WESTLAKE VILLAGE, Calif., Mar 11, 2004 (BUSINESS WIRE) -- Homestore, Inc. (HOMS) , the leading provider of real estate media and technology solutions, today reported financial results for the fourth quarter ended December 31, 2003. Total revenue for the fourth quarter was $54.9 million, compared to $55.1 million in the third quarter of 2003. The gross margin improved to 74 percent from 72 percent in the previous quarter.

Homestore also reported that the net loss for the fourth quarter was $(12.1) million, or $(0.10) per share, compared to a net loss of $(30.6) million, or $(0.26) per share, for the third quarter of 2003. Results for the fourth quarter included a restructuring charge of $4.1 million and an impairment charge of $1.8 million. The third quarter results included an impairment charge of $15.7 million. Excluding restructuring, impairment and certain other non-cash expenses, principally stock-based charges, depreciation, and amortization, Homestore's loss from operations was $(770,000) in the fourth quarter, compared to a loss of $(4.8) million in the third quarter of 2003. The decrease in loss was primarily due to reductions in the Company's operating expenses. This information is provided because management uses it to monitor and assess the Company's performance and believes it is helpful to investors in understanding the Company's business.

At December 31, 2003, Homestore had $35.5 million in cash and short-term investments available to fund operations. This cash balance reflects a $10.0 million payment made on October 15, 2003, related to the class action settlement.

"As we move beyond the historical financial, legal and operational issues that challenged the Company's development, we are encouraged by the returns we are receiving from our staged product and marketing investment priorities," said Mike Long, Homestore's chief executive officer. "Homestore's Media Services segment, our largest business and the primary beneficiary of our investment strategy to date, experienced its third consecutive quarter of sequential core revenue growth. This segment also achieved improved profitability, with operating margins increasing from 6.6 percent in the third quarter to 15 percent in the fourth. We believe these trends are early indicators of the market acceptance of our products and services, better reflecting the value we deliver to our customers."

Year over Year Quarterly Results

Revenue for the fourth quarter totaled $54.9 million, versus $60.8 million for the fourth quarter of 2002. The year over year decline in revenue is due primarily to the expiration of certain legacy revenue agreements with Cendant Corp., which accounted for $3.6 million, and a decline in software revenues from the sale of The Hessel Group in early 2003.

The loss from continuing operations was $(12.1) million, or $(0.10) per share, compared to a loss of $(37.6) million, or $(0.32) per share, in the fourth quarter of 2002. The net loss for the fourth quarter was $(12.1) million, or $(0.10) per share, compared to a net loss of $(36.6) million, or $(0.31) per share, in the fourth quarter of 2002.

Full Year Results

For the year ended December 31, 2003, Homestore's revenue was $218.7 million, down $45.9 million from revenue of $264.6 million for 2002. The loss from continuing operations was $(49.7) million, or $(0.42) per share, compared to $(176.1) million, or $(1.49) per share for 2002. The net loss for the year was $(47.1) million, or $(0.40) per share, compared with a net loss of $(163.4) million, or $(1.39) per share, for the year ended December 31, 2002.

Update on Settlement of Shareholder Class Action Lawsuit

Last October, Homestore announced a preliminary court approval of the settlement agreement between Homestore and The California State Teachers' Retirement System (CalSTRS) related to the consolidated shareholder class action lawsuit. A final court approval hearing took place on January 16, 2004. Thereafter, the court issued an interim order in which the judge generally approved of the terms of the settlement but requested additional briefing from the parties on ancillary issues. The briefs were submitted February 20, 2004, and Homestore expects a decision regarding trial court approval of the settlement in the near future.

Under the terms of the settlement, Homestore has agreed to pay $13.0 million in cash and issue 20.0 million new shares of Homestore common stock to members of the class and will adopt certain corporate governance provisions designed to enhance shareholder interests. Homestore has already transferred $10 million in cash into an escrow account during the fourth quarter, with the additional $3.0 million in cash and 20.0 million shares of common stock due upon final judicial approval of the settlement. Following the final approval, the $13.0 million, net of court approved costs, and the 20.0 million shares of newly issued common stock will be distributed to the class. Additional information regarding the settlement agreement is included in documents Homestore files from time to time with the Securities and Exchange Commission.

Conference Call

As previously announced, Homestore will host a conference call, which will be broadcast live over the Internet today, Thursday, March 11, 2004, at 2:00 p.m. PST (5:00 p.m. EST). Chief Executive Officer, Mike Long, and Chief Financial Officer, Lew Belote, will discuss the Company's fourth quarter and full year 2003 results, and Homestore's progress. In order to participate in the call, investors should log on to http://ir.homestore.com and click on "Event Calendar." Windows Media Player software is required and is obtainable at no cost. Please connect to the above Web site ten minutes prior to the call to load any necessary audio software. A replay of the call will be available in the same section of the Company's Web site two hours after the end of the call. A telephone replay will also be available from 5:00 p.m. PST (8:00 p.m. EST) on March 11 until midnight on March 18 at 706-645-9291, conference code 5616994. For additional information regarding the Company's results, please go to the "SEC Filings" section at http://ir.homestore.com to view annual reports as filed with the Securities and Exchange Commission on Form 10-K. Homestore's Form 10-K for the year ended December 31, 2003 is expected to be filed with the Securities and Exchange Commission on, or before, Monday, March 15, 2004.

Use of Non-GAAP Financial Measures

To supplement its consolidated financial statements presented in accordance with generally accepted accounting principles in the United States ("GAAP"), Homestore uses a non-GAAP measure of income (loss) from operations excluding restructuring, impairment and certain other non-cash expenses. 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 Homestore's current financial performance and its prospects for the future. Homestore believes these non-GAAP results provide useful information to both management and investors by excluding certain expenses that it believes are not indicative of its core operating results and 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.

Caution Regarding Forward Looking Statements

This press release may contain forward-looking statements, including information about management's view of Homestore's future expectations, plans and prospects, within the safe harbor provisions under The Private Securities Litigation Reform Act of 1995. These statements involve known and unknown risks, uncertainties and other factors which may cause the results of Homestore, its subsidiaries, divisions and concepts to be materially different than those expressed or implied in such statements. These risk factors and others are included from time to time in documents Homestore files with the Securities and Exchange Commission, including but not limited to its Form 10-Ks, Form 10-Qs and Form 8-Ks. Other unknown or unpredictable factors also could have material adverse effects on Homestore's future results. The forward-looking statements included in this press release are made only as of the date hereof. Homestore cannot guarantee future results, levels of activity, performance or achievements. Accordingly, you should not place undue reliance on these forward-looking statements. Finally, Homestore expressly disclaims any intent or obligation to update any forward-looking statements to reflect subsequent events or circumstances.

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