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Move, Inc. (NASDAQ:MOVE)

Q2 2014 Results Earnings Conference Call

July 29, 2014 04:30 PM ET

Executives

Jessica Thorsheim - Director of Investor Relations

Steve Berkowitz - Chief Executive Officer

Rachel Glaser - Chief Financial Officer

Analysts

Jason Helfstein - Oppenheimer & Company

Mitch Bartlett - Craig Hallum

James Cakmak - Telsey Advisory Group

Ian Corydon - B. Riley & Company

John Campbell - Stephens, Inc.

Dan Kurnos - The Benchmark Company

Operator

Jessica Thorsheim

….. A copy of our news release issued earlier this afternoon is also available on the company’s IR website.

Please be advised that some of the comments that will be made today constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act, that involve potential risks and uncertainties concerning Move’s expected financial performance as well as Move’s strategic and operational plans.

These potential risks and uncertainties include among others, decreases or delays in advertising spending, market acceptance of new products and services, and our future expected financial results.

Additional factors are discussed in the company’s annual and quarterly reports, which are filed with the SEC and are available on our website. All information discussed on this call is as of July 29, 2014, and Move undertakes no duty to update this information. Results projected on the call today may differ materially from actual results and should not be considered as a guarantee of future performance.

On the call today, we will also be discussing non-GAAP financial measures and talking about the company’s performance. Reconciliations of those measures to GAAP measures can be found on tables attached to today’s press release.

I’d now like to turn the call over to Steve Berkowitz.

Steve Berkowitz

Thank you, Jessica. And thank you all for joining our Q2 2014 earnings call today. As they say, the more things change, the more they stay the same.

Move has been a leading player in the online real estate since the beginning. And we will continue to be drivers of the innovation for both consumer and the real estate industry as a whole. The first six months of this year have been no difference with non-stop action marked by changes and accomplishments that have been good for the company.

This quarter we introduced significant changes to our Connection for Co-Brokerage business model and launched it to our customers in July with great success. We reorganized our industry platforms team assembling the greatest bench of industry talent this company has ever had. And last but not least, the latest transactions news placed $3.5 billion valuation on the company of comparable size and we like the comp.

We’ve seen much more -- we see much more opportunities and risk created by the merger of two of our competitors. As I will talk about our quarter and year ahead, I will highlight our unique position in the industry and the opportunity created by the changing landscape.

Undaunted by the tasks at hands, our team is highly motivated to win. As evidence of that, Q2 was another strong quarter for us. This marked the ninth straight quarter of year-over-year revenue growth -- year-over-year revenue growth fueled by a healthy real estate market and growing consumer audience.

Unique users grew another 18% this quarter for realtor.com and were continuing to see healthy growth and leaps to our broker and agent customers, particularly from exceptional engagement across all of our platforms.

On today’s call, I will first discuss our ongoing relationship with the industry and the National Association of Realtors. Next, I will share key Q2 highlights. And lastly, I will highlight our plans for the rest of the year.

One of the highlight of Q2 was our ever strengthening relationship with the National Association of Realtors and with brokers, franchises and MLSes that comprise its member base. We were delighted to participate in the NAR’s mid-year conference in May with 16 speaking engagements that attracted more than 7500 key industry participants.

Our theme centered around on the value of the real estate professional at every transaction for reasons, accuracy and credibility are imperative to creating positive consumer experiences and by the realtor brand which we share with the industry truly does convey what is real in real estate.

My favorite moment came when I was up at the opening of the event and presented our new marketing campaign to over 3500 people in the room and watched their reaction and heard their applause. On our last call, we discussed the announcement by the NAR to invest in a brand marketing campaign that promotes realtors and realtor.com.

On July 17th, this campaign hit the television airwaves joining their radio placements that were life already. The NAR television campaign blend seamlessly with our accuracy matters campaign and we’re pleased that now we’re achieving double to reach in frequency with this combined effort.

We are working together with the industry to define what accuracy means and why accuracy matters. Accuracy goes well beyond just the presence of a listing. The speed with which the listing goes up, the profit from taking it down, timely revisions for listing price and only taking information from credible sources, all contribute to probably preparing a consumer with the accurate information they need to work with the realtor.

The only portal out there that can say we offer accuracy to and for the industry. And the fact that our data is MLS connected with broker support means it’s authentic, unaltered and validated by various professionals, endowed with tremendous amount of trust in that professional when the time comes for the consumer to make a professional connection.

ListHub is similarly MLS connected, accessing data from over 500 data sources or 70% of the listing coverage in the country with a high level of accuracy. The ListHub platform provides the industry an infrastructure for data analytics, performance management and marketing services. When you consider there are approximately 100,000 U.S. brokers, more than 800 MLSes and nearly 2 million for sale home listings at any point in time, the value and data control ListHub brings to industry is extremely significant.

Industry alignment is a critical component of who we are and how we succeed. That alignment is achieved by providing a platform to the industry that improves the efficiency and effectiveness of every piece of the value chain. At our Analyst and Investor Day in May, we shared some of the future vision and strategy for our industry platform and in the past quarter, we’ve also made a few key investments in building the industry platforms team.

First, Luke Glass, General Manager of ListHub has been promoted to Executive Vice President of Industry Platform. Celeste Starchild, previously head of sales for ListHub steps us as its General Manager. In addition, 25-year industry veteran, Russ Cofano joined Move’s team as Senior Vice President of Industry Relation to develop strategic strategies that further opened communication with the industry. And Jonathan Smoke joined the industry team as the Realtor.com’s first Chief Economist.

Jonathan, a 20-year real estate veteran and highly respected housing trends expert, will be the company’s Chief Spokesperson about housing trends and policies. Jonathan will help drive awareness of the realtor.com brand as the most trusted national source of housing data and market insights. The evolution of our industry platform strategy and the team itself were one of the many positive achievements in Q2.

Now let me turn to the overall results and a few more Q2 highlights. Revenue in second quarter was $61.3 million which we estimated, could have been closer to $62 million, had it not been for DDoS attack. Q2 adjusted EBITDA was $3.1 million which we estimated, could have been closer to $4 million without the impact of the DDoS attack.

Rachel will talk about our financial results in more detail and provide some color on some of our planned and unplanned events that impacted our quarter. There are four themes for Q2 that merit discussion. One, our sustained and steady audience growth through new content offering in the success of our accuracy matters marketing campaign; two, continued product innovation and progress on our website enhancement; third, inherent value of our software suite; and lastly, the ListHub platform and its benefit to the industry ecosystem.

Starting with our audience growth, on May 12th, we launched the second phase of our national brand marketing campaign accuracy matters. We are very pleased with this performance so far which demonstrates the material list in our website traffic and mobile application downloads.

In the second quarter, we attracted roughly 31 million unique users on realtor.com, an 80% jump year-over-year. The realtor.com brand campaign has aired for 21 weeks now and is one obvious driver of increasing consumer traffic. Our mobile app downloads have increased dramatically with ListHub nearly 70% versus last year.

Updated research shows our aided brand awareness increased more than 12% since the campaign starts. These large increase in audience have not diluted the quality of our very transaction ready audience. We see that approximately 90% of homes viewed continue to be for sale properties. Other measures of quality is evidenced by the activity this audience engages in. Leads continue to increase year-over-year at all platforms. These are serious homebuyers intent on connecting with real estate professionals.

Consumers relying on mobile devices for home search continue to be a major part of the story with mobile listing detailed page views now nearly 60% of all page views and engagement that is 8 times more than desktop users.

Improving consumer awareness through brand marketing is one way in which we’ve grown our audience. We also continue to work intensely to grow our audience through content additions in the for-sale real estate space as well as rentals, home improvement, financing and lending on the web and through mobile apps.

Let me give you two good examples. Our rentals listing content has increased 77% year-over-year and 11% over last quarter. Listings growth fueled audience growth to 62% year-over-year and 9% quarter-over-quarter and audience growth in turn, there is a number of quality leads. Lead growth is up 124% year-over-year and we are in early stages of expanding this segment and also continue to be positive.

A second example, we are beginning to tap into the category of homeowners. In our partnership with Porsche, we offer consumers a tool that provides home and neighborhoods reports complete with home improvement project history, the cost and details of remodel, background information for professional who previously worked on home and other information.

A second Q2 theme I want to highlight is product innovation and website enhancements to improve consumer experience and audience engagement. A few weeks ago, we received from industry publication, Inman, the award for the Most Innovative Real Estate Application for our agent discovery data. While the pilot add-in, we are pleased to be recognized for innovation and we observed and learned a lot from the pilot and we have been hard at work developing an innovative product to help individuals discover the perfect realtor to meet his or her needs.

Inman also awarded Move the most innovative use of new technology for our Realtor.com powered Doorstep slight mobile app, which is one of the most creative apps. It is one of the most creative ways we use our assets to deliver new tools to consumers. If you have an iPhone and haven’t downloaded the app yet, I highly encourage you to do so. It’s fun and somewhat addictive.

In addition, the Houston Association of REALTORS won Inman’s award for Most Innovative MLS Service because it was the first to adopt the top MLS real estate network and now offers statewide listing for Texas.

The third area to highlight in Q2 was our software and services suite. While leads in the last year grew significantly, annual home transaction still hovered at about 5 million. It is the simple fact that with the massive growth in leads against the backdrop of relatively flat transaction volume, the conversion of rates on leads is declining. This fact underscores the importance of our software and services offering, which are designed to help agents and brokers identify the highest quality leads as efficiently as possible and stay connected with consumers until they close the transaction.

Ideally our software also helps the real estate professionals stay in touch with the consumer for all future residential transactions they need. This is exactly what our software suite including Top Producer, FiveStreet, TigerLead and Market Snapshot is designed to accomplish. In an integrated go-to-market approach, we have combined Top Producer and FiveStreet with great success. Subscriptions continue to decline and we are getting rare reviews from these customers. In addition, Top Producer’s follow-up coach and quick response for mobile enable customers to better manage client follow-up on the go and in turn their downtime into opportunities to quickly connect and strengthen client relationships.

The addition of industry leading followers to our Market Snapshot product complement the listing alert feature and now aligns with every stage of a prospect sign and selling cycle. Market Snapshot is an outstanding product that has growing adoption amongst many of the largest brokers. The fourth area to note in this quarter is ListHub, the center piece of our industry platform. So far this year, we have added over 40 new MLSs. In the quarter, we averaged it over 800 new broker accounts each month and during the quarter we also delivered an average of more than 150,000 ListHub online marketing reports to sellers each month.

One last Q2 event and I want to spend a couple of minutes on, as many of you already know, on June 18, our website was a target of malicious distributed denial service of attack which directed massive amounts of traffic to our websites. Unfortunately, these types of attacks are becoming common for online businesses. They attack made realtor.com top producer systems and move websites intermittently and accessible.

We estimated that our actual June users would have been 3% to 4% higher in the month if not for the attack. Our internal systems were not comprised and no consumer customer information was jeopardized. Since the attack, we’ve greatly increased our website’s DDoS protection.

At the beginning of the year, we set out three very clear goals for 2014, one, grow our consumer audience, two, enhance and integrate our product suite that harness the competitive advantages of our real estate platform, and three, nourish and expand our relationships with the real estate industry collaborating with the NAR and focus on raising ROI for brokers, agents, and industry partnerships.

Our focus on this combination has shown the industry the important role Move plays in their success. Let’s touch on each goal briefly. First, to continue to grow our consumer audience, we are laser focused on providing absolutely the best content in the for-sale real estate space. Our Accuracy Matters campaign has real traction now, and through that effort we are becoming known and differentiated to consumers as the go to site for reliable and credible real estate information.

We are ferociously building contents to not only attract consumers but to keep them engage once we have them. We continue to enhance photo quality and size and enhance the map experience. In addition, we have the number of personalization initiatives in the pipeline, many of which benefit from our new registration platform that we just released. And we have a mobile first mindset. We will be launching our rentals application on the iPad this quarter and Android tablet application is in development.

Our second goal for 2014 we continue to focus on our software suite and the integration of those products to improve the efficacy of the marketing spend by real estate professionals in every part of the value chain. We meet many investors on our third goal to nourish and expand our relationship with the industry. First, the collaborative marketing partnership we have with the NAR launched as we previously discussed. Second, our alliance with the largest brokers in the industry continues to grow. This quarter we renewed deals with Howard Hanna and (indiscernible), two of the largest brokers and testimony to the fundamental support the industry and else. There are more deal renewals in the pipeline and extended agreements for a broader range of products and services.

Lastly our outreach in collaboration with MLSs and state and local associations continues to expand. With our strongest industry relations bench, we will be speaking at more and more trade association events in the coming months. And before I conclude, I am compelled to add fourth goal to our 2014 outlook, which was clearly articulated at our Analyst and Investor Day in May. That is to align and improve the exchange of value for the products and services we provide to the industry.

To that end, the most significant initiative in the second half of the year is the shift of the business model of our Co-Broke product. The new model offers a choice of exclusive leads price to value exclusivity or shared leads that the industry has gravitated to over time. We have enhanced the quality of the lead itself by providing more data, including telephone numbers, email, and search history and we bundled those leads with the basic FiveStreet software for free, which improves the real estate professional speed of response and quality of response, therefore a better consumer experience.

Realtors are able to better target and prioritize prospects and they have much more informed when they make that consumer connection. Most importantly, we received accolades from our customers or thrilled to have access to inventory in areas that were sold out, and even better this change build a very nice prospect list for us to upsell the premium version of FiveStreet or Top Producer product at a later date.

In summary, each of those goals supports our ultimate strategy to serve the whole real estate ecosystem. Move’s purpose is so much more than simply attracting and selling consumer attention. We are the front end entry point for real estate content to the consumer internet space and the industry’s back end platform to help them serve the customers. In both aspects, we represent the highest level of quality and service in the industry and code of ethics that no other online real estate portal can touch.

Now let me turn the call over to Rachel for more details about our Q2 financials and 2014 guidance.

Rachel Glaser

Thank you, Steve. I am very pleased to review our second quarter results with you. Starting with the topline, our total revenue for the second quarter was $61.3 million, an increase of $3.8 million or 7% from the second quarter last year and up 6% on a sequential basis. Absent the impact of the DDoS attack, we estimate that revenue could have been closer to $62 million.

Q2 was our ninth straight quarter of year-over-year revenue growth. Breaking that growth down into our two revenue categories, consumer advertising grew 6% compared with the second quarter of last year increasing to $47.4 million and representing 77% of total sales. Software and services revenue grew 8% to $13.9 million in Q2. Software and services is now 23% of our total revenue.

Let me pull back to cover a little bit and outline where the growth is coming from within consumer advertising. First, Co-Broke grew 32% year-over-year powered by a growing consumer audience who convert to lead a very strong rate. We’re again able to expand ListHub through our inventory.

Overall, Q2 renewal rates remained at over 80%. Showcase is also performing right in line with expectations. As we said on last quarter’s call, the percentage of all listings that have been enhanced with showcase coverage is about 42%, down from a high of 48% several years ago.

Renewal rates has stayed consistently in the 80% range indicating we have a solid installed based that value the lead and the brand impressions showcase customers accrued from their investments. Historical listing count or what we call HLC continues to grow modestly and in Q2 at $6.9 million historical listings, an increase of 70% versus the prior year and a 1% versus the prior quarter.

Q2 represented the fifth quarter of a year-over-year growth in HCL. We have stated that our goal is to grow revenue to $100 per historical listing. This quarter revenue per HLC was $35.59, up 5% versus the prior quarter.

Turning now to media, our audience growth propelled growth and patience and impressions up 18% and 17% respectively. Media revenue jumps 32% year-over-year on Q2 and 20% versus Q1. Over one-third of that growth is coming from new advertisers, primarily within the lending category. The success of our marketing campaign has clearly bolstered our brand strength.

There are two areas in our consumer business that struggled in the quarter. First, a DDoS attack resulted in an impacted of approximately $400,000 to $700,000 in the quarter. A portion of this was with the media, the websites were down intermittently and we could not fulfill our insertion orders. In addition, there was an impact due to productivity loss for our sales team as internet and backing systems were dark for those day.

Second, softness in the moving business resulted in a 20% year-over-year revenue decline. We observed a trend that lowers are shifting away from third party resources to directly acquiring their own website traffic. This creates competition between ourselves and our customers for the traffic. We are evaluating our strategies in this business and we will update you later in the year.

Overall, our core realtor.com business would have grown 11% in Q2 and is on a run rate to end the year at 16% growth when we exclude the moving from the total.

Turning briefly to revenue drivers of our software business, TigerLead continues to grow increasing 7% year-over-year. The gaining factor in TigerLead is inventory. We have many zip codes that are sold out. This creates pricing leverage in certain geographies which we are evaluating. In addition, we are focused on improving its performance marketing capability.

Another bright spot is Top Producer, which includes Top Producer CRM FiveStreet and Market Snapshot. Together, revenue grew for the third sequential quarter in Q2 and added 2300 net new subscribers.

Turning out to profit performance, adjusted EBITDA in the second quarter was $3.1 million or 5% of revenue. We estimate that without the DDoS attack, adjusted EBITDA could have been closer to approximately $4 million. Total core operating expenses defined as the four major expense categories, less stock-based compensation and nonrecurring charges were $62.4 million for the second quarter.

There are two areas of investments that were initiated in Q2 and may have continued impacts to our full year financial. First, our marketing investment was significantly larger this quarter versus prior year. This expense includes the media cost associated with running out as a national television. The digital component of the marketing campaign including in three media and SEM and the creative introduction cost that pulling towards the new accuracy matters campaign, the majority of which were expense in the quarter.

The second area of investment in the quarter is a labor. We rapidly and successfully added a large number of sales agents to our Scottsdale call center. These agents are focused on building large block of a new business enable by inventory expansion in Co-Broke product. We expected them to be profit generators as they hit their strides.

Our new release includes the reconciliation of GAAP net income and earnings per share to non-GAAP. The calculation of non-GAAP net income is similar to that for adjusted EBITDA, excluding non-cash items, such as stock-based compensation and charges, amortization of intangibles and amortization of debt discount and issuance costs.

In second quarter, net cash flow from operating activities was $2.6 million, with cash ending at $117 million. Total capital expenditure in the quarter was $3.8 million.

Before turning to guidance, let me provide some additional information on the changes we made to our Co-Broke product. The new product in pricing model was rolled out in mid June as we began free selling to existing customers with subscription to absolute renewal in July. The new product offers a choice between shared and non-shared leads. The exclusive version is tight and approximately 1.5% to 2 times the value of the shared product.

In modeling the potential future yield from this new product, the variables we calibrated for take rates between exclusive and shared retention rate, conversion rate at new pricing tiers and new customer penetration to name a few. We are very pleased that the initial week of selling, all of our metrics indicating a modeled revenue trajectory appropriately. We see renewal rates over 70%. Today, we see an evenly divided take rate between the exclusive products and the shared product.

In short Co-Broke is performing exactly as we had hoped and the run rate is on healthy growth rate in future quarters. With that as the background, let me now provide financial guidance for the third quarter and the full year 2014. We currently expect revenue for the third quarter of 2014 to be approximately $65 million. This represents around 10% year-over-year revenue growth.

We expect our third quarter adjusted EBITDA to be roughly $4.5 million, representing 7% of revenue. By revenue line, Q3 revenue for consume ad products is expected to be approximately $50 million to $51 million or 10% growth over the same period last year. We expect software and services revenue to be about $14 million to $15 million, up about 10% over Q3 2013.

We are updating our full year revenue guidance to incorporate the expected lower revenue in our moving business and the one time hit from the DDoS attack. Our current projection for the full year $252 million to $254 million look implies 11% growth year-over-year at the midpoint. Similarly, we will adjust our profit expectation to $28 million. This reflects our continued investment in marketing, the impact of slightly lower revenue expectations and a build up of our sales team.

We are very excited about our comp positioning, our success in Q2 and our outlook for the remainder of the year.

With that, I will turn the call back over to Steve for some final remarks.

Steve Berkowitz

Rachel, thanks. Second quarter of 2014 marked another successful quarter for our company. We’re excited about the progress made and the foundation we put in place for the future. Our goals are to connect the realtor.com brand to a younger mobile audience, introduce the realtor.com brands rentals and create a more personalized experience that attract and engage its consumer and stanzas our platform for reality differentiation, consumer housing insights and information and efficacy.

Before I open for questions, I wanted to talk about the change that’s just happened in the industry. I know as you all aware that the post merger of two of our largest competitors and we certainly as well. So let me make a few point.

All in all, the transaction itself doesn’t change any fundamentals for us. They were our largest competitors last week, they still are today and they probably will be tomorrow.

Whether the marketplace wants to see the creation of this kind of mega brand remains to be seen. I know realtors. They are independent local business people. They may be a bit aware of this but that part isn’t clear at this point in time. The other things that don’t change is the relative difference for realtors and consumers is the accuracy of the information that we serve on the realtor.com as compared with others try to achieve.

The content on realtor.com is better because it comes from actual realtors that are selling homes in neighborhoods across the country. Lastly, we believe we can build the realtor.com brand in the eyes of the consumer as one of the go-to brands for consumers in real estate.

I could easily say that we believe that the tremendous opportunity still lies ahead of us and there is still enormous value to be created. Our drivability to be more competitive in this market place, positions us for continued success for the rest of the year.

With that, I’ll open your call to questions.

Question-and-Answer Session

Operator

(Operator Instructions) And the first question comes from Jason Helfstein with Oppenheimer & Company.

Jason Helfstein - Oppenheimer & Company

Thanks. Two questions, just first on the guidance implies that revenue accelerates to 20% year-over-year on the fourth quarter. I presume a significant amount of that is coming form the Co-Broke pricing changes? If you can just gives us similar color on their other catalyst in the fourth quarter besides Co-Broke perhaps on the media side as well?

And then secondly, Steve, you talked about ListHub. I mean, of course, we’ve been getting a lot of questions just from clients, kind of, like your long-term plans for ListHub. It seems to hold significant strategic value, I believe it was included. It’s a tribulation in one of the deals that one of your competitors signed with a leading brokerage firm. Just talk about longer term, what you’re willing to, what your plans are for ListHub? Thanks.

Steve Berkowitz

Sure. So in terms of Q4, I mean, the growth is coming from Co-Broke because Q4 from a media perspective is always a little bit slower than Q3. So what you’re seeing in Q4 is a fact that we are -- we will be into the fourth, fifth and sixth month of selling the Co-Broke, the new Co-Broke product. So yes, we’ll have a -- so that’s a big, a big driver of the growth for us. It is opening those new slots and creating the new pricing.

Jason Helfstein - Oppenheimer & Company

And then is it Moving before -- is it Moving -- are you expecting Moving to have less of an impact because seasonally it’s a small quarter from people to Move?

Steve Berkowitz

Yeah, it is still -- we're still projecting it to be down. But yes, it will be seasonally less. But again for us to grow the business in Q4 is a little bit an anomaly this year because of what’s happening with the Co-Broke product and the timing of the launch.

Rachel Glaser

On the Moving, (indiscernible) talked about Moving is baked into the guidance we just gave.

Jason Helfstein - Oppenheimer & Company

Right. But as it is more of a lower impact from the revenue in the fourth quarter than it does, right?

Rachel Glaser

Yeah.

Steve Berkowitz

And now we’ve got kind of a better headlines, we feel pretty good about the guidance we’ve given you. But as we look at the -- it is at the Co-Broke. Now at ListHub, I think, ListHub is an important and I truly believe it’s an important part of the ecosystem and should hopefully become and even more important part of the ecosystem. It’s an opportunity and it has originally created for the -- to give the brokers through the MLSes the opportunity to control where their content goes.

And I believe today that’s more important than it was yesterday and more important than it was a year ago. And I think hopefully as the industry starts to look at the changes and it will agree and will look to see that ListHub continues to be an important part of that -- of that ecosystem.

I think there is another piece of the ListHub strategy that I think is important that we discussed at our Analyst Day is the fact that ListHub just doesn’t supply information to online portal. It also becomes a source of information back into the industry. So the idea that we’re working closely with Houston Association Of Realtors to help them build better reporting and better content back into their systems. We work at some of the major brokers in helping them feed information back into their systems.

So I believe ListHub has an important piece to the ecosystem but again the whole premise of ListHub and the whole future of ListHub is really in a big way based on what brokers used to do. So we believe we have a pretty strong message and we believe that some of the changes in the industry hopefully will help that message.

Jason Helfstein - Oppenheimer & Company

Thank you.

Operator

The next question comes from Mitch Bartlett with Craig-Hallum. Please go ahead.

Mitch Bartlett - Craig Hallum

Yeah, just following up on what you just said. ListHub, the whole key is what brokers -- what the control brokers want to impose going forward or how we put it. What is the sentiment right now, brokers as far as ListHub and where am I to go? Can you be more definitive?

Steve Berkowitz

I can only be definitive as what I know but as I can tell you we grew our MLS agreements by 40 in the last quarter. ListHub continuing to grow with content sources. I think ListHub is becoming more important to the brokers themselves not just as I said for content distribution but also for the ability for them to power some of their own system.

So to me, I think that there is a strong support for ListHub from the brokers. There is a strong support from the MLSes for ListHub. I mean, I take the question which I can’t answer for you is what is this change, potential change in the industry mean. To that, does it become more important or less important. I think that’s way to soon to tell.

Mitch Bartlett - Craig Hallum

Got it. Okay. And then on Co-Broke, just same set of questions again, just on Co-Broke, it launched, it sold, started selling. You have great renewals and also a good split between the exclusive and the non-exclusive. Can you give us any idea of, first your guidance came down a little bit because of Moving and some of the other activities but it had nothing to do with Co-Broke or anything like that. Is that true?

Rachel Glaser

That’s true. We tried to take quite clearly that Co-Broke is performing exactly as we modeled it which is very positive.

Mitch Bartlett - Craig Hallum

Okay.

Steve Berkowitz

But I think the one good takeaway from Co-Broke is that there is a concern in the industry, I believe whether it’s -- whether it’s come to the surface yet or not about exclusivity of leads. And I think what we try to do in building our Co-Broke product is to offer customers the opportunity to go exclusive or not exclusive which is very different, I think than anybody else in this industry.

I think our goal is to realize that leads are growing faster, significantly faster than homes are being sold. And we have to find a way to make sure we’re making those leads smarter. And we’re valuing the exchange of values being appropriately happening between both the content provider and as well as the agent or broker who is buying the leads.

So we feel like again we’re stepping into the part of the industry where we’re trying to do it smarter and more to the benefit of everybody in the value chain than just trying to increase the volume of leads.

Mitch Bartlett - Craig Hallum

Got it. Okay. Thank you very much.

Rachel Glaser

Thanks Mitch.

Operator

The next question comes from James Cakmak with Telsey Advisory Group. Please go ahead.

James Cakmak - Telsey Advisory Group

Hi. Thanks. So you touched on Co-Broke. I appreciate the color there. I guess on the other side of the equation, looking at showcases and the mix of the HLC comes down. Can you talk about, you’re still thinking about price increases to offset that as we look into next year to provide a list on that line.

And then secondly, I guess, Steve, just stepping back more big picture and not specifically on ListHub but just on, you seem to maintain pretty strong confidence in your market position, even following this transaction between low end Trulia. I guess based on the conversations that you had with your top brokers, with the industry, I guess following the announcement, I guess can you just talk about where that confidence is coming from that the industry will continue to be or perhaps in a catalytic way much more so behind you than before, just there is talk about Move as you see today versus couple of days ago?

Rachel Glaser

Let me take a showcase one first. So at our Analyst Day we talked about the fact that we built our product based on industry who really wanted exclusivity to all of our products originally designed on the concept of exclusivity in the case of Co-Broke, it’s one -- inquiry goes to one agent. In the case of showcase it’s certain my listing, my lead, they get exclusivity to all of leads after on listing and all the branding. And what we said was that the industry clearly has shifted in terms -- the industry isn’t actually valuing that exclusive any more because of the other models that have sprung up around us. So the first change they are making with to the Co-Broke model to offer a choice. If we want the exclusivity, then the pricing will reflect the value of that exclusivity or else will be the choice too.

But to shares lead model which is what the industry has gravitated to more and more. So we will prove that concept all the way through all our products. I focus less on towards pricing increase and more towards the concept of making sure that product that we offer that are exclusive are value -- are price to value that exclusivity and that’s what we are working on now in the back half of the year and we will see that start to evolve those things as we enter 2015, but I am not going to give any 2015 guidance today because that is what we are working on and it’s all ahead of us.

James Cakmak - Telsey Advisory Group

Thank you, Rachel.

Rachel Glaser

Yes.

Steve Berkowitz

So I don’t think I am more confident today than I was yesterday or maybe what three days ago or whenever the rumor started. I just feel like it’s the right answer for the industry, right. I felt that before. I feel that today. I feel the industry there has been a huge gap created in the industry in market value right. There has been today billions and billions and billions of dollars of market value, that’s been created on the back of listing. And that has been in my opinion a transfer of value from the people creating those listings to the people who are using those listings to get advertising.

And so my belief is that this industry is starting to realize this in the last three years all of a sudden billions of dollars of value that was sitting into brokers is now moving over to somebody else. And I think ListHub offers them an opportunity to take control of their data. They have always had control of their data through ListHub. I am hoping that this allow them to realize the importance of the transfer value, that’s happening not just on advertising dollars but actually in enterprise value that has happened. And I think these transactions proved that the other day.

So I am a strong believer in getting the industry to use its leverage and to find a way to get value for those hundreds of thousands of people who are walking around, walking into homes, getting a listing, putting that information into the system, not putting in an estimate, and putting in an actual price for that property and making a commitment to a consumer around that price not just saying hey computer calculated that price, I mean that’s what I am going to do and having a personal relationship with the seller. So for us what I believe is that these events I hope will just strengthen the story that we have been telling for the last five years and actually with the purpose of realtor.com existed in the beginning which was to allow distribution of listing and make sure that there was a fair value exchange.

James Cakmak - Telsey Advisory Group

Thank you.

Operator

The next question comes from Ian Corydon with B. Riley & Company. Please go ahead.

Ian Corydon - B. Riley & Company

Thank you. How much would lead year-over-year in the quarter and how much was Top Producer revenue up?

Rachel Glaser

We don’t break out the Top Producer discretely, so I can’t provide that information and I am -- we didn’t disclose our leads, we haven’t disclosed our leads. So it was up double-digits.

Ian Corydon - B. Riley & Company

Okay. And what’s the price of the Moving business at this point?

Rachel Glaser

We have also not broken down our Moving revenues so I can’t answer that either, but we did say that it’s decreased 20% year-over-year. So you can even perhaps triangulate.

Ian Corydon - B. Riley & Company

Okay. And the changes that you’re considering making to TigerLead, are you looking at raising prices or changing the structure of the product?

Steve Berkowitz

So on the TigerLead side what we are looking at is finding ways to actually increase the lead flow. And actually we launched a couple of new at least one new version of the product this past or just maybe this past few weeks and maybe last quarter. So what we are doing is we are findings way to repackage this product into different ways for people to get access to it, the same way that we would create pricing tiers in our Co-Broke product based on home prices.

We are looking at different ways to create Tiger inventory that will allow us to expand the business. We still have places that are unfold, so there is still quite a bit of potential, but what we look at again just like Co-Broke, we have to find a way to continue to generate more leads to those customers and those customers are really exclusive focused customers. Again, they are another set of customers that are focused on exclusive leads.

Ian Corydon - B. Riley & Company

Got it. And last question is on showcase, when did that get restructured and is there any structural reason why you can’t do that sooner rather than later?

Rachel Glaser

We talked about it something that would be a 2015 initiatives and the reasons have a lot to do with what the industry will accept or how the impact will roll out to our customers. So it’s not anything technically impeding us something that we will do. It’s more about what’s the right answer, what’s the highest yield, what’s the highest way to optimize all of the consumer ad revenue that we have and so it’s no a quick decision for us.

Steve Berkowitz

And it’s also about value exchange, right. I think we are and we will continue to be strong supporters of the brokerage industry and the broker brands in addition to being extremely strong supporters of the agents and their agent brands as well as very strong components of the consumer. So for us, it’s looking at understanding that value exchange I talked about earlier of content flow, the value of the leads that we generate the exclusivity of those leads and then the tools that we can supply them to actually make sure that their agents are managing the leads through the broker or those leads are being followed through.

So I think what you are going to see is do and continue to do is to find ways like we did with Co-Broke to package solutions that aren’t just giving them high quantities of leads. So I think it’s a little more of a working closely with the brokers and agents to make sure that on their listings, on their content that we are managing the value exchange.

Ian Corydon - B. Riley & Company

Got it. And could you say if this is an early, mid or late 2015 event or has that not been decided yet?

Steve Berkowitz

We haven’t given that Ian. We have gone and we are still on the planning process for 2015 and as we took that we haven’t Ian, we have frameworks. No, we are not going to give our any information on that.

Ian Corydon - B. Riley & Company

Thank you.

Operator

The next question comes from John Campbell with Stephens, Inc. Please go ahead.

John Campbell - Stephens, Inc.

Hi, guys. Good afternoon.

Steve Berkowitz

Hey, John.

John Campbell - Stephens, Inc.

Just back to ListHub, just two quick questions and then I got a follow-up. But first, could you guys just first tell us if the recent Zillow and Trulia development change, anything that relates to that? The enforcement of each of those contracts just maybe the syndication rights and then just on the back end of that, when we guys do start the renewal discussions, is there anything that technically prohibit you from meaningfully raising price if you so choose?

Steve Berkowitz

The answer to your second question is no. There is nothing that impedes us other than making sure that we’ve got the right exchange in value, which again you hear me talk a lot about. And in terms of the contracts, it’s too early to tell, right. I mean, we know nothing about what the proposed deal structure is. We know little bit about but we have no idea how that will be interpreted in terms of the contract relationship with either one of those two companies.

But again, I will put the issue out there that I believe again, today if brokers choose, they have the opportunity to do whatever they choose to do. We will have the opportunity to do what we’re contractually capable of doing but again, hopefully the industry will see that there’s an opportunity to find better ways to manage their content and useless stuff to do that.

John Campbell - Stephens, Inc.

Got it. And then on the recent ZipRealty and realty deal, I mean, that looks like a pretty interesting combo. I know you can't really comment on my deal itself but is there any direct impact you guys, as far as zips got a fairly good CRM offering that it helps their age. Its going to manage their leads. So just curious if there is any kind of overlap there with TigerLead and Top Producer. And then if there is any kind of positive impact from additional agents at realty?

Steve Berkowitz

I think as like I said, I think our product stand on their own, Top Producer and TigerLead. Today, they are very agent focus progress as we’ve have them we’ve actually been aided by putting FiveStreet on top of it and other things we’re actually making them broker tool. So I would believe again that we’ve not done big sales to brokers as maybe some of our competitors have.

So we have opportunity I think to continue to grow that business by putting broker tools on top of it. I don't think the ZipRealty thing affects us as much as it may affect people who already sold in their solutions in scale to people like Century 21 and companies like that. But we again see the marketplace. We got a very good quarter with subscriptions in Top Producer, TigerLead is still strong. And so we feel like we’re getting good traction at the agent and a little bit more attraction at the broker level.

John Campbell - Stephens, Inc.

Got it. Thanks for taking my question.

Steve Berkowitz

Thank you.

Rachel Glaser

Thanks John.

Operator

The next question comes from Dan Kurnos with The Benchmark Company. Please go ahead.

Dan Kurnos - The Benchmark Company

Yeah. Great. Thanks for taking my question. Steve, just stepping back for a second here in terms of the marketing campaign, I’d love to hear a little bit more about the expanded reach that you’re getting both from new markets that you gone in after the initial testing phase. What benefit you’re getting from the NAR in terms of debt and breadth? Sort of maybe any comments on initial ROI and also what you think the impact might be of the merger on the marketplace, whether its going to impact to CBCs or not?

Steve Berkowitz

Sure. Couple of things, its too early to say the impact of the NAR campaign but we said that it has, it at least doubled our reach in terms of -- I don’t know, people call them GRPs or JPYs, I’m don’t know. But whenever -- the size of your audience. So we’re seeing and we’re excited that the commercials and sales are so aligned.

I mean, I actually had a friend come up to me the other day and said they saw our commercial on TV and I said, wait a minute, I’m not running it on that channel. Then they explain the commercial, okay, that’s the NAR’s commercial. It’s the one that talked about real estate and real estate agents. And I was like, that tells me right, that’s really working well.

In terms of the ROI, we’re continuing to see positive results in our audience and positive results in the thing that we do. It’s still too early in each time, in each segment. So look at that we’re making quite a bit of progress and we’re continuing to send, looking at that ROI and looking at the results of those campaigns as we look at that.

In terms of what does it mean, in terms of the marketing CPC perspective or cost of marketing, I don’t know what this change will impact or not impact, right. I mean, I think again, you’re looking at two company’s coming together. So I can't really kind of applying on what that will mean in terms of descending landscape. I do think what it does do for us.

Is it clearly establishes who we are, right. I think there always been some confusion out there or maybe some confusion about where each company sat and what each company did. And I feel like right now, clearly, we’ve always had a stated position. And I think that stated position is one that aligns with what type, we believe the industry and the consumer needs. So we feel like, I said, this is -- it’s got risks to it but it’s got a lot of opportunities to it too. So we feel like we’ll see how it all fix up.

Dan Kurnos - The Benchmark Company

Great. Thanks for that color. And then just secondarily, you talked a lot about or at least made a point to talk about increased rental content in the quarter and you certainly made a point to call out that adjacent market verticals would be significant area of opportunity for you guys. I’m just wondering since then if there is any update on timing of rollout of new products when we see you guys get more aggressive in tapping those markets?

Steve Berkowitz

I mean, I think on the rental side, it’s really audience cry. We’re continuing to focus on growing that audience. We’re continuing to look at how do we leverage our assets in different ways. We’re going to be launching our new version of doorstep swipe, I think this week. And it will include rentals content that award-winning aftermath rentals content in it. And I think it’s a very different, a very different delivery.

On the mortgage side, we’re continuing to look at ways to partner with people, partner with vendors to find ways to bring more of those opportunities, more of those that we think are transaction-ready consumers into the mortgage cycle and that’s been as Rachel said for the good part of our media growth in Q2. And I think it will continue into next year. So like I said it’s, they are natural for us.

I think we’re going to -- our challenge always as a company is let’s stay focused on what we’re really good at and let’s monetize additional agencies the best way we can. And today, the few things we’re focusing on is home for sale and all properties that are in the market and rental.

Dan Kurnos - The Benchmark Company

Got it. Great. And then just to be super clear, Rachel, since you mentioned that earlier, I just want to make sure that I’m understanding not about Co-Broke in particular but in terms of the guidance, it’s only reduced from the DDoS and the Move impact. There was nothing else in there, no additional softness, nor the verticals?

Rachel Glaser

That’s basic. There’s no additional softness. Dan, you have that correct. Co-Broke is doing as well, better than we had expected.

Dan Kurnos - The Benchmark Company

And it’s not Showcase or Software either, it’s those specific, two specific….

Rachel Glaser

Specifically, Showcase is performing exactly in line with our expectations.

Dan Kurnos - The Benchmark Company

Okay. Great.

Rachel Glaser

And software is doing -- that subscriber is up on our software business. It’s really just the Moving and DDoS.

Dan Kurnos - The Benchmark Company

Perfect. Thanks very much.

Operator

This concludes our question-and-answer session. I would like to turn the conference back over to Steve Berkowitz for any closing remarks.

Steve Berkowitz

Well, thank you very much for attending. I will actually be out on the road for the next four weeks, going to see our customers. I’ve got some big broker meetings and some exciting stuff out there as we talk to our customers. And I just want to meet everybody with the opening comment that we said.

We believe very strongly that there is enormous value in our business. That value continues to be justified by many of the things that we’re doing and we’re executing on and we still see a very strong opportunity ahead for us. And we’re excited about where the future is going. And thank you very much and we will speak to you next quarter.

Operator

The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.

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