ZipRealty Announces Third Quarter 2012 Results

EMERYVILLE, Calif. – November 6, 2012 - ZipRealty, Inc. (http://www.ziprealty.com) (NASDAQ: ZIPR), the most prominent online, technology-enabled residential real estate brokerage company in the industry serving 19 metropolitan markets through its company owned-and-operated real estate brokerage and an additional 12 markets through its Powered by Zip network, today announced financial results for the third quarter ended September 30, 2012.

Third Quarter 2012

Net revenues were $19.8 million, a 15% decrease from the $23.3 million reported in the third quarter last year. Excluding markets closed during the past year, net revenues of $19.7 million decreased 8% from the same market net revenues of $21.5 million in the third quarter last year. The Company’s net loss for the quarter was $4.9 million, or a net loss of $0.24 per share, which includes a $5.0 million charge related to the recent legal settlement with the State of California. Excluding this legal settlement charge, net income was $60 thousand compared to a net loss of $845 thousand, or a net loss of $0.04 per share, in the period one year ago. Adjusted EBITDA for the quarter was positive $1.0 million, which was approximately 39% higher than that of prior year.

Lanny Baker, President and CEO of ZipRealty, commented, “We are pleased that the litigation and corporate restructuring is behind us and we feel that we are positioned to leverage our technology to generate growth in our brokerage services and Powered By Zip businesses. We are also pleased to announce that we delivered a second consecutive quarter with Adjusted EBITDA above $1.0 million, raising our year-to-date Adjusted EBITDA to $811 thousand, versus a $2.1 million loss for the same period last year.”

In the Company’s consumer business, monthly unique visitors to its website, mobile website and native applications continued to grow, with September marking the fourth consecutive month of year-over-year double-digit growth in monthly uniques. The Company is increasing its online presence, expanding the service footprint through the brokerage services business, Powered by Zip network and by adding coverage areas. ZipRealty now serves a geographic area that includes approximately 41% of households and 42% of population in the domestic U.S.

The Company also grew marketing and other revenues with the September 1^st launch of its new marketing agreement with Citibank N.A, a subsidiary of Citigroup, which, combined with the New American Mortgage marketing agreement, is expected to offset fully the revenues received previously from Bank of America.

The Powered by Zip business continued its expansion as evidenced by the addition of two strong brokerage partners in the prime real estate markets of Brooklyn and Long Island, NY. These additions bring the total number of brokerages in the PBZ network to twelve.

“Continued focus on cost containment, which can be seen in the sharply improved bottom line results announced today, points to our strong control over operating expenses. As a result, our 5.2% Adjusted EBITDA margin furthers our goal of achieving a positive Adjusted EBITDA fiscal year.”

“At the same time, we continue to invest in improving consumer and agent experience. In Q3, we upgraded our website and mobile applications. Additionally, we began beta testing of the transformational change to our Zip Agent Platform.”

“We are guided by our vision of creating an easy and efficient way for people to buy and sell real estate. More than ever, serious consumers seek to interact and transact with a real estate company online. This trend clearly favors companies with an effective and proven technology and data strategy. And in response, we continue to focus on positioning ZipRealty to be the company that most effectively meets their demands. Our unique combination of world-class technology, comprehensive and current information, and all-star local agents, continues to resonate with a significant and growing number of home buyers and sellers: For the quarter ended September 30, 2012, we closed $705 million in real estate transaction home value from our owned and operated business. Simultaneously, our Powered by Zip network partners closed $54 million in transaction home value using our systems.”

“I am more confident than ever that we will continue to create a superior home buying experience for consumers, to improve competitiveness for real estate agents in our owned-and-operated business and Powered by Zip network, and to add significant value to our Company.”

The Company announced the following operating metrics for the third quarter of 2012:

Balance Sheet & Liquidity

As of September 30, 2012, the Company had approximately $19.1 million of cash, cash equivalents and short-term investments, with no long-term debt. Relative to June 30, 2012, the Company’s cash, cash equivalents and short-term investments were essentially unchanged. However, we did accrue a $5.0 million liability related to our settlement with the California Department of Labor and have since transferred those funds.

Financial Outlook

For the year 2012, the Company reiterates its business outlook and continues to expect positive Adjusted EBITDA.

Mr. Baker commented, “For the remainder of 2012, we believe that the health of the residential housing market will continue to be significantly affected by the availability of credit, inventory and shadow inventory levels, the pace at which banks process their foreclosure pipelines and interest rates, as well as any significant change in unemployment levels.”

“However, I continue to believe that, while this economic environment is challenging to the real estate industry, our technology solutions will provide us and our partners with an efficient means to grow market share despite these economic headwinds.”

Recent Highlights

Use of Non-GAAP Financial Measures

To supplement its financial statements presented in accordance with Generally Accepted Accounting Principles (“GAAP”), ZipRealty uses a non-GAAP measure it refers to as Adjusted EBITDA. The Company defines Adjusted EBITDA as net income (loss) less interest income plus interest expense, provision for income taxes, depreciation and amortization expense, stock-based compensation and further adjusted to eliminate the impact of certain items that the Company does not consider reflective of its ongoing core operating performance. This non-GAAP measure is provided to enhance the user's overall understanding of ZipRealty’s current financial performance and its prospects for the future, particularly in comparison to the practices of other reasonably similar firms. ZipRealty believes this non-GAAP measure provides useful information to both management and investors by excluding certain items it believes are not reflective of its core operating results and thus presents a more meaningful basis for comparison between periods. Further, this non-GAAP measure presents key information the Company uses for planning, forecasting its future operations and as a measure for determining management compensation. The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP. A reconciliation of this non-GAAP measure to the most comparable GAAP measure, net income (loss) is provided in the attached tables.

Conference Call Details

A conference call to report third quarter financial results will be webcast live on Tuesday, November 6th, 2012 at 5:00 p.m. Eastern Time on the investor relations section of ZipRealty’s website, www.ziprealty.com. Listeners may also access the call by dialing 866.271.0675, passcode: 47362907. A replay of the call will also be available through November 13th, 2012 at 888.286.8010 and passcode: 57547875.

About ZipRealty, Inc.

ZipRealty is a leading national real estate brokerage and provider of proprietary technology and comprehensive online marketing tools for the residential real estate brokerage industry. For home buyers and sellers who increasingly want control, choice and a seamless, customized service, ZipRealty offers Internet-enabled, state-of-the-art technology and complete access to accurate, timely information via their website and mobile applications, which real estate professionals can combine with their own local knowledge and personal expertise to offer an exceptional start-to-finish client experience. For real estate professionals who seek more productive ways to conduct business, ZipRealty provides technology and online marketing tools to enhance their online sales channel, including lead generation, conversion and service of their clients.

The ZipRealty technology and online marketing products serve its full-service, owned-and-operated residential real estate brokerage business in 19 markets nationwide, as well as its Powered by Zip network of leading third-party local brokerages in 12 markets.

Like us on Facebook, follow us on Twitter, or for more information, visit http://www.ziprealty.com or call 1-800-CALL-ZIP.

Cautionary Language

This release contains forward-looking statements within the meaning of the "safe harbor" provisions of the federal securities laws, including, without limitation, statements regarding leveraging the Company’s technology to generate growth in its brokerage services and Powered by Zip businesses, the Company’s expectation for its new mortgage marketing arrangements to offset fully the revenues received previously from Bank of America, the Company’s achievement of positive Adjusted EBITDA in 2012, the Company’s continued creation of a superior home buying experience for consumers, continued competitive improvement of agents, and continued addition of significant Company value, the expectation that the adoption of the upgraded ZAP by agents will help improve their productivity in 2013, the ability of the Company’s technology solutions to provide and efficient means to grow market share despite a challenging economic environment, the state of the housing market and related factors such as unemployment, housing inventory, foreclosures, interest rates and lending standards, and statements under “Financial Outlook” concerning expected adjusted EBITDA for full year 2012. The forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected. The risks and uncertainties include but are not limited to the Company’s history of losses and expectations concerning future losses, volatility in the real estate market, macroeconomic factors such as unemployment, tight credit, inventory levels, foreclosure processing delays and the impact of government programs, recent changes to the Company’s business model and operations that may not realize intended results, changes in lead patterns, agent turnover and agent productivity that may result from opening the Company’s website to provide users with access to more information before registration, the Company’s ability to comply with often complex federal and state laws and regulations concerning its agent classification, compensation, termination and other business practices, to reverse market share declines, to build its new and unproven Powered by Zip network, to successfully adapt to changes in the management team, to remain an innovation leader in its industry, to access leads and MLS listings from third parties that it does not control, to adapt to changes in technologies and practices relating to the nature and use of information, to protect arrangements for diversifying its revenue stream, to attract agents with its atypical value proposition, and to manage the growth of technology and control systems, the impact of website advertising and lead generation services on the visit-to-transaction pathway of potential customers, the Company’s pursuit of revenue growth opportunities that may reduce its profit margins, seasonality, protecting the privacy of consumer information, systems security, interruptions, delays and failures, geographic concentration, the protection and defense of the Company’s intellectual property rights, and other risk factors set forth in the Company's Form 10-K for the year ended December 31, 2011. The forward-looking statements included in this release are made as of today’s date and, except as otherwise required by law, ZipRealty does not intend to update these forward-looking statements to reflect events or circumstances after the date hereof.

ZipRealty, Inc.

Consolidated Statements of Operations (unaudited)

(in thousands, except per share amounts and operating data)

(1) Amortization of internal-use software and website development costs included in product development

Supplemental operating data (unaudited) (2)

Reconciliation of non-GAAP adjusted EBITDA to net loss (unaudited, in thousands)

The Company defines Adjusted EBITDA as net income (loss) less interest income plus interest expense, provision for income taxes, depreciation and amortization expense, stock-based compensation and further adjusted to eliminate the impact of certain items that it does not consider reflective of its ongoing core operating performance. The Company presents Adjusted EBITDA because it believes it assists investors and analysts in comparing its core operating performance across reporting periods on a consistent basis by excluding items that the Company does not believe are reflective of its core operating performance.