SOURCE: HouseValues, Inc.

May 06, 2008 16:00 ET

HouseValues Announces First Quarter Results

KIRKLAND, WA--(Marketwire - May 6, 2008) - HouseValues, Inc. (NASDAQ: SOLD) today announced results for the quarter ended March 31, 2008.

Comparisons of Quarterly Results

--  Revenue was $11.2 million in the first quarter compared to $12.2
    million in the fourth quarter of 2007.  The decline in sequential quarter
    revenue primarily reflected fewer customers in the company's agent-direct
    business that was partially offset by a full quarter of revenue from the
    Realty Generator business acquired in November 2007.
    
--  Net loss was $1.2 million in the first quarter, compared to a net loss
    of $9.8 million in the fourth quarter, which included charges of $9.3
    million to reduce the carrying value of goodwill and long-lived assets and
    to record a valuation allowance against deferred tax assets.
    
--  The Adjusted EBITDA loss of less than $0.1 million in the first
    quarter included $0.6 million of cash severance expense. The first quarter
    result compared to positive Adjusted EBITDA from continuing operations of
    $0.8 million in the fourth quarter of 2007.  The first quarter result is
    consistent with HouseValues' previously stated forecast of modest Adjusted
    EBITDA losses in for the first half of 2008.
    
--  Cash position remained strong at $63.0 million, up modestly from year-
    end.
    

"Despite a severe deterioration of the housing market in the first quarter, HouseValues made important progress towards the company's strategic objectives, while at the same time reducing shares outstanding and strengthening our cash position," said CEO Ian Morris.

"While many real estate markets are in turmoil today, consumers will continue to buy and sell homes, they are increasingly going online to do so and the majority will continue to seek the expertise of real estate professionals," Morris noted. "By supporting our customers and enhancing our offerings as we ride out the cycle, we are positioning HouseValues for long-term leadership in a category still ripe with opportunity."

Realty Generator Benefits Have Broad Business Impact

Brokerage firms need to have an effective business solution and internet strategy to attract agents, boost their productivity and drive success. Realty Generator has achieved strong retention of its brokerage customers by providing them with a turn-key, full service lead management solution. HouseValues is investing in continued enhancement of the Realty Generator platform for its brokerage company customers while also incorporating many of its key features into upcoming releases of its agent products.

As a result of these efforts, HouseValues expects to grow its Realty Generator business while at the same time introducing new features that are expected to improve the retention rate and unit economics of its agent-direct customers that are currently responsible for the significant majority of the company's revenue. In the second half of this year the company expects to deliver significant enhancements to the consumer experience, further automation of key agent tasks, and intelligence and follow up tools that notify customers when their prospects are most likely to become ready to transact.

Cash Position and Share Repurchase Update

The company believes that its strong cash position is a strategic asset. Liquidity and safety of principal continue to be core to the company's investment policy. Early in the first quarter the company successfully liquidated short-term investments, including all auction rate securities without any loss of capital and in advance of the issues that have affected investors in those markets. The company is currently invested in cash equivalents consisting of money market funds that invest in high quality, short-term U.S. Government obligations and repurchase agreements collateralized by U.S. Government Obligations. Cash and cash equivalents were $63.0 million on March 31, 2008, representing a slight increase from the year-end level.

Year-to-date HouseValues has re-purchased and retired 397,175 shares at an average cost of $2.51, and may purchase up to approximately 1.4 million additional shares under the current share repurchase authorization.

Conference Call

HouseValues will host a conference call and live Webcast to discuss fourth quarter financial results today 4:30 p.m. Eastern time. To listen to the live conference call, please dial 719-325-4888. 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. Eastern time through midnight Wednesday, May 7th by dialing 719-457-0820 and entering the passcode 6994715#.

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 2007 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 or loss before results of discontinued operations, net interest, gain on sale of fixed assets, income taxes, depreciation, amortization, impairment of long-lived assets, equity in loss of investee and stock-based compensation. Gain on sale of fixed assets is a new element in our Adjusted EBITDA calculation in the first quarter, effective with the sale of our purchase option for our Yakima, WA facility and its remaining 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 from continuing operations.

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


                                               Three months ended
                                     -------------------------------------
                                      March 31,   December 31,   March 31,
                                         2008        2007          2007
                                     -----------  -----------  -----------

Net loss                             $    (1,192) $    (9,836) $    (1,616)
Less
  Interest income, net                      (519)        (762)        (586)
Add
  Gain on sale of fixed assets              (791)           -            -
  Loss on impairment of long-lived
   assets                                      -        4,916            -
  Equity in loss of unconsolidated
   subsidiary                                151          162            -
  (Gain) loss on discontinued
   operations                                  -          (37)          36
  Depreciation and amortization of
   property and equipment
   from continuing operations                959        1,064        2,155
  Amortization of intangible assets
   for continuing operations                 492          333          395
  Stock-based compensation from
   continuing operations                     823          940        1,234
  Income tax expense (benefit)                 2        4,041       (1,275)
                                     -----------  -----------  -----------
Adjusted EBITDA from continuing
 operations                          $       (75) $       821  $       343
                                     ===========  ===========  ===========

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 Realty Generator, 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
                                                         March 31,
                                                  ------------------------
                                                      2008         2007
                                                  -----------  -----------

Revenues                                          $    11,196  $    17,838
Expenses:
  Sales and marketing (1)                               7,430       12,387
  Technology and product development (1)                1,958        2,790
  General and administrative (1)                        2,706        3,552
  Gain on sale of fixed assets                           (791)           -
  Depreciation and amortization of property and
   equipment                                              959        2,155
  Amortization of intangible assets                       492          395
                                                  -----------  -----------
    Total expenses                                     12,754       21,279
                                                  -----------  -----------
  Loss from operations                                 (1,558)      (3,441)
Equity in loss of unconsolidated subsidiary              (151)           -
Interest income, net                                      519          586
                                                  -----------  -----------
Loss before income tax expense                         (1,190)      (2,855)
Income tax expense (benefit)                                2       (1,275)
                                                  -----------  -----------
  Net loss from continuing operations                  (1,192)      (1,580)
Discontinued operations
  Loss from operations of discontinued mortgage
   segment                                                  -          (56)
  Income tax benefit                                        -          (20)
                                                  -----------  -----------
    Loss on discontinued operations                         -          (36)
                                                  -----------  -----------
      Net loss                                    $    (1,192) $    (1,616)
                                                  ===========  ===========

Net (loss) income per share:
Basic:
  Continuing operations                           $     (0.05) $     (0.06)
  Discontinued operations                         $         -  $         -
                                                  -----------  -----------
  Total                                           $     (0.05) $     (0.07)
                                                  ===========  ===========

Diluted:
  Continuing operations                           $     (0.05) $     (0.06)
  Discontinued operations                         $         -  $         -
                                                  -----------  -----------
  Total                                           $     (0.05) $     (0.07)
                                                  ===========  ===========

Number of shares used in per share calculations:
  Basic                                                24,523       24,428
                                                  ===========  ===========
  Diluted                                              24,523       24,428
                                                  ===========  ===========

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

                                                  -----------  -----------
                                                      2008         2007
                                                  -----------  -----------

  Sales and marketing                             $       153  $       230
  Technology and product development                       70          115
  General and administrative                              600          889
  Discontinued operations                                   -           19
                                                  -----------  -----------
                                                  $       823  $     1,253
                                                  ===========  ===========






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

                                                   March 31,   December 31,
                                                      2008         2007
                                                  ------------ ------------
Assets
Current assets:
  Cash and cash equivalents                       $     63,013 $     35,450
  Short-term investments                                     -       27,400
  Accounts receivable, net of allowance
   of $152 and $50                                         125          128
  Prepaid expenses and other assets                      1,721        1,764
  Prepaid income taxes                                     916          905
                                                  ------------ ------------
  Total current assets                                  65,775       65,647
Property and equipment, net of accumulated
 depreciation of $11,232 and $11,518                     5,310        6,187
Goodwill                                                 3,987        3,833
Intangible assets, net of accumulated
 amortization of $3,068 and $2,576                       5,838        6,330
Minority investment in unconsolidated subsidiary         2,437        2,588
Other noncurrent assets                                      -          398
                                                  ------------ ------------
    Total assets                                  $     83,347 $     84,983
                                                  ============ ============

Liabilities and Shareholders' Equity
Current liabilities:
  Accounts payable                                $      1,037 $      1,395
  Accrued compensation and benefits                      1,862        2,084
  Accrued expenses and other current liabilities         1,778        1,809
  Deferred rent, current portion                           289          289
  Deferred revenue                                         394          373
  Note payable                                           1,905        1,873
                                                  ------------ ------------
    Total current liabilities                            7,265        7,823
Deferred rent, less current portion                        600          722
                                                  ------------ ------------
    Total liabilities                                    7,865        8,545
Shareholders' equity:
  Preferred stock, par value $0.001 per share,
   stated at amounts paid in; authorized
   30,000,000 shares;  none issued and
   outstanding at March 31, 2008 and
   December 31, 2007, respectively                           -            -
  Common stock, par value $0.001 per share,
   stated at amounts paid in; authorized
   120,000,000 shares;  issued and
   outstanding 24,311,388 and
   24,521,139 shares at March 31, 2008 and
   December 31, 2007, respectively                      66,611       66,375
  Retained earnings                                      8,871       10,063
                                                  ------------ ------------
    Total shareholders' equity                          75,482       76,438
                                                  ------------ ------------
    Total liabilities and shareholders' equity    $     83,347 $     84,983
                                                  ============ ============



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

                                                     Three months ended
                                                          March 31,
                                                  -----------------------
                                                      2008         2007
                                                  -----------  -----------

 Cash flows from operating activities:
   Net Loss                                       $    (1,192) $    (1,616)
   Adjustments to reconcile net loss to net cash
    used in operating activities:
     Depreciation and amortization of property
      and equipment                                       959        2,155
     Amortization of intangible assets                    492          396
     Stock-based compensation                             823        1,253
     Tax benefit deficiency from exercises of
      stock options                                         -          (74)
     Deferred income tax benefit                            -         (849)
     Gain on sale of fixed assets                        (791)           -
     Equity in loss of unconsolidated subsidiary          151            -
     Changes in certain assets and liabilities
       Accounts receivable                                  3          316
       Prepaid expenses and other assets                  441          (45)
       Prepaid income taxes                               (11)       1,237
       Accounts payable                                  (473)      (1,601)
       Accrued compensation and benefits                 (222)        (764)
       Accrued expenses and other current
        liabilities                                      (205)      (1,812)
       Deferred rent                                     (122)         (93)
       Deferred revenue                                    21         (430)
                                                  -----------  -----------
         Net cash used in operating activities           (126)      (1,927)
                                                  -----------  -----------

 Cash flows from investing activities:
   Purchases of short-term investments                      -      (16,645)
   Sales of short-term investments                     27,400        9,760
   Purchases of property and equipment                   (376)        (611)
   Proceeds from sale of fixed assets                   1,209            -
   Acquisition of Realty Generator                       (228)           -
                                                  -----------  -----------
         Net cash provided by (used in)
          investing activities                         28,005       (7,496)
                                                  -----------  -----------

 Cash flows from financing activities:
   Purchase and retirement of common stock               (342)           -
   Proceeds from exercises of stock options and
    warrants                                               26          142
   Tax benefit from exercises of stock options              -           29
                                                  -----------  -----------
         Net cash (used in) provided by financing
          activities                                     (316)         171
                                                  -----------  -----------

         Net increase (decrease) in cash and cash
          equivalents                                  27,563       (9,252)

 Cash and cash equivalents at beginning of period      35,450       49,376

                                                  -----------  -----------
 Cash and cash equivalents at end of period       $    63,013  $    40,124
                                                  ===========  ===========

Contact Information

  • 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