- ZipRealty, Inc. Announces Third Quarter Results

Business Wire, Dec 4, 2006

EMERVILLE, Calif. -- Explanatory Note: This is a corrected version of the press release issued on November 8, 2006 to remedy the disclosure of pro forma non-cash income taxes and resulting pro forma earnings and pro forma earnings per basic share and per diluted share for the three months and the nine months ended September 30, 2006. This correction contains no other changes and does not update the original release for any developments subsequent to November 8, 2006. For each period, the Company reported pro forma earnings per diluted share of $0.07 rather than the actual result of $0.06. The GAAP financial statements attached to the release did not change as a result of this correction. The information was accurately disclosed in the Company's Form 10-Q filed on November 9, 2006.

ZipRealty, Inc. (Nasdaq: ZIPR) today announced financial results for its third quarter ended September 30, 2006. For the quarter, net revenues were $26.2 million, a 7.3% decrease from the $28.2 million reported in the third quarter of 2005. The Company's net income for the period was $0.6 million, or $0.03 per diluted share compared to net income of $2.9 million or $0.11 per diluted share in the year ago period. On a pro forma basis, earnings per diluted share was $0.06 versus earnings of $0.11 per diluted share in the year ago period.

Richard Sommer, CEO of ZipRealty, commented, "We are pleased with our third quarter results, which exceeded expectations, particularly in the context of continued challenging market conditions in the residential real estate sector. New markets performed well during the period, and we continued to enjoy efficiencies in our customer acquisition efforts."

Sommer continued, "Having been in the CEO role for slightly more than two months, I can say with confidence that ZipRealty is ideally positioned to succeed in the residential real estate industry. Not only do we have a business model capable of true scale, but our opportunity to win share in the $60 billion dollar residential market is significant. Fortunately, we are fully financed to execute this plan, and although it will take some evaluation and investment, I am confident in the final outcome. Ultimately, by exceeding our client's expectations with each and every transaction, we will materially strengthen our brand, and foster long-term agent and customer loyalty. This, in turn, should accelerate our national success."

Gary Beasley, President and Chief Financial Officer, added, "We are currently evaluating our overall market expansion strategy for 2007, but at this time are pleased to announce plans to launch operations in Naples, Florida and Tucson, Arizona during the first quarter. These are both attractive markets, in states where we currently operate. Therefore, we expect a relatively simple launch process, and financial returns consistent with other recently opened new markets."

ZipRealty announced the following operating metrics for the third quarter of fiscal 2006:

* At September 30, 2006, 1,747 ZipAgents were employed, up from 1,669 at the end of the second quarter of fiscal 2006 and 1,383 at the end of the third quarter of fiscal 2005.

* Total value of real estate transactions closed decreased approximately 11.8% to $1.20 billion from $1.36 billion in the third quarter of 2005.

* Number of transactions closed decreased 6.0% to 3,467 from 3,689 during the same period last year.

* Average net revenue per transaction was $7,332, representing a 0.6% decrease from $7,375 in the second quarter of 2006, and a 1.9% decrease from $7,475 in the third quarter of 2005.

Balance Sheet & Liquidity

As of September 30, 2006, the Company had approximately $88.4 million of cash, cash equivalents and short-term investments, representing approximately $3.76 per diluted share, with no long-term debt.

Financial Guidance

Based upon current visibility into the fourth quarter, the Company expects full year 2006 revenues to range between $90 and $92.5 million. At this revenue level, reported net loss per share for the full year is expected to be between $0.15 and $0.20 with a corresponding pro forma loss per share range of approximately $0.10 to $0.15. Implicit in this guidance is an estimated fourth quarter revenue range of $18 to $20 million, reported net loss per share of $0.13 to $0.18, and a proforma loss per share of $0.17 to $0.22.

During the fourth quarter of fiscal 2005, the Company reversed its valuation allowance on deferred tax assets. Subsequent to this reversal, and the Company's adoption of FAS123(R) effective the first quarter of 2006, the Company currently estimates an effective 2006 income tax rate of approximately 32% will be recorded for book purposes. ZipRealty does not expect to pay material cash taxes until it exhausts its federal and state net operating loss carryforwards.

Use of Non-GAAP Financial Measures

To supplement its financial statements presented in accordance with GAAP, ZipRealty uses a non-GAAP measure of net income (loss) it refers to as "pro forma earnings" that excludes certain items including stock-based compensation charges, non-cash income taxes and one-time items such as the litigation settlement expense incurred in 2005. 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 ZipRealty's current financial performance and its prospects for the future. ZipRealty believes these non-GAAP results provide useful information to both management and investors by excluding certain items it believes are not indicative of its core operating results and thus presents 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.