KIRKLAND, WA today announced results for the quarter and year
ended December 31, 2007.
Prior period results have been restated to reflect continuing
operations consistent with the company's decision announced last
year to discontinue its mortgage lead business.
Full Year 2007 Results from Continuing Operations
-- Revenue was $59.8 million compared to $85.8 million in 2006.
-- Net loss -- which included non-cash charges of $9.2 million to reduce
the carrying value of goodwill and other long-lived assets and to record a
valuation allowance against the deferred tax assets -- was $12.6 million
compared to net income of $3.3 million in 2006.
-- Adjusted EBITDA was $2.6 million compared to $10.5 million in 2006.
"Despite market conditions that were more challenging than many
anticipated, HouseValues generated $2.6 million in Adjusted EBITDA
while making investments that enhance both our products and our
strategic position," said CEO Ian Morris.
HouseValues has been responsive to the real estate business
cycle by aggressively managing its cost structure and as a result
drove positive Adjusted EBITDA throughout 2007. The company
recognizes that great businesses are built in down cycles and as a
result has focused on profitably driving the success of existing
customers while at the same time making strategic investments that
the company expects will lead to future growth.
Sequential Quarter Comparisons of Results from Continuing
Operations
-- Revenue was $12.2 million in the fourth quarter compared to $13.8
million in the third quarter of 2007.
-- Net loss -- which included non-cash charges of $9.3 million to reduce
the carrying value of goodwill and other long-lived assets and to record a
valuation allowance against the deferred tax assets -- was $9.9 million
compared to a net loss of $0.9 million in the third quarter.
-- Adjusted EBITDA was $0.8 million in the fourth quarter compared to
$0.5 million in the third quarter.
The decline in sequential quarter revenue reflected fewer
customers and lower average monthly revenue per user in the
company's agent-direct business that was slightly offset by the
inclusion of two months of Realty Generator revenue in the fourth
quarter. Customer count and average monthly revenue metrics exclude
Realty Generator customers that typically spend more and are
retained longer than individual real estate agents.
Strategic Investments Build for the Future
The company's corporate development efforts yielded two
strategic investments in the fourth quarter that broaden the
company's market opportunity, its product offerings, and its
channels to real estate professionals.
HouseValues acquired Realty Generator LLC, a leading provider of
marketing and technology solutions that enables real estate
brokerages and agent e-teams, as well as their affiliated agents
and lender partners to significantly increase their incomes.
Additionally, HouseValues expects to leverage technology and
features acquired as part of the Realty Generator purchase across
its traditional business, a move that the company believes will
lead to greater agent success and retention as well as lower
ongoing technology operating and maintenance costs, and more rapid
product innovation.
During the fourth quarter, HouseValues also made an equity
investment in the ActiveRain Real Estate Network. ActiveRain is the
leading professional community and social networking platform
serving the real estate community. ActiveRain has rapidly grown its
membership over the past two years to more than 70,000 real estate
professionals.
Strong Cash Position
HouseValues considers its strong cash and investments position
to be a strategic asset. Despite the real estate downturn,
HouseValues used virtually no cash in operations last year.
During 2007, HouseValues invested cash to acquire Realty
Generator for $9.2 million and to make an equity investment in
ActiveRain for $2.75 million. The company also repurchased and
retired $1.0 million of its common shares. HouseValues ended 2007
with $62.9 million in cash, cash equivalents and short term
investments.
Other Business Matters
On January 7, 2008, HouseValues terminated the lease for its
former Yakima facility, which was closed in the third quarter of
2007. The company received a fee of $1.4 million for assigning its
purchase option for that facility and transferring all remaining
assets to a third party. The company did not pay a lease
termination fee and will record a gain of approximately $0.8
million in the first quarter of 2008.
On January 23, 2008, HouseValues announced and made effective a
workforce restructuring that reduced headcount by approximately 45
employees. HouseValues expects to realize about $5 million in
annualized savings as a result of the restructuring. The company
will incur cash severance charges of approximately $0.6 million,
and additional accelerated vesting charges of $0.2 million related
to equity compensation in the first quarter of 2008.
Conference Call
HouseValues will host a conference call and live Webcast to
discuss these financial results at 4:30 p.m. Eastern time. To
listen to the live conference call, please dial 719-234-0008. A
live webcast of the call will be available from the Investor
Relations section of the company's Web site at
http://www.housevaluesinc.com. An audio replay of the call will
also be available to investors beginning at 7:30 p.m. ET on
February 21 through 11:59 p.m. on February 24 by dialing
719-457-0820 and entering the passcode 8339540#.
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 and real
estate market conditions, to manage lead generation and other
costs, and to expand into new lines of business. Please refer to
the company's 2006 Form 10-K filed with the Securities and Exchange
Commission 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
Adjusted EBITDA from continuing operations is a non-GAAP
financial measure provided as a complement to results in accordance
with accounting principles generally accepted in the United States
of America ("GAAP"). The term "Adjusted EBITDA from continuing
operations" refers to a financial measure that we define as
earnings before results of discontinued operations, net interest,
income taxes, depreciation, amortization, impairment of long-lived
assets, equity in loss of investee and stock-based compensation.
Equity in loss of investee is a new element in our Adjusted EBITDA
calculation in the fourth quarter, effective with our investment in
ActiveRain. Adjusted EBITDA is not a substitute for measures
determined in accordance with GAAP, and may not be comparable to
Adjusted EBITDA as reported by other companies. We believe Adjusted
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 Adjusted 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 Adjusted EBITDA for planning purposes and in presentations
to our board of directors. See below for a reconciliation of net
(loss) income, the most comparable GAAP measure, to Adjusted EBITDA
from continuing operations.
HouseValues, Inc.
NON-GAAP FINANCIAL MEASURE AND RECONCILIATION
(In thousands)
(unaudited)
Three months ended Years ended
------------------------------- --------------------
December September December December December
31, 2007 30, 2007 31, 2006 31, 2007 31, 2006
--------- --------- --------- --------- ---------
Net (loss) income ($ 9,836) ($ 804) ($ 5,339) ($ 12,375) ($ 3,138)
Less
Interest income,
net (762) (883) (642) (2,982) (2,653)
Add
Loss on
impairment of
long-lived
assets 4,916 1,200 - 6,116 -
Equity in loss
of unconsolidated
subsidiary 162 - - 162 -
(Gain) loss on
discontinued
operations (37) (74) 4,629 (194) 6,466
Depreciation and
amortization of
property and
equipment
from continuing
operations 1,064 1,170 1,488 5,634 5,177
Amortization of
intangible
assets from
continuing
operations 333 16 70 760 564
Stock-based
compensation
from continuing
operations 940 646 958 3,544 3,837
Income tax
expense
(benefit) from
continuing
operations 4,041 (761) (896) 1,954 252
--------- --------- --------- --------- ---------
Adjusted EBITDA from
continuing
operations $ 821 $ 510 $ 268 $ 2,619 $ 10,505
========= ========= ========= ========= =========
About HouseValues, Inc.
Founded in 1999, HouseValues, Inc. (NASDAQ: SOLD) provides real
estate professionals with the tools and services they need to
manage and grow their real estate businesses. The company's
subscription software products include RealtyGenerator, a turnkey
lead generation and lead management system for real estate
brokerage companies; and MarketLeader, a customer relationship
management and lead management solution for real estate agents. The
company also provides real estate professionals with access to
industry-leading media buying and lead generation services to help
them attract new clients and promote themselves throughout their
community.
Additionally, HouseValues provides consumers with free access to
the information and tools they need throughout the home buying and
selling process. The company's consumer websites include:
JustListed.com a service that notifies home buyers as soon as new
homes hit the market; HouseValues.com, a service that provides home
sellers with market valuations of their current home; and
HomePages.com, a real estate portal that enables consumers to see
all the home listings in their area, view detailed neighborhood and
school data, compare recent home sales, find local real estate
agents, and find the value of their own home.
Real estate professionals can learn more about the company's
services at www.realtygenerator.com and www.marketleader.com. For
more information please visit www.housevaluesinc.com.
SOLD: FINANCIAL
HouseValues, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(unaudited)
Three months ended Years ended
December 31, December 31,
------------------ ------------------
2007 2006 2007 2006
-------- -------- -------- --------
Revenues $ 12,189 $ 19,148 $ 59,808 $ 85,824
Expenses:
Sales and marketing (1) 7,879 13,463 39,453 55,476
Technology and product
development (1) 1,694 3,311 9,114 11,375
General and administrative (1) 2,735 3,064 12,166 12,305
Impairment of goodwill and
long-lived assets 4,916 - 6,116 -
Depreciation and amortization
of property and equipment 1,064 1,488 5,634 5,177
Amortization of intangible
assets 333 70 760 564
-------- -------- -------- --------
Total expenses 18,621 21,396 73,243 84,897
-------- -------- -------- --------
(Loss) income from operations (6,432) (2,248) (13,435) 927
Equity in loss of unconsolidated
subsidiary (162) - (162) -
Interest income, net 762 642 2,982 2,653
-------- -------- -------- --------
(Loss) income before income tax
expense (5,832) (1,606) (10,615) 3,580
Income tax expense (benefit) 4,041 (896) 1,954 252
-------- -------- -------- --------
Net (loss) income from
continuing operations (9,873) (710) (12,569) 3,328
Discontinued operations
Gain (loss) from discontinued
operations 57 (7,122) 297 (9,950)
Income tax expense (benefit) 20 (2,493) 103 (3,484)
-------- -------- -------- --------
Gain (loss) on discontinued
operations 37 (4,629) 194 (6,466)
-------- -------- -------- --------
Net loss ($ 9,836) ($ 5,339) ($12,375) ($ 3,138)
======== ======== ======== ========
Net (loss) income per share:
Basic:
Continuing operations (0.40) (0.03) (0.51) 0.13
Discontinued operations 0.00 (0.19) 0.01 (0.25)
-------- -------- -------- --------
Total (0.40) (0.22) (0.50) (0.12)
======== ======== ======== ========
Diluted:
Continuing operations (0.40) (0.03) (0.51) 0.13
Discontinued operations 0.00 (0.19) 0.01 (0.24)
-------- -------- -------- --------
Total (0.40) (0.22) (0.50) (0.12)
======== ======== ======== ========
Number of shares used in per share
calculations for continuing
operations:
Basic 24,498 24,367 24,520 25,374
======== ======== ======== ========
Diluted 24,498 24,367 24,520 26,486
======== ======== ======== ========
(1) Stock-based compensation is included in the expense line items above in
the following amounts:
-------- -------- -------- --------
2007 2006 2007 2006
-------- -------- -------- --------
Sales and marketing $ 302 $ 201 $ 804 $ 894
Technology and product
development 93 179 404 682
General and administrative 545 578 2,336 2,261
Discontinued operations - 50 19 275
-------- -------- -------- --------
$ 940 $ 1,008 $ 3,563 $ 4,112
======== ======== ======== ========
HouseValues, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(unaudited)
December 31, December 31,
2007 2006
------------ ------------
Assets
Current assets:
Cash and cash equivalents $ 35,450 $ 49,376
Short-term investments 27,400 28,400
Accounts receivable, net of allowance of $50
and $161 128 416
Prepaid expenses and other current assets 1,764 1,747
Deferred income taxes - 1,643
Prepaid income taxes 905 2,254
------------ ------------
Total current assets 65,647 83,836
Property and equipment, net of accumulated
depreciation of $11,518 and $8,803 6,187 11,469
Goodwill and intangible assets, net of
accumulated amortization of $2,576 and $2,439 10,163 4,231
Minority investment in unconsolidated subsidiary 2,588 -
Deferred tax assets and other noncurrent assets 398 1,826
------------ ------------
Total assets $ 84,983 $ 101,362
============ ============
Liabilities and Shareholders? Equity
Current liabilities:
Accounts payable $ 1,395 $ 3,201
Accrued compensation and benefits 2,084 3,185
Accrued expenses and other current liabilities 1,809 5,057
Deferred rent, current portion 289 289
Deferred revenue 373 1,141
Note payable 1,873 -
------------ ------------
Total current liabilities 7,823 12,873
Deferred rent, less current portion 722 1,094
Note payable - 1,742
------------ ------------
Total liabilities 8,545 15,709
Shareholders? equity:
Common stock, par value $0.001 per share,
stated at amounts paid in; authorized
120,000,000 shares; issued and outstanding
24,521,139 and 24,410,843 shares at
December 31, 2007 and 2006, respectively 66,375 63,215
Retained earnings 10,063 22,438
------------ ------------
Total shareholders? equity 76,438 85,653
------------ ------------
Total liabilities and shareholders? equity $ 84,983 $ 101,362
============ ============
HouseValues, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
Years ended December 31,
------------------------
2007 2006
----------- -----------
Cash flows from operating activities:
Net loss ($ 12,375) (3,138)
Adjustments to reconcile net loss to net cash
(used in) provided by operating activities:
Depreciation and amortization of property
and equipment 5,634 5,177
Amortization of intangible assets 760 1,259
Stock-based compensation 3,563 4,112
Excess tax benefit from exercises of
stock options (83) 0
Deferred income tax expense (benefit) 3,060 (3,529)
Impairment of goodwill and long-lived
assets 6,116 6,186
Equity in loss of unconsolidated
subsidiary 162 -
Changes in certain assets and
liabilities, net of acquisitions
Accounts receivable 300 161
Prepaid expenses and other assets (773) 955
Prepaid income taxes 995 (1,164)
Other noncurrent assets 11 -
Accounts payable (1,373) 1,417
Accrued compensation and benefits (1,101) (1,051)
Accrued expenses and other current
liabilities (3,699) 1,661
Deferred rent (372) (329)
Deferred revenue (864) (553)
----------- -----------
Net cash (used in) provided by
operating activities (39) 11,164
----------- -----------
Cash flows from investing activities:
Purchases of short-term investments (39,145) (5,000)
Sales of short-term investments 40,145 2,240
Purchases of property and equipment (2,808) (7,742)
Additions to intangible assets (14) (48)
Change in restricted cash and other
noncurrent assets - 330
Cash paid for business acquisitions, net of
cash acquired (9,225) (1,287)
Minority investment in unconsolidated
subsidiary (2,750) -
----------- -----------
Net cash used in investing
activities (13,797) (11,507)
----------- -----------
Cash flows from financing activities:
Proceeds from exercises of stock options and
warrants 795 1,376
Excess tax benefit from exercises of stock
options 83 550
Purchase and retirement of common stock (968) (11,441)
----------- -----------
Net cash used in financing
activities (90) (9,515)
----------- -----------
Net decrease in cash and cash
equivalents (13,926) (9,858)
Cash and cash equivalents at beginning of period 49,376 59,234
----------- -----------
Cash and cash equivalents at end of period $ 35,450 $ 49,376
=========== ===========
Investor Contact: Mark Lamb Director of Investor Relations
HouseValues, Inc. 425.952.5801 markl@housevalues.com Press Contact:
Hugh Siler Siler & Company for HouseValues, Inc. 949.646.6966
hugh@silerpr.com
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