EX-99.1 2 v230476_ex99-1.htm Unassociated Document

ZipRealty Announces Second Quarter 2011 Results

Adjusted EBITDA loss of $54,000 compared with Adjusted EBITDA income of $1.3 million in the prior year

Continued progress on corporate reorganization reflected in operating expenses reduced by more than 30% from prior year

Same market net revenues were $23.6 million, a decrease of 25% from the year earlier period

Progress on strategic transition with revised commission rebate policy and plan to expand Powered by Zip program to additional markets
 
EMERYVILLE, Calif. – August 2, 2011 - ZipRealty, Inc. (NASDAQ: ZIPR) today announced financial results for the second quarter.  Net revenues were $23.6 million, a 37% decrease from the $37.6 million reported in the second quarter last year.  Same market net revenues, which exclude markets closed during the first quarter of 2011, were $23.6 million, a 25% decrease from the $31.6 million in the second quarter last year.  The Company’s net loss for the quarter was $972,000, or $0.05 per share, compared to a net loss of $225,000, or $0.01 per share, in the year-ago period. Adjusted EBITDA for the quarter was a $54,000 loss versus Adjusted EBITDA income of $1.3 million in the second quarter last year.
 
Lanny Baker, President and CEO of ZipRealty, commented, “We are now six months into the process of realigning ZipRealty toward our two primary goals – achieving profitability and sharpening the focus on our core strengths in customer service, technology and online marketing.  Although Adjusted EBITDA was a small loss for the second quarter, the expense reduction actions undertaken earlier this year are on track to deliver more than $20 million in operating cost reductions, as planned.  With the real estate market in the areas we serve facing continuing pressure and our business in transition, reaching our stated goal of positive Adjusted EBITDA for the year remains a challenge.  However, we remain committed to placing ZipRealty on a profitable footing and plan to manage the business aggressively.  We anticipate that transaction volume and revenue comparisons will begin to improve in the second half of 2011.”

Mr. Baker continued, “Meanwhile, the strategic changes set into motion earlier this year have begun to show encouraging progress.  The new version of the ZipRealty.com website, with a more open design, is attracting more users, ranking higher within search engine results, doing a far better job of showcasing ZipRealty’s all-star agents, and contributing to positive trends in customer acquisition costs.  The elimination of the Company’s standard rebate policy, which will phase in during the third quarter, follows months of successful testing and research, and now positions ZipRealty to enhance both its image and the financial productivity of agents.  Finally, our Powered by Zip initiative can now demonstrate tangible transaction volume and market share results for our first brokerage partners and we have begun to explore expanding the program to additional markets.”
 
 
 

 
 
The Company announced the following operating metrics for the second quarter of 2011:
 
 
·
The total value of real estate transactions closed decreased to $1.0 billion in the second quarter of 2011 versus $1.6 billion in the same period last year.  The total value of same market real estate transactions closed was $1.0 billion in the second quarter of 2011 versus $1.4 billion in the same period last year.
 
 
·
The total number of transactions closed in the second quarter of 2011 was 3,992 compared to 7,100 in the same period last year.  Same market total transactions closed were 3,992 compared to 5,626 in the prior year.
 
 
·
Average net transaction revenue per close was $5,558 compared to $5,129 in the same period last year.  Same market average net transaction revenue per close was $5,558 compared to $5,422 last year.
 
 
·
At June 30, 2011, there were 2,197 ZipRealty agents engaged, down from 3,251 agents at the end of the second quarter last year and 2,422 agents at March 31, 2011.
 
Balance Sheet & Liquidity
 
As of June 30, 2011, the Company had approximately $24.1 million of cash, cash equivalents and short-term investments, with no long-term debt.  Relative to March 31, 2011, the Company’s cash, cash equivalents and short-term investments decreased by approximately $2.6 million.
 
 
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 first quarter financial results will be webcast live on Tuesday, August 2, 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 866-804-6926, passcode: 54450061.  A replay of the call will also be available through August 9, 2011 at 888-286-8010, passcode: 26091154.

 
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About ZipRealty, Inc.

ZipRealty is a leading full-service residential real estate brokerage focused on finding better, faster ways to connect home buyers and sellers with the information, tools and professional services they value to complete their residential real estate transactions. The Company offers a 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 users 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 both to home buyers and sellers and to 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 the Company’s commitment to achieving profitability and sharpening its focus on its core strengths in customer service, technology and online marketing, the Company’s expected operating cost reductions for the year, the Company’s goal of achieving positive Adjusted EBITDA for the year, improvement in revenue and transaction volumes in the second half of 2011, the success of the Company’s new website design, the success of the Company’s elimination of its standard rebate policy, and the success and growth of the Company’s Powered by Zip initiative.  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 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, 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.


 
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ZipRealty, Inc.
Consolidated Statements of Operations (unaudited)
(in thousands, except per share amounts and operating data)
 
 
   
Three Months Ended June 30,
      Six Months Ended June 30,  
   
2011
   
2010
   
2011
   
2010
 
                         
Net transaction revenues
  $ 22,187     $ 36,415     $ 40,579     $ 61,256  
Marketing and other revenues
    1,388       1,169       2,741       2,116  
   Net revenues
    23,575       37,584       43,320       63,372  
                                 
Operating costs and expenses
                               
   Cost of revenues
    12,862       20,995       23,821       36,301  
   Product development
    1,969       2,257       3,918       4,672  
   Sales and marketing
    7,281       11,645       15,436       22,411  
   General and administrative
    2,450       2,990       4,807       6,599  
   Restructuring charges, net
    -       -       2,264       -  
      Total operating costs and expenses
    24,562       37,887       50,246       69,983  
                                 
Loss from operations
    (987 )     (303 )     (6,926 )     (6,611 )
Interest income
    15       78       43       167  
Loss before income taxes
    (972 )     (225 )     (6,883 )     (6,444 )
Provision for income taxes
    -       -       -       -  
                                 
Net loss
  $ (972 )   $ (225 )   $ (6,883 )   $ (6,444 )
                                 
                                 
Net loss per share:
                               
   Basic and diluted
  $ (0.05 )   $ (0.01 )   $ (0.34 )   $ (0.32 )
                                 
Weighted average common shares outstanding:
                               
   Basic and diluted
    20,549       20,338       20,530       20,381  
                                 
                                 
Supplemental operating data (unaudited)
                               
Number of agents at beginning of period
    2,422       3,017       3,403       3,085  
Number of agents at end of period
    2,197       3,251       2,197       3,251  
Total value of real estate transactions closed during period (in billions)
  $ 0.95     $ 1.61     $ 1.74     $ 2.69  
                                 
Number of transactions closed during period  (1)
    3,992       7,100       7,628       12,003  
                                 
Average net revenue per transaction during period  (2)
  $ 5,558     $ 5,129     $ 5,320     $ 5,103  
                                 
Same market total value of real estate transactions closed during period (in billions)
  $ 0.95     $ 1.37     $ 1.71     $ 2.30  
                                 
Same market number of transactions closed during period  (1)
    3,992       5,626       7,420       9,530  
                                 
Same market average net revenue per transaction during period  (2)
  $ 5,558     $ 5,422     $ 5,374     $ 5,399  
 
(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 (unaudited, in thousands)

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 June 30,
      Six Months Ended June 30,  
   
2011
   
2010
   
2011
   
2010
 
                         
GAAP net loss as reported
  $ (972 )   $ (225 )   $ (6,883 )   $ (6,444 )
Add back
                               
  Interest income
    (15 )     (78 )     (43 )     (167 )
  Depreciation and amortization
    484       567       973       1,170  
  Stock-based compensation expense
    449       1,043       837       1,738  
  Restructuring charges, net
    -       -       2,264       -  
Non-GAAP Adjusted EBITDA
  $ (54 )   $ 1,307     $ (2,852 )   $ (3,703 )
 
 
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ZipRealty, Inc.
Consolidated Balance Sheets (unaudited)
(in thousands, except per share amounts)
 
   
June 30,
   
December 31,
 
   
2011
   
2010
 
Assets
           
Current assets
           
  Cash and cash equivalents
  $ 19,492     $ 13,393  
  Short-term investments
    4,573       18,948  
  Accounts receivable, net of allowance of $143 and $103, respectively
    1,939       1,959  
  Prepaid expenses and other current assets
    1,994       2,123  
                 
Total current assets
    27,998       36,423  
                 
Restricted cash
    390       390  
Property and equipment, net
    2,577       2,712  
Intangible assets, net
    14       28  
Other assets
    268       252  
                 
Total assets
  $ 31,247     $ 39,805  
                 
                 
Liabilities and Stockholders' Equity
               
Current liabilities
               
  Accounts payable
  $ 1,723     $ 2,275  
  Accrued expenses and other current liabilities
    4,871       7,450  
  Accrued restructuring charges
    653       -  
                 
Total current liabilities
    7,247       9,725  
                 
Other long-term liabilities
    111       179  
                 
    Total liabilities
    7,358       9,904  
                 
                 
Stockholders' equity
               
Common stock: $0.001 par value; 24,158 and 24,136 shares issued and 20,557
               
   and 20,541 outstanding, respectively
    24       24  
Additional paid-in capital
    157,286       156,384  
Accumulated other comprehensive income (loss)
    (1 )     13  
Accumulated deficit
    (115,808 )     (108,925 )
Treasury stock, at cost: 3,601 and 3,595 shares, respectively
    (17,612 )     (17,595 )
   Total stockholders' equity
    23,889       29,901  
                 
Total liabilities and stockholders' equity
  $ 31,247     $ 39,805  
 
 
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ZipRealty, Inc.
Consolidated Statements of Cash Flows (unaudited)
(in thousands)
 
 
  Six Months Ended June 30,  
 
 
2011
   
2010
 
             
Cash flows from operating activities
           
Net loss
  $ (6,883 )   $ (6,444 )
Adjustments to reconcile net loss to net cash used in operating activities
               
Depreciation and amortization
    959       1,156  
Amortization of intangible assets
    14       14  
Stock-based compensation expense
    837       1,738  
Non-cash restructuring charges
    54       -  
Provision for doubtful accounts
    40       54  
Amortization of short-term investment premium (discount)
    145       310  
Changes in operating assets and liabilities
               
Accounts receivable
    (20 )     (1,467 )
Prepaid expenses and other current assets
    129       399  
Other assets
    (16 )     107  
Accounts payable
    (552 )     1,020  
Accrued expenses and other current liabilities
    (2,579 )     146  
Accrued restructuring charges
    653       -  
Other long-term liabilities
    (68 )     (85 )
Net cash used in operating activities
    (7,287 )     (3,052 )
                 
Cash flows from investing activities
               
Restricted cash
    -       20  
Purchases of short-term investments
    (4,575 )     -  
Proceeds from sale or maturity of short-term investments
    18,791       1,871  
Purchases of property and equipment
    (839 )     (919 )
Net cash provided by investing activities
    13,377       972  
                 
Cash flows from financing activities
               
Proceeds from stock option exercises
    26       58  
Acquisition of treasury stock
    (17 )     (203 )
Net cash provided by (used in) financing activities
    9       (145 )
Net increase (decrease) in cash and cash equivalents
    6,099       (2,225 )
                 
Cash and cash equivalents at beginning of period
    13,393       23,737  
                 
Cash and cash equivalents at end of period
  $ 19,492     $ 21,512  
 
 
 
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