SOURCE: Market Leader, Inc.

Market Leader, Inc.

August 04, 2009 16:00 ET

Market Leader® Announces Second Quarter Results

KIRKLAND, WA--(Marketwire - August 4, 2009) - Market Leader, Inc. (NASDAQ: LEDR) today announced results for the second quarter ended June 30, 2009.

Comparisons of Quarterly Results

--  Revenue was $5.9 million in the second quarter compared to $6.5
    million in the first quarter, reflecting a sequential quarter decline in
    the customer count that was more moderate than in the first quarter.
    Revenue from the company's Vision products increased 40 percent to $2.1
    million in the second quarter compared to $1.5 million in the first.
    
--  Net loss of $3.0 million in the second quarter compared to net loss of
    $2.9 million in the first quarter.
    
--  Adjusted EBITDA was a loss of $1.2 million in the second quarter
    compared to an Adjusted EBITDA loss of $0.9 million in the first quarter.
    
--  Market Leader's cash position remained strong with $55.2 million in
    cash, cash equivalents and short-term investments.
    
--  Customer retention improved for the second consecutive quarter.
    

"Market Leader achieved a record high level of customer retention in the second quarter, demonstrating the important role our products play in the lives of our real estate professional customers. We are proud that our products are helping so many Market Leader customers thrive despite a challenging real estate market," said CEO Ian Morris.

Vision Product Update

Market Leader believes that its Vision-based products -- RealtyGenerator™, Team Leader™ and Growth Leader™ -- drive stronger customer success and retention than traditional lead generation products. These products accounted for more than a third of the Company's second quarter revenue and the Company continues to expect that they will represent a majority of revenue by year-end.

Market Leader has now signed more than one hundred RealtyGenerator agreements with brokerage companies nationwide as a result of its marketing partnership with Realty Executives International that commenced in April 2009. Early feedback from these customers has been positive with many customers already reporting significant new business from their use of the RealtyGenerator system.

Market Leader's improved customer retention rate is being driven by both the success that customers are seeing with the company's Vision products as well as stronger retention rates from the thousands of customers who have built their business around the Company's JustListed® and HouseValues® products. About half of all Market Leader customers have been using the Company's products for two years or longer, and these core customers are an important factor in the strong retention rates seen Company wide.

This progress has further strengthened Market Leader's previously stated expectation that the sequential quarter revenue declines seen in recent quarters will moderate significantly in the third quarter.

Market Remains Challenging

While existing home sales improved in the second quarter compared to the first quarter level, research from REAL Trends, Inc. shows that real estate commissions declined once again in the second quarter. Market Leader expects real estate professionals to continue to remain cautious regarding new marketing expenditures as they recover from the industry slowdown.

Cash Position Update

The Company believes that its strong cash position is a strategic asset. Liquidity and security of principal continue to be core to the Company's investment policy. The Company invests in money market funds that hold high quality, short-term U.S. Government obligations and repurchase agreements collateralized by U.S. Government obligations, U.S. Treasury securities, and FDIC-insured certificates of deposit with terms of one year or less. Cash, cash equivalents and short-term investments totaled $55.2 million at the end of the second quarter.

Conference Call

Market Leader will host a conference call and live Webcast to discuss second quarter financial results on Tuesday, August 4, 2009 at 4:30 p.m. Eastern Time. To listen to the live conference call, please dial 913-312-0869. A live webcast of the call will be available from the Investor Relations section of the Company's Web site at http://www.marketleader.com. An audio replay of the call will also be available to investors beginning at 6:30 p.m. Central Time on August 4 through 11:59 p.m. Central Time on August 5 by dialing 719-457-0820 and entering the passcode 2249478#.

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, to develop new products, to expand into new lines of business, and to effectively re-brand and re-launch the Company. Please refer to the Company's 2008 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 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" refers to a financial measure that we define as earnings or loss before net interest, income taxes, depreciation, amortization, impairment of long-lived assets including goodwill impairment, equity in loss of unconsolidated subsidiary, stock-based compensation and gain on sale of fixed assets. 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 operating performance. 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, the most comparable GAAP measure, to Adjusted EBITDA.

                            Market Leader, Inc.
              NON-GAAP FINANCIAL MEASURE AND RECONCILIATION
                              (In thousands)
                                (unaudited)


                                                   Three months ended
                                              ----------------------------
                                              June 30,  March 31, June 30,
                                                2009      2009      2008
                                              --------  --------  --------

Net loss                                      $ (3,015) $ (2,875) $ (1,271)
Adjustments
    Interest income and expense, net               (59)      (95)     (289)
    Impairment of and equity in loss of
     investee                                       61        94       185
    Depreciation and amortization of property
     and equipment                                 780       803     1,015
    Amortization of acquired intangible
     assets                                        480       482       492
    Stock-based compensation                       535       711       745
    Income tax expense                               2         2        34
                                              --------  --------  --------
Adjusted EBITDA                               $ (1,216) $   (878) $    911
                                              ========  ========  ========

About Market Leader, Inc.

Market Leader (NASDAQ: LEDR) provides real estate professionals with innovative marketing and technology solutions that enable them to grow and manage their business. Founded in 1999 by a second-generation real estate agent, Market Leader provides real estate agents, agent teams, and brokerage companies with subscription software and advertising products that enable them to generate a steady stream of prospects, as well as the tools and training they need to convert these prospects into clients.

With a long history of innovation, Market Leader pioneered online lead generation for real estate professionals a decade ago and today is the leading marketing partner to the real estate industry. The Company also provides consumers with free access to the information and tools they need throughout the home buying and selling process through its national consumer real estate sites. These websites enable Market Leader to provide its customers with access to millions of future home buyers and sellers while providing these consumers with free access to the information they seek throughout the home buying and selling process.

For more information on Market Leader visit www.MarketLeader.com.

                            Market Leader, Inc.
              CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                  (In thousands, except per share data)
                                (unaudited)


                                    Three months ended   Six months ended
                                         June 30,            June 30,
                                    ------------------  ------------------
                                      2009      2008      2009      2008
                                    --------  --------  --------  --------

Revenues                            $  5,947  $ 10,131  $ 12,476  $ 21,327
Expenses:
    Sales and marketing (1)            4,676     6,242     9,418    13,672
    Technology and product
     development (1)                   1,278     1,491     2,685     3,449
    General and administrative (1)     1,744     2,232     3,713     4,938
    Gain on sale of fixed assets           -         -         -      (791)
    Depreciation and amortization
     of property and equipment           780     1,015     1,583     1,974
    Amortization of acquired
     intangible assets                   480       492       962       984
                                    --------  --------  --------  --------
      Total expenses                   8,958    11,472    18,361    24,226
                                    --------  --------  --------  --------
    Loss from operations              (3,011)   (1,341)   (5,885)   (2,899)
Equity in loss of investee               (61)     (185)     (155)     (336)
Interest income and expense, net          59       289       154       808
                                    --------  --------  --------  --------
Loss before income tax expense        (3,013)   (1,237)   (5,886)   (2,427)
Income tax expense                         2        34         4        36
                                    --------  --------  --------  --------
        Net loss                    $ (3,015) $ (1,271) $ (5,890) $ (2,463)
                                    ========  ========  ========  ========

Net loss per share - basic and
 diluted:                           $  (0.13) $  (0.05) $  (0.24) $  (0.10)
                                    ========  ========  ========  ========

Number of shares used in per share
 calculations                         24,112    24,235    24,085    24,379
                                    ========  ========  ========  ========

(1) Stock-based compensation is included in the expense line items above in
    the following amounts:

                                    --------  --------  --------  --------
                                      2009      2008      2009      2008
                                    --------  --------  --------  --------

    Sales and marketing             $    184  $    225  $    388  $    378
    Technology and product
     development                         (50)        8        33        78
    General and administrative           401       512       825     1,112
                                    --------  --------  --------  --------
                                    $    535  $    745  $  1,246  $  1,568
                                    ========  ========  ========  ========




                            Market Leader, Inc.
                  CONDENSED CONSOLIDATED BALANCE SHEETS
                    (In thousands, except share data)
                                (unaudited)

                                                                  December
                                                        June 30,     31,
                                                          2009      2008
                                                        --------  --------
Assets
Current assets:
   Cash and cash equivalents                            $ 34,220  $ 47,668
   Short-term investments                                 20,991    10,980
   Trade accounts receivable, net of allowance of $30
    and $29                                                   56        79
   Prepaid expenses and other current assets               1,277     1,482
                                                        --------  --------
   Total current assets                                   56,544    60,209
Property and equipment, net of accumulated depreciation
 of $13,202 and $13,859                                    4,517     4,452
Acquired intangible assets, net of accumulated
 amortization of $5,468 and $4,506                         3,224     4,179
Minority investment in investee                              429       584
                                                        --------  --------
     Total assets                                       $ 64,714  $ 69,424
                                                        ========  ========

Liabilities and Shareholders’ Equity
Current liabilities:
   Accounts payable                                     $    744  $    736
   Accrued compensation and benefits                       1,113     1,767
   Accrued expenses and other current liabilities            961     1,111
   Deferred rent, current portion                            214       289
   Deferred revenue                                          544       374
                                                        --------  --------
     Total current liabilities                             3,576     4,277
Deferred rent, less current portion                          841       303
                                                        --------  --------
     Total liabilities                                     4,417     4,580
Shareholders’ equity:
   Preferred stock, par value $0.001 per share, stated
    at amounts paid in; authorized 30,000,000 shares;
    none issued and outstanding                                -         -
   Common stock, par value $0.001 per share, stated at
    amounts paid in; authorized 120,000,000 shares;
    issued and outstanding 24,120,760 and 24,035,074
    shares at June 30, 2009 and December 31, 2008,
    respectively                                          69,243    67,900
   Accumulated deficit                                    (8,946)   (3,056)
                                                        --------  --------
     Total shareholders’ equity                           60,297    64,844
                                                        --------  --------
     Total liabilities and shareholders’ equity         $ 64,714  $ 69,424
                                                        ========  ========




                            Market Leader, Inc.
              CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                              (In thousands)
                                (unaudited)

                                                         Six months ended
                                                             June 30,
                                                        ------------------
                                                          2009      2008
                                                        --------  --------
 Cash flows from operating activities:
    Net loss                                            $ (5,890) $ (2,463)
    Adjustments to reconcile net loss to net cash used
     in operating activities:
        Depreciation and amortization of property and
         equipment                                         1,583     1,974
        Amortization of acquired intangible assets           962       984
        Stock-based compensation                           1,246     1,568
        Deferred income tax expense                            0        59
        Gain on sale of fixed assets                           0      (791)
        Equity in loss of investee                           155       336
        Changes in certain assets and liabilities
            Trade accounts receivable                         23        36
            Prepaid expenses and other current assets        280       (81)
            Other noncurrent assets                            -       398
            Accounts payable                                (172)     (505)
            Accrued compensation and benefits               (654)     (157)
            Accrued expenses and other current
             liabilities                                     (57)     (447)
            Deferred rent                                    463      (221)
            Deferred revenue                                 170        45
                                                        --------  --------
              Net cash used in operating activities       (1,891)      735
                                                        --------  --------
 Cash flows from investing activities:
    Purchases of short-term investments                  (19,981)        -
    Sales of short-term investments                       10,000    27,400
    Proceeds from sale of fixed assets                         -     1,209
    Purchases of property and equipment                   (1,425)     (970)
    Payments related to the Realty Generator
     acquisition                                            (155)     (382)
                                                        --------  --------
              Net cash (used in) provided by investing
               activities                                (11,561)   27,257
                                                        --------  --------
 Cash flows from financing activities:
    Payment of taxes due upon vesting of restricted
     stock                                                   (41)        -
    Purchase and retirement of common stock                    -      (997)
    Proceeds from exercises of stock options                  45       207
                                                        --------  --------
              Net cash provided by (used in) financing
               activities                                      4      (790)
                                                        --------  --------
              Net (decrease) increase in cash and cash
               equivalents                               (13,448)   27,202

 Cash and cash equivalents at beginning of period         47,668    35,450
                                                        --------  --------
 Cash and cash equivalents at end of period             $ 34,220  $ 62,652
                                                        ========  ========


LEDR: FINANCIAL

Contact Information

  • Investor Contact:
    Mark Lamb
    Director of Investor Relations
    Market Leader, Inc.
    425.952.5801
    markl@marketleader.com

    Press Contact:
    Hugh Siler
    Siler & Company for Market Leader, Inc.
    949.646.6966
    hugh@silerpr.com