Revenues Increase Significantly Over 2006
CALGARY, March 24 /CNW/ - Zaio Corporation (TSX-V: ZAO) announced today
their fourth quarter and 2007 year-end financial results. The significant
changes in the Company during the past year become apparent when reviewing the
financial results. Revenue in the fourth quarter of 2007 increased by 17% to
CDN$5.7 million (US$5.8 million) compared to CDN$4.9 million (US$4.7 million)
in the third quarter of 2007 and increased 3,167% compared to CDN$175,000
(US$154,000) in the fourth quarter of 2006. Net Income in the fourth quarter
of 2007 was a loss of CDN$2.3 million (US$2.4 million) compared to a loss of
CDN$775,000 (US$680,000) in the fourth quarter of 2006.
"The past year saw a remarkable change in the Company and in our
industry," stated Thomas Inserra, Zaio CEO. "The four acquisitions, two
private placements, tripling of Zone sales to appraisers and a six fold
increase in photographs, along with increased demand for our services in the
market, combined to create an exciting environment for future growth."
2007 Financial Review
The Company generated revenue of $12.4 million in 2007, compared to
revenue of $289,000 in 2006. Four business acquisitions in 2007 resulted in
significant expansion and diversification of the Company's revenues. Prior to
the acquisitions of the net assets of Realink Corporation, Kirchmeyer &
Associates Inc., Real Info Inc. and Virtual Imaging Corporation in the second
and third quarters, revenue was primarily derived from the licensing of the
Company's valuation software to property appraisers in cities across the
United States where Zaio is currently active. At year end 2007, licensing
revenue represented only 22% of total revenue, demonstrating significant
growth in appraisal related revenues. On July 1, 2007, the license fee per
zone increased to US$9,800 from US$9,000 at the beginning of the year. On
January 1, 2008 this fee further increased to $10,000 per zone. A discount is
available for multiple zone purchases. The license fee is recorded as deferred
revenue until licensees have been supplied with photographs and property data
for their zones, thereby allowing them to proceed with the valuation process.
The third and fourth quarters of 2007 were the first in which Zaio completed
the photography, data matching, and training allowing Zone appraisers to begin
their inspections of homes across America. This is the last step in the
process of completing appraisals, making them live and available for customers
to purchase. As a result, 412 zones were returned to Zone Appraisers and the
Company was able to recognize $2.7 million in revenue which had previously
been deferred. During 2007, a total of $6.7 million in appraisal zone sales
was deferred and a total of $2.7 million that had been previously deferred was
recognized as revenue and included a related exchange gain bringing the total
deferred at December 31, 2007 to $6.2 million.
The four acquisitions made by the Company during the second and third
quarters of the year added multiple new revenue streams from the sale of
traditional valuation products. These products contributed $9.7 million or 78%
of the Company's revenue for the year.
Cost of Sales
Cost of sales associated with the revenue from the traditional valuation
products in the Company's U.S. subsidiary was $6.6 million resulting in a
gross margin of 32% for the year. The revenue from the sale of appraisal zones
in the Canadian company has no related cost of sales associated with them and
therefore when included increase the Company's gross margin to 47% for the
Selling, General and Administration Expenses
Selling, General and Administrative expense was just under $10.0 million
for the year compared to $1.3 million in 2006. With four acquisitions this
year the Company has grown to 185 employees and now has U.S. bases in
Scottsdale, Arizona, Buffalo, New York and Chicago, Illinois. All costs
related to the sale of Zones are included in selling expenses and the Company
now has three Zone sales representatives across the United States. Volatility
in the Company's stock price over the last year triggered a significant
increase in the amount of stock compensation expense recorded for the quarter
and first nine months of the year. This non-cash item amounted to $3.2 million
compared to $375,000 in the prior year and is not included in the total of
selling, general and administrative expense.
The net loss for the year was $9.3 million or $0.238 per share compared
to a net loss of $1.4 million or $0.052 per share for the same period in 2006.
The net loss included a one-time write-down of $839,000 relating to
investments in non-bank sponsored asset backed commercial paper.
Financial Condition and Liquidity
At December 31, 2007, Zaio had total assets of $40.8 million. The
Company's cash balance at December 31, 2007 was $11.7 million, excluding
investments of $3.6 million, with working capital of $3.9 million, excluding
deferred revenue of $10.1 million and investments of $3.6 million. The Company
also has amounts owing to it on the sale of Appraisal Zones of just under
US$3.0 million which do not appear on the balance sheet. Deferred revenue
amounts are being transferred to the earnings statement as certain conditions
described earlier are met. During the third and fourth quarters, the Company
transferred a total of $2.7 million in deferred revenue to revenue with any
related exchange gain as the first set of zones were turned over to Zone
Appraisers allowing them to complete their valuation work. At December 31,
2007, Zaio had no long term debt. The Company has used the best information
available to value its investment in asset backed commercial paper and
accordingly has taken a 20% write-down from its face value. A proposed
restructuring of the investments is expected to be presented to holders in the
In December, the Company closed a private placement pursuant to which the
Company issued 13,650,000 Units at a price of $1.10 per Unit resulting in
gross proceeds of $15,015,000. The proceeds will be used to fund the Company's
rapid database expansion.
The strategic acquisitions made during the year have provided significant
resources necessary to support our acceleration and growth. The Company now
has the ability to deliver a full range of valuation services to the mortgage
backed securities and lending markets in all 50 states. In addition, these
acquisitions have allowed Zaio to substantially increase its rate of
photography and the subsequent population of its proprietary database.
Acquisitions have provided relationships with nearly 500 lender clients
ordering a wide range of valuation services nationwide. Currently, Zaio and
its affiliated appraisers and photographers are now deployed in more than 200
cities across America. Zaio is quickly adding photos, site verified property
data, and valuations to its Appraisal Knowledge Warehouse(TM) so customers can
objectively and "instantly" value real estate. Zaio's database currently
consists of 140 million property records, and over 19 million photographs. The
acquisition of the technology assets of Appraisal.com in early 2008 provides
the company with additional means to continue serving the needs of a large
number of lenders and appraisers.
Management continues to explore opportunities to align with potential
strategic partners in the valuation industry and will consider further
acquisitions that allow us to penetrate our various markets and create value
During 2007, a total of 992 Zone licenses were sold to property
appraisers across the country bringing the total to date to 1,526 and the rate
of photography rose on a weekly basis, occasionally exceeding highs of over
100,000 per day. Commencing in the third quarter of the year, the Company
began handing fully completed zones back to Zone Appraisers allowing them to
conclude the valuation process and start the earnings and revenue sharing
process. This important transition will continue to accelerate into 2008 as
sold Zones are integrated and returned to participating appraisers.
In November of 2007, Zaio sponsored the nation's premier appraisal
conference, Valuation 2007, which attracted more than 400 appraisers and
lenders. The Company also hosted its first National Summit in Las Vegas which
was attended by 230 Zone Appraisers. Interest in Zones among appraisers and in
valuation products by lenders was very strong. Our marketing efforts along
with widespread media relating to the industry conditions have resulted in a
surge of interest among appraisers and lenders. This in turn has led to a
significant increase in inquiries to our call centre.
The Company is focused on working with Zone owners during 2008 to ensure
that Zones sold in 2007 become available to lenders for valuation products
during the year. Continuous improvements in our technology will ensure this
process becomes as efficient and economical as possible. Particular attention
will be directed to three geographical areas across the southern United States
as Southern California, Arizona and Florida have been substantially
photographed and the required property data is already in the database. Each
of these areas has been affected significantly by the sub-prime mortgage
crisis and lenders are likely to be anxious to receive speedy and accurate
values on foreclosed properties while mortgage portfolio managers will be
required to update the value of underlying collateral.
The last mortgage crisis in the early 1990's resulted in a massive effort
by lenders to revalue their portfolios and created significant revenue streams
for appraisers across the country. A similar effort is expected and will
include an even larger asset base considering the growth of publicly traded
mortgage backed securities in the past ten years. Zaio has the capability to
value property nationwide through its premiere group of qualified appraisers
making it more efficient and economical for lenders and others involved.
Another important focus for the company in 2008 will be managing its
expenditures associated with the database and keeping them in line with
revenues. With over 19 million photographs now in the database, including
Zones which have not yet sold, we are in a position to match the rate of
future photography with Zone sales and thus ensure the maximum preservation of
cash resources. Our first priority will be to photograph Zones as soon as
possible after they are licensed.
In addition to our conventional appraisal services in all 50 states, Zaio
appraisers are also engaged in an effort to appraise homes in advance of a
request from a lender, ensuring total independence and objectivity and to
eliminate the possibility an appraiser was pressured to arrived at a value.
New national policies of Fannie Mae and Freddie Mac demonstrate that appraiser
pressure is real and a significant industry problem. We believe the best way
for lenders to ensure appraiser independence and comply with these new
policies is to rely upon and leverage Zaio's independence, appraiser expertise
and proprietary technology solutions.
Earnings Conference Call
We invite you to attend our year end conference call on Tuesday,
March 25, at 3:00pm EST by dialing (800) 732-0232.
Zaio is a technology and database company. Zaio maintains a secure
database of 140 million properties and is now site verifying property data,
photos and appraisals of virtually every property in America. Zaio's network
of local appraiser experts photograph, inspect and appraise entire cities, one
building at a time using a proprietary GeoScore(TM) rating system. Zaio is
ranked among the top 50 best performing companies of more than 2,000
corporations on the TSX-V Exchange, and trades under the symbol "ZAO".
Additional information is available under the symbol "ZAOFF".
For investors who would like to be added to Zaio's investor distribution
list, please contact Don Kelly at email@example.com.
The TSX Venture Exchange has not reviewed and does not accept
responsibility for the adequacy or accuracy of this press release. This press
release contains forward-looking statements which may include financial and
business prospects, as well as statements regarding the Company's future
plans, objectives or economic performance and financial outlooks. Such
statements are subject to risk factors associated with the real estate
industry, and the overall economy in both Canada and the United States. The
Company believes that the expectations reflected in this press release are
reasonable, but actual results may be affected by a variety of variables and
may be materially different from the results or events predicted in the
forward-looking statements. Readers are therefore cautioned not to place undue
reliance on these forward-looking statements.
In evaluating forward-looking statements readers should consider the risk
factors which could cause actual results or events to differ materially from
those indicated by such forward-looking statements. These forward-looking
statements are made as of the date hereof, and unless otherwise required by
applicable securities laws, the Company does not intend nor does it undertake
any obligation to update or revise any forward-looking statements to reflect
subsequent information, events, results or circumstances or otherwise.
For further information:
For further information: Thomas J. Inserra, President and CEO, (480)
575-5111; Rodney D. Mitton, CFO, (403) 802-2033