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Move Inc. Reports Operating Results (10-Q)

November 09, 2009 | About:
gurufocus

10qk

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Move Inc. (MOVE) filed Quarterly Report for the period ended 2009-09-30.

Homestore Inc. is a leading destination on the Internet for real estate information, advertising products and services. The family of web sites, consisting of homestore.com, REALTOR.com, HomeBuilder.com, SpringStreet.com and CommercialSource.com provides the most comprehensive source of real estate listings and content on the Internet. Through the family of web sites, they provide a wide variety of information and tools for consumers, real estate industry professionals, advertisers and providers of real estate related products and services. Move Inc. has a market cap of $261 million; its shares were traded at around $1.69 with and P/S ratio of 1.1.

Highlight of Business Operations:

As part of the sale in 2002 of the Companys ConsumerInfo division to Experian Holdings, Inc. (Experian), $10.0 million of the purchase price was put in escrow to secure the Companys indemnification obligations (the Indemnity Escrow). Under the terms of the stock purchase agreement, the Companys maximum potential liability for claims by Experian was capped at $29.3 million less the balance in the Indemnity Escrow, which amount was approximately $8.5 million. During 2008, Experian demanded $29.3 million in indemnity payments. The Company denied liability for that sum and a bifurcated arbitration proceeding ensued to resolve the dispute. Subsequent to the completion of the first phase of the arbitration proceedings, on April 20, 2009, the parties settled the dispute and entered into a full release of all claims under which Experian received $7.4 million from the Indemnity Escrow and the Company received the balance of the escrow of $1.1 million, which is included in gain on disposition of discontinued operations for the nine months ended September 30, 2009.

Cost of revenue increased $0.2 million, or 2%, to $12.0 million for the three months ended September 30, 2009, compared to $11.8 million for the three months ended September 30, 2008. The increase was primarily due to higher software and hardware maintenance costs of $0.3 million, increased costs of $0.3 million associated with development services to NAR and increased product fulfillment costs of $0.2 million resulting from improvements made to the featured product lines, partially offset by a $0.6 million decrease in personnel related costs.

Sales and marketing. Sales and marketing expenses decreased $5.2 million, or 22%, to $18.8 million for the three months ended September 30, 2009, compared to $24.0 million for the three months ended September 30, 2008. The decrease was primarily due to a decrease in online distribution costs of $3.6 million, a decrease in personnel related costs of $0.9 million, a decrease in on-line and other marketing costs of $0.5 million and other cost decreases of $0.2 million.

Product and web site development. Product and web site development expenses increased $0.8 million, or 12%, to $7.6 million for the three months ended September 30, 2009, compared to $6.8 million for the three months ended September 30, 2008. The increase was primarily due to increased personnel related costs of $0.7 million and increased consulting cost of $0.2 million partially offset by other cost reductions of $0.1 million.

General and administrative. General and administrative expenses decreased $2.4 million, or 13%, to $16.2 million for the three months ended September 30, 2009, compared to $18.6 million for the three months ended September 30, 2008. The decrease was primarily due to a decrease in legal costs of $1.4 million, a $0.5 million decrease in depreciation expense and a $0.5 million decrease in rent expense.

General and administrative. General and administrative expenses decreased approximately $10.5 million, or 17%, to $51.2 million for the nine months ended September 30, 2009, compared to $61.8 million for the nine months ended September 30, 2008. The decrease was primarily due to a $6.0 million decrease in personnel related expenses, excluding non-cash stock-based compensation, primarily due to our restructuring efforts. Additionally, there was a $3.9 million decrease in legal fees, a $1.4 million decrease in rent expense due to our restructuring efforts, a $1.3 million decrease in depreciation expense, a $0.9 million decrease in outside consulting costs, a $0.3 million decrease in recruiting costs, a $0.3 million decrease in hardware and software costs, and other cost decreases of $0.9 million. These decreases were partially offset by an increase in non-cash stock based compensation of $4.5 million primarily due to the acceleration and modification of options upon the termination of executive officers and restricted stock awards and options granted to the new Chief Executive Officer that were immediately vested.

Read the The complete ReportMOVE is in the portfolios of Ron Baron of Baron Funds.

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