EX-99.1 2 dex991.htm PRESS RELEASE Press Release

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