ZipRealty Inc. today announced a $946,000 net loss for the second quarter, which includes a $4.1 million one-time charge relating to the pending settlement of a threatened class-action lawsuit over employee compensation practices in California.
ZipRealty had earlier announced that there could be possible legal action relating to the company’s practice of requiring a minimum level of productivity from its real estate agents to effectively qualify to receive an expense allowance. And the company had said it believes that any necessary adjustments to its expense-allowance practices would not materially impact future profit margins.
Meanwhile, net revenues were $25.8 million for the second quarter, which is a 58 percent increase from the $16.3 million generated in second-quarter 2004, and the company reported operating expenses of $27.4 million for the quarter.
The agreement to settle the expense allowance litigation “is subject to the execution of a definitive settlement agreement and court approval. Under the final terms of that agreement, the company expects to be released from any further liability related to the issue,” the company announced in a statement today.
The net loss in the second quarter resulted in a loss of $.05 per diluted share, the company reported.
Eric Danziger, CEO of ZipRealty, commented, “We believe our record operating performance in the second quarter is a result of increased market penetration by our growing ZipAgent force, efficient lead management, increasing visibility and strength of our brand and the company’s highly scalable business model. With our busy season in full swing, we believe ZipRealty is well positioned to continue its profitable growth and benefit from further penetration in existing and new markets.”
The company also announced:
- At quarter end, the company employed 1,235 ZipAgents, up from 983 at the end of the first quarter and up 72 percent from 717 at the end of the second quarter of fiscal 2004.
- Total value of real estate transactions closed increased approximately 60 percent to $1.24 billion in the second quarter of 2005 from $770 million in the second quarter of 2004.
- Number of transactions closed during the second quarter of 2005 increased 54 percent to 3,375 versus 2,192 in the second quarter of 2004.
- Average net revenue per transaction increased to $7,475 in the second quarter of 2005, compared to $7,391 in the first quarter of 2005 and $7,255 in the second quarter of 2004.
- The company’s satisfaction rating for overall service was 95 percent during the second quarter of 2005.
ZipRealty is a full-service residential real estate brokerage firm that offers rebates and discounts to consumers. Founded in 1999, the company operates in 14 major metropolitan areas in 10 states and the District of Columbia. The company’s business strategy utilizes a Web site that enables home buyers and sellers to access comprehensive local Multiple Listing Services home listings data and other relevant information. The company also utilizes a proprietary business management technology platform that is designed to reduce costs.
The company launched Las Vegas operations in May, and officially launched operations in Houston in July. Additionally, the company plans to enter the Miami market in the fourth quarter of this year. “We believe its size and market characteristics make it a natural fit for our customer-centric approach,” Danziger said in a statement. “While not having a material influence on our results yet, these exciting new markets represent the next logical step in establishing a truly national brand while further diversifying our revenue base and helping drive future top-line growth.”
As of June 30, 2005, the company had approximately $86.8 million of cash, cash equivalents and short-term investments, and no long-term debt.
Based on current trends, the company expects revenues to be between $97 and $102 million for fiscal 2005. The company expects 2005 net income per diluted shares to range from $0.22 to $0.26. Excluding the one-time charge associated with the lawsuit settlement, the company expects 2005 proforma net income per diluted share to be $0.38 to $0.42, consistent with previous guidance.
Management believes that pro forma net income per diluted share for the year provides useful information for investors because it excludes the impact of a one-time charge and is thus more readily comparable to earlier periods and to previous guidance, according to the earnings announcement. Diluted shares outstanding are expected to average approximately 26.1 million for the year.
For the third quarter of 2005, the company expects revenues to be between $27 million and $29 million. Reported net income per diluted share is expected to be between $0.12 and $0.14.
A conference call to discuss fiscal second-quarter financial results were broadcast live on the Web at about 5 p.m. Eastern Time today on the investor relations section of ZipRealty’s Web site, http://www.ziprealty.com/. A replay of the conference call is available through Aug. 10, 2005 by dialing (888) 203-1112, password 4474175.
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