LoopNet's 3Q Results Sizzle Past Estimates

Yesterday, LoopNet (LOOP) reported 3Q 2007 results.

3Q 2007 Highlights

• Revenue up 47% to $18.6 million from $12.7 million in 3Q 2006

• Cost of sales $2.07 million from $1.42 million in 3Q 2006

• EBITDA up 52% to $9.1 million from $6 million in 3Q 2006

• Net income $5.8 million ($0.14 per share) from $3.8 million ($0.09 per share) in 3Q 2006

• Profit margin 31.02% from 29.64% in 3Q 2006

• Diluted share count 40,825,000

• Cash flow from operating activities $9.99 million

• $101 million in cash

• No debt

• Total registered members up 51% to 2,407,313 from 3Q 2006

• Premium members up 19% to 90,186

• Average monthly price for premium membership up 17% to $53.07

• Total commercial real estate listings up 25% to 538,000 from 3Q 2006

• Profile views of listings up 21% to approximately 40.2 million from 3Q 2006

4Q and Fiscal 2007 Outlook

• Expects 4Q revenue of $18.9 million to $19.1 million

• Expecting EPS of $0.11 to $0.12

• Expecting effective tax rate of 40.7%

• Expecting full-year revenue of $70.1 million to $70.3 million

• Expecting EBITDA of $33.4 million to $33.6 million

• Expecting full-year EPS of $0.49 to $0.50

• Expecting effective tax rate of 39.3%

Analysts were on average expecting an EPS of $0.11 on sales of $17.89 million. LoopNet beat both of these measures by a decent amount, especially the EPS. LoopNet has beat earnings estimates for at least the past five quarters now (which is as far back as Yahoo!'s data goes), and this quarter was the most they've beaten estimates by since the 4Q 2006 when they beat estimates by 44.4%. I've been invested in LoopNet for only a month now and am still learning about the business. From the looks of it, this is LoopNet's strongest quarter yet (at least since fiscal 2006) in terms of cash flow from operating activities.

Both financially and in terms of subscribers the company is plowing ahead (obviously), but what makes this all the more impressive is the fact that the company is adding to its already-large cash position while keeping debt at nada. This is a great example of LoopNet's cash production and cash management as well. The large cash position together with the strong cash flow production makes me very confident in the company's future.

Anyway, at this point in time I can't offer too many of my own thoughts without stating the obvious. LoopNet's business and financials are strong, and all I can say is I'm very confident in the business going forward and I look forward to following its progress.

For the 4Q 2007, analysts are expecting an EPS of $0.12 per share with sales of $18.73 million (both inline with what LoopNet has projected).

Disclosure: Author has a long position in LOOP

Comments

[Rob Pflieger]

Good quarter across the board but read the transcript. Churn was above historical rates (they don't state it explicitly but indicate it was outside of the traditional 3-5% monthly churn rate). Mgmt indicated that Premium Subscribers would decline sequentially in Q4 due to price increases, higher churn and soft commercial real estate market. I wonder if the company is beginning to hit the ceiling on raising prices which you can only do for so long before you start losing subs (which they are now seeing). So you have a company that is being valued at ~25x 2008 EBITDA that is not seeing any subscriber growth in Q4 which is likely to carry into 2008. Put another way, the company is valued at about $9k per paying subscriber that generates $53 per month in revenue but has a half life (based on 5% monthly churn) of about 10 months (lifetime value of a customer is about $1500). I'd love to own this business personally because it is a cash cow but at no where near these valuations.

[Rob Pflieger]

Good quarter across the board but read the transcript. Churn was above historical rates (they don't state it explicitly but indicate it was outside of the traditional 3-5% monthly churn rate). Mgmt indicated that Premium Subscribers would decline sequentially in Q4 due to price increases, higher churn and soft commercial real estate market. I wonder if the company is beginning to hit the ceiling on raising prices which you can only do for so long before you start losing subs (which they are now seeing). So you have a company that is being valued at ~25x 2008 EBITDA that is not seeing any subscriber growth in Q4 which is likely to carry into 2008. Put another way, the company is valued at about $9k per paying subscriber that generates $53 per month in revenue but has a half life (based on 5% monthly churn) of about 10 months (lifetime value of a customer is about $1500). I'd love to own this business personally because it is a cash cow but at no where near these valuations.

[russellmania]

Where were you able to read the conference call transcript? It doesn't appear to be here on seekingalpha.com