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Trulia's Q2 Loss Widens Y/Y, Revenues Increase; Shares Down

Zacks Equity Research

Shares of Trulia (TRLA) have been on the rise ever since the news of its proposed acquisition by Zillow (Z) got out. However, the second-quarter results announced on Jul 31 dragged the share price to some extent.

Trulia reported second-quarter adjusted loss per share (including share-based compensation but excluding acquisition and restructuring expenses) of 38 cents which was wider than the year-ago loss of 1 cent. Nonetheless, the reported loss was narrower than the Zacks Consensus Estimate of a loss of 42 cents.

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Consistent with the previous two quarters of more than 100% year-over-year revenue increase, revenues for the quarter surged 115.7% from the year-ago quarter to $64.1 million. Reported revenues also beat the Zacks Consensus Estimate of $62 million.

Revenues from Marketplace were soared 142% year over year and a 41% revenue increase from Media segment positively impacted revenues. Also, the company added 7000 subscribers sequentially during the quarter to reach a total of 74k subscribers. On a year-over-year basis, subscribers increased 130%. It is also worth noting that Trulia’s average revenue per user increased from $196 to $206 sequentially primarily due to higher number of products being purchased by subscribers.  

Trulia reported 52 million total unique visitors in which mobile traffic accounted for approximately 48%.

Moving on to the operational metrics, Truila’s continuous investment in sales and marketing campaigns and technology costs negatively impacted operating results. While the company’s total costs (excluding acquisition and restructuring expenses) soared 155.9% year over year to $76.4 million, operating loss came in at $12.3 million which compared unfavorably with $131k loss incurred in the year-ago quarter. Trulia reported adjusted net loss of $14.2 million compared with a loss of $406k in the year-ago quarter.

Trulia exited the quarter with cash and cash equivalents of $214.9 million compared with $220.8 million in the previous quarter. The company’s cash flow from operations came in at $7.7 million for the first six months of fiscal 2014.

The company provided revenue guidance for the third quarter which is expected in the range of $68.4 to $70.4 million, a 73.5% year-over-year increase at the mid-point. The Zacks Consensus Estimate is pegged at $67 million. Trulia expects its adjusted EBITDA to range between $5.4 million and $5.6 million for the third quarter.

Our Take

Despite a significant rise in revenues, Trulia’s second-quarter bottom line was impacted by higher investments to fuel long-term growth. The company also provided encouraging third-quarter guidance.

Trulia’s pending acquisition by Zillow is expected to remain an overhang on the stock. As per the proposed acquisition plan, shareholders of Trulia will receive 0.444 share of Zillow for each Trulia share. The acquisition is expected to close in 2015.

Nonetheless, higher investments and competition from Move Inc. (MOVE) and post acquisition integration issues remain the headwinds for the company.

Currently, Trulia has a Zacks Rank #4 (Sell). Investors can look into NVIDIA Corp. (NVDA) which sports a Zacks Rank #1 (Strong Buy).

Read the Full Research Report on NVDA
Read the Full Research Report on MOVE
Read the Full Research Report on Z

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