Despite a fantastic rise in home prices, new home construction and inventories are at multi-decade lows. If you add a per-capita factor to the statistics, it's one of the lowest points on record. At some point, there will be a surge in construction and volumes of home purchases that go with it. Move (UNKNOWN:MOVE.DL) is one company ready to capitalize on it, as well competitors Trulia (UNKNOWN:TRLA.DL) and Zillow (NASDAQ:ZG).
Move reported its third-quarter results on Oct. 29. Revenue jumped 19% to $58.5 million. Of this amount, advertising revenue rose 14% to $45.6 million, and software & service revenue flew 41% to $13.2 million. Earnings before interest, taxes, depreciation, and amortization, or EBITDA, climbed 17% to $8 million.
It was the eighth consecutive quarter of revenue growth and the highest revenue growth since 2006. Move guided for full-year 2013 to show $227 million in revenue with adjusted EBITDA of 12% to 13% of sales. This implies that the fourth quarter will show revenue of $56.5 million with adjusted EBITDA of $6.8 million to $7.3 million.
CEO Steve Berkowitz stated, "We are continuing to execute efficiently and effectively and will continue to capitalize on the market opportunity in front of us." It's interesting that Berkowitz didn't use the customary tone that most CEOs normally use, including words such as "expects" or "anticipates." He seems very confident.
What was said
Berkowitz pointed out that unique user growth is accelerating. Move saw growth of 10% in Q1, 18% in Q2, and 22% in Q3. For Q4, Berkowitz reported, "We're continuing to see a very healthy growth in leads reported to our broker and agent customers driven by exceptional engagement from our mobile users."
While this is quite encouraging, Berkowitz warned that new housing construction is at a 50-year low. As a result, housing inventory available is constrained. This is causing prices to rise, but volumes of transactions to languish. Despite this, CFO Rachel Glaser stated, "We expect continued growth in the coming quarters."
During the Q&A, Glaser stated, "We expect to double the amount of content at the end and the next several quarters, we're actually never done because rental content comes on and off the market with higher velocity even for sale." This suggests you should expect further acceleration in revenue and EBITDA ahead.
Move isn't the only company getting ready to make a move for 2014 and beyond. In its conference call, Trulia CFO Sean Aggarwal stated, "As the real estate market continues this recovery, we are well-positioned to benefit from the uptick in marketing spend." Like Move, Trulia has been seeing a surge in revenue that it expects to continue each quarter going forward.
CEO Pete Flint also stated, "We see tremendous opportunities ahead for us to grow subscriber numbers." Just as Move did, however, Flint cautions that Q4 is seasonally weaker for Trulia and the rest of the industry. Trulia's confidence points to 2014 and beyond.
Meanwhile, Zillow saw an explosion in revenue across all areas, though part of that was due to an interview CEO Spencer Rascoff conducted with Obama back in August. In the conference call, Rascoff stated, "Advertising is working for us, and because we are in high growth investment mode, we expect that we will spend at least the same amount, if not more, in 2014." Zillow believes online advertising for this industry could grow from $10 billion to $20 or $30 billion.
Foolish final thoughts
Move is doing this well even with real estate transaction volumes possibly slowing. Just imagine on how well it could do when things are actually robust. Follow the new home starts figures. When those figures start accelerating, the domino effect could make companies such as Move, Trulia, and Zillow huge winners.
Nickey Friedman has no position in any stocks mentioned. The Motley Fool recommends Zillow. The Motley Fool owns shares of Zillow. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.