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| 8-K - FORM 8-K - ZIPREALTY INC | d8k.htm |
Exhibit 99.1
ZipRealty Announces Fourth Quarter and Full-Year 2010 Results
Full year net revenues of $118.7 million, a decrease of 3.6% from the prior year
Net revenues of $27.0 million in the fourth quarter, a 20% decrease from the year-earlier period
Full year Adjusted EBITDA loss of $9.9 million compared to a loss of $7.3 million in the prior year
EMERYVILLE, Calif. – March 8, 2011 - ZipRealty, Inc. (NASDAQ: ZIPR) today announced financial results for the fourth quarter and year ended December 31, 2010. For the fourth quarter, net revenues were $27.0 million, a 20% decrease from the $33.9 million reported in the fourth quarter last year. The Company’s net loss for the quarter was $4.0 million or $0.20 per share, compared to a net loss of $2.1 million, or $0.11 per share, in the year-ago period. Adjusted EBITDA for the quarter was a $2.6 million loss versus a loss of $0.9 million in the fourth quarter last year.
Lanny Baker, President and CEO of ZipRealty, commented, “The residential real estate market had a volatile year in 2010, and ZipRealty’s financial performance, particularly in the second half of the year, was disappointing. We anticipate similarly challenging market trends in 2011, and we have taken steps to reduce costs, shutter underperforming operations and focus resources on our most attractive opportunities. Although our balance sheet remains healthy, it is imperative that ZipRealty move quickly toward sustainable profitability. The reorganization undertaken in January is expected to eliminate more than $20 million in annual operating costs, and we expect ZipRealty to achieve positive Adjusted EBITDA for 2011.”
Mr. Baker continued, “Beginning with our transition to an independent contractor relationship with agents in 2010 and extending through the recent redesign of our website and the changes we are making in our marketing approach and our business model, ZipRealty is refocusing to better capitalize on its strengths in customer service, industry-leading technology and efficient online marketing capabilities. Our goal is to build a successful technology- and marketing-driven company that empowers real estate customers and the agents who serve them. We are gaining momentum toward these goals in early 2011, and to this end we expect to make additional changes to our business during the year.”
The Company announced the following operating metrics for the fourth quarter of 2010:
| • | The total value of real estate transactions closed decreased to $1.1 billion in the fourth quarter of 2010 versus $1.5 billion in the same period last year. |
| • | The total number of transactions closed was 4,930 compared to 6,355 in the same period last year. |
| • | Average net transaction revenue per close decreased approximately 0.8% to $5,155 from $5,199 in the same period last year. |
| • | At December 31, 2010, there were 3,403 ZipRealty agents engaged, up from 3,085 agents at the end of the prior year and 3,305 agents at September 30, 2010. At February 28, 2011 there were approximately 2,500 agents after closing underperforming operations and completing the transition to an independent contractor agent model in all of our markets. |
Balance Sheet & Liquidity
As of December 31, 2010, the Company had approximately $32.3 million of cash, cash equivalents and short-term investments, with no long-term debt. ZipRealty’s cash, cash equivalents and short-term investments decreased by approximately $2.2 million since September 30, 2010.
Use of Non-GAAP Financial Measures
To supplement its financial statements presented in accordance with Generally Accepted Accounting Principles (“GAAP”), ZipRealty uses a non-GAAP measure it refers to as Adjusted EBITDA. The Company defines Adjusted EBITDA as net income (loss) less interest income plus interest expense, provision for income taxes, depreciation and amortization expense, stock-based compensation and further adjusted to eliminate the impact of certain items that the Company does not consider reflective of its ongoing core operating performance. This non-GAAP measure is provided to enhance the user’s overall understanding of ZipRealty’s current financial performance and its prospects for the future, particularly in comparison to the practices of other reasonably similar firms. ZipRealty believes this non-GAAP measure provides useful information to both management and investors by excluding certain items it believes are not reflective of its core operating results and thus presents a more meaningful basis for comparison between periods. Further, this non-GAAP measure presents key information the Company uses for planning, forecasting its future operations and as a measure for determining management compensation. The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP. A reconciliation of this non-GAAP measure to the most comparable GAAP measure, Net Income (Loss) is provided in the attached tables.
Conference Call Details
A conference call to discuss fourth quarter financial results will be webcast live on Tuesday, March 8, 2011 at 5:00 p.m. Eastern Time on the investor relations section of ZipRealty’s website, www.ziprealty.com. Listeners may also access the call by dialing 866-804-6924, passcode: 17056029. A replay of the call will also be available through March 15, 2011 at 888-286-8010 and passcode: 70612984.
About ZipRealty, Inc.
ZipRealty is a leading full-service residential real estate brokerage focused on finding better, faster ways to connect clients with the information, tools and professional services they value to complete their residential real estate transactions. The Company serves its clients through its combination of a leading online presence, robust proprietary technology and knowledgeable local real estate professionals in the field. The Company’s award-winning, user-friendly website and mobile applications give its clients on-the-go access to comprehensive local Multiple Listing
Services home listings data, as well as other relevant market and neighborhood information and tools. The Company’s proprietary technology, including its agent productivity platform, helps increase the efficiency of real estate agents while reducing customer acquisition and management costs, allowing the Company to invest in making its value proposition differentiated and more attractive to both clients and agents. Founded in 1999, the Company operates in 23 major markets in 18 states and the District of Columbia. The Company also has referral arrangements with third-party brokerages in two markets where it does not conduct its own brokerage operations. For more information on ZipRealty, visit www.ziprealty.com or call 1-800-CALL-ZIP.
Cautionary Language
This release contains forward-looking statements within the meaning of the “safe harbor” provisions of the federal securities laws, including, without limitation, statements regarding challenging market trends in 2011, the impact of the Company’s steps to reduce costs, the Company’s expectation to achieve positive Adjusted EBITDA for 2011, the Company’s refocusing on better capitalizing on its strengths in customer service, industry-leading technology and efficient online marketing to empower real estate customers and agents, and expected additional changes to the Company’s business during 2011. The forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected. The risks and uncertainties include but are not limited to the Company’s history of losses and expectations concerning future losses, volatility in the real estate market, macroeconomic factors such as unemployment, tight credit, inventory levels, foreclosure processing delays and the impact of government programs, recently announced changes to the Company’s business model and operations that may not realize intended results, the Company’s ability to remain an innovation leader in its industry, to adapt to changes in technologies and practices relating to the nature and use of information, to comply with often complex federal and state laws and regulations concerning its agent classification, compensation, termination and other business practices, to attract, retain and incentivize agents and key personnel, to grow local market share in the face of intense competition, to access leads and MLS listings from third parties that it does not control, to develop, maintain and protect a strong brand identity, to protect arrangements for diversifying its revenue stream, to manage the growth of technology and control systems, and to successfully integrate new members of the management team, the Company’s testing of offering alternatives to rebates, the impact of website advertising and lead generation services on the visit-to-transaction pathway of potential customers, the Company’s pursuit of revenue growth opportunities that may reduce its profit margins, seasonality, systems interruptions, delays and failures, geographic concentration, the protection and defense of the Company’s intellectual property rights, and other risk factors set forth in the Company’s Form 10-K for the year ended December 31, 2009 and Form 10-Q for the quarter ended September 30, 2010. The forward-looking statements included in this release are made as of today’s date and, except as otherwise required by law, ZipRealty does not intend to update these forward-looking statements to reflect events or circumstances after the date hereof.
ZipRealty, Inc.
Consolidated Statements of Operations (unaudited)
(in thousands, except per share amounts and operating data)
| Three Months
Ended December 31, |
Twelve Months
Ended December 31, |
|||||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
| Net transaction revenues |
$ | 25,414 | $ | 33,037 | $ | 113,637 | $ | 120,738 | ||||||||
| Marketing and other revenues |
1,593 | 888 | 5,059 | 2,392 | ||||||||||||
| Net revenues |
27,007 | 33,925 | 118,696 | 123,130 | ||||||||||||
| Operating expenses |
||||||||||||||||
| Cost of revenues |
15,731 | 19,181 | 68,302 | 72,197 | ||||||||||||
| Product development |
2,344 | 2,534 | 9,276 | 9,429 | ||||||||||||
| Sales and marketing |
9,784 | 11,265 | 43,545 | 41,881 | ||||||||||||
| General and administrative |
3,210 | 3,333 | 13,376 | 13,405 | ||||||||||||
| Total operating expenses |
31,069 | 36,313 | 134,499 | 136,912 | ||||||||||||
| Loss from operations |
(4,062 | ) | (2,388 | ) | (15,803 | ) | (13,782 | ) | ||||||||
| Other income (expense), net: |
||||||||||||||||
| Interest income |
33 | 85 | 253 | 718 | ||||||||||||
| Other income (expense), net |
— | — | — | 1 | ||||||||||||
| Total other income (expense), net |
33 | 85 | 253 | 719 | ||||||||||||
| Loss before income taxes |
(4,029 | ) | (2,303 | ) | (15,550 | ) | (13,063 | ) | ||||||||
| Provision for (benefit from) income taxes |
— | (171 | ) | — | (171 | ) | ||||||||||
| Net loss |
$ | (4,029 | ) | $ | (2,132 | ) | $ | (15,550 | ) | $ | (12,892 | ) | ||||
| Net loss per share: |
||||||||||||||||
| Basic and diluted |
$ | (0.20 | ) | $ | (0.11 | ) | $ | (0.76 | ) | $ | (0.64 | ) | ||||
| Weighted average common shares outstanding: |
||||||||||||||||
| Basic and diluted |
20,454 | 20,226 | 20,510 | 20,242 | ||||||||||||
| Supplemental operating data (unaudited) |
||||||||||||||||
| Number of ZipAgents at beginning of period |
3,305 | 3,205 | 3,085 | 2,816 | ||||||||||||
| Number of ZipAgents at end of period |
3,403 | 3,085 | 3,403 | 3,085 | ||||||||||||
| Total value of real estate transactions closed during period (in billions) |
$ | 1.09 | $ | 1.47 | $ | 4.96 | $ | 5.30 | ||||||||
| Number of transactions closed during period (1) |
4,930 | 6,355 | 22,013 | 23,100 | ||||||||||||
| Average net revenue per transaction during period (2) |
$ | 5,155 | $ | 5,199 | $ | 5,162 | $ | 5,227 | ||||||||
| (1) | The term “transaction” refers to each representation of a buyer or seller in a real estate purchase or sale. |
| (2) | Average net revenue per transaction equals net transaction revenues divided by number of transactions with respect to each period. |
Reconciliation of non-GAAP Adjusted EBITDA to net loss
The Company defines Adjusted EBITDA as net income (loss) less interest income plus interest expense, provision for income taxes, depreciation and amortization expense, stock-based compensation and further adjusted to eliminate the impact of certain items that it does not consider reflective of its ongoing core operating performance. The Company presents Adjusted EBITDA because it believes it assists investors and analysts in comparing its core operating performance across reporting periods on a consistent basis by excluding items that the Company does not believe are reflective of its core operating performance.
| Three Months Ended December 31, |
Twelve Months Ended December 31, |
|||||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
| Net loss |
$ | (4,029 | ) | $ | (2,132 | ) | $ | (15,550 | ) | $ | (12,892 | ) | ||||
| Add back: |
||||||||||||||||
| Interest income |
(33 | ) | (85 | ) | (253 | ) | (718 | ) | ||||||||
| Provision for income taxes |
— | (171 | ) | — | (171 | ) | ||||||||||
| Depreciation and amortization |
519 | 634 | 2,228 | 2,588 | ||||||||||||
| Stock-based compensation expense |
979 | 897 | 3,672 | 3,899 | ||||||||||||
| Non-GAAP Adjusted EBITDA |
$ | (2,564 | ) | $ | (857 | ) | $ | (9,903 | ) | $ | (7,294 | ) | ||||
ZipRealty, Inc.
Consolidated Balance Sheets (unaudited)
(in thousands, except per share amounts)
| December 31, 2010 |
December 31, 2009 |
|||||||
| Assets |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 13,393 | $ | 23,737 | ||||
| Short-term investments |
18,948 | 20,397 | ||||||
| Accounts receivable, net of allowance |
1,959 | 1,603 | ||||||
| Prepaid expenses and other current assets |
2,123 | 2,726 | ||||||
| Total current assets |
36,423 | 48,463 | ||||||
| Restricted cash |
390 | 110 | ||||||
| Property and equipment, net |
2,712 | 3,390 | ||||||
| Intangible assets, net |
28 | 58 | ||||||
| Other assets |
252 | 371 | ||||||
| Total assets |
$ | 39,805 | $ | 52,392 | ||||
| Liabilities and Stockholders’ Equity |
||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 2,275 | $ | 1,620 | ||||
| Accrued expenses and other current liabilities |
7,450 | 8,815 | ||||||
| Total current liabilities |
9,725 | 10,435 | ||||||
| Other long-term liabilities |
179 | 327 | ||||||
| Total liabilities |
9,904 | 10,762 | ||||||
| Stockholders’ equity: |
||||||||
| Common stock: $0.001 par value; 24,136 and 23,930 shares issued and 20,541 and 20,445 shares outstanding, respectively |
24 | 24 | ||||||
| Additional paid-in capital |
156,384 | 152,440 | ||||||
| Common stock warrants |
— | 4 | ||||||
| Accumulated other comprehensive loss |
13 | (153 | ) | |||||
| Accumulated deficit |
(108,925 | ) | (93,375 | ) | ||||
| Treasury stock, at cost: 3,595 and 3,485 shares, respectively |
(17,595 | ) | (17,310 | ) | ||||
| Total stockholders’ equity |
29,901 | 41,630 | ||||||
| Total liabilities and stockholders’ equity |
$ | 39,805 | $ | 52,392 | ||||
ZipRealty, Inc.
Consolidated Statements of Cash Flows (unaudited)
(in thousands)
| Twelve Months Ended December 31, |
||||||||
| 2010 | 2009 | |||||||
| Cash flows from operating activities |
||||||||
| Net loss |
$ | (15,550 | ) | $ | (12,892 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities |
||||||||
| Depreciation and amortization |
2,198 | 2,557 | ||||||
| Amortization of intangible assets |
30 | 31 | ||||||
| Stock-based compensation expense |
3,672 | 3,899 | ||||||
| Provision for doubtful accounts |
74 | 3 | ||||||
| Amortization of short-term investment premium (discount) |
626 | 5 | ||||||
| Loss on disposal of property and equipment |
120 | 44 | ||||||
| Changes in operating assets and liabilities |
||||||||
| Accounts receivable |
(430 | ) | 19 | |||||
| Prepaid expenses and other current assets |
603 | 716 | ||||||
| Other assets |
119 | 405 | ||||||
| Accounts payable |
655 | (549 | ) | |||||
| Accrued expenses and other current liabilities |
(1,319 | ) | 2,063 | |||||
| Other long-term liabilities |
(148 | ) | (114 | ) | ||||
| Net cash used in operating activities |
(9,350 | ) | (3,813 | ) | ||||
| Cash flows from investing activities |
||||||||
| Restricted cash |
(280 | ) | 20 | |||||
| Purchases of short-term investments |
(5,174 | ) | (16,084 | ) | ||||
| Proceeds from sale and maturity of short-term investments |
6,163 | 26,664 | ||||||
| Purchases of property and equipment |
(1,577 | ) | (1,411 | ) | ||||
| Net cash provided by (used in ) investing activities |
(868 | ) | 9,189 | |||||
| Cash flows from financing activities |
||||||||
| Proceeds from stock option exercises |
159 | 21 | ||||||
| Purchase of treasury stock |
(285 | ) | (160 | ) | ||||
| Net cash used in financing activities |
(126 | ) | (139 | ) | ||||
| Net increase (decrease) in cash and cash equivalents |
(10,344 | ) | 5,237 | |||||
| Cash and cash equivalents at beginning of period |
23,737 | 18,500 | ||||||
| Cash and cash equivalents at end of period |
$ | 13,393 | $ | 23,737 | ||||
ZipRealty, Inc.
Results of Operations - Existing and New Markets
The following table summarizes certain financial data related to our operations by new and existing markets for the periods indicated:
| Three months ended December 31, 2010 | Three months ended December 31, 2009 | |||||||||||||||||||||||
| Existing | New | Total | Existing | New | Total | |||||||||||||||||||
| (in thousands) | (in thousands) | |||||||||||||||||||||||
| Statements of Operations Data |
||||||||||||||||||||||||
| Net transaction revenues |
$ | 20,827 | $ | 4,587 | $ | 25,414 | $ | 27,353 | $ | 5,684 | $ | 33,037 | ||||||||||||
| Marketing and other revenues |
191 | 25 | 216 | 102 | 25 | 127 | ||||||||||||||||||
| Net revenues |
21,018 | 4,612 | 25,630 | 27,455 | 5,709 | 33,164 | ||||||||||||||||||
| Operating expenses: |
||||||||||||||||||||||||
| Cost of revenues |
13,047 | 2,684 | 15,731 | 16,200 | 2,981 | 19,181 | ||||||||||||||||||
| Sales and marketing |
6,155 | 1,816 | 7,971 | 6,836 | 2,095 | 8,931 | ||||||||||||||||||
| Total operating expenses |
19,202 | 4,500 | 23,702 | 23,036 | 5,076 | 28,112 | ||||||||||||||||||
| Income (loss) from market operations |
$ | 1,816 | $ | 112 | $ | 1,928 | $ | 4,419 | $ | 633 | $ | 5,052 | ||||||||||||
The following table summarizes certain financial data related to our operations by new and existing markets for the periods indicated:
| Three months ended December 31, 2010 | Three months ended December 31, 2009 | |||||||||||||||||||||||
| Existing | New | Total | Existing | New | Total | |||||||||||||||||||
| Statements of Operations Data |
||||||||||||||||||||||||
| Net transaction revenues |
99.1 | % | 99.5 | % | 99.2 | % | 99.6 | % | 99.6 | % | 99.6 | % | ||||||||||||
| Marketing and other revenues |
0.9 | % | 0.5 | % | 0.8 | % | 0.4 | % | 0.4 | % | 0.4 | % | ||||||||||||
| Net revenues |
100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||||||
| Operating expenses: |
||||||||||||||||||||||||
| Cost of revenues |
62.1 | % | 58.2 | % | 61.4 | % | 59.0 | % | 52.2 | % | 57.8 | % | ||||||||||||
| Sales and marketing |
29.3 | % | 39.4 | % | 31.1 | % | 24.9 | % | 36.7 | % | 26.9 | % | ||||||||||||
| Total operating expenses |
91.4 | % | 97.6 | % | 92.5 | % | 83.9 | % | 88.9 | % | 84.7 | % | ||||||||||||
| Income (loss) from market operations |
8.6 | % | 2.4 | % | 7.5 | % | 16.1 | % | 11.1 | % | 15.3 | % | ||||||||||||
| Other Operating Data |
||||||||||||||||||||||||
| Number of markets (1) |
23 | 12 | 35 | 23 | 12 | 35 | ||||||||||||||||||
| Number of transactions closed during the period (2) |
||||||||||||||||||||||||
| Buyer representation |
3,608 | 900 | 4,508 | 4,634 | 1,162 | 5,796 | ||||||||||||||||||
| Seller representation |
317 | 105 | 422 | 444 | 115 | 559 | ||||||||||||||||||
| 3,925 | 1,005 | 4,930 | 5,078 | 1,277 | 6,355 | |||||||||||||||||||
| Average net revenue per transaction (3) |
$ | 5,306 | $ | 4,564 | $ | 5,155 | $ | 5,387 | $ | 4,450 | $ | 5,199 | ||||||||||||
| Number of ZipAgents at end of the period |
2,681 | 722 | 3,403 | 2,429 | 656 | 3,085 | ||||||||||||||||||
| (1) | Existing markets include markets opened as of December 31, 2006 and new markets include markets opened in 2007 and later. Westchester County, NY and Long Island, NY were combined during 2009 and are included as one market for all periods presented. |
Comparable existing markets:
| Atlanta, GA | Houston, TX | Phoenix, AZ | ||||
| Austin, TX | Las Vegas, NV | Sacramento, CA | ||||
| Baltimore, MD | Los Angeles, CA | San Diego, CA | ||||
| Boston, MA | Miami, FL | San Francisco Bay Area, CA | ||||
| Chicago, IL | Minneapolis, MN | Seattle, WA | ||||
| Dallas, TX | Orange County, CA | Tampa, FL | ||||
| Fresno/Central Valley, CA | Orlando, FL | Washington, DC | ||||
| Greater Philadelphia Area, PA | Palm Beach, FL | |||||
| New markets and the month opened: | ||||||
| Naples, FL | March 2007 | Virginia Beach, VA | August 2007 | |||
| Tucson, AZ | March 2007 | Charlotte, NC | August 2007 | |||
| Denver, CO | April 2007 | Raleigh-Durham, NC | September 2007 | |||
| Jacksonville, FL | May 2007 | Westchester County/Long Island, NY | December 2007 | |||
| Salt Lake City, UT | July 2007 | Hartford, CT | July 2008 | |||
| Richmond, VA | July 2007 | Portland, OR | April 2009 | |||
| (2) | The term “transaction” refers to each representation of a buyer or seller in a real estate purchase or sale |
| (3) | Average net revenue per transaction equals net transaction revenues divided by number of transactions with respect to each period |