EX-99.1 2 dex991.htm PRESS RELEASE Press release

Exhibit 99.1


For Release:

Tuesday, October 31st

4:00 p.m. Eastern

HouseValues Announces Third Quarter Results

New Share Repurchase Authorization Announced

KIRKLAND, Wash. – October 31, 2006 – HouseValues, Inc. (NASDAQ: SOLD) today announced results for the quarter ended September 30, 2006.

HouseValues reported revenue of $24.0 million for the third quarter of 2006, a slight increase from the comparable quarter last year. The company reported a net loss for the quarter of $1.5 million, or $0.06 per share. This compares to net income of $4.3 million and earnings per diluted share of $0.16 in the third quarter of 2005.

Sales and marketing expenses were significantly higher than the comparable quarter of the prior year, primarily due to higher media expenses and increased sales staff to support expansion of markets served and products offered. The increase in media expense primarily reflected the company’s support for new products launched in the past year and lower consumer response rates attributed to market conditions.

On a sequential quarter basis, revenue was seven percent lower in the third quarter of 2006 compared to the second quarter of 2006, reflecting declines in average revenue per real estate customer and mortgage revenue. The decline in average revenue per real estate customer reflected lower pricing in some areas where housing transaction volumes have slowed significantly, coupled with the company’s successful expansion into historically under-penetrated markets that tend to be lower priced.

“While we are not satisfied with our third quarter financial results, HouseValues grew its customer base modestly and generated $1.5 million in cash from operations during the period despite challenging real estate market conditions,” said Ian Morris, Chief Executive Officer of HouseValues.

Expansion in Under-Penetrated Markets Taps National Advertising Strength

HouseValues demonstrated continued progress in the third quarter toward driving higher penetration and better monetization of consumer requests in historically under-penetrated markets. The company already generates leads in many of these markets through the reach of its efficient nationwide advertising campaigns. HouseValues expects to generate a greater portion of its lead production through this highly efficient medium over time. As such, the company expects that better alignment of its customer base with the reach of its consumer advertising programs will favorably impact future lead generation costs and strengthen the company’s competitive advantage in the years to come.

New Share Repurchase Authorization Announced

Reflecting its continued confidence in the company’s long-term strategic direction, HouseValues’ Board of Directors today announced a new authorization to purchase up to two million shares of the company’s common stock. Supporting this authorization, HouseValues had $78.9 million in cash, cash equivalents and short-term investments at quarter end.

HouseValues previously announced an authorization to repurchase up to two million shares of the company’s common stock on July 25th and completed all previously authorized purchases on October 27, 2006. The cost was $11.4 million, or an average price of $5.72 per share.

Mary Reeder Named Chief Technology Officer

HouseValues recently named Mary Reeder as the company’s Chief Technology Officer. Prior to joining HouseValues, Mary served as CTO and Senior Vice President of R&D for ten years at Onyx Software, an innovator in web-based Customer Relationship Management (CRM) software and solutions. Prior to Onyx, she spent seven years in technology leadership positions at Microsoft Corporation.

Nikesh Parekh Named Vice President of Mortgage

HouseValues recently named Nikesh Parekh as the company’s Vice President of Mortgage. Niki brings a track record of success in both the online real estate and mortgage industries. Since joining HouseValues in 2002, Niki has been responsible for a number of key initiatives, including the acquisition of Soar Solutions and the highly-successful launch of JustListed.

Conference Call

HouseValues will host a conference call and live webcast to discuss these financial results at 4:30 p.m. Eastern Time on October 31, 2006. To listen to the live conference call, please dial 913-312-1268. 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. ET on October 31, 2006, through 11:59 p.m. on November 1, 2006, by dialing 719-457-0820 and entering the passcode 5159304#.

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 grow its mortgage, HomePages and lead generation businesses, to respond to competitive threats, to manage lead generation and other costs, and to expand into new lines of business. Please refer to the company’s recent filings with the Securities and Exchange Commission on Forms 10-Q and 10-K 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 before net interest, income taxes, depreciation, amortization and stock-based compensation. 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 the operating performance of our operations. 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) income, the most comparable GAAP measure, to Adjusted EBITDA.

HouseValues, Inc.


(In thousands)



     Three months ended
September 30,
   Nine months ended
September 30,
     2006     2005    2006    2005

Net (loss) income

   $ (1,463 )   $ 4,331    $ 2,201    $ 10,969



Interest income, net

     717       491      2,011      1,295



Depreciation and amortization of property and equipment

     1,559       506      3,689      1,262

Amortization of intangible assets

     258       151      1,063      454

Stock-based compensation

     956       274      3,104      829

Income tax expense

     (157 )     2,086      157      5,282

Adjusted EBITDA

   $ 436     $ 6,857    $ 8,203    $ 17,501

About HouseValues Inc.

Founded in 1999, HouseValues Inc. provides consumers and real estate professionals with the information and tools they need for success throughout the home buying and selling process. The company’s flagship consumer products include HomePages.com™, a lifestyle and neighborhood-centric home buying and selling service; TheLoanPage.com, a service that provides current and prospective home owners with competitive mortgage and refinance quotes from leading lenders; HouseValues.com®, a service that provides home sellers with market valuations of their current home; and JustListed.com™, a service that alerts home buyers as soon as new homes hit the market that meet their criteria. Learn more at www.housevaluesinc.com.


HouseValues, Inc.


(In thousands, except per share data)



     Three months ended
September 30,
   Nine months ended
September 30,
     2006     2005    2006    2005


   $ 23,985     $ 23,337    $ 76,722    $ 61,533



Sales and marketing (1)

     17,303       11,556      49,948      30,582

Technology and product development (1)

     3,389       1,823      10,421      4,958

General and administrative (1)

     3,813       3,375      11,254      9,321

Depreciation and amortization of property and equipment

     1,559       506      3,689      1,262

Amortization of intangible assets

     258       151      1,063      454

Total expenses

     26,322       17,411      76,375      46,577

(Loss) Income from operations

     (2,337 )     5,926      347      14,956

Interest income, net

     717       491      2,011      1,295

(Loss) Income before income tax expense

     (1,620 )     6,417      2,358      16,251

Income tax (benefit) expense

     (157 )     2,086      157      5,282

Net (loss) income

   $ (1,463 )   $ 4,331    $ 2,201    $ 10,969

Net (loss) income per share:



   $ (0.06 )   $ 0.17    $ 0.09    $ 0.43


   $ (0.06 )   $ 0.16    $ 0.08    $ 0.40

Number of shares used in per share calculations:



     25,404       25,574      25,713      25,291


     25,404       27,772      27,081      27,443

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


     2006     2005    2006    2005

Sales and marketing

   $ 218     $ 57    $ 798    $ 185

Technology and product development

     176       42      578      121

General and administrative

     562       175      1,728      523
   $ 956     $ 274    $ 3,104    $ 829

HouseValues, Inc.


(In thousands, except share data)



     September 30,
   December 31,



Current assets:


Cash and cash equivalents

   $ 50,334    $ 59,234  

Short-term investments

     28,575      25,640  

Accounts receivable, net of allowance of $177 and $242

     474      577  

Prepaid expenses and other assets

     1,541      1,700  

Deferred income taxes

     1,567      258  

Prepaid income taxes

     1,278      997  

Other current assets

     96      579  

Total current assets

     83,865      88,985  

Property and equipment, net of accumulated depreciation of $7,376 and $3,689

     12,461      11,118  


     6,815      6,227  

Intangible assets, net of accumulated amortization of $3,066 and $2,003

     3,799      4,853  

Other noncurrent assets

     408      408  

Total assets

   $ 107,348    $ 111,591  

Liabilities and Shareholders’ Equity


Current liabilities:


Accounts payable

   $ 1,308    $ 1,030  

Accrued compensation and benefits

     3,574      4,236  

Accrued expenses and other current liabilities

     5,087      6,529  

Deferred rent, current portion

     289      289  

Deferred revenue

     1,554      1,694  

Total current liabilities

     11,812      13,778  

Deferred income taxes

     969      726  

Deferred rent, less current portion

     1,180      1,423  

Note payable

     1,709      1,600  

Total liabilities

     15,670      17,527  

Shareholders’ equity:


Common stock, par value $0.001 per share, stated at amounts paid in; authorized 120,000,000 shares; issued and outstanding 24,611,795 and 25,783,980 shares at September 30, 2006 and December 31, 2005, respectively

     63,901      71,385  

Deferred stock-based compensation

     —        (2,897 )

Retained earnings

     27,777      25,576  

Total shareholders’ equity

     91,678      94,064  

Total liabilities and shareholders’ equity

   $ 107,348    $ 111,591  

HouseValues, Inc.


(In thousands)



     Nine months ended
September 30,
     2006     2005  

Cash flows from operating activities:


Net income

   $ 2,201     $ 10,969  

Adjustments to reconcile net income to net cash provided by operating activities:


Depreciation and amortization of property and equipment

     3,689       1,262  

Amortization of intangible assets

     1,063       454  

Stock-based compensation

     3,104       829  

Deferred income tax benefit

     (1,066 )     (412 )

Tax benefit from exercises of stock options

     —         1,736  

Changes in certain assets and liabilities


Accounts receivable

     103       (209 )

Prepaid expenses and other assets

     287       (129 )

Prepaid income taxes

     (188 )     —    

Other current assets

     483       1,521  

Accounts payable

     118       (197 )

Accrued compensation and benefits

     (662 )     1,318  

Accrued expenses and other current liabilities

     1,282       2,116  

Deferred rent

     (243 )     107  

Deferred revenue

     (140 )     441  

Income taxes payable and other

     109       39  

Net cash provided by operating activities

     10,140       19,845  

Cash flows from investing activities:


Purchases of short-term investments

     (5,000 )     (12,799 )

Sales of short-term investments

     2,065       4,300  

Purchases of property and equipment

     (7,235 )     (4,984 )

Additions to goodwill and intangible assets

     (1,335 )     (1,155 )

Net cash used in investing activities

     (11,505 )     (14,638 )

Cash flows from financing activities:


Purchase and retirement of common stock

     (9,107 )     —    

Proceeds from exercises of stock options and warrants

     1,070       848  

Tax benefit from exercises of stock options

     502       —    

Proceeds from sale of common stock, net of issuance costs paid

     —         (614 )

Net cash (used in) provided by financing activities

     (7,535 )     234  

Net (decrease) increase in cash and cash equivalents

     (8,900 )     5,441  

Cash and cash equivalents at beginning of period

     59,234       57,562  

Cash and cash equivalents at end of period

   $ 50,334     $ 63,003  

# # #


For Additional Information:

Investors Only:

Mark Lamb

Director of Investor Relations

HouseValues, Inc.



Press Only:

Hugh Siler

Siler & Company for HouseValues, Inc.