Real estate media and technology supplier Homestore, Inc. (HOMS, Trade) today reported its financial results for the quarter and nine months ended September 30, 2002.

Homestore reported third quarter revenue from continuing operations of $63.8 million, down three percent from revenue of $65.9 million for the second quarter of 2002. The decline in revenue of $2.1 million from the second quarter is a result of a change in the Company's sales and fulfillment strategy of virtual tour products and a decline in online advertising revenue from non-recurring contracts. Even with the decline in revenue, the gross profit margin improved to 72 percent in the third quarter compared to 68 percent in the second quarter.

The loss from continuing operations was $(40.4) million, or $(0.34) per share, compared to a loss from continuing operations of $(62.4) million, or $(0.53) per share in the second quarter of 2002. The net loss for the quarter was $(39.8) million, or $(0.34) per share, compared to $(52.3) million or $(0.44) per share for the second quarter of 2002. In the third quarter, the Company recorded a restructuring charge of $10.7 million. In the second quarter, the Company had a $10.2 million gain from the sale of ConsumerInfo.com and a $23.0 million litigation settlement charge. Excluding these non-recurring items, the net loss in the third quarter was $(29.0) million compared to $(39.4) million in the second quarter of 2002.

Non-cash expenses included in operating results, consisting of stock-based charges, depreciation and amortization, were $29.6 million in the third quarter compared to $28.5 million in the second quarter of 2002. Excluding these non-cash expenses and the non-recurring charges outlined above, the Company's income from operations was $0.7 million in the third quarter of 2002 compared to a loss from operations of $(8.4) million in the second quarter of 2002.

The $10.7 million restructuring charge in the third quarter consisted of $3.6 million relating to a reduction in work force and continued cost containment measures during the third quarter, coupled with $7.1 million representing an adjustment to the reserves recorded in previous quarters. The adjustment in reserves is primarily related to unoccupied office space in San Francisco where market lease rates continue to deteriorate.

At September 30, 2002, Homestore had $87.8 million in unrestricted cash and cash equivalents available to fund operations.

"We set out at the beginning of the year to strengthen our balance sheet, stabilize our revenues, and get our expense structure in line with those revenues by the end of the year. We have accomplished these goals a full quarter earlier than our previous expectations," said Mike Long, Homestore's Chief Executive Officer. "We are now in a position to focus on and execute a growth strategy for Homestore. We have adequate resources and intend to make strategic investments in products and services that will enhance the productivity and profitability of our customers."

YEAR OVER YEAR RESULTS

Compared to the year ago results, Homestore's revenue declined 21 percent from revenue of $80.8 million for the third quarter of 2001. The loss from continuing operations was $(40.4) million, or $(0.34) per share compared to a loss of $(137.8) million, or $(1.25) per share for the third quarter 2001. The net loss for the quarter was $(39.8) million, or $(0.34) per share compared to a net loss of $(138.3) million, or $(1.25) per share for the third quarter 2001.

NINE MONTH RESULTS

For the nine months ended September 30, 2002, Homestore's revenue was $203.8 million, down eight percent from revenue of $222.3 million for the same period in 2001. The loss from continuing operations was $(138.4) million, or $(1.17) per share, an improvement of $220.0 million, or $2.26 per share compared to a loss of $(358.4) million, or $(3.43) per share for the first nine months of 2001. The net loss for the nine months was $(126.8) million, or $(1.08) per share compared to a net loss of $(359.0) million, or $(3.44) per share for the same period in 2001.

HOMS TO MOVE TO NASDAQ SMALL CAP MARKET

Homestore also announced today that its application to transfer from The Nasdaq National Market to the Nasdaq SmallCap Market has been approved, effective at the opening of business on November 18, 2002. Homestore's common stock will continue trading under its current symbol: HOMS.

Published: November 15, 2002

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