In the home stretch of our fourth quarter review, our attention turns toward the beloved MOVE. If you read this blog, you’ll know of my obsession with the company.
Change is afoot for MOVE but not in the way the business is being run. Steve Berkowitz, the former CEO of Ask.com (where he did an admirable job before IAC bought it and ran weird TV ads), is now heading up the firm and Lorna & co. were shown the door unceremoniously a little over a year they arrived to fixed the beleaguered real estate site.
Berkowitz now steps into the hot seat and not a lot is changing. Revenue for the fourth quarter was down 8% year over from, $62.6m to $57.5m, with online display advertising down 24% and new homes advertising understandably falling off a cliff too.
Realtor.com and Top Producer, the crown jewels of the company, declined slightly and lost subscribers. Renewals in both seem to have been particularly hit hard in December and January, though. Laughably, Lew Belote, the firm’s CFO, babbled on about Realtors buying Christmas presents and their Realtor.com ad renewals bouncing as a possible reasoning behind the dip. Ah yeah, sure.
The firm cut $20m in operating costs last year but incredulously the firm’s General and Administrative line item was still 31% of revenue last year. An analyst on the earnings call asked management why the hell the line item was so high. Even when you rationalize the stock compensation costs, legal costs ($7m last year) and office costs you are left wondering why the fuck General and Adminstrative costs are *three* times Product Development costs ($75m vs ~$25m) in 2008.
The analyst backed out the stock compensation costs and came to a figure of 24% of revenue in the fourth quarter and said that compares to 14% for all other Internet companies he covers.
And this is for a business that actually loses money. Perhaps another area for reduction in costs might be the $1.2m in fees the firm paid for former CEO Mike Long’s corporate jet in the last year alone.
I can’t help but think the company will be a valuable one over the longer term with a significant monopoly lead in online real estate and huge barriers to entry (if Trulia or Zillow ever reach Realtor.com in uniques they are still miles away from total pages/minutes of engagement). But Move is doing everything in their power to ensure they give others a chance to overtake them.
The stock is cheap with yesterday’s closing price of $1.39 valuing the firm at $212m. The company has $110m in cash and another $130m in auction rate securities. Net out the $65m loan they have from the bank who sold them the auction rate securities and you have a rough cash position of $175m.
That leaves the business valued at $37m. For a firm that did $242m in revenue last year.
The business is break even at the moment but if they cut G&A in half that would leave $35m in profit. Even that is still pathetic when you compare that to well run, leading real estate portals like realestate.com.au in Australia, Seloger in France and Rightmove in the UK but at least it would be something.
But you have heard all this compelling valuation shit from me before so I will shut up.
Conclusion: Real estate was exposed to the pain much earlier than the overall economy and so the fourth quarter is business as usual for the company of late. Display advertising down 24% is a bad omen for the rest of the market but the fact that Realtor.com and Top Producer are treading water is encouraging. Someone fix this company already!
