In my very first blog posting about Transparency, I noted that one of my goals with this blog is to share our financial results so everyone on the staff has a clearer picture of how we are doing. As I do this, I’ll be comparing our results to our budget. Although some might prefer comparisons to last year, or to an updated forecast, I think keeping track of where we are against budget is still the most important measure of how we are doing. Our budget represents a commitment we’ve made to our investors. It’s our way of saying, “if you invest in our business here are the results that we expect to achieve”. Because we need our investors to continue investing in us—in new technology, for instance—we must carefully monitor how well we are doing in achieving our past commitments. And when we fall short, it is important that we understand why and develop plans for getting back on track.

This has certainly been a challenging year. Our budgets were set at the end of 2007, before we could see the full impact of the recession in the Real Estate industry, for instance, or how the market for legal recruitment advertising might be impacted. So while we actually reduced our budget in several areas just before locking in the 2008 targets, we clearly did not fully account for the economic difficulties in some of our businesses. On the other hand, we also did not fully predict how the foreclosure crisis would lead to record public notice listings in our Florida, Atlanta and, to a lesser extent, Philadelphia newspapers.

In reporting the numbers below, please note that I am only reporting results for the old “ALM Media”, excluding the Incisive Divisions which are still part of the UK budgets. So these figures do not include the Interactive Marketing Division (SES, ClickZ and Search Engine Watch). I’ll try to find a way to incorporate those results in the future.

For the eight months which ended on August 31st, our consolidated revenues were running 9.4% behind budget. With the exception of public notice revenues (up 8.3%) and books (up 5.6%), every other revenue line we track was down against budget. Here are the major line items:

• Combined Display and B2B advertising was down 21.4% vs. budget, reflecting the dramatic advertising slowdown in the Real Estate division as well as cutbacks among the Legal Division’s display and B2B advertisers.

• Classified advertising revenues are down 30.8% vs. budget, reflecting the slowdown in attorney help wanted advertising in our newspaper group.

• Law Firm advertising is 11.0% under budget, primarily due to softness in the newspapers as law firms cut back on their professional announcements.

• Seminar/Tradeshow revenues are down 19.0%, reflecting in large part our shutdown and reorganization of the SRI conference group this past Spring and, to a lesser extent, the challenges our Canadian business conferences have faced this year because of weakness in the Financial sector.

Bad as that may sound, when compared to last year our revenues are only off 2%. That’s a pretty mild impact so far in the current economic downturn, far less of a year-to-year decline than we experienced during the 2001-2002 recession.

With such big declines in our major revenue areas compared to our budget, it should not be surprising that through the end of August our EBITDA was 16% below our budget. (For those not familiar with the term, EBITDA means “earnings before interest, taxes, depreciation and amortization”. It is a way of looking at the cash flow that comes from our on-going operations, without including our financing costs (interest), taxes or non-cash accounting adjustments (depreciation and amortization). It basically tells us “here’s how much cash is available from the business after we pay all of our regular expenses in order to pay the interest on our debt, any taxes which may be due, and to set aside money to replace over time the property, plant and equipment which is sitting on our balance sheet”).

Put another way, while our North American businesses continue to be profitable, we are delivering lower bottom-line results than our investors had expected. The reasons are quite clear, and primarily spring from the state of the economy and its impact on our businesses. Our response to that challenge has been to reduce our costs, in some places dramatically, while continuing to invest in areas which we still believe show great promise for the future. Those include our online and data businesses, the research business, and custom publishing.

As we are now putting together our budget for 2009, I would expect that we will keep our revenue growth expectations for next year very modest, and look to protect our profitability by continuing to be careful with our costs. Several prominent economists are now predicting at least a 12 month recession, and we need to plan accordingly, knowing that while some of our lines of business may come back quicker, others may take longer to revive.

Meanwhile, the year is not yet over, and we have a lot of big projects on schedule for the last few months of 2008. Our bookings for the Legal Division’s Magazine group look strong for the next few months, and we have a number of Custom Publishing directories due to publish before year-end which could make a big difference in our results. Book publishing has been a strength for the company this year, and a great deal of our book sales traditionally occur in the fourth quarter.

So I’m optimistic that we can reduce those negative comparisons to our 2008 revenue and Ebitda budgets. With that said, we cannot succeed without you- the staff at Incisive Media. The innovation, teamwork, and focus of our staff in the coming months will be critical. As we move into the fourth quarter of 2008 and prepare for 2009 I need for each of you to:

• Innovate – Turn your ideas for growth into action. Reach out to your management and share ways that your brand, your team or our business overall can grow.

• Work smarter – Identify process improvements that would increase productivity and reduce redundancy.

• Negotiate better – Make sure that all vendor contracts are reviewed and that we get optimal terms for our business.

• Eliminate waste - Within your own department work on ways to reduce unnecessary spending.

As always, whether in this forum or through your local work group, I invite you to share your thoughts on how we can continue to close the gap and come closer to meeting our budget in the coming months.