Commercial PropertyHomestore Reaches Profitability
Homestore, operator of Realtor.com, just reported the strongest results since new management took over the fraud-plagued company three years ago and founding management was asked to step down.
The company has battled lawsuits, legal expenses to fund the defenses of former Homestore executives, significant competition from other third-party advertisers/lead generators targeting Realtors, and customer complaints about its pricing policies, to establish a new revenue model achieving the titanic turnaround.
Stating financial results for the second quarter ended June 30, 2005, the total revenue for the second quarter was $63.3 million, a 16 percent increase from $54.3 million in the second quarter of 2004, says the company. Net income for the second quarter was $3.3 million, or $0.02 per share, compared to a net loss of $4.3 million, or $0.03 per share, for the second quarter of 2004.
"The second quarter financial results are the strongest Homestore has delivered since we began the turnaround a little over three years ago," said Mike Long, Homestore"s chief executive officer. "Our past investments in our Realtor.com and Top Producer businesses continue to deliver increasingly positive returns, reinforcing our belief that the investments we are currently making in other areas of the company will create long term value."
Net income for the second quarter of 2005 included legal expense of $4.2 million, reflected in General & Administrative costs, related to the Company"s obligation to advance the defense costs of former officers, and a $1.4 million reduction of previous restructuring charges. Net loss from the second quarter of 2004 included a $2.2 million litigation settlement expense.
The $4.2 million legal expense is in addition to a $7.2 million expense reflected in the third quarter of 2004 and represents the estimated legal costs incurred through June, 30, 2005 by the former officers. The company says it will continue to incur expense in subsequent quarters as further defense costs are incurred and until such time as the matters are resolved, or it is determined the company is no longer obligated to advance these costs.
Homestore"s EBITDA (income from operations, excluding restructuring charges and certain other non-cash and non-recurring items, principally stock-based charges, depreciation, and amortization) for the second quarter of 2005 was $2.9 million, compared to $2.3 million for the second quarter of 2004. The Company"s EBITDA calculation for the second quarter excludes the impact of $1.3 million in non-recurring revenue. The Company has reported EBITDA because management uses it to monitor and assess the Company"s performance and believes it is helpful to investors in understanding the Company"s business.
Shares of Homestore rose 39 percent after the online real estate company posted second-quarter results that were better than Wall Street expectations.