SOLD Housevalues (MM)

HouseValues, Inc. (NASDAQ:SOLD) today announced results for the quarter ended June 30, 2005. For the quarter, HouseValues reported revenue of $20.6 million, an increase of 85 percent from the comparable quarter last year. Second quarter 2005 net income was $3.7 million, or $0.14 per diluted share, compared to net income of $2.3 million, or $0.11 per diluted share, in the second quarter of 2004. "Our customers are some of the most successful real estate and mortgage professionals in North America, and we are proud to be helping a growing number of HouseValues subscribers win more business by exceeding the expectations of Internet enabled consumers," said Ian Morris, chief executive officer of HouseValues, Inc. Chief Financial Officer John Zdanowski added, "The second quarter capped off our 17th consecutive quarter of profitability. Net income grew 27 percent over the first quarter even as we continued to invest aggressively in new services that will benefit both real estate professionals and consumers." New Service for Mortgage Professionals Launched In the quarter, HouseValues announced a new service specifically designed to help mortgage professionals write more business by enabling them to build strong relationships with both prospective home buyers and local real estate agents. The new mortgage marketing service from HouseValues is already in use by more than 500 mortgage companies across North America. Borrell Associates expects online mortgage advertising will grow from $2 billion dollars last year to over $4.3 billion in 2009 -- more money than will be spent by mortgage professionals on direct mail, newspapers or television. Business Outlook The company expects third quarter revenue in the range of $22.5 to $23.5 million, EBITDA between $5.5 and $6.0 million and GAAP diluted earnings per share of $0.11 to $0.13. HouseValues also increased the minimum revenue, EBITDA and EPS values of its expected ranges for the full year. HouseValues expects 2005 revenue in the range of $85 million to $88 million. The company expects full-year EBITDA in the range of $22 million to $23 million and GAAP earnings per share of $0.46 to $0.50. The company believes its new product development activities will drive incremental revenue in 2006. The HouseValues Solution HouseValues solves the marketing challenges facing the real estate and mortgage professionals by helping them capture, cultivate, and convert leads into closed business. They do this by generating hundreds of thousands of consumer requests each month and providing those requests to real estate and mortgage professionals on an exclusive basis, along with a Web based customer relationship management tool and a personal coach dedicated to helping every customer succeed. HouseValues has built relationships with nearly 14,000 real estate and mortgage professionals representing every major real estate franchise brand and brokerage company, serving about 55,000 North American neighborhoods. "HouseValues offers these real estate and mortgage professionals a far better value proposition than newspapers and other print classified offerings," Morris said. "That's why we expect to continue to grow our share of real estate and mortgage marketing spend at the expense of other media." Conference Call HouseValues, Inc. will host a conference call to discuss these financial results today at 2:00 p.m. PT/5:00 p.m. ET. A live Web cast of the call will be available from the Investor Relations section of the company's Web site at http://www.housevaluesinc.com and via replay beginning three hours after the completion of the call. The call will be available via live audio at 1-800-218-0204. An audio replay of the call will also be available to investors beginning at 8 p.m. ET today, through August 18, 2005, by dialing 1-303-590-3000 and entering the passcode 11033023#. Forward-Looking Statements This release contains forward-looking statements relating to the Company's anticipated plans, products, services, and financial performance. The words "believe," "expect," "anticipate," "intend" and similar expressions identify forward-looking statements, but their absence does not mean the statement is not forward looking. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that could cause actual results to differ materially from those anticipated in the forward looking statements. Factors that could affect the Company's actual results include its ability to retain and increase its customer base, to respond to competitive threats, to manage costs, and to expand into new lines of business. Please refer to the company's recent filings with the Securities and Exchange Commission on Form 10-Q and 10-K for a more detailed description of these and other risks that could materially affect actual results. Given these risks and uncertainties, you should not place undue reliance on these forward-looking statements. The forward-looking statements are made as of today's date and the Company assumes no obligation to update any such statements to reflect events or circumstances after the date hereof. Non GAAP Measures This press release includes a discussion of EBITDA, which is a non GAAP financial measure provided as a complement to results provided in accordance with accounting principles generally accepted in the United States of America ("GAAP"). The term "EBITDA" refers to a financial measure that is defined as earnings before net interest, income taxes, depreciation and amortization. EBITDA is not a substitute for measures determined in accordance with GAAP, and may not be comparable to EBITDA as reported by other companies. We believe EBITDA to be relevant and useful information to our investors as this measure is an integral part of our internal management reporting and planning process and is the primary measure used by our management to evaluate the operating performance of our operations. The components of EBITDA include the key revenue and expense items for which our operating managers are responsible and upon which we evaluate their performance, and we also use EBITDA for planning purposes and in presentations to our board of directors. See below for a reconciliation of net income, the most comparable GAAP measure, to EBITDA. About HouseValues, Inc. HouseValues, Inc. (NASDAQ: SOLD) provides innovative marketing services that enable residential real estate professionals to capture and cultivate leads, and convert these leads into closed transactions. HouseValues' integrated offering provides real estate professionals with leads generated from its HouseValues.com and JustListed.com Web sites, together with its online prospect management system and personalized coaching and training to help them increase lead conversion. More information about the company can be found at http://www.housevaluesinc.com -0- *T HouseValues, Inc. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share data) (unaudited) Quarter ended Six months ended June 30, June 30, 2005 2004 2005 2004 Revenues $20,577 $11,150 $38,196 $20,473 Expenses: Sales and marketing 10,276 5,037 18,898 9,352 Technology and product development 1,607 783 2,841 1,506 General and administrative 3,043 1,376 5,813 2,699 Depreciation and amortization of property and equipment 402 191 756 389 Amortization of intangible assets 151 218 303 381 Stock-based compensation 258 55 555 76 ----------------- ---------------- Total expenses 15,737 7,660 29,166 14,403 ----------------- ---------------- Income from operations 4,840 3,490 9,030 6,070 Interest income 486 24 804 41 ----------------- ---------------- Income before income tax expense 5,326 3,514 9,834 6,111 Income tax expense 1,618 1,235 3,196 2,148 ----------------- ---------------- Net income $3,708 $2,279 $6,638 $3,963 ================= ================ Net income per share: Basic $0.15 $0.12 $0.26 $0.21 ================= ================ Diluted $0.14 $0.11 $0.24 $0.19 ================= ================ HouseValues, Inc. NON-GAAP FINANCIAL MEASURE AND RECONCILIATION (In thousands, except per share data) (unaudited) Net income $3,708 $2,279 $6,638 $3,963 Less Interest income 486 24 804 41 Add Depreciation and amortization of property and equipment 402 191 756 389 Amortization of intangible assets 151 218 303 381 Stock-based compensation 258 55 555 76 Income tax expense 1,618 1,235 3,196 2,148 ----------------- ---------------- EBITDA $5,651 $3,954 $10,644 $6,916 ================= ================ HouseValues, Inc. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share data) (unaudited) June 30, December 31, 2005 2004 Assets Current assets: Cash and cash equivalents $57,658 $57,562 Short-term investments 23,815 17,316 Accounts receivable, net of allowance of $274 and $95 393 84 Prepaid expenses and other assets 1,232 1,245 Deferred income taxes 796 222 Prepaid income taxes 1,212 - Other current assets 538 1,605 ---------- -------------------- Total current assets 85,644 78,034 Property and equipment, net of accumulated depreciation of $2,800 and $2,051 6,257 3,702 Goodwill 1,815 948 Intangible assets, net of accumulated amortization of $1,529 and $1,226 1,326 1,430 Other noncurrent assets 389 450 ---------- -------------------- Total assets $95,431 $84,564 ========== ==================== Liabilities and Shareholders' Equity Current liabilities: Accounts payable $1,151 $1,167 Accrued compensation and benefits 2,781 2,407 Accrued expenses and other current liabilities 4,928 3,706 Deferred rent, current portion 261 261 Deferred revenue 1,336 1,014 Income taxes payable - 103 ---------- -------------------- Total current liabilities 10,457 8,658 Deferred rent, less current portion 1,416 1,306 ---------- -------------------- Total liabilities 11,873 9,964 Shareholders' equity: Common stock, par value $0.001 per share, stated at amounts paid in; authorized 120,000,000 shares; issued and outstanding 25,508,376 and 24,935,000 shares at June 30, 2005 and December 31, 2004 69,943 68,631 Deferred stock-based compensation (3,616) (4,624) Retained earnings 17,231 10,593 ---------- -------------------- Total shareholders' equity 83,558 74,600 ---------- -------------------- Total liabilities and shareholders' equity $95,431 $84,564 ========== ==================== HouseValues, Inc. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (unaudited) Six months ended June 30, 2005 2004 Cash flows from operating activities: Net income $6,638 $3,963 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization of property and equipment 756 389 Amortization of intangible assets 303 381 Stock-based compensation 555 76 Deferred income tax benefit (513) (117) Tax benefit from exercises of stock options 1,107 - Changes in certain assets and liabilities Accounts receivable (309) 2 Prepaid expenses and other assets 81 77 Prepaid income taxes (1,212) - Other current assets 1,067 - Accounts payable 180 (395) Accrued compensation and benefits 374 252 Accrued expenses and other current liabilities 1,181 607 Deferred rent 110 - Deferred revenue 322 249 Income taxes payable (103) 140 ----------- ----------- Net cash provided by operating activities 10,537 5,624 ----------- ----------- Cash flows from investing activities: Purchases of short-term investments (10,799) (12,000) Sales of short-term investments 4,300 - Change in restricted cash - 125 Purchases of property and equipment (3,402) (281) Purchases of goodwill and intangible assets (580) (258) ----------- ------------ Net cash used in investing activities (10,481) (12,414) ----------- ------------ Cash flows from financing activities: Issuance costs related to the sale of common stock (614) - Cash held for third party common stock transaction - 750 Proceeds from exercises of stock options 654 19 Proceeds from repayment of shareholder note receivable - 1 ----------- ----------- Net cash provided by financing activities 40 770 ----------- ----------- Net increase (decrease) in cash and cash equivalents 96 (6,020) Cash and cash equivalents at beginning of period 57,562 7,181 ----------- ----------- Cash and cash equivalents at end of period $57,658 $1,161 =========== =========== *T SOLD: FINANCIAL