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MOVE > SEC Filings for MOVE > Form 10-Q on 3-May-2013All Recent SEC Filings

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Form 10-Q for MOVE INC


3-May-2013

Quarterly Report


Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following "Management's Discussion and Analysis of Financial Condition and Results of Operations" is intended to assist the reader in understanding the Company's business and is provided as a supplement to, and should be read in conjunction with, the Company's condensed consolidated financial statements and accompanying notes. The Company's results of operations discussed below are presented in conformity with GAAP.

This Quarterly Report on Form 10-Q and the following "Management's Discussion and Analysis of Financial Condition and Results of Operations" may contain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. This Act provides a "safe harbor" for forward-looking statements to encourage companies to provide prospective information about themselves so long as they identify these statements as forward looking and provide meaningful cautionary statements identifying important factors that could cause actual results to differ from the projected results. All statements other than statements of historical fact that the Company makes in this Form 10-Q are forward looking. Generally, you can identify these statements by use of forward-looking words such as "estimates," "expects," "anticipates," "projects," "plans," "intends," "believes," "might," "will," "should," or the negative of these terms and other comparable terminology, although not all forward-looking statements are so identified. In particular, the statements herein regarding industry prospects and our future consolidated results of operations or financial position are forward-looking statements. Forward-looking statements reflect our current expectations, which are inherently uncertain. Actual results may differ significantly from our expectations. Factors that could cause or contribute to such differences include those discussed below and elsewhere in this Form 10-Q, as well as those discussed in the Annual Report, and in other documents we file with the SEC. This Form 10-Q should be read in conjunction with the Annual Report, including the factors described under the caption Part 1, Item 1A, "Risk Factors" within the Annual Report.

Our Business

Move, Inc. and its subsidiaries ("Move," "we," "our" or "us" ) operate an online network of web sites for real estate search, finance, moving and home enthusiasts and provide a comprehensive resource for consumers seeking the online information and connections they need regarding real estate. Our consumer web sites are realtor.comŽ, Move.com and Moving.comTM. We also provide lead management software and marketing services for real estate agents and brokers through our Top ProducerŽ and TigerLeadŽ businesses. Through our ListHubTM business, we are also an online real estate listing syndicator and provider of advanced performance reporting solutions for the purpose of helping to drive an effective online advertising program for brokers, real estate franchises, and individual agents.

With realtor.comŽ as our flagship web site and brand, we are the leading real estate information marketplace connecting consumers with the information and the expertise they need to make informed home buying, selling, financing and renting decisions. Move's purpose is to help people love where they live. To that end we strive to create the leading marketplace for real estate information and services by connecting people at every stage of the real estate cycle with the content, tools and professional expertise they need to find a perfect home.

Through the collection of assets we have developed over nearly 20 years in this business, Move is positioned to address the needs and wants of both consumers and real estate professionals throughout the process of home ownership. Although the real estate marketplace has been unquestionably changed by the Internet, and likely will continue to evolve through the growth of mobile devices and social networking, our business continues to be about empowering consumers with timely and reliable information and connecting them to the real estate professionals who have the expertise to help them better understand and succeed in that marketplace.


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We provide consumers with a powerful combination of breadth, depth and accuracy of information about homes for sale, new construction, homes for rent, multi-family rental properties, senior living communities, home financing, home improvement and moving resources. Through realtor.comŽ, consumers have access to over 100 million properties across the U.S. as well as properties for sale from another 32 countries worldwide. Our for-sale listing content, comprising over 4 million properties as of March 31, 2013, and accessible in 11 different languages, represents the most comprehensive, accurate and up-to-date collection of its kind, online or offline. Through realtor.comŽ and our mobile applications, we display approximately 98% of all for-sale properties listed in the U.S. We source this content directly from our relationships with more than 800 MLSs across the country, which represents nearly all MLSs, with approximately 90% of the listings updated every 15 minutes and the remaining listings updated daily.

Realtor.comŽ's substantial content advantage has earned us trust with both consumers and real estate professionals. We attract a highly engaged consumer audience and have developed an exceptionally large number of relationships with real estate professionals across the country. More than 23 million users, viewing an average of over 390 million pages and spending an average of nearly 325 million minutes on the realtor.comŽ web site each month over the last twelve-month period, interact with over 400,000 real estate professionals on realtor.comŽ and our mobile applications. We delivered approximately 50% more connections between our consumers and real estate professionals during the twelve months ended March 31, 2013, as compared to the prior year. This illustrates the success of our continued commitment to not only deliver valuable information to consumers, but more importantly, to connect them with real estate professionals who can provide the local expertise consumers want when making home-related decisions.

In addition to providing an industry-leading content mix, Move facilitates connections and transactions between consumers and real estate professionals. Although attracting and engaging a large consumer audience is an important part of our business, to succeed we must also focus on winning the hearts and minds of real estate professionals, who are both customers of our business and suppliers of much of our property content. We believe this starts with our commitment to respecting the listing and content rights of the real estate agents, brokers, MLSs and others who work hard to help generate these important data resources. Through realtor.comŽ and ListHubTM, we aggregate, syndicate and display real estate listings across the web and on mobile applications. Part of the reason we have become the leading source for real estate listing content is that we work closely with, and respect the rights of, real estate professionals while still maintaining a balance that allows consumers to obtain the information and expertise they expect and need.

At the same time, we are committed to delivering valuable connections, advertising systems and productivity and lead management tools to real estate professionals, with the goal of helping to make them more successful. By combining realtor.comŽ advertising systems with the productivity and lead management tools offered through our Top ProducerŽ and TigerLeadŽ SaaS CRM products, we are able to help grow and enrich connections between our customers and consumers, and to help our customers better manage those connections in an effort to facilitate transactions and grow their business.

Our dual focus on both the consumer and the real estate professional has helped us create and maintain realtor.comŽ as a distinct advantage in the online real estate space. For nearly 20 years, we have provided consumers with access to a highly accurate and comprehensive set of real estate listing data and, as a result, have built relationships within the real estate industry that are both broad and deep. We expect this industry to continue to progress as new technologies are embraced and as consumers' needs and wants evolve. We also expect that real estate professionals, to stay relevant, will likewise need to evolve along with technology, consumers and the market. We aim to keep realtor.comŽ positioned to lead this transformation with consumers and real estate professionals at the forefront, and expect to leverage our collection of advertising systems, productivity tools and other assets to do so.

Products and Services

Our products and services are broadly defined into two audience-driven groups:
Consumer Advertising and Software and Services.

Consumer Advertising

Our Consumer Advertising products are focused on providing real estate consumers with the information, tools and professional expertise they need to make informed home buying, selling, financing and renting decisions through our operation of realtor.comŽ and other consumer-facing web sites.

Through our realtor.comŽ web site, mobile applications and business operations, we offer a number of services to real estate franchises, brokers and agents, as well as non-real estate related advertisers, in an effort to connect those advertisers with our consumer audience. We categorize the products and services available through realtor.comŽ as listing advertisements and non-listing advertisements. Listing advertisements are typically sold on a subscription basis. Pricing models for non-listing advertisements include CPM, CPC, cost-per-unique user and subscription-based sponsorships of specific content areas or specific targeted geographies.


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We separately operate several other web sites providing multi-family rental, senior housing and moving-related content and services to our consumer audience. Through our Rentals and Senior Housing businesses, we aggregate and display rental listings nationwide. We offer a variety of listing-related advertisements that allow rental property owners and managers to promote their listings and connect with consumers through our web sites. Pricing models include monthly subscriptions and CPC. Through our Moving.comTM business we provide consumers with quotes from moving companies and truck rental companies. The majority of revenue from Moving.comTM is derived from cost-per-lead pricing models.

Our Consumer Advertising products represented approximately 78% and 83% of our overall revenues for the three months ended March 31, 2013 and 2012, respectively.

Software and Services

Our Software and Services products are committed to delivering valuable connections to real estate professionals by providing them with advertising systems, productivity and lead management tools, and reporting with the goal of helping to make them more successful.

Top ProducerŽ and TigerLeadŽ are our SaaS businesses providing productivity and lead management tools tailored to real estate agents. These businesses complement realtor.comŽ and our mission of connecting consumers and real estate professionals to facilitate transactions by empowering real estate professionals' ability to connect with, cultivate and ultimately convert their relationships with homebuyers and sellers into transactions. Our Top ProducerŽ product offerings include a web- and mobile-based CRM solution, our Market SnapshotŽ product and a series of template web site products. The TigerLeadŽ SaaS CRM product provides real estate agents and brokers with a sophisticated IDX web site platform to capture and manage leads that are delivered with unique insights such as how many times a user has returned to the site to search particular listings and price ranges.

Additionally, through our TigerLeadŽ business, we are able to provide expertise in real estate search engine marketing through sophisticated key word buying and a platform and model that grades each lead source and lead in order to deliver high quality intelligent leads to the agent or broker.

ListHubTM syndicates for-sale listing information from MLSs or other reliable data sources, such as real estate brokerages, and distributes that content to an array of online web sites. Our ListHubTM product line allows participating web sites to display real property listings, and provides agents, brokers, franchises and MLSs the ability to obtain advanced performance reporting about their listings on the participating web sites. Listing syndication pricing includes fixed- or variable-pricing models based on listing counts. Advanced reporting products are sold on a monthly subscription basis.

Our Software and Services products represented approximately 22% and 17% of our overall revenues for the three months ended March 31, 2013 and 2012, respectively.

Market and Economic Conditions

In recent years, our business has been, and we expect may continue to be, influenced by a number of macroeconomic, industry-wide and product-specific trends and conditions. For a number of years prior to 2006, the U.S. residential real estate market experienced a period of hyper-sales rates and home price appreciation, fueled by the availability of low interest rates and flexible mortgage options for many consumers. During the latter half of 2006 and through 2008, lending standards were tightened, equity markets declined substantially, liquidity in general was impacted, unemployment rates rose and consumer spending declined. The combination of these factors materially impacted the U.S. housing market in the form of fewer home sales, lower home prices and accelerating delinquencies and foreclosures, all of which created a cycle that further exacerbated the housing market downturn.

The effects of this downturn on the housing market have persisted for several years but key market indicators suggest that large parts of the housing market may have bottomed out and have entered a recovery mode. During the first quarter of 2013, the U.S. saw a 20% reduction in the median age of inventory, as well as a year-over-year reduction in inventory of approximately 16%. National median list prices increased 2% year-over-year for the first quarter of 2013 compared to the first quarter of 2012.

Mortgage delinquency rates continued to decline in 2013. However, banks continue to have tighter credit standards for mortgage loans, which have made home purchases more difficult. Unemployment rates have declined in 2013; however, job and wage growth is still tepid and may be impacted by recent and impending changes in fiscal policy. Therefore, we believe that market conditions could continue to impact spending by real estate professionals in the near term.


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Critical Accounting Policies

Our discussion and analysis of our financial condition and results of operations is based upon our unaudited Condensed Consolidated Financial Statements, which have been prepared in accordance with GAAP. The preparation of these unaudited Condensed Consolidated Financial Statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to revenue recognition, uncollectible receivables, valuation of investments, intangible and other long-lived assets, stock-based compensation and contingencies. Our estimates are based upon historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. There were no significant changes to our critical accounting policies during the three months ended March 31, 2013, as compared to those policies disclosed in the Annual Report.

Legal Contingencies

We are currently involved in certain legal proceedings, as discussed within the section "Legal Proceedings" in Note 22, "Commitments and Contingencies," within our Consolidated Financial Statements contained in Item 8 in the Annual Report, and in Note 15, "Commitments and Contingencies," to our unaudited Condensed Consolidated Financial Statements contained within Part I, Item 1 of this Quarterly Report on Form 10-Q. Because of the uncertainties related to both the amount and range of potential liability in connection with legal proceedings, we are unable to make a reasonable estimate of the liability that could result from unfavorable outcomes in our remaining pending litigation. As additional information becomes available, we will assess the potential liability related to our pending litigation and determine whether reasonable estimates of the liability can be made. Unfavorable outcomes, or significant estimates of our potential liability, could materially impact our results of operations and financial position.


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Results of Operations



Three Months Ended March 31, 2013 and 2012



The following tables present our results of operations for the three months
ended March 31, 2013 and 2012, and as a percentage of total revenue:



                                                                 Three Months Ended March 31,
                                                                   2013               2012
                                                                        (In thousands)
Consolidated Statement of Operations Data:
Revenue
Consumer advertising                                          $        42,148    $        39,445
Software and services                                                  12,090              8,296
Total revenue                                                          54,238             47,741
Cost of revenue                                                        12,688              9,645
Gross profit                                                           41,550             38,096
Operating expenses:
Sales and marketing                                                    19,843             17,412
Product and web site development                                        9,846              8,714
General and administrative                                             11,538             10,888
Amortization of intangible assets                                         999                397
Total operating expenses                                               42,226             37,411

Operating (loss) income                                                  (676 )              685

Interest (expense) income, net                                            (14 )                1
Earnings of unconsolidated joint venture                                  602                199
Other expense, net                                                        (27 )              (52 )

(Loss) income before income taxes                                        (115 )              833
Income tax (benefit) expense                                              (15 )               25
Net (loss) income                                                        (100 )              808
Convertible preferred stock dividend and related accretion                  -               (918 )
Net loss applicable to common stockholders                    $          (100 )  $          (110 )


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                                                                Three Months Ended March 31,
                                                                  2013               2012
As a Percentage of Revenue:
Revenue
Consumer advertising                                                     78 %               83 %
Software and services                                                    22 %               17 %
Total revenue                                                           100 %              100 %
Cost of revenue                                                          23 %               20 %
Gross profit                                                             77 %               80 %
Operating expenses:
Sales and marketing                                                      37 %               37 %
Product and web site development                                         18 %               18 %
General and administrative                                               21 %               23 %
Amortization of intangible assets                                         2 %                1 %
Total operating expenses                                                 78 %               79 %

Operating (loss) income                                                  -1 %                1 %

Interest (expense) income, net                                            0 %                0 %
Earnings of unconsolidated joint venture                                  1 %                1 %
Other expense, net                                                        0 %                0 %

(Loss) income before income taxes                                         0 %                2 %
Income tax (benefit) expense                                              0 %                0 %
Net (loss) income                                                         0 %                2 %
Convertible preferred stock dividend and related accretion                0 %               -2 %
Net loss applicable to common stockholders                                0 %                0 %

Revenue

Revenue increased $6.5 million, or 14%, to $54.2 million for the three months ended March 31, 2013, compared to $47.7 million for the three months ended March 31, 2012.

Revenue attributable to our Consumer Advertising products increased $2.7 million, or 7%, to $42.1 million for the three months ended March 31, 2013, compared to $39.4 million for the three months ended March 31, 2012. The increase in revenue was primarily due to increases in listing advertisements in our realtor.comŽ business and our Co-BrokeTM product, along with increases from our Relocation.com acquisition, partially offset by revenue decreases from our featured products (i.e. Featured Homes, Featured Area Community and Buyer Assist).

Revenue for our Software and Services products increased $3.8 million, or 46%, to $12.1 million for the three months ended March 31, 2013, compared to $8.3 million for the three months ended March 31, 2012. The increase in revenue was primarily due to new SaaS product and marketing services revenue associated with our TigerLeadŽ acquisition, as well as increased publishing revenue in our ListHubTM business, partially offset by a decline in revenues from our Top ProducerŽ product suite.

Cost of Revenue

Cost of revenue increased $3.0 million, or 32%, to $12.7 million for the three months ended March 31, 2013, compared to $9.6 million for the three months ended March 31, 2012. The increase was primarily due to a $2.5 million increase in lead acquisition costs related to our newer TigerLeadŽ and Relocation.com businesses. In addition, there was a $0.2 million increase in consulting expense, a $0.2 million increase in personnel-related costs and $0.1 million in other cost increases.

Gross margin percentage was 77% for the three months ended March 31, 2013, compared to 80% for the three months ended March 31, 2012 primarily due to the lower margins associated with the newer TigerLeadŽ and Relocation.com businesses.

Operating Expenses

Sales and marketing. Sales and marketing expenses increased $2.4 million, or 14%, to $19.8 million for the three months ended March 31, 2013, compared to $17.4 million for the three months ended March 31, 2012, primarily due to the increased investment in our marketing department and the rebranding of realtor.comŽ during the quarter. This increase was mainly due to increases in personnel-related costs of $1.7 million, a $0.6 million increase in brand and consumer marketing expense and other cost increases of $0.1 million.


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Product and web site development. Product and web site development expenses increased $1.1 million, or 13%, to $9.8 million for the three months ended March 31, 2013, compared to $8.7 million for the three months ended March 31, 2012. The increase was primarily due to increases in consulting and personnel-related costs as we continue to invest in new product initiatives.

General and administrative. General and administrative expenses increased $0.7 million, or 6%, to $11.5 million for the three months ended March 31, 2013, compared to $10.9 million for the three months ended March 31, 2012. The increase was primarily due to increases in personnel-related costs of $1.2 million, including a $0.6 million increase in stock-based compensation, and a $0.2 million increase in rent expense related to the relocation of our corporate office in San Jose, California. These increases were partially offset by a $0.4 million decrease in litigation-related charges that occurred in the three months ended March 31, 2012 and a $0.3 million decrease in bad debt expense primarily due to a significant media customer filing bankruptcy during the three months ended March 31, 2012.

Amortization of intangible assets. Amortization of intangible assets increased $0.6 million to $1.0 million for the three months ended March 31, 2013, compared to $0.4 million for the three months ended March 31, 2012. This increase was due to the amortization of intangible assets that were newly acquired in the year ended December 31, 2012.

Stock-based compensation and charges. The following chart summarizes the stock-based compensation and charges that have been included in the following captions for each of the periods presented (in thousands):

                                               Three Months Ended
                                                   March 31,
                                                2013         2012
Cost of revenue                              $      102    $     54
Sales and marketing                                 511         289
Product and web site development                    580         359
General and administrative                        1,430         761
Total stock-based compensation and charges   $    2,623    $  1,463

Stock-based compensation and charges increased $1.2 million for the three months ended March 31, 2013, compared to the three months ended March 31, 2012, primarily due to grants of restricted stock units to TigerLeadŽ senior management pursuant to their employment agreements in connection with the acquisition in September 2012, as well as additional grants of time-based restricted stock units to key employees.

Interest (Expense) Income, Net

Interest (expense) income, net remained relatively constant for the three months ended March 31, 2013 and 2012.

Other Expense, Net

Other expense, net remained relatively constant for the three months ended . . .

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