retail

   190      190

  Self storage (1)

   125        50

  Warehouse/distribution (2)

     47        47

  Flex/research & development

     47        47

  Seniors housing

   110      110

  Student housing

   200      200

  Affordable housing

   110      110
         

(1)   Increased to 125 markets as of March 1, 2018.

(2)   Expected doubling of coverage during the fourth quarter of 2018.

Recent Database Enhancements

Reis is continually expanding its property level and market coverage by geography and property type. In February 2018, Reis announced the expansion of coverage to include every commercially zoned structure and land parcel in the nation, regardless of location, size or use type (“Every Property, Everywhere”). As of March 1, 2018, Reis increased its detailed coverage of the self storage sector to 125 markets. In July 2018, the Company added 1.1 million non-arm’s length transactions to its sales transactions database. Also in July 2018, the Company began publishing detailed lease terms and effective rents for office properties, providing economic transparency at the property level on intelligence gathered directly from space leasing brokers, owners and managers. Additional development plans for 2018 include an expected doubling of coverage of warehouse/distribution markets to approximately 100 markets during the fourth quarter of 2018 and further enhancements to “Every Property, Everywhere.”

Property Performance Database – “Every Property, Everywhere”

Reis’s core property performance database contains information on competitive, income-producing properties in the U.S., with enhanced focus on the apartment, office, retail, warehouse/distribution, flex/research & development, self storage, seniors housing, student housing and affordable housing sectors. On an ongoing basis, Reis surveys and receives data downloads from building owners, leasing agents and managers, which include key building performance statistics including, among others: occupancy rates; rents; rent discounts and other concessions; tenant improvement allowances; lease terms; and operating expenses. In addition, Reis processes multiple data sources on commercial real estate, including: public filings databases; tax assessor records; deed transfers; planning boards; and numerous local, regional and national publications and commercial real estate websites. Reis screens and assembles large volumes of data into integrated supply and demand trends on a monthly basis at the neighborhood (submarket) and metropolitan market levels. All collected data are subjected to a rigorous quality assurance and validation process developed over

 

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many years. At the property level, surveyors compare the data collected in the current period with data previously collected on that property and similar properties. If any unusual changes in rents and vacancies are identified, follow-up procedures are performed for verification or clarification of the results. All aggregate market data at the submarket and market levels are also subjected to comprehensive quality controls.

New Construction Database

In addition to its core property database, Reis develops and maintains a new construction database that identifies and monitors projects that are being added to our covered markets. Detailed tracking of the supply side of the commercial real estate market is critical to projecting performance changes at the market and submarket levels. This database is updated weekly and reports relevant information such as project size, property type, location, status, and estimated completion dates for projects that are planned, proposed or under construction.

Sales Transactions Database – “Every Sale, Everywhere”

Over the past three years, Reis has made it a priority to expand and improve its sales transactions database. In September 2016, Reis expanded its commercial real estate sales transactions database to include virtually all U.S. markets and property types, regardless of geography or sector. This was followed up with the third quarter 2017 addition of land transactions, including history across virtually all U.S. counties, as well as other information such as parcel boundaries and taxes and the July 2018 inclusion of 1.1 million non-arm’s length transactions. These enhancements appeal to mortgage and property originators and underwriters, investment sales brokers, tax assessors, tax appeal firms, appraisers, and any other real estate professionals seeking the most comprehensive database of CRE transactions to source deals, search for related business, conduct due diligence or gain a competitive edge with market intelligence. 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 desirable datapoints and licensed photographs.

Products and Services

Reis has invested in a robust technology infrastructure to disseminate a number of market information products to meet the demands of a wide variety of commercial real estate professionals, from large financial institutions seeking an integrated commercial real estate portfolio management platform, to a single access user seeking local market intelligence. Reis is committed to consistently upgrading and expanding its product offering to reach new markets and new types of consumers of commercial real estate information.

Reis SE

Reis SE (or sometimes referred to as “Reis Subscriber Edition”), available at www.reis.com, is the Company’s flagship product, designed to assist in market research, due diligence and support of commercial real estate transactions, including loan originations, underwriting, acquisitions, risk assessment (such as loan loss reserves and impairment analyses), portfolio monitoring, asset management and appraisal. Reports are retrievable by street address, property type (apartment, office, retail, warehouse/distribution, flex/research & development, self storage, seniors housing, student housing and affordable housing) or on the market/submarket level and are available as full color, presentation quality documents or in spreadsheet formats.

Key features of Reis SE include:

 

   

Market Reports - Reis provides updated trends and forecasts of rent, vacancy, and inventory for apartment, office, retail, warehouse/distribution, flex/research & development, self storage, seniors housing, student housing and affordable housing property types in up to 275 metropolitan areas and approximately 7,900 discrete market areas and segments.

 

   

Rent Comparables - Based on a user specified area, Reis supplies property level performance data such as rents and vacancies, as well as comparable group summary statistics, including concessions, operating expenses and lease terms.

 

   

Sales Comparables - Reis maintains a sales transactions database including virtually all U.S. markets and property types. The database captures key information on each transaction, such as buyer, seller, purchase price, capitalization rate and financing details, where available.

 

   

Construction Comparables - Reis monitors new projects from the planning stages to opening day to stabilization, capturing the anticipated effect of new competitive inventory on local supply and demand dynamics.

 

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Property Lookup – For virtually any commercially zoned property or parcel anywhere in the nation, Property Lookup assembles into a brief report all relevant structural, transactional, locational, and performance information from the Reis database.

 

   

Economics of a Lease – For the office sector, Reis itemizes the components of landlord concession packages to display effective rents, operational expenses and leasing costs to present expected property net cash flow, resulting in actionable insight at the property level.

 

   

Single Property Valuation - Designed to help clients quantify the value and risk associated with their commercial real estate holdings, the valuation module utilizes three valuation methods – discounted cash flow, direct capitalization and sales price per square foot – supported by comparable transactions in the local market or submarket.

 

   

Executive Briefings - Comprehensive summaries that take the form of an analyst’s write-up for hundreds of metropolitan areas, thousands of submarkets, and tens of thousands of individual properties. What a real estate analyst could take days preparing, Reis can generate in seconds.

 

   

“First Glance” Reports - Quarterly narrative reports provide an early assessment of the apartment, office, retail and industrial sectors across the U.S. and commentary on new construction activity.

 

   

Quarterly Briefings - Conference calls each quarter attended by hundreds of Reis subscribers, plus members of the media, during which Reis economists provide an overview of the latest high-level findings and forecasts for the commercial real estate space and capital markets.

 

   

Real Estate News and Commentary - The Reis “Observer” and news stories selected by Reis analysts from among hundreds of sources to provide news relevant to a particular market and property type.

 

   

Email Alerts - Customizable email alerts that let users receive proactive updates on markets of interest, recent sales transactions and new construction activity.

Access to Reis SE is by secure password and can be customized to accommodate the geographic coverage, property type and analytical needs of subscribers. For example, the product can be tailored to provide access to all or only selected markets, property types and report combinations.

Reis Portfolio CRE and Other Portfolio Support Products and Services

Reis Portfolio CRE enables clients to quickly and thoroughly assess portfolio risks and opportunities by integrating client loan and property information with Reis property and submarket data which is processed through a credit model. The solution is delivered in a web-based, visually engaging interface. Reis Portfolio CRE is targeted to both debt and equity capital providers active in U.S. commercial real estate and, specifically, to banks with significant CRE loan exposure.

As a loan-level analysis and surveillance platform, Reis Portfolio CRE enables property valuation, credit analysis, stress testing, benchmarking and portfolio pricing. In addition to providing credit default metrics such as expected losses and probabilities of default at the loan and portfolio levels, outputs include forecasted collateral operating incomes and values under multiple economic scenarios. These features allow clients to integrate internal data to create customizable scenario forecasts to meet regulatory stress testing requirements, set loan loss reserves and monitor their collateral.

The Reis Portfolio CRE platform is intended for both large and small lending institutions, Commercial Mortgage Backed Security, or CMBS, investors and equity investors, among others. Reis Portfolio CRE has been designed in a modular fashion that allows banks of varying asset sizes to select the applications and price points most appropriate to the scale of their CRE portfolios.

Through Reis Portfolio CRE, the Company intends to be able to support lenders as they prepare for the 2020 adoption of new FASB accounting requirements referred to as the Current Expected Credit Loss Model, or CECL.

The Company has been able to assist financial institutions in the evaluation of their CRE loan portfolios through other means besides Reis Portfolio CRE, including custom data deliverables and providing data clean-up, advisory and other consulting services. Reis stands ready to assist all financial services firms and other real estate professionals however they need information or services.

 

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Application Programming Interface (“API”)

During the second quarter of 2017, Reis completed development of an Application Programming Interface, commonly referred to as an API. The API is a system that allows firms to receive Reis data elements directly into internal systems without going through Reis SE. For Reis, the strategic importance of the API is threefold. First, the opportunity to deliver Reis data directly into an institution’s internal systems appeals to the contract signers and executives responsible for maximizing the productivity of originators, underwriters, or analysts, eliminating the need to manually re-key data onto internal forms. Second, the API integrates Reis data into clients’ processes to increase adoption and heighten the probability of longer-term contractual relationships. Finally, Reis’s API is responsive to many of the challenges and opportunities stimulated by Fintech and related technologies, as well as heightened regulatory scrutiny. Eligible users of the API include existing Reis SE subscribers, large financial institutions, business information firms, and Fintech start-ups operating in tangential vertical markets.

ReisReports

ReisReports is a product tailored to meet the needs of smaller enterprises and individuals, professional investors, brokers and appraisers, available at www.ReisReports.com. Although providing subscribers with less content and a more limited number of reports, ReisReports utilizes the same proprietary database that supports Reis SE. ReisReports is available on a monthly or annual subscription basis at affordable price points.

Data Redistribution / Marketing Alliances

The Company has established data redistribution agreements with information service providers as part of a strategy designed to raise brand awareness and generate sales leads for Reis’s information and services. Over time, third party users may enter into agreements with Reis directly in order to gain access to the full suite of reports and analytical modules. The Company’s data redistribution agreements are typically multi-year contracts in length, do not afford access to Reis’s proprietary database and provide limited views of Reis’s market data.

Cost of Service

Reis’s data is made available in six ways, with price points that are reflective of the level of content being made available:

 

   

annual and multi-year subscriptions to Reis SE ranging in price from $1,000 to in excess of $1,000,000, depending upon the subscriber’s line of business and the combination of markets, property types and reports subscribed to; renewals for Reis SE are negotiated in advance of the expiration of an existing contract based on factors such as a subscriber’s historical and projected report consumption;

 

   

annual and multi-year subscriptions to Reis Portfolio CRE typically ranging in price from the low tens of thousands of dollars into the hundreds of thousands of dollars;

 

   

annual and multi-year subscriptions to the Reis API, which can range in price from the low tens of thousands of dollars into the hundreds of thousands of dollars, depending on the amount of data and the number of elements being provided;

 

   

capped Reis SE subscriptions typically ranging in price from $1,000 to $25,000, allowing clients to download a fixed retail value of reports over a period of up to twelve months;

 

   

custom data deliverables ranging in price from $1,000 for a specific data element to hundreds of thousands or millions of dollars for custom data deliveries, portfolio valuation and credit analysis;

 

   

subscriptions to ReisReports, which are charged to a credit card, having a retail price in the low hundreds of dollars per month, depending on the level of service subscribed to (monthly or annual pricing options are available); and

 

   

individual reports, which can be purchased with a credit card, having retail prices up to $999 per report, are available to anyone who visits Reis’s retail website or contacts Reis via telephone, fax or email; however, certain reports are only available with an annual subscription or capped subscription account.

Other Reis Services Information

For additional information on the Reis Services business, refer to the Company’s annual report on Form 10-K for the year ended December 31, 2017, which was filed with the Securities and Exchange Commission on March 8, 2018.

 

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Additional Segment Financial Information

See Note 3 to the Company’s consolidated financial statements included in this filing for additional information regarding the Company’s segments.

Selected Significant Accounting Policies

For a description of our selected significant accounting policies and estimates, see our annual report on Form 10-K for the year ended December 31, 2017. Changes to our significant accounting policies and estimates as a result of adopting the new revenue standard are discussed below.

As of January 1, 2018, the Company adopted the new revenue standard using the modified retrospective transition method. As such, we recognized the cumulative effect of adopting the new standard as an adjustment to our opening balance of retained earnings. The prior period comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods. The cumulative effect of adopting the new standard as it relates to revenue recognition resulted in an immaterial adjustment to retained earnings upon adoption. There was no material change to our revenue recognition patterns for subscription revenue, which continues to be recognized ratably over the related contract period, and other revenue, which continues to be recognized at a point in time upon completion and delivery to the customer or upon collection of settlement fees. In certain cases, management judgment is required in allocating revenue to multiple performance obligations such as custom data deliverables and one-time settlement fees when combined with a subscription service.

Additionally, the new standard requires that we capitalize certain costs associated with obtaining contracts with customers, such as commissions, which is the most impactful aspect of the new standard on our accounting. The new standard requires these costs to be capitalized and amortized over the estimated life of the asset. Previously, these costs were expensed as incurred. We capitalize commissions on both new customer contracts and renewal contracts. Judgment is required to estimate future commission rates on multi-year contracts, as commission plans may change year-over-year. Significant judgment is also required to estimate the amortization period for commissions on new customer contracts, which we amortize over a period of approximately four years, taking into consideration our technology and customer renewal rates.

See Notes 2 and 4 to the consolidated financial statements included in Part I, Item 1 of this report for additional information.

Critical Business Metrics

Management considers certain metrics in evaluating its consolidated results and the performance of the Reis Services segment. These metrics are revenue, revenue growth, EBITDA (which is earnings (net (loss) income) before interest, taxes, depreciation and amortization), EBITDA growth, EBITDA margin, Adjusted EBITDA (which is net (loss) income before interest, taxes, depreciation, amortization, stock based compensation and professional fees incurred in connection with the Company’s review of strategic alternatives), Adjusted EBITDA growth and Adjusted EBITDA margin. Other important metrics that management considers include the cash flow generation as well as the visibility into future performance as supported by our deferred revenue and other related metrics discussed in this Item 2.

Following is a presentation of revenue, net (loss) income, (loss) income before income taxes, EBITDA, Adjusted EBITDA and the related margins on a consolidated basis and revenue, EBITDA and EBITDA margin for the Reis Services segment and the related margins on a consolidated basis (see below for a reconciliation of net (loss) income to EBITDA and Adjusted EBITDA for both the Reis Services segment and on a consolidated basis for each of the periods presented here).

 

(amounts in thousands, excluding percentages)

 

                    
     For the Three Months Ended             Percentage  
     June 30,      Increase      Increase  
     2018      2017      (Decrease)      (Decrease)  

Consolidated:

           

Total revenue

    $             11,984          $             11,709           $ 275           2.3%    

Net (loss) income (A)

    $ (459)         $ 397           $ (856)          (215.6)%    

(Loss) income before income taxes (A)

    $ (580)         $ 538           $             (1,118)                      (207.8)%    

EBITDA (A)

    $ 1,709          $ 2,516           $ (807)          (32.1)%    

EBITDA margin

     14.3%         21.5%         

Adjusted EBITDA (A)

    $ 2,944          $ 3,091           $ (147)          (4.8)%    

Adjusted EBITDA margin

     24.6%         26.4%         

Reis Services segment:

           

Total revenue

    $ 11,984          $ 11,709           $ 275           2.3%    

EBITDA

    $ 3,537          $ 3,501           $ 36           1.0%    

EBITDA margin

     29.5%        29.9%         

 

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(amounts in thousands, excluding percentages)                     
     For the Six Months Ended             Percentage  
     June 30,      Increase      Increase  
     2018      2017      (Decrease)      (Decrease)  

Consolidated:

           

Total revenue

    $             23,764          $             23,835           $ (71)          (0.3)%    

Net (loss) income (A)

    $ (811)         $ 932           $             (1,743)          (187.0)%    

(Loss) income before income taxes (A)

    $ (976)         $ 651           $ (1,627)                      (249.9)%    

EBITDA (A)

    $ 3,607          $ 4,569           $ (962)          (21.1)%    

EBITDA margin

     15.2%        19.2%         

Adjusted EBITDA (A)

    $ 5,619          $ 5,679           $ (60)          (1.1)%    

Adjusted EBITDA margin

     23.6%        23.8%         

Reis Services segment:

           

Total revenue

    $ 23,764          $ 23,835           $ (71)          (0.3)%    

EBITDA

    $ 6,873          $ 6,790           $ 83           1.2%    

EBITDA margin

     28.9%        28.5%         

 

  (A)

During the three and six months ended June 30, 2018, the Company’s reported net (loss), (loss) before income taxes and Consolidated EBITDA were negatively impacted by professional fees incurred related to the Company’s review of strategic alternatives which aggregated $603,000 and $775,000, respectively. Consolidated Adjusted EBITDA and Reis Services EBITDA were not impacted by these expenses.

Revenue Performance - Metrics

In order to provide additional insight into our revenue, 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 and six months ended June 30, 2018 and 2017:

 

(amounts in thousands, excluding percentages)

 

 
     For the Three Months Ended June 30,         
     2018      2017      Variance  
     $      % of Total      $      % of Total      $      %  

Subscription revenue

    $ 11,521          96.1%        $ 11,429          97.6%        $ 92          0.8%   

Other revenue (A)

     463          3.9%         280          2.4%         183          65.4%   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Total revenue

    $             11,984                      100%        $             11,709                      100.0%        $             275                      2.3%   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    
     For the Six Months Ended June 30,         
     2018      2017      Variance  
     $      % of Total      $      % of Total      $      %  

Subscription revenue

    $             23,078                      97.1%        $             23,008                      96.5%        $             70                       0.3%   

Other revenue (A)

     686          2.9%         827          3.5%         (141)          (17.0)%   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Total revenue

    $ 23,764          100.0%        $ 23,835          100.0%        $ (71)          (0.3)%   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    
                   

 

  (A)

In the periods presented, other revenue includes non-subscription revenue comprised of one-time settlements.

2018 Revenue Performance

Management Summary

The Company’s second quarter 2018 revenue and Reis Services EBITDA growth has occurred despite lower TTM renewal rates.

Direct comparability of current and historical renewal rates is challenging due to the changing nature of some of Reis’s subscription agreements. As IP cases have proliferated in recent years, Reis may resort to the imposition of a “usage cap” to protect from further unauthorized usage. Full utilization of the usage negotiated under a cap can result in an acceleration of revenue recognition under the original contract and entering into a new contract for additional report consumption, outcomes that create revenue but do not positively impact the Company’s renewal rate in the current reporting period.

 

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Direct comparability between current and historical renewal rates is also difficult due to our enhanced ability to upsell new features and data sets upon contract renewal such as our API, “Every Property, Everywhere,” and Affordable Housing reports, among other new products. Negotiations involving the addition of some or all of these features may result in delaying a contract renewal beyond its anniversary date resulting in a lower reported renewal rate, but that in fact represents upside potential as the contract for expanded service is finalized in the subsequent reporting period. In the aggregate, the widening of Reis’s service offerings and related contractual provisions make the historical correlation between trending renewal rates and current and future financial performance less direct. Further, the Company’s record level of deferred revenue and the twelve month component of Aggregate Revenue Under Contract for the second quarter of 2018 (discussed herein) continues to emphasize the visibility into the strength of our revenue base.

It is management’s experience that lost customers frequently re-enter subscription agreements as indicated by the fact that over the past four years approximately 50% of IP related subscriptions and settlements have come from former subscribers who subsequently engaged in post-subscription unauthorized usage.

Subscription Revenue

Total revenue for the second quarter of 2018 increased by approximately $275,000, or 2.3% from the second quarter of 2017 and increased $204,000, or 1.7% from the first quarter of 2018. Subscription revenue increased $92,000, or 0.8% for the second quarter of 2018 from the second quarter of 2017 and decreased slightly by $(36,000), or (0.3)% from the first quarter of 2018.

Renewal Rates — The Company’s June 30, 2018 trailing twelve month (“TTM”) base renewal rate, including price increases, was 80.1% (for institutional subscribers, the base renewal rate, including price increases, was 80.9%). For the TTM ended June 30, 2017, the Company’s base renewal rate, including price increases, was 89.2% (for institutional subscribers, the base renewal rate, including price increases, was 90.7%).

The lower June 30, 2018 TTM renewal rate reflects certain non-renewals by institutional subscribers in the fourth quarter of 2017 and the first and second quarters of 2018. During 2018, there were two large financial institutions with expiring contracts that aggregated approximately $1,519,000, that renewed in the aggregate for $163,000. Both of these institutions have demonstrated a continuing need for Reis data and have also been identified as IP cases. Dialogue is ongoing with these institutions to restore subscription service and resolve prior and current unauthorized access to Reis data. Though there can be no assurance of a timely resolution of these IP cases, if any. Any favorable resolution would have a positive impact on Reis’s financial performance and renewal rates.

While the Company continues to have lower renewal rates for customers who have become subscribers as a result of previous unauthorized access to Reis data (the TTM overall renewal rate for this customer group was 50.8% at June 30, 2018), management continues to work to raise the renewal rate among this subset of customers by emphasizing multi-year contracts and assigning a dedicated team of account managers to train and service these accounts.

New Business — Reis new business bookings in 2018 came from a variety of sources, including the single largest first year contract from a commercial bank in the Company’s history. Revenue in the first half of 2018 continued to be positively impacted by sales that were directly tied to recent product improvements, including new contracts with investment sales brokers associated with our expanded sales transaction database, as well as API wins.

Other Revenue

The Company’s other revenue for the three and six months ended June 30, 2018 and 2017 is comprised solely of one-time settlements. Approximately 3.9%, 2.4%, 2.9% and 3.5% of total revenue was generated from one-time settlements for the three and six months ended June 30, 2018 and 2017, respectively.

Reis continues to successfully resolve cases in which our intellectual property rights have been violated. The Company continues to be very active in protecting its intellectual property by pursuing firms and individuals who had previously gained unauthorized access to our services. The discovery of instances of unauthorized usage creates opportunities for Reis’s compliance team to engage in productive conversations with firms regarding ongoing access to Reis data in accordance with the terms and conditions of a subscription agreement. Reis has developed a programmatic approach to promptly resolving cases of unauthorized usage and has devoted significant client services and account management resources to increase the renewal rates of IP infringement related accounts to levels typical of all other Reis subscribers. As a result of these compliance procedures, the Company has been able to generate revenue through either one-time settlement payments or by signing up the non-complying firm or individual to an annual or multi-year Reis SE subscription.

 

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Revenue from one-time settlement payments aggregated $463,000 and $280,000 in the three months ended June 30, 2018 and 2017, respectively, and $686,000 and $827,000 in the six months ended June 30, 2018 and 2017, respectively. Our compliance team continues to identify instances of unauthorized access. The period of unauthorized usage being identified is much shorter and report consumption is not as significant as cases that were settled in prior years. Management believes that compliance resolutions will yield a continuing and significant volume of subscription contracts and recurring revenue for the foreseeable future.

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 June 30, 2018 and 2017, respectively. A comparison of these balances at June 30 of each year is more meaningful than a comparison to the December 31, 2017 balances, as a greater percentage of renewals occur in the fourth quarter of each year.

 

     June 30,  
   2018      2017  

Deferred revenue (GAAP basis)

    $             25,890,000         $             24,183,000    

Amounts under non-cancellable contracts for which the Company does not yet have the contractual right to bill at the period end (A)

     21,604,000          24,163,000    
  

 

 

    

 

 

 

Aggregate Revenue Under Contract

    $ 47,494,000         $ 48,346,000    
  

 

 

    

 

 

 
       

 

  (A)

Amounts are billable subsequent to June 30 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 June 30, 2018 was approximately $33,910,000 related to amounts under contract for the forward twelve-month period through June 30, 2019. The remainder reflects amounts under contract beyond June 30, 2019. The forward twelve-month Aggregate Revenue Under Contract amount is approximately 70.5% of total revenue on a trailing twelve-month basis ending June 30, 2018 of approximately $48,118,000. For comparison purposes, at June 30, 2017, the forward twelve-month Aggregate Revenue Under Contract was approximately $33,136,000 and approximately 70.6% of total revenue on a trailing twelve-month basis ended June 30, 2017.

2018 Earnings Metrics - Net (Loss) Income, (Loss) Income before Income Taxes, Consolidated Adjusted EBITDA and Reis Services EBITDA

The Company had a net (loss) of $(459,000) for the three months ended June 30, 2018 and net income of $397,000 for the three months ended June 30, 2017. The Company had a (loss) before income taxes of $(580,000) for the 2018 second quarter as compared to pretax income of $538,000 in the 2017 second quarter. The 2018 second quarter included the impact of increased professional fees related to our previously announced review of strategic alternatives, which were approximately $603,000 in the period. Also in the 2018 period, there was additional amortization expense of $312,000 over the 2017 second quarter from the launch of our 2017 and 2018 product releases such as the inclusion of land sales in our sales transaction database, the increase in coverage of the self storage sector and the expansion of coverage in February 2018 for “Every Property, Everywhere.” These items resulted in the (loss) before income taxes and net (loss) reported for the 2018 period.

The Company had a net (loss) of $(811,000) for the six months ended June 30, 2018 and net income of $932,000 for the six months ended June 30, 2017. The Company had a (loss) before income taxes of $(976,000) and pretax income of $651,000 for the six months

 

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ended June 30, 2018 and 2017, respectively. The 2018 six month period included the impact of increased professional fees related to our previously announced review of strategic alternatives, which were approximately $775,000 in the period. Also in the 2018 period, there was additional amortization expense of $645,000 over the 2017 period from the launch of our 2017 and 2018 product releases such as the inclusion of land sales in our sales transaction database, the increase in coverage of the self storage sector and the expansion of coverage in February 2018 for “Every Property, Everywhere.” These items, along with the revenue decline described above, resulted in the (loss) before income taxes and net (loss) reported for the six months ended June 30, 2018.

See below for reconciliations of net (loss) income to EBITDA and Adjusted EBITDA on a consolidated and segment basis.

Consolidated Adjusted EBITDA for the three months ended June 30, 2018 was $2,944,000, a decrease of $(147,000), or (4.8)%, from the second quarter 2017 amount of $3,091,000. The Consolidated Adjusted EBITDA margins were 24.6% and 26.4% for the three months ended June 30, 2018 and 2017, respectively. The decrease in Consolidated Adjusted EBITDA and the modest margin decline is a result of expense increases from the 2017 period of $422,000, offset by the revenue increase of $275,000. Expense increases included the impact of the new revenue recognition standard on commission expense in the 2018 period of $107,000 and other net increases for compensation related costs and other accruals. The professional fees associated with the strategic alternatives review do not impact Consolidated Adjusted EBITDA.

Consolidated Adjusted EBITDA for the six months ended June 30, 2018 was $5,619,000, a decrease of $(60,000), or (1.1)%, from the 2017 comparable period amount of $5,679,000. The Consolidated Adjusted EBITDA margins were 23.6% and 23.8% for the six months ended June 30, 2018 and 2017, respectively. The decrease in Consolidated Adjusted EBITDA for the 2018 six month period is a result of a revenue decline of $71,000 and expense decreases of $11,000. Expense reductions in the 2018 period from the 2017 period are a result of a reduction for compensation related costs and accruals, offset by the impact of the new revenue recognition standard on commission expense in the 2018 period of $182,000 and additional legal fees related to IP. The professional fees associated with the strategic alternatives review do not impact Consolidated Adjusted EBITDA.

Reis Services EBITDA for the three months ended June 30, 2018 was $3,537,000, an increase of $36,000, or 1.0%, from the second quarter 2017 amount. Reis Services EBITDA margins were 29.5% and 29.9% for the three months ended June 30, 2018 and 2017, respectively. The increase to Reis Services EBITDA is a result of the quarterly revenue increase of $275,000, offset by expense increases from the 2017 second quarter of $239,000. The expense increase from the 2017 second quarter to the 2018 comparable period is a result of the impact of the new revenue recognition standard on commission expense in the period of $107,000 and other net increases in compensation related costs and accruals. The professional fees associated with the strategic alternatives review do not impact Reis Services EBITDA.

Reis Services EBITDA for the six months ended June 30, 2018 was $6,873,000, an increase of $83,000, or 1.2%, from the 2017 comparable period amount of $6,790,000. Reis Services EBITDA margins were 28.9% and 28.5% for the six months ended June 30, 2018 and 2017, respectively. The increase in Reis Services EBITDA is a result of expense reductions of $154,000, offset by the reduction of revenue in the period of $71,000. The expense decrease in the 2018 period from the 2017 period is a result of reductions for compensation related costs and accruals, offset by the impact of the new revenue recognition standard on commission expense in the period of $182,000, and additional legal fees related to IP compliance litigation.

Reconciliations of Net (Loss) Income to EBITDA and Adjusted EBITDA

We define EBITDA as earnings (net (loss) income) before interest, taxes, depreciation and amortization. We define Adjusted EBITDA as earnings (net (loss) income) before interest, taxes, depreciation, amortization, stock based compensation and professional fees incurred in connection with the Company’s review of strategic alternatives. 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, isolating non-cash charges for stock based compensation and the non-recurring nature of professional fees related to the Company’s review of strategic alternatives. 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

 

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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 (Loss) to EBITDA and

Adjusted EBITDA for the Three Months Ended June 30, 2018

   By Segment         
       Reis Services              Other (A)              Consolidated      

 

Net (loss)

          $ (459)      

Income tax (benefit)

           (121)      
        

 

 

 

Income (loss) before income taxes

    $ 1,247           $ (1,827)            (580)      

Add back:

        

Depreciation and amortization expense

     2,261            —             2,261       

Interest expense (income), net

     29            (1)            28       
  

 

 

    

 

 

    

 

 

 

EBITDA

     3,537            (1,828)            1,709       

Add back:

        

Stock based compensation expense, net

     —            632             632       

Professional fees in connection with strategic alternative review (B)

     —            603             603       
  

 

 

    

 

 

    

 

 

 

Adjusted EBITDA

    $ 3,537           $ (593)           $ 2,944       
  

 

 

    

 

 

    

 

 

 

Reconciliation of Net Income to EBITDA and

Adjusted EBITDA for the Three Months Ended June 30, 2017

   By Segment         
       Reis Services              Other (A)              Consolidated      

 

Net income

          $ 397      

Income tax expense

           141      
        

 

 

 

Income (loss) before income taxes

    $ 1,522           $ (984)            538      

Add back:

        

Depreciation and amortization expense

     1,947            —             1,947      

Interest expense (income), net

     32            (1)            31      
  

 

 

    

 

 

    

 

 

 

EBITDA

     3,501            (985)            2,516      

Add back:

        

Stock based compensation expense, net

     —            575             575      
  

 

 

    

 

 

    

 

 

 

Adjusted EBITDA

    $ 3,501           $ (410)           $ 3,091      
  

 

 

    

 

 

    

 

 

 

Reconciliation of Net (Loss) to EBITDA and

Adjusted EBITDA for the Six Months Ended June 30, 2018

   By Segment         
       Reis Services              Other (A)              Consolidated      

 

Net (loss)

          $ (811)      

Income tax (benefit)

           (165)      
        

 

 

 

Income (loss) before income taxes

    $ 2,288           $ (3,264)            (976)      

Add back:

        

Depreciation and amortization expense

     4,524            —             4,524       

Interest expense (income), net

     61            (2)            59       
  

 

 

    

 

 

    

 

 

 

EBITDA

     6,873            (3,266)            3,607       

Add back:

        

Stock based compensation expense, net

     —            1,237             1,237       

Professional fees in connection with strategic alternative review (B)

     —            775             775       
  

 

 

    

 

 

    

 

 

 

Adjusted EBITDA

    $ 6,873           $ (1,254)           $ 5,619       
  

 

 

    

 

 

    

 

 

 

 

See footnotes on next page.

 

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(amounts in thousands)

 

Reconciliation of Net Income to EBITDA and

Adjusted EBITDA for the Six Months Ended June 30, 2017

   By Segment         
       Reis Services              Other (A)              Consolidated      

 

Net income

          $ 932       

Income tax (benefit)

           (281)      
        

 

 

 

Income (loss) before income taxes

    $ 2,871           $ (2,220)            651       

Add back:

        

Depreciation and amortization expense

     3,855            —             3,855       

Interest expense (income), net

     64            (1)            63       
  

 

 

    

 

 

    

 

 

 

EBITDA

     6,790            (2,221)            4,569       

Add back:

        

Stock based compensation expense, net

     —            1,110             1,110       
  

 

 

    

 

 

    

 

 

 

Adjusted EBITDA

    $ 6,790           $ (1,111)           $ 5,679       
  

 

 

    

 

 

    

 

 

 

 

 

(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.

(B)

For purposes of reporting Consolidated Adjusted EBITDA, the Company is adding back the professional fees incurred related to its review of strategic alternatives in the 2018 periods.

Results of Operations

Comparison of the Results of Operations for the Three Months Ended June 30, 2018 and 2017

Total revenue and related cost of sales were approximately $11,984,000 and $3,314,000, respectively, for the three months ended June 30, 2018, which resulted in a gross profit for the Reis Services segment of approximately $8,670,000. Amortization expense included in cost of sales (for the database intangible asset) was approximately $1,085,000 during this period. Total revenue and related cost of sales were approximately $11,709,000 and $3,216,000, respectively, for the three months ended June 30, 2017, which resulted in a gross profit for the Reis Services segment of approximately $8,493,000.    Amortization expense included in cost of sales (for the database intangible asset) was approximately $917,000 during this period. See “— Critical Business Metrics of the Reis Services Business” for a discussion of the variances and trends in revenue and EBITDA of the Reis Services segment. The increase in cost of sales of $98,000 resulted from a $168,000 increase in amortization expense for database costs (from product enhancements such as affordable housing, the increase to the number of markets covered for self storage, and the expansion of records in our sales comparable offerings and “Every Property, Everywhere”), offset by lower employment related costs in the 2018 period of approximately $70,000 from a reduced head count in the 2018 period compared to the 2017 period.

Sales and marketing expenses were approximately $3,234,000 and $3,105,000 for the three months ended June 30, 2018 and 2017, respectively, and solely represented costs of the Reis Services segment. Amortization expense included in sales and marketing expenses (for the customer relationships intangible asset) was approximately $225,000 and $231,000 during the three months ended June 30, 2018 and 2017, respectively. The increase in sales and marketing expenses between the two periods of approximately $129,000 was primarily the effect of contract asset amortization expense of $107,000 as a result of the new revenue recognition standard in 2018.

Product development expenses were approximately $1,295,000 and $1,106,000 for the three months ended June 30, 2018 and 2017, respectively, and solely represented costs of the Reis Services segment. Amortization expense included in product development expenses (for the website intangible asset) was approximately $698,000 and $548,000 during the three months ended June 30, 2018 and 2017, respectively. Product development costs increased $189,000, primarily due to increased amortization expense for the website intangible asset of $150,000, and greater employment related costs in the 2018 period.

General and administrative expenses of approximately $4,693,000 for the three months ended June 30, 2018 included current period expenses of approximately $3,807,000, depreciation expense of approximately $254,000 for furniture, fixtures and equipment, and approximately $632,000 of net non-cash compensation expense. The net non-cash compensation expense was comprised of equity awards for employees and directors. General and administrative expenses of approximately $3,713,000 for the three months ended June 30, 2017 included current period expenses of approximately $2,887,000, depreciation expense of approximately $251,000 for furniture, fixtures and equipment, and approximately $575,000 of net non-cash compensation expense. Excluding the non-cash expenses, the net increase in general and administrative expenses of $920,000 was primarily the result of professional fees incurred in connection with the strategic alternatives review (aggregating $603,000 in the 2018 period) and an increase in compensation related costs and accruals in the 2018 period.

 

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Interest expense of $28,000 and $32,000 for the three months ended June 30, 2018 and 2017, respectively, was comprised of unused facility fees and deferred financing cost amortization on the Company’s revolving credit facility, which we refer to as the Revolver. There was no outstanding balance on the Revolver during the three months ended June 30, 2018 and 2017.

The income tax benefit of $121,000 during the three months ended June 30, 2018 reflected a deferred Federal tax benefit of $94,000 and deferred state and local tax benefit of $45,000, offset by a current state and local tax expense of $18,000. Income tax expense of $141,000 during the three months ended June 30, 2017 reflected deferred Federal tax expense of $103,000, current state and local tax expense of $16,000, current Federal AMT expense of $16,000, and deferred state and local tax expense of $6,000.

Comparison of the Results of Operations for the Six Months Ended June 30, 2018 and 2017

Total revenue and related cost of sales were approximately $23,764,000 and $6,692,000, respectively, for the six months ended June 30, 2018, which resulted in a gross profit for the Reis Services segment of approximately $17,072,000. Amortization expense included in cost of sales (for the database intangible asset) was approximately $2,135,000 during this period. Total revenue and related cost of sales were approximately $23,835,000 and $6,582,000, respectively, for the six months ended June 30, 2017, which resulted in a gross profit for the Reis Services segment of approximately $17,253,000. Amortization expense included in cost of sales was approximately $1,789,000 during this period. See “— Critical Business Metrics of the Reis Services Business” for a discussion of the variances and trends in revenue and EBITDA of the Reis Services segment. The increase in cost of sales of $110,000 resulted from a $346,000 increase in amortization expense for database costs (from product enhancements such as affordable housing, the increase to the number of markets covered for self storage, and the expansion of records in our sales comparable offerings and “Every Property, Everywhere”), offset by lower employment related costs in the 2018 period of approximately $236,000 from a reduced head count in the 2018 period compared to the 2017 period.

Sales and marketing expenses were approximately $6,233,000 and $6,433,000 for the six months ended June 30, 2018 and 2017, respectively, and solely represented costs of the Reis Services segment. Amortization expense included in sales and marketing expenses (for the customer relationships intangible asset) was approximately $452,000 and $462,000 during the six months ended June 30, 2018 and 2017, respectively. The decrease in sales and marketing expenses between the two periods of approximately $200,000 resulted from lower employment related costs in the 2018 period, offset by the effect of contract asset amortization expense of $182,000 as a result of the new revenue recognition standard in 2018.

Product development expenses were approximately $2,584,000 and $2,273,000 for the six months ended June 30, 2018 and 2017, respectively, and solely represented costs of the Reis Services segment. Amortization expense included in product development expenses (for the website intangible asset) was approximately $1,427,000 and $1,118,000 during the six months ended June 30, 2018 and 2017, respectively. Product development costs increased $311,000, primarily due to increased amortization expense for the website intangible asset of $309,000.

General and administrative expenses of approximately $9,172,000 for the six months ended June 30, 2018 included current period expenses of approximately $7,425,000, depreciation expense of approximately $510,000 for furniture, fixtures and equipment, and approximately $1,237,000 of net non-cash compensation expense. The net non-cash compensation expense was comprised of equity awards for employees and directors. General and administrative expenses of approximately $7,833,000 for the six months ended June 30, 2017 included current period expenses of approximately $6,237,000, depreciation expense of approximately $486,000 for furniture, fixtures and equipment, and approximately $1,110,000 of net non-cash compensation expense. Excluding the non-cash expenses, the net increase in general and administrative expenses of $1,188,000 was primarily the result of professional fees incurred in connection with the strategic alternatives review (aggregating $775,000 in the 2018 period), consulting fees in connection with the adoption of the new revenue recognition standard, additional legal fees related to IP compliance litigation and an increase in compensation related costs and accruals in the 2018 period.

Interest expense of $60,000 and $65,000 for the six months ended June 30, 2018 and 2017, respectively, was comprised of unused facility fees and deferred financing cost amortization on the Revolver. There was no outstanding balance on the Revolver during the six months ended June 30, 2018 or 2017.

The income tax benefit of $165,000 during the six months ended June 30, 2018 reflected a deferred Federal tax benefit of $128,000 and deferred state and local tax benefit of $72,000, offset by a current state and local tax expense of $35,000. The income tax benefit of $281,000 for continuing operations during the six months ended June 30, 2017 reflected deferred Federal tax benefit of $370,000 and deferred state and local tax benefit of $134,000, offset by current state and local tax expense of $188,000 and current Federal AMT expense of $35,000.

 

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Income Taxes

For more information regarding income taxes, see Note 7 to the Company’s consolidated financial statements included in this filing.

Liquidity and Capital Resources

The core Reis Services business has traditionally generated significant cash annually and we expect it to continue to do so. The Company’s consolidated cash and cash equivalents balance aggregated approximately $15,049,000 at June 30, 2018. The Company had cash flows provided by its operating activities of $3,741,000. The Company’s cash used in the six months ended June 30, 2018 included: (1) making investments in its websites and databases of $3,825,000, (2) paying aggregate dividends of approximately $4,433,000 and (3) repurchasing 2,000 shares of the Company’s common stock for approximately $36,000 in the six months ended June 30, 2018.

At June 30, 2018, the Company’s short-term and long-term liquidity requirements include: current operating and capitalizable costs, including accounts payable and other accrued expenses; near-term product development and enhancement of the website and databases either through building with Company resources or through acquisitions; operating leases; growth in operating expenses, including possible further increases in the number of Reis employees and additional resources devoted to our sales and marketing efforts; other costs, including public company expenses not included in the Reis Services segment; costs associated with the Company’s review of strategic alternatives; the resolution of open tax years with state and local tax authorities; the payment of state and local taxes based on income (in excess of limitation amounts) and tax on capital; payment of employee taxes on vested equity awards, for which the employee uses shares to settle his/her minimum withholding tax obligations with the Company; the use of cash for the payment of quarterly dividends; and repurchases of shares of Reis common stock (at June 30, 2018, approximately $400,000 remained available to be purchased under our current share purchase authorization). The Company expects to meet these short-term and long-term liquidity requirements generally through the use of available cash and cash generated from subscription revenue of Reis Services and, if necessary or deemed prudent to do so, with borrowings under the Revolver.

The Company’s level of capital expenditures related to website and database development continues to decline, largely the result of launching its “Every Sale, Everywhere” and “Every Property, Everywhere” initiatives in 2017. Specifically, after peaking at $2,399,000 in the second quarter of 2017, the Company’s capital investment declined to $2,126,000 in the third quarter of 2017 and to $1,930,000 in the fourth quarter of 2017. In the second quarter of 2018, the Company’s capital expenditures further dipped to $1,875,000.

The Company has a $20,000,000 revolving credit facility, which expires in January 2019. At June 30, 2018, there was no outstanding balance on the Revolver. For additional information regarding the Revolver, see Note 6 to the Company’s consolidated financial statements included in this filing.

On June 24, 2015, the Company’s shelf registration statement on Form S-3 was declared effective. The shelf registration statement permitted the offering, issuance and sale of up to a maximum aggregate offering price of $75,000,000 of the Company’s stock from time to time for three years through June 24, 2018. At this time, while the Company is exploring strategic alternatives, the shelf registration statement expired unused. Any determinations about the filing of a new shelf registration statement, if any, will be at the discretion of the Company’s Board.

The Company has NOLs that it expects to utilize against future Federal, state and local taxable income. The use of certain NOLs for New York State and New York City purposes will be subject to an annual limitation and, therefore, any taxable income in excess of the limitation will be subject to tax. Tax payments related to 2018 are expected to be for state and local taxes based on income, in excess of limitation amounts, and tax on capital. As described under the Tax Act, the Company expects to receive approximately $1,737,000 in Federal cash refunds from existing AMT credits that will not be utilized prior to 2021. The expected refund is based on receiving 50% of the available AMT credit balance annually between 2018 and 2021.

The Company may determine to use its cash to: (1) acquire or invest in other databases or information companies that have logical adjacencies or complementary products or services; (2) repurchase additional shares of Reis common stock; or (3) pay a special dividend or increase its recurring quarterly dividend. There can be no assurance that the Company will use its cash for any of these purposes during 2018, or thereafter.

Issuer Purchases and Equity Securities

On August 30, 2016, the Company’s Board of Directors authorized a repurchase program of shares of the Company’s common stock up to an aggregate of $5,000,000. Purchases under the program may be made from time to time in the open market or through privately negotiated transactions. Depending on market conditions, financial developments and other factors, these purchases may be commenced or suspended at any time, or from time to time, without prior notice and may be expanded without prior notice. The

 

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Company may make purchases pursuant to a trading plan under Securities Exchange Act Rule 10b5-1, permitting open market purchases of common stock during blackout periods.

During the six months ended June 30, 2018, the Company purchased an aggregate of 2,000 shares of common stock, at an average price of $17.81 per share, leaving approximately $400,000 at June 30, 2018 that may be used to purchase additional shares under the program. For additional information related to stock repurchases, see Note 8 to the Company’s consolidated financial statements.

Changes in Cash Flows

Cash flows for the six months ended June 30, 2018 and 2017 are summarized as follows:

 

     For the Six Months Ended June 30,  
   2018     2017  

Net cash provided by operating activities

    $ 3,740,564         $ 6,161,162     

Net cash (used in) investing activities

     (3,893,570)         (5,224,717)    

Net cash (used in) financing activities

     (4,468,548)         (3,544,429)    
  

 

 

   

 

 

 

Net (decrease) in cash and cash equivalents

    $         (4,621,554)        $         (2,607,984)    
  

 

 

   

 

 

 

Net cash provided by operating activities decreased $(2,420,000) from $6,161,000 provided in the 2017 period to $3,741,000 provided in the 2018 period. This decrease was primarily due to greater payments in the 2018 period than in the 2017 period for liabilities and other accruals at each respective December 31 balance sheet date.

Net cash used in investing activities decreased by $(1,331,000) from $5,225,000 used in the 2017 period to $3,894,000 used in the 2018 period. This change resulted from a $628,000 decrease in purchases of furniture, fixtures and equipment and by a $703,000 decrease of cash used in the 2018 period as compared to the 2017 period for website and database development costs for continuing product development initiatives.

Net cash used in financing activities was approximately $4,469,000 and $3,544,000 in the 2018 and 2017 periods, respectively. The 2018 period includes approximately $4,433,000 for dividends declared and paid in the six months ended June 30, 2018 and stock repurchases aggregating $36,000. The 2017 period includes approximately $3,942,000 for dividends declared and paid in the six months ended June 30, 2017 and stock repurchases aggregating $2,537,000, offset by proceeds from the exercise of stock options by Reis employees aggregating $2,935,000.

Cautionary Statement Regarding Forward-Looking Statements

This quarterly report on Form 10-Q 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 (loss), 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:

 

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lower than expected revenues and other performance measures such as net income (loss), income (loss) before income taxes and EBITDA and Adjusted EBITDA for the Reis Services segment and on a consolidated basis;

 

   

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 the Company’s 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, 2017, which was filed with the Securities and Exchange Commission on March 8, 2018.

You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date of this quarterly report on Form 10-Q. 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 quarterly report on Form  10-Q or to reflect the occurrence of unanticipated events.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

The Company’s primary market risk exposure has been to changes in interest rates. This risk may be managed by limiting the Company’s financing exposures, to the extent possible, by purchasing interest rate caps when deemed appropriate.

At June 30, 2018 and December 31, 2017, the Company’s only potential exposure to interest rates was on variable rate based debt. This exposure has historically been minimized through the use of interest rate caps. During the six months ended June 30, 2018 and throughout 2017, the Company did not have any interest rate caps. No debt was outstanding at June 30, 2018 and December 31, 2017. For more information about the Company’s debt, see Note 6 to the Company’s consolidated financial statements included in this filing.

Reis holds cash and cash equivalents at various regional and national banking institutions. Management monitors the institutions that hold our cash and cash equivalents. Management’s emphasis is primarily on safety of principal. Management, in its discretion, has diversified Reis’s cash and cash equivalents among banking institutions to potentially minimize exposure to any one of these entities. To date, we have experienced no loss or lack of access to our invested cash or cash equivalents; however, we can provide no assurances that access to invested cash and cash equivalents will not be impacted by adverse conditions in the financial markets.

Cash balances held at banking institutions with which we do business generally exceed the Federal Deposit Insurance Corporation insurance limits. While management monitors the cash balances in these bank accounts, such cash balances could be impacted if the underlying banks fail or could be subject to other adverse conditions in the financial markets.

Item 4. Controls and Procedures.

As of June 30, 2018, the Company carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures as of June 30, 2018 were designed at a reasonable assurance level and were effective to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported, within the time periods specified in the SEC rules and forms, and to ensure that such

 

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information is accumulated and communicated to the Company’s management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

There has been no change in the Company’s internal control over financial reporting during the quarter covered by this report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Part II. Other Information

Item 1. Legal Proceedings.

As disclosed in Note 11 to the Company’s consolidated financial statements included in this filing, the Company is not a party to any litigation that could reasonably be foreseen to be material to the Company, and the disclosure set forth in such Note 11 is incorporated herein by reference.

Item 1A. Risk Factors.

A wide range of risks may affect our business and financial results, now and in the future; however, we consider the risks described under “Item 1A. Risk Factors” in our annual report on Form 10-K for the year ended December 31, 2017, which was filed with the SEC on March 8, 2018, to be the most significant. There may be other currently unknown or unpredictable economic, business, competitive, governmental or other factors that could have material adverse effects on our business or future results. See “Part I. Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Cautionary Statement Regarding Forward-Looking Statements” for additional information.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Issuer Purchases of Equity Securities

On August 30, 2016, the Company’s Board of Directors authorized a repurchase program of shares of the Company’s common stock up to an aggregate of $5,000,000. Purchases under the program may be made from time to time in the open market or through privately negotiated transactions. Depending on market conditions, financial developments and other factors, these purchases may be commenced or suspended at any time, or from time to time, without prior notice and may be expanded without prior notice. The Company may make purchases pursuant to a trading plan under Securities Exchange Act Rule 10b5-1, permitting open market purchases of common stock during blackout periods consistent with the Company’s “Policies for Transactions in Reis Stock and Insider Trading and Tipping.”

During the second quarter of 2018, the Company repurchased the following common shares:

 

Period

  

Total Number of
  Shares Purchased  

  Average Price
  Paid per Share  
    Total Number of
Shares Purchased
  as Part of Publicly  
  Announced Plans
or Programs
    Maximum Dollar
Value of Shares
That May Yet Be
Purchased Under  
the Plans or
Programs
 

April 1, 2018 to April 30, 2018

   —      $ —         —        $ 399,128    

May 1, 2018 to May 31, 2018

   —      $ —         —        $ 399,128    

June 1, 2018 to June 30, 2018

   —      $ —         —        $ 399,128    

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

None.

 

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Item 5. Other Information.

On August 7, 2018, Reis, Inc. (“Reis” or the “Company”), as guarantor, and its wholly owned subsidiary, Reis Services, LLC (“Reis Services”), as borrower, entered into a Third Amendment (the “Third Amendment”) to the Amended and Restated Loan and Security Agreement, dated as of January 28, 2016, by and among Reis Services, LLC, as Borrower, Reis, Inc., as Guarantor, and Capital One, National Association, as lender (the “Lender”).

The Third Amendment makes certain modifications to the Amended and Restated Loan and Security Agreement, including amending the fixed charge coverage ratio to be tested only when the revolver is drawn, and extending the period of the minimum liquidity requirement of $10,000,000 of average collected balances in non-interest bearing demand deposit accounts with the Lender from March 31, 2018 through the maturity date, as well as other minor reporting changes.

The foregoing is a summary of the material terms of the Third Amendment and not a complete description of the Third Amendment. Accordingly, the foregoing is qualified in its entirety by reference to the Third Amendment, attached to this quarterly report on Form 10-Q as Exhibit 10.1, and incorporated herein by reference.

Item 6. Exhibits.

Exhibits filed with this Form 10-Q:

 

    Exhibit    

No.

 

Description

10.1

  Third Amendment to Amended and Restated Revolving Loan and Security Agreement, dated as of August 7, 2018, by and among Reis Services, LLC, as Borrower, Reis, Inc., as Guarantor, and Capital One, National Association, as Lender.

31.1

  Chief Executive Officer Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2

  Chief Financial Officer Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1

  Chief Executive Officer and Chief Financial Officer Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101

  Interactive Data Files, formatted in extensible Business Reporting Language (XBRL).

 

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

REIS, INC.
By:  

/s/  Mark P. Cantaluppi

 

Mark P. Cantaluppi

Vice President, Chief Financial Officer

Date:  August 9, 2018

 

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