Exhibit 99.1
HOMESTORE REPORTS FOURTH QUARTER AND FULL YEAR 2003
RESULTS
Reduced Operating Losses, Improved Gross Margins
WESTLAKE VILLAGE, CALIF. - MARCH 11, 2003 - Homestore, Inc. (NASDAQ: HOMS), the
leading provider of real estate media and technology solutions, today reported
financial results for the fourth quarter ended December 31, 2003. Total revenue
for the fourth quarter was $54.9 million, compared to $55.1 million in the third
quarter of 2003. The gross margin improved to 74 percent from 72 percent in the
previous quarter.
Homestore also reported that the net loss for the fourth quarter was $(12.1)
million, or $(0.10) per share, compared to a net loss of $(30.6) million, or
$(0.26) per share, for the third quarter of 2003. Results for the fourth quarter
included a restructuring charge of $4.1 million and an impairment charge of $1.8
million. The third quarter results included an impairment charge of $15.7
million. Excluding restructuring, impairment and certain other non-cash
expenses, principally stock-based charges, depreciation, and amortization,
Homestore's loss from operations was $(770,000) in the fourth quarter, compared
to a loss of $(4.8) million in the third quarter of 2003. The decrease in loss
was primarily due to reductions in the Company's operating expenses. This
information is provided 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.
At December 31, 2003, Homestore had $35.5 million in cash and short-term
investments available to fund operations. This cash balance reflects a $10.0
million payment made on October 15, 2003, related to the class action
settlement.
"As we move beyond the historical financial, legal and operational issues that
challenged the Company's development, we are encouraged by the returns we are
receiving from our staged product and marketing investment priorities," said
Mike Long, Homestore's chief executive officer. "Homestore's Media Services
segment, our largest business and the primary beneficiary of our investment
strategy to date, experienced its third consecutive quarter of sequential core
revenue growth. This segment also achieved improved profitability, with
operating margins increasing from 6.6 percent in the third quarter to 15 percent
in the fourth. We believe these
trends are early indicators of the market acceptance of our products and
services, better reflecting the value we deliver to our customers."
YEAR OVER YEAR QUARTERLY RESULTS
Revenue for the fourth quarter totaled $54.9 million, versus $60.8 million for
the fourth quarter of 2002. The year over year decline in revenue is due
primarily to the expiration of certain legacy revenue agreements with Cendant
Corp., which accounted for $3.6 million, and a decline in software revenues from
the sale of The Hessel Group in early 2003.
The loss from continuing operations was $(12.1) million, or $(0.10) per share,
compared to a loss of $(37.6) million, or $(0.32) per share, in the fourth
quarter of 2002. The net loss for the fourth quarter was $(12.1) million, or
$(0.10) per share, compared to a net loss of $(36.6) million, or $(0.31) per
share, in the fourth quarter of 2002.
FULL YEAR RESULTS
For the year ended December 31, 2003, Homestore's revenue was $218.7 million,
down $45.9 million from revenue of $264.6 million for 2002. The loss from
continuing operations was $(49.7) million, or $(0.42) per share, compared to
$(176.1) million, or $(1.49) per share for 2002. The net loss for the year was
$(47.1) million, or $(0.40) per share, compared with a net loss of $(163.4)
million, or $(1.39) per share, for the year ended December 31, 2002.
UPDATE ON SETTLEMENT OF SHAREHOLDER CLASS ACTION LAWSUIT
Last October, Homestore announced a preliminary court approval of the settlement
agreement between Homestore and The California State Teachers' Retirement System
(CalSTRS) related to the consolidated shareholder class action lawsuit. A final
court approval hearing took place on January 16, 2004. Thereafter, the court
issued an interim order in which the judge generally approved of the terms of
the settlement but requested additional briefing from the parties on ancillary
issues. The briefs were submitted February 20, 2004, and Homestore expects a
decision regarding trial court approval of the settlement in the near future.
Under the terms of the settlement, Homestore has agreed to pay $13.0 million in
cash and issue 20.0 million new shares of Homestore common stock to members of
the class and will adopt certain corporate governance provisions designed to
enhance shareholder interests. Homestore has already transferred $10 million in
cash into an escrow account during the fourth quarter, with
the additional $3.0 million in cash and 20.0 million shares of common stock due
upon final judicial approval of the settlement. Following the final approval,
the $13.0 million, net of court approved costs, and the 20.0 million shares of
newly issued common stock will be distributed to the class. Additional
information regarding the settlement agreement is included in documents
Homestore files from time to time with the Securities and Exchange Commission.
CONFERENCE CALL
As previously announced, Homestore will host a conference call, which will be
broadcast live over the Internet today, Thursday, March 11, 2004, at 2:00 p.m.
PST (5:00 p.m. EST). Chief Executive Officer, Mike Long, and Chief Financial
Officer, Lew Belote, will discuss the Company's fourth quarter and full year
2003 results, and Homestore's progress. In order to participate in the call,
investors should log on to http://ir.homestore.com and click on "Event
Calendar." Windows Media Player software is required and is obtainable at no
cost. Please connect to the above Web site ten minutes prior to the call to load
any necessary audio software. A replay of the call will be available in the same
section of the Company's Web site. A telephone replay will also be available
from 5:00 p.m. PDT (8:00 p.m. EDT) on March 11 until midnight on March 18 at
706-645-9291, conference code 5616994. For additional information regarding the
company's results, please go to the "SEC Filings" section at
http://ir.homestore.com to view annual reports as filed with the Securities and
Exchange Commission on Form 10-K. Homestore's Form 10-K for the year ended
December 31, 2003 is expected to be filed with the Securities and Exchange
Commission on, or before Monday, March 15, 2004.
USE OF NON-GAAP FINANCIAL MEASURES
To supplement its consolidated financial statements presented in accordance with
generally accepted accounting principles in the United States ("GAAP"),
Homestore uses a non-GAAP measure of income (loss) from operations excluding
restructuring, impairment and certain other non-cash expenses. A reconciliation
of this non-GAAP measure to GAAP is provided in the attached tables. These
non-GAAP adjustments are provided to enhance the user's overall understanding of
Homestore's current financial performance and its prospects for the future.
Homestore believes these non-GAAP results provide useful information to both
management and investors by excluding certain expenses that it believes are not
indicative of its core operating results and a more consistent basis for
comparison between quarters. Further, this non-GAAP method is the primary basis
management uses for planning and forecasting its future operations. The
presentation of this additional information should not be considered in
isolation or as a substitute for results prepared in accordance with GAAP.
CAUTION REGARDING FORWARD LOOKING STATEMENTS
This press release may contain forward-looking statements, including information
about management's view of Homestore's future expectations, plans and prospects,
within the safe harbor provisions under The Private Securities Litigation Reform
Act of 1995. These statements involve known and unknown risks, uncertainties and
other factors which may cause the results of Homestore, its subsidiaries,
divisions and concepts to be materially different than those expressed or
implied in such statements. These risk factors and others are included from time
to time in documents Homestore files with the Securities and Exchange
Commission, including but not limited to its Form 10-Ks, Form 10-Qs and Form
8-Ks. Other unknown or unpredictable factors also could have material adverse
effects on Homestore's future results. The forward-looking statements included
in this press release are made only as of the date hereof. Homestore cannot
guarantee future results, levels of activity, performance or achievements.
Accordingly, you
should not place undue reliance on these forward-looking
statements. Finally, Homestore expressly disclaims any intent or obligation to
update any forward-looking statements to reflect subsequent events or
circumstances.
(FINANCIAL TABLES FOLLOW)
HOMESTORE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
THREE MONTHS ENDED
-----------------------------------------------
DECEMBER 31, SEPTEMBER 30, DECEMBER 31,
2003 2003 2002
--------- --------- ---------
Revenue $ 53,017 $ 53,751 $ 55,410
Related party revenue 1,862 1,336 5,414
--------- --------- ---------
54,879 55,087 60,824
Total revenue
Cost of revenue 14,188 15,414 16,935
--------- --------- ---------
Gross profit 40,691 39,673 43,889
Operating expenses:
Sales and marketing 24,861 25,990 34,672
Product and website development 4,957 5,251 6,087
General and administrative 14,368 16,986 19,917
Amortization of intangible assets 2,492 5,935 9,386
Acquisition and restructuring charges 4,100 -- --
Impairment of long-lived assets 1,758 15,664 7,335
Litigation settlement -- -- --
--------- --------- ---------
Total operating expenses 52,536 69,826 77,397
--------- --------- ---------
Loss from operations (11,845) (30,153) (33,508)
Interest income (expense), net (136) (234) 389
Other income (expense), net (76) (195) (4,500)
--------- --------- ---------
Loss from continuing operations (12,057) (30,582) (37,619)
Gain on disposition of discontinued operations -- -- 1,029
Income from discontinued operations -- -- --
--------- --------- ---------
Net loss $ (12,057) $ (30,582) $ (36,590)
========= ========= =========
Basic and diluted loss per share
Continuing operations $ (.10) $ (.26) $ (0.32)
========= ========= =========
Discontinued operations $ -- $ -- $ .01
========= ========= =========
Net loss $ (.10) $ (.26) $ (0.31)
========= ========= =========
Shares used to calculate basic and diluted per
share amounts 120,273 119,418 118,096
========= ========= =========
HOMESTORE, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURE
IMPACT OF RESTRUCTURING, IMPAIRMENT AND CERTAIN OTHER NON-CASH EXPENSES ON
LOSS FROM OPERATIONS
(in thousands)
(unaudited)
THREE MONTHS ENDED
--------------------------------------------
DECEMBER 31, SEPTEMBER 30, DECEMBER 31,
2003 2003 2002
-------- -------- -----------
Loss from operations $(11,845) $(30,153) $(33,508)
Plus:
Stock-based charges 105 848 13,035
Amortization of intangible assets 2,492 5,935 9,386
Depreciation 2,620 2,890 3,372
Acquisition and restructuring 4,100 -- --
Impairment of long-lived assets 1,758 15,664 7,335
-------- -------- --------
Loss from operations excluding
restructuring, impairment and certain other
non-cash expenses $ (770) $ (4,816) $ (380)
======== ======== ========
HOMESTORE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
YEAR ENDED
-----------------------------
DECEMBER 31, DECEMBER 31,
2003 2002
--------- ---------
Revenue $ 211,015 $ 233,455
Related party revenue 7,695 31,158
--------- ---------
218,710 264,613
Total revenue
Cost of revenue 60,261 78,304
--------- ---------
Gross profit 158,449 186,309
Operating expenses:
Sales and marketing 103,861 164,629
Product and website development 21,659 30,279
General and administrative 67,257 84,813
Amortization of intangible assets 22,366 37,165
Acquisition and restructuring charges 4,100 12,087
Impairment of long-lived assets 29,580 7,335
Litigation settlement 63,600 23,000
--------- ---------
Total operating expenses 312,423 359,308
--------- ---------
Loss from operations (153,974) (172,999)
Interest income (expense), net (424) 2,620
Gain on settlement of distribution agreement 104,071 --
Other income (expense), net 673 (5,682)
--------- ---------
Loss from continuing operations (49,654) (176,061)
Gain on disposition of discontinued operations 2,530 11,790
Income from discontinued operations -- 846
--------- ---------
Net loss $ (47,124) $(163,425)
========= =========
Basic and diluted loss per share
Continuing operations $ (.42) $ (1.49)
========= =========
Discontinued operations $ .02 $ .11
========= =========
Net loss $ (.40) $ (1.39)
========= =========
Shares used to calculate basic and diluted per
share amounts 118,996 117,900
========= =========
HOMESTORE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
YEAR ENDED
DECEMBER 31,
--------------------------
2003 2002
--------- ---------
CASH FLOWS FROM CONTINUING OPERATING ACTIVITIES:
Loss from continuing operations $ (49,654) $(176,061)
Adjustments to reconcile net loss to net cash used in continuing operating
activities:
Depreciation 11,906 14,397
Amortization of intangible assets 22,366 37,165
Accretion of distribution agreement -- 14,812
Impairment of long-lived assets 29,580 7,335
Provision for doubtful accounts 2,248 5,115
Stock-based charges 7,249 66,907
Gain on settlement of distribution agreement (104,071) --
Realized loss on sale of marketable securities 180 3,168
Write-off of capitalized software -- 2,849
Other non-cash items 405 1,938
Changes in operating assets and liabilities, net of acquisitions and
discontinued operations:
Accounts receivable 9,120 (1,240)
Prepaid distribution expense 20,787 10,869
Other assets (1,614) 4,782
Accounts payable and accrued expenses 33,784 (54,938)
Accrued distribution agreement (22,069) --
Deferred revenue 3,783 (10,679)
Deferred revenue from related parties (6,657) (23,436)
--------- ---------
Net cash used in continuing operating activities (42,657) (97,017)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (9,422) (3,289
Purchases of short-term investments (21,575) --
Maturities of short-term investments -- 14,394
Proceeds from sale of marketable equity securities 1,320 2,250
--------- ---------
Net cash provided by (used in) investing activities (29,677) 13,355
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from payment of stockholders' notes 61 3,463
Proceeds from exercise of stock options, warrants and shares issuances under
employee stock
purchase plan 3,302 800
Repurchases of common stock -- (169)
Transfer from restricted cash -- 243
Settlement of stock issuance obligation -- (521)
--------- ---------
Net cash provided by financing activities 3,363 3,816
--------- ---------
Net cash used in continuing activities (68,971) (79,846)
Net cash provided by discontinued operations 2,450 122,037
--------- ---------
Change in cash and cash equivalents (66,521) 42,191
Cash and cash equivalents, beginning of period 80,463 38,272
--------- ---------
Cash and cash equivalents, end of period $ 13,942 $ 80,463
========= =========
HOMESTORE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
DECEMBER 31, DECEMBER 31,
2003 2002
----------- -----------
ASSETS
Current assets:
Cash and cash equivalents $ 13,942 $ 80,463
Restricted cash -- 90,000
Short-term investments 21,575 --
Accounts receivable, net 14,576 25,945
Current portion of prepaid distribution expense 10,509 21,863
Other current assets 10,585 12,739
----------- -----------
Total current assets 71,187 231,010
Prepaid distribution expense, net of current portion -- 13,150
Property and equipment, net 21,454 25,933
Goodwill, net 20,477 23,258
Intangible assets, net 25,758 72,771
Other assets 14,672 13,086
----------- -----------
Total assets $ 153,548 $ 379,208
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,409 $ 3,419
Accrued expenses 42,576 59,732
Accrued litigation settlement 53,600 --
Accrued distribution obligation 7,406 211,973
Obligation under capital leases 1,535 --
Deferred revenue 31,348 29,625
Deferred revenue from related parties 4,042 7,024
----------- -----------
Total current liabilities 141,916 311,773
Distribution obligation, net of current portion -- 7,500
Obligation under capital leases 369 --
Deferred revenue from related parties 2,869 6,510
Other non-current liabilities 8,066 14,695
----------- -----------
Total liabilities 153,220 340,478
----------- -----------
Stockholders' equity:
Common stock 122 118
Additional paid-in capital 1,992,591 1,990,755
Treasury stock (14,470) (18,567)
Notes receivable from stockholders -- (106)
Deferred stock-based charges (258) (2,246)
Accumulated other comprehensive income (loss) 267 (424)
Accumulated deficit (1,977,924) (1,930,800)
----------- -----------
Total stockholders' equity 328 38,730
----------- -----------
Total liabilities and stockholders' equity $ 153,548 $ 379,208
=========== ===========
HOMESTORE, INC.
SEGMENT OPERATING RESULTS
(in thousands)
(unaudited)
THREE MONTHS ENDED
--------------------------------------------
DECEMBER 31, SEPTEMBER 30, DECEMBER 31,
2003 2003 2002
-------- -------- --------
Revenue:
Media services $ 36,508 $ 35,476 $ 37,915
Software 6,814 7,129 9,966
Print 11,557 12,482 12,943
-------- -------- --------
Total revenue 54,879 55,087 60,824
-------- -------- --------
Operating income (loss)
Media services 5,578 2,350 9,562
Software (865) (670) (2,374)
Print (375) 28 56
Unallocated (16,183) (31,861) (40,752)
-------- -------- --------
Loss from operations $(11,845) $(30,153) $(33,508)
======== ======== ========
HOMESTORE, INC.
SEGMENT REVENUE
(in thousands)
(unaudited)
THREE MONTHS ENDED
----------------------------------------
DECEMBER 31, SEPTEMBER 30, DECEMBER 31,
2003 2003 2002
------- ------- -------
Revenue by Segment
Media - Core $35,185 $34,503 $33,631
Media - Related Party 1,323 973 4,284
------- ------- -------
Total 36,508 34,476 37,915
Software - Core 6,275 6,766 8,835
Software - Related
Party 539 363 1,131
------- ------- -------
Total 6,814 7,129 9,966
Print - Core 11,557 12,482 12,943
------- ------- -------
Total revenue $54,879 $55,087 $60,824
======= ======= =======
ABOUT HOMESTORE
Homestore, Inc. (NASDAQ: HOMS) is the leading provider of real estate media and
technology solutions. The Company operates the number one network of home and
real estate Web sites including flagship site REALTOR.com(R), the official Web
site of the National Association of REALTORS(R); HomeBuilder.com(TM), the
official new homes site of the National Association of Home Builders;
RENTNET(R), an apartments, senior housing, corporate housing and self-storage
resource; and Homestore.com(R), a home information resource. Homestore's print
businesses are Homestore(R) Plans and Publications and Welcome Wagon(R).
Homestore's professional software divisions include Computers for Tracts(TM),
Top Producer(R) Systems and WyldFyre(TM) Technologies. For more information:
http://ir.homestore.com.
REALTOR(R) is a federally registered collective membership mark, which
identifies a real estate professional who is a Member of the NATIONAL
ASSOCIATION OF REALTORS(R) and subscribes to its strict Code of Ethics. All
other registered trademarks or service marks are the property of their
respective holders.
# # #
Contact:
Mollie O'Brien
Director, Investor Relations
Homestore Inc.
805-557-3846
mollie.obrien@homestore.com