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Zillow (NASDAQ:Z)
Q2 2013 Earnings Call
August 06, 2013 5:00 pm ET
Raymond Jones
Spencer M. Rascoff - Chief Executive Officer and Director
Chad M. Cohen - Chief Financial Officer, Principal Accounting Officer and Treasurer
Mark S. Mahaney - RBC Capital Markets, LLC, Research Division
Ronald V. Josey - JMP Securities LLC, Research Division
Heath P. Terry - Goldman Sachs Group Inc., Research Division
Aaron M. Kessler - Raymond James & Associates, Inc., Research Division
Daniel L. Kurnos - The Benchmark Company, LLC, Research Division
James Cakmak - Telsey Advisory Group LLC
Mark May - Citigroup Inc, Research Division
Chad Bartley - Pacific Crest Securities, Inc., Research Division
Good day, ladies and gentlemen, and thank you for standing by, and welcome to the Zillow Second Quarter 2013 Earnings Conference Call. [Operator Instructions] As a reminder, today's conference may be recorded. It is my pleasure to turn the floor over to RJ Jones, Investor Relations Officer. Please go ahead.
Raymond Jones
Thank you. Good afternoon, and welcome to Zillow's Second Quarter 2013 Earnings Conference Call. Joining me today to talk about our results are Spencer Rascoff, Chief Executive Officer; and Chad Cohen, Chief Financial Officer.
Before we get started, as a reminder, during the course of this call, we will make forward-looking statements regarding the future events and the future financial performance of the company. We caution you to consider the important risk factors that could cause actual results to differ materially from those in the forward-looking statements made in the press release and on this conference call. These risk factors are described in our press release and are more fully detailed under the caption Risk Factors in our annual report on Form 10-K for the year ended December 31, 2012, and in our other filings with the SEC. In addition, please note that the date of this conference call is August 6, 2013, and any forward-looking statements that we make today are based on the assumptions as of this date. We undertake no obligation to update these statements as a result of new information or future events.
During this call, we will present both GAAP and non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures is included in today's earnings press release. In our remarks, the non-GAAP financial measure, adjusted EBITDA will be referred to simply as EBITDA, which excludes share-based compensation. This call is being broadcast on the Internet, and is available on the Investor Relations section of the Zillow website at investors.zillow.com. A recording of this call will be available after 8 p.m. Eastern Time today. Please note that the earnings press release is available on our website. And after the call, a copy of today's prepared remarks and historical exhibits of our business metrics will also be available on our website.
After management's remarks, we will host a live question-and-answer session. During the Q&A, we will entertain questions asked via Twitter and Facebook, in addition to questions from those dialed into the call. Individuals may submit questions by tweeting to the Zillow handle, using the #ZEarnings hashtag or the official Zillow Facebook page. I will now turn the call over to Spencer.
Spencer M. Rascoff
Thank you for joining us to discuss Zillow's second quarter performance. Today, I'll start with highlights from our results in the quarter, and then give a midyear update on our 2013 strategic priorities of growing our audience, growing our Premier Agent business and growing our emerging Marketplaces. I will then turn the call over to Chad to discuss our financials and our outlook in more detail. And we'll, of course, open up the call for questions from dialed in participants and our social media audience on Twitter and Facebook.
Zillow had, a tremendous second quarter, achieving record revenue, which led to an EBITDA result that exceeded our plans. Our total revenue for the quarter was almost $47 million, up 69% year-over-year, driven by strong performance across the board in our Marketplace and Display revenue categories.
In our Marketplace category, both our real estate and Mortgage businesses, saw their positive momentum continue. We added almost 4,800 Premier Agents during the quarter, which was an all-time high for quarterly net adds. In our Mortgage business, revenue neared $6 million as we continue to gain traction on both the consumer and professional sides of the Marketplace. Our Q2 run rate for total Marketplace revenue was about $157 million, which is nearly double this time last year.
Meanwhile, our Display revenue category showed excellent growth of almost 30% year-over-year, despite macro challenges in the display advertising industry, stemming from the proliferation of programmatic ad exchanges. Much credit goes to our Display sales team, adding new advertisers, as well as increasing spend levels from our existing advertisers. As a result of our strong sales, combined with a high operating leverage inherent in our model, our EBITDA exceeded $5 million for the quarter. From the top to the bottom line, Zillow is firing on all cylinders. I'm extremely proud of the team and our performance this quarter.
Turning now to our strategic priorities. When I laid out our 3 priorities for 2013, I said number one was to grow our audience. We are pleased to announce that during the month of July, we hit a significant milestone of more than 61 million unique users on mobile and the web during a single month, representing 24 million net adds year-over-year or 66% growth. It was just last quarter that we topped 50 million unique users for the first time.
To put our audience growth into perspective, during just the past year, we added the equivalent in unique users of almost an entire Move Inc, or 2/3 of a Trulia. This is based on unique user counts that both brands self-published in their Q2 reports. This is staggering growth in just the past year.
We all know the future is mobile, and we have even more market share leadership on mobile than on the desktop. 60% of our visits now come from a mobile device. In fact, mobile visits have nearly doubled year-over-year. And in July, 120 homes were viewed per second on mobile compared to 63 per second last year.
Our growth always begins with our product and our focus on empowering consumers with the best experience possible. A few recent product innovations include a new shopping search filter by school type on desktop, and our new foreclosures guide on home detail pages that incorporates more foreclosure data with our analytics to help buyers get an edge. Some of our product design inspiration gets channeled into our semiannual hackweek. And we completed another great one in June, where we saw some excellent new ideas from our very creative product teams. For more details on what hackweek is all about, as a social supplement to this earnings call, we just posted new information to Facebook to give everyone a better sense of our culture of innovation and creative work environment.
Also supporting our audience growth, we continued our investment in brand advertising this year, which we outlined for you last quarter. We launched a second TV spot in June called Long Distance, which you can view at zillow.com/tv. We now have 2 TV spots airing nationwide across major cable networks.
We believe in brand advertising as a long-term investment to build an enduring brand and household name. However, like everything at Zillow, we voraciously measure all of our advertising channels through our full funnel metrics, and we are constantly analyzing and optimizing our spend. After less than 2 quarters of advertising, we are very pleased with the results we've seen.
At the top of the funnel, we have seen a noticeable lift in our traffic that we can attribute to our advertising. And as a result, we are taking market share in the category. Since January 1 of this year, we have more than doubled our lead in real estate category market share over our closest competitor, as defined by comScore Media Metrix Multi-Platform. Zillow now represents almost 1/3 of the category desktop unique users, with a substantial lead versus the closest competitors.
More important than raw audience growth is growth in shoppers and shopping activity. Our advertising attracts serious home shoppers, which is evident in all of the engagement metrics we track, including increased views of homes per sale and time spent home shopping per user. Importantly, while audience growth has been more than 60% each month in Q2, contacts to Premier Agents have grown even faster, showing year-over-year growth rates above 80%. The investment in our brand, as well as in tech and development is resulting in accelerating trends all the way down the shopping funnel.
And while building brand awareness is a multiyear endeavor, we have also seen early positive signs in consumer awareness of Zillow. Since the start of the year, Google Trends, which measures search volumes for various terms on Google, reports that searches for the word Zillow have increased 61%, while real estate searches have grown only 16% and searches for the brand names of our 2 closest competitors grew 16% to 18%.
As we've said for the past few quarters, investing in our brand today is part of our long-term strategy. We believe in the primacy of audience. That whichever model serves the consumers the best, establishes the largest household brand and wins the largest sustained audience, ultimately will take the lion's share of the media revenue available in our category. This is the story of online media leaders in category after category, the audience leader tends to end up with most of the revenue and profits.
Audience leadership is the most important thing to attract advertisers but it's not enough. We also believe that providing software tools for our advertisers is important. This leads us to our second priority for the year, growing our Premier Agent business. We now have more than 38,000 Premier Agents, with record growth in net adds during this quarter. In addition to growing our agent count, we launched a number of products and benefits to provide more value for existing Premier Agents.
As a result of our Buyfolio acquisition last year, we recently began the rollout of Agentfolio, a private and collaborative mobile and web-based shopping experience for Premier Agents and their clients. Agentfolio enhances the value of an agent in the shopping process, while providing a terrific user experience for home shoppers and ultimately helps agents communicate better with their clients and close more deals. The service is free for Platinum Premier Agents, and can be purchased separately by non-Premier Agents for a monthly fee.
Agentfolio is now live in 6 major markets, and we plan to roll it out to 5 additional cities by the end of the year. Reception from our Premier Agents so far has been very positive.
Postings inside Agentfolio come from MLSs and are powered by Diverse Solutions, our 2011 acquisition that expanded Zillow into the agent website business. This is a great example of our M&A strategy. We bought 2 small software companies, 1 in New York and 1 in Irvine, each for less than $10 million. And through our successful integration, we were able to launch incredibly disruptive MLS-powered websites available for free to Premier Agents, which Inman News awarded us Innovation of the Year last year. Now we are able to roll out another free tool for Premier Agents, Agentfolio.
Additionally, during the quarter, we launched a new efficient way for agents to partner with mortgage lenders in their market, called our Premier Agent Lender program. A common practice in the industry is for individual real estate agents and mortgage lenders to refer clients to one another, as well as to co-market their services together. Our new Premier Agent Lender program lets Premier Agents endorse a lender that they prefer on Zillow, and in turn allows the lender to subsidize or grow the Premier Agent's advertising subscription. We're very excited about the potential of this program and the value it adds for Premier Agents.
Now I'll move on to our third strategic priority for the year: Growing our emerging Marketplaces, Mortgages, rentals and home improvement. Starting on our Mortgage business, revenue grew more than 100% year-over-year, with consumers submitting an average of 1.7 million loan request each month, up 86% year-over-year. Our consumer experience is unparalleled, with anonymous potential borrowers receiving more than 30 personalized quotes per loan request. We continue to believe that drilling our own well in mortgages is the right long-term strategy, giving us complete control to build the best consumer experience possible. It also significantly lessens any impact of rising mortgage rates on the refinance business, as the vast majority of Zillow Mortgage Marketplace users are buyers seeking purchase loans.
On the lender side of the Marketplace, our Mortech product suite, which includes the best-in-class CRM and product pricing engine, continues to perform very well. We are pleased with our lender Pro Tools revenue growth and contribution margin. The Mortech acquisition, 7 months post-closing, has played out as we'd hoped, providing a suite of software tools for lenders to improve the ROI on their Zillow spend, and makes Zillow a more important partner to our lenders.
As for our Rentals Marketplace, we continue to make good progress in building out our consumer and professional sides. We're investing significantly in development of both of our consumer rental brands, Zillow and HotPads, focusing on listings volume, freshness and quality. Zillow.com serves nearly 10 million rental shoppers on the web each month. And audience growth is good for the professional side of our marketplace, as individual contacts to property managers have grown 80% year-over-year.
About 6 months ago, we shared that we expected to begin monetizing the Rentals Marketplace in late 2013, and we are on schedule. Just last month, we began selling featured properties for multifamily property managers, which allows premium placement in local search results on Zillow and on HotPads. While we don't expect a material impact on 2013 results, we believe that our substantial rental lead volumes and our sales strategy position us well for rentals revenue in 2014.
The rental advertising TAM for multifamily apartment buildings is more than $6.6 billion, to say nothing of the single-family opportunity. There is a big business to be built here, and we are focused on building it.
And in our newest Marketplace, our home improvement product, Zillow Digs, we continue to grow our consumer offering and audience, although this product remains in the very early stages. Most recently, we launched an innovative way for users to identify and match the paint colors seen in thousands of photos to find real paint colors in stores, as well as search our photos by color palette. We will continue to grow consumer audience in Zillow Digs and focus on revenue down the road.
All in all, a tremendous performance across all of our strategic priorities and all of our home-related Marketplaces this quarter.
Before concluding my remarks, I'm going to take a moment to update portions of our outlook and briefly discuss the event we're hosting with President Barack Obama tomorrow. Regarding our outlook, we now project our revenue for the full year 2013 to be in the range of $186 million to $188 million, up 60% year-over-year at the midpoint. While this is an increase of about $7 million over the midpoint of our previous range, we're holding our projection for EBITDA at $20 million for the full year, and investing the difference back into the business. As we continue to receive positive signals from our brand advertising, we become more excited about the opportunity and strategic focus we've chosen in creating a lasting consumer brand for the long term. We will continue to invest substantially in product development and brand advertising this year.
Finally, we are extremely excited about tomorrow's event that Zillow is hosting with President Barack Obama. The team at Zillow is collecting questions from homeowners, renters and prospective buyer via social media, and tomorrow I'll present some of those questions to the President in a live event. Zillow exists to help people become smarter about what's often the largest purchase of their lifetime, their home. This is an unprecedented opportunity for users to ask their housing questions to the President of the United States. More details on this event can be found at zillow.com/whitehouse.
In conclusion, when considering the enormous opportunities in front of us, we are thrilled with our position for the long game. We remain excited and determined to extend our category lead by focusing on our strategic priorities and planting seeds for long-term growth. We're still in the early days with much to do.
With that, I'll turn it over to Chad.
Chad M. Cohen
Thanks, Spencer. After going through our financial results for the second quarter, I'll also address the outlook in further detail that Spencer briefly touched on, and then we'll open up the call for questions.
Overall, this was a great quarter for Zillow. Starting with traffic. Second quarter traffic grew 62% year-over-year to 54.3 million average monthly unique users, peaking in June with approximately 56 million, and then topping that again in July with more than 61 million.
Next, second quarter revenue totaled a record $46.9 million, up 69% year-over-year. Compared to our outlook, we exceeded the $44 million midpoint of our range by $2.9 million due to terrific performance in both our Marketplace and Display revenue categories.
Marketplace revenue reached $36.5 million representing 86% year-over-year growth and 78% of total revenue.
Taking a closer look at our real estate Marketplace revenue subcategory, which is made up of our Premier Agent, Diverse Solutions and Rentals businesses. Revenue was $30.6 million in the quarter and grew 80% year-over-year. The primary driver of growth was our Premier Agent business, where we added a record 4,777 Premier Agents in the quarter, with a net increase of 16,111 Premier Agents from this time last year. This represents a slight acceleration of our Premier Agent net adds from this time last year when we grew our subscriber by 70%.
Also, as we are able to open up more impression inventory, as a result of our traffic growth, more than 50% of our bookings during the quarter went to existing agents purchasing additional impressions, which is consistent with prior trends. Keep in mind that when our traffic grows, additional inventory can be created and then sold in subscriptions to Premier Agents. Revenue is then recognized over the life of the subscription contract.
Average monthly revenue per user, or ARPU, was $266 in the quarter for the Premier Agent business, and represented a 1% increase from last year and 3% increase sequentially from the previous quarter. As a reminder, the ARPU figure is an output that is neither a proxy for pricing nor a metric by which we run the business. Our inventory model allows agents to purchase available impressions at prices that are determined by local market dynamics and an amount based on their budget.
Moving now from real estate to mortgages, which consist of our Zillow Mortgage Marketplace and our Mortech software businesses. Revenue reached $5.8 million and grew 126% year-over-year. During the quarter, 5.3 million loan requests were submitted to Zillow Mortgage Marketplace, growing 86% over last year, an increase over the Q1 growth rate of 74%. The vast majority of the loan requests submitted were for purchase loans as opposed to refinancing.
Turning to our Display category. Revenue was $10.5 million and increase of 29% year-over-year, which is the third consecutive quarter of accelerated growth. These gains were broad based, with healthy growth across most of our primary Display verticals, including builders, banking and brokerages. Our Display business represented 22% of total revenue this quarter and continue to deliver a strong contribution margin.
Moving on to our expenses. Total operating expenses were $57.3 million in the second quarter as compared to $26.5 million in the same quarter last year. The $30.8 million increase in expenses versus last year was primarily due to 3 factors: First, increased headcount related expenses, reflecting growth from over 440 employees to just under 700 employees, with approximately 25% of the year-over-year increase on employee base resulting from our acquisitions. Second, increase in advertising investment to grow our audience. And third, as outlined in the 10-Q we filed on May 8, a onetime $7.1 million acceleration of stock-based compensation related to a prior acquisition. Our operating expense increase year-over-year would have been closer to 60% or $15.3 million, if we were to exclude the advertising increase and onetime expense.
Now we'll go into a few details briefly on each major expense line item, starting with cost of revenue. For the second quarter, our cost of revenue was $4.3 million or 9% of revenue as compared to $3.3 million or 12% of revenue in the same period last year. Leverage came from 2 sources: First, higher levels of engagement with Zillow-owned and -operated properties versus our revenue-sharing partners; and second, fixed cost of operating our platform that allow for our scalability.
Next, sales and marketing expenses, which include our Premier Agent sales team, marketing team and advertising activity, was $32.9 million or 70% of revenue as compared to $12.2 million or 44% of revenue in the same period last year. The variance from last year resulted primarily from our increased investments across advertising channels to support long-term growth objectives. Compared to last year, advertising expenses increased approximately $8.4 million. Also, adding to the increase in the sales and marketing line item, was the onetime $7.1 million stock charge I mentioned earlier. Excluding these 2 items, sales and marketing expenses increased approximately 43% year-over-year and represented 37% of revenues.
Next, technology and development costs were $11.1 million or 24% of revenue compared to $5.8 million or 21% of revenue last year. The increase in expenses was primarily driven by growth of our engineering teams that support product initiatives and higher amortization of intangibles year-over-year related to our acquisitions. We believe that our extraordinary product development team of more than 180 people is the best in the industry. On an absolute basis and as a percent of our revenue, we are investing more in technology than any other real estate media company or brokerage, which helps us extend both our audience lead, as well as the software tools we provide to our real estate advertisers.
Lastly, G&A costs were $9 million or 19% of revenue, as compared to the same period last year at $5.2 million or 19% of revenue. This is driven by incremental headcount, along with increased professional services and facilities costs to support our growth.
Turning now to probability. Our EBITDA for the quarter was $5.3 million, representing 11% of revenue. This result exceeds our guidance midpoint by $4.3 million, primarily due to the higher revenue than we projected flowing through to the bottom line and also due to a combination of expense timing, along with better-than-expected efficiencies across spending areas, including marketing and headcount.
On a GAAP basis, net loss for the quarter was $10.2 million, representing a GAAP loss per share of $0.30 for basic and fully diluted shares of 35 million. We ended this quarter with approximately $208 million in cash, cash equivalents and investments. We remain debt free with our credit lines untapped and available to us.
Now I'll discuss our outlook, starting with the third quarter 2013. For the third quarter, our revenue is expected to be in the range of $49.5 million to $50.5 million, which represents 57% year-over-year growth at the midpoint of the range. Looking at the sales and marketing line item in the third quarter, we anticipate recording total expenses of $29 million to $30 million for the period. Compared to prior year, we anticipate an incremental investment in brand advertising of $9 million to $10 million, as well as ongoing hiring in our inside sales group. We will continue to track performance of our investment in advertising very carefully in terms of the signals we monitor throughout the shopping funnel.
Our EBITDA for the third quarter is expected to be approximately $1.5 million to $2 million. Looking at the projected reconciling figures to EBITDA, total stock-based compensation in the third quarter is expected to be in the range of $3.5 million to $4 million, and depreciation and amortization expenses are expected to be in the range of $5.5 million to $6 million. Although we do not provided a GAAP EPS outlook, we expect a basic and fully diluted weighted average share count of approximately 36 million shares for the quarter.
Now looking at full year 2013, we are raising our revenue guidance from the previous range of $178 million to $182 million to a range of $186 million to $188 million for the full year, representing 60% year-over-year growth at the midpoint of the range. The increase in our revenue outlook comes from our confidence in recent trends in our 3 main revenue sources: Premier Agent, Mortgages and Display.
Regarding full year sales and marketing expenses, we now project approximately $100 million in total expenses for the year. This figure exceeds the high end of the previous outlook range by $2 million and includes approximately $3 million to $4 million in stock-based compensation but excludes the onetime stock charge.
As Spencer mentioned previously, we are reinvesting our near-term positive EBITDA variances back into our business, primarily into advertising. Looking back at the beginning of this year, we anticipated that we would be committing about 20 points -- percentage points of EBITDA margin to brand advertising and another 10 or more percentage points to develop new products and grow our Marketplaces. In the second quarter, we then increased our commitment to advertising based on the compelling positive signal we received from advertising tests, and we will continue this commitment throughout the rest of the year. These factors have resulted in our projected EBITDA margin running below our target model this year, deliberately to support our pursuit of a sustainable, long-term competitive advantage in our category.
Consistent with our strategic decisions on how we will invest back into our business, we expect approximately $20 million in full year EBITDA, which is in line with our previous outlook range. We anticipate total depreciation and amortization expenses for the year to be in the range of $22 million to $23 million, as well as share-based compensation to also be in the range of $22 million to $23 million, and CapEx and capitalized data content to be in the range of $12 million to $14 million. We expect fourth quarter 2013 basic and diluted share counts to be approximately 36 million weighted average shares.
In conclusion, we continue to make progress and gain momentum. We achieved record results in traffic and revenues in the second quarter and extended our traffic lead versus our competitors. We remain focused on execution in growing our audience, growing our Premier Agent business and growing our emerging Marketplaces on mobile and on the web, as we aggressively attack the huge market opportunities that we address in the life cycle of homes.
I want to thank you for your time today. And with that, we'll open up the call to questions. I'd also like to remind you that we will be considering questions submitted via Twitter and Facebook with the hashtag #ZEarnings.
Question-and-Answer Session
[Operator Instructions] And it looks like our first question will come from the line of Mark Mahaney with RBC.
Mark S. Mahaney - RBC Capital Markets, LLC, Research Division
Can I try 2 questions, please? Can you talk about the process whereby how you decided on the monetization strategy for rentals? I think you were considering a couple of different ways to monetize that service, how you selected this one. And then given the big increase you've shown in Premier Agents this quarter but also the big number reported by Trulia as well, do you get a sense that there's greater or less overlap in your customer bases within your companies and Move.com and other players in the industry? Do you sense that real estate professionals are signing up for multiple services more than in the past? Or are you just -- is it mostly greenfield ads for the 3 or 4 of you?
Spencer M. Rascoff
Mark, Spencer. On rentals monetization, we benefited from HotPads, 5 years of rentals monetization, of experimenting with different monetization model. We've chosen a paid inclusion model for multifamily charged on a per building -- per apartment community or per building basis. Now that's solves [ph] for an effective cost per lead or cost per lease. So even though we're charging on a cost per building basis, there's still sort of an implied cost per lead or cost per lease that we use to help triangulate around the pricing strategy. We've been selling it this way for a couple of weeks, integrated across Zillow and HotPads, ahead of or on schedule. I'm very excited about this growing into 2014, but I think we still have a lot of learnings to do, frankly. So in the case of mortgages, for example, when we started -- experimented with monetization, it took us probably a year or more to find the right monetization model. Here, I don't think it will take nearly that long because we have experience. But it's still very early days for us in rentals monetization. On the PA Overlap question, I get -- I have the distinct impression that there's not significant overlap between our Premier Agents and other online media company. Most Premier Agents that I speak with, especially at the higher ARPU levels, the $5,000, $10,000 a month ARPU Premier Agents weren't spending that money anywhere a year or 2 ago. So we haven't stolen share from other online or offline channels. And most of the -- those higher ARPU Premier Agents that I tend to spend a lot of time with aren't paying advertisers of any of our competitors.
Our next question will come from Ron Josey with JMP Securities.
Ronald V. Josey - JMP Securities LLC, Research Division
So 2, please. The first is just on over impressions. Now that we're a few quarters into the transition to impression-based model. I think Spencer, I heard you say total contacts Premier Agents grew 80%. Does that still mean that you are all generating around on average 10 to 20 leads per month or is this trending higher now? And then the next question, just bigger picture. When you look out, say, in 3 to 5 years these rentals start to sort of kick in here, do you think that Zillow is still primarily a Premier Agent business model or how quickly does that model shift in your opinion?
Spencer M. Rascoff
Sure. So contacts to Premier Agents were up 80% year-over-year. We're citing that specific for the first time to help investors understand the impact that advertising has have -- is having on our business. It would be a gross misunderstanding of our business results to conclude that our audience growth is hollow audience. And these are serious home shoppers, and the fact that lead counts -- lead volumes are growing even faster than unique users is one way to demonstrate that to investors. The number of leads per Premier Agent per month is still in the 10 to 20 range. And just to extend upon that because the reason you're interested in that, I assume, is to think about Premier Agent ROI. We think the ROI to the Premier Agent is better -- either the same or better than it was a year or 2 ago. Part of that is based on ability to drive more listing lease to Premier Agents. Part of it is some of the software that we're providing to help them improve their conversion rate. Part of that is increasing home values, which are driving larger commission checks for each close. So we think -- yes, the lead counts are substantially similar to where they were a year ago, and we think the ROI is the same or better. The second part of the question was long term. Premier Agents today is -- gosh, 2/3 of our total revenue, I should do the math on that.
Chad M. Cohen
Spencer M. Rascoff
About 2/3. If your question is if I look out 5 years, what will Premier Agent be? There's no question that is rental revenue, which will be the next leg of this stool. As rental revenue comes online over the next couple of years, that will still share, if you will from Premier Agent. And I can absolutely foresee a time in the future, where our Premier Agents is less the half of our total revenue when we're at -- I don't know, significantly higher revenue levels than we're at today as home improvement kicks in and as mortgages grow and as rentals starts to monetize at a higher level.
We'll do one more from the conference call, and then we'll go to some social media questions.
Our next question will come from Heath Terry with Goldman Sachs.
Heath P. Terry - Goldman Sachs Group Inc., Research Division
Spencer, as you have launched more products like Agentfolio, can you give us a sense of what kind of adoption you're seeing for these incremental service offerings to agents, what kind of buy-in you're getting for things like the CRM offering, in website and whether or not, that buy-in, whether you want to look at it as sort of products per agent, is changing as you add new agents?
Spencer M. Rascoff
One of the most important reports that I look at on sometimes, daily, but definitely weekly basis is the adoption rate among Premier Agents of different sets of features that either we build for them inside our CRM or Agentfolio or having a Premier Agent website. There's no question that driving adoption of these types of software features is hard work, among such a fragmented subscriber base that typically not at their desk. They're running around trying to sell houses and not necessarily sitting there, waiting to learn about how to use software. So it takes a lot of hard work. We're doing a lot of the local events. We're using account management function in addition to our sales team to help drive adoption of these features. The standout in terms of adoption rates, so far, I'd say would be our Premier Agent website, where through Diverse Solutions, we're now offering free websites that are IDS-powered so they connect to their MLS. And we've roll those out on an individual agent by agent basis. That's still requires a fair amount of work on the part of the real estate agent to get the paperwork between their MLS then us, and sometimes their broker. And so even the adoption of that, relatively simple features still takes a fair amount of work. But we're 2 years, I guess, almost 2 years into that effort now, and adoption for that is among the highest of our different features of the various tools that we get to Premier Agent. At the other end of the spectrum, I would say, Agentfolio has just started literally a couple of weeks ago. We launched it in Chicago and Phoenix, and then San Diego. And I think we're just rolling it out in L.A. and the Bay Area. So just a handful of cities and in the very early days in terms of adoption of Agentfolio, at kind of the other end of the spectrum. Actually, just one other sort of strategy point, I guess, on the software platform question. I do think there is something of a subtle but I think important strategy difference going on between us and major competitors. And I just want to make sure that investors and analysts understand it. So philosophically, what we're doing is we're offering relatively lightweight, typically mobile-centric and almost always free software to help agents and also rental professionals and mortgage professionals manage their business. We're not offering enterprise-level expensive sort of brokerage level bloatware. That's not the strategy. We're not to trying to lock individual agents into a single system that they have to use to manage their business. We're being much more of an open horizontal model, where we're perfectly content with agents that use other types of CRMs. If they want to use our free CRM, great. If they want to pay a lot of money to buy somebody else's CRM, either a legacy or older company or a new entry to the startup, that's fine, too. The focus, though, is in growing audience and then providing a suite of free software tools should our agents want to use them. So it's kind of a subtle but I think important distinction.
Okay, so a couple of questions from Twitter. The Tech Editor of thestreet.com, Chris, tweets, how's the earnings? With the stock up sharply year-to-date, are there any plans for doing additional offering? So we have nothing to announce right now in terms of a follow on offering. We're always evaluating our capital needs and thinking about market receptivity to potential offering that we have nothing to announce right now.
Another one, from Neil Doshi with CRT. How should we think about your long-term vision on marketing spend and how that would play out on your long-term EBITDA margin outlook? We haven't -- we go 1 quarter out and full year on margin. And so we definitely haven't given 2014 margin outlook. What we'll do is late this year, we'll look back at 2013 and evaluate how ad spend performed for us in the year as we go into 2014 budgeting. And then, when we report first quarter 2014 results, we'll give the full year outlook for 2014. So investors will have to stay tuned for our thoughts on longer-term around 2014 margin.
And an analyst with Needham & Company, Shawn Rassouli, tweets, can you comment on the mix of the mortgage loan request between finance and purchases and what impact do you expect to see on volumes in a rising interest rate environment? Also have you seen any impact on loan request volume, following a competitor's launch of mortgage rate table product in late Q2? So on the last point we haven't seen any impact, no change in the competitive landscape in terms of the mortgage, the mortgage business. And the purchase refi mix is very heavily weighted towards purchase loans. It's -- it always has been even when mortgage rates were very low and we had a lot of refi business. The fact that Zillow Mortgage Marketplace is attached to a real estate shopping site always causes Zillow Mortgage Marketplace to skew towards purchased loans as compared with refi.
Operator, we'll go back to more calls from -- or more questions from the conference call.
The next question in our queue is Aaron Kessler with Raymond James.
Aaron M. Kessler - Raymond James & Associates, Inc., Research Division
First, Chad, can you give us -- or clarify -- can you reclassify the revenues at all? I notice the mortgage is a separated out. I thought that was a little different than what you have before. And then just for Spencer, in terms of the CRM investments that you're seeing kind of across the space, can you just give us a sense for what's going on there? Is it essentially trying to close the loop more and maybe to drive higher ROI for the agents so that they can see the ROI. Do you think you've seen a number of your competitors investing more in CRM solutions recently?
Chad M. Cohen
This is Chad. What we did was to give our investors a little more visibility into our business. And to break out in subcategories, our Marketplace business. So we have now 2 subcategories that sit within Marketplace: they're real estate and Zillow Mortgage Marketplace. Within real estate, we have our core Premier Agent business, as well as the Diverse Solutions and a very small contribution from rentals. And then Zillow Mortgage Marketplace, separately, we have our core shopping platform for mortgages, as well as our Mortech business. So overall, our Marketplace business which grew 86% year-over-year in the second quarter to $36.5 million is comprised of real estate, which grew 80% year-over-year, $30.6 million, and Zillow Mortgage Marketplace, which grew 126% year-over-year to $5.8 million.
Spencer M. Rascoff
And on the CRM question, so we have a CRM that we call Agent Hub, which is a free mobile and web-based CRM. Basically, what it does is it lets agents keep track of the leads that comes to them through Zillow. It lets them write private notes to themselves. It lets them save information about the clients. It let's them sign those clients up to receive new listings notifications directly from that agent's MLS. And then of course, now we also have Agentfolio, which allows for what I consider basically a 2-way CRM. It allows the client, the buyer, to send information to the agent. I don't want to see this house. I saw this house already. I don't like this house because of x, y, z. And then the agent can communicate back and forth through Agentfolio with the home shoppers. So it's basically another CRM is a decent way to think about it. Also powered by MLS listings via Diverse Solutions. The reason that we're doing this is to help agents keep track of their leads better. It's not that 10 to 20 leads a month agents that even I'm talking about here. I'm talking about the agents that get 50, 100, 200 leads a month from Zillow, and probably, dozens of leads a month from other sources as well. And helping those agents keep track of all those leads and remember which houses have I shown to which client, who's at what stage of the purchase process is incredibly important. I would -- back to the strategy point, that kind of how we think about these agent tools, a pretty good comp, from a strategy standpoint, would be Google Buying Urchin and renaming it Google Analytics and giving it away for free. The reason that Google gives away Google Analytics is they figured if everybody out there that runs a website has really good data on what's happening on their website, then they'll buy more AdWords from Google. And Google is not interested in maximizing the revenue from Google Analytics. And if advertisers like Zillow or eBay or Amazon and want to go by more expensive website analytics tools from somebody else, then that's fine with Google. They're not really interested in making money from Google Analytics. They're interested in making money from the big pie, which is selling media. And that's our strategy as well. The reason that we're giving away Agentfolio and the reason we giving away the Agent Hub, our CRM as part of Zillow, is to help these agents keep track of their leads. We're not interested in the TAM of selling software tools to agents or brokers. We do not think that is a big pie. We think the big pie here is selling access to our audience, and that's what we're focused on.
Our next question will come from Dan Kurnos with Benchmark Company.
Daniel L. Kurnos - The Benchmark Company, LLC, Research Division
Just 2 quick questions. Maybe to drill a bit more down into the rental side of the business. We've seen Trulia get a little bit more aggressive on rentals and obviously move -- is benefiting from the recent operating agreement revision from the NAR. So how do you see that marketplace evolving and what are you guys doing to differentiate yourself? And then secondly, maybe just a bit of a housekeeping question. We saw a decent quarter-over-quarter recovery in Display revenue per unique despite the impressive traffic growth. Just wondering if there's anything beyond seasonality there?
Spencer M. Rascoff
Sure. On rentals first, I'd say our strategy on rental is quite different from those 2 main competitors. Firstly, I would describe it as drilling our own wells. So we have not outsourced a significant part of our rentals product to another company, as one of our competitors has. And we're not a relatively new entrant into the rentals game because our affiliation has prohibited us from going after that opportunity. So we're unencumbered and sort of drilling our own well here. And we have audience leadership, the Zillow and HotPads, or even the Zillow rental network is the largest rental network on the web, according to comScore. So the focus now for us is turning on that monetizations spigot. We already drive more rental leads a month than for-sale leads. And yet, we don't typically monetize those rental leads. So we are now starting to sell on a cost per paid inclusion basis, which starts to monetize the multi-family portion of that huge river of leads that flows through Zillow and HotPads. And Greg Schwartz, our Chief Revenue Officer, the same person that helped build the Premier Agent business with hundreds of sales reps and a huge business on the Premier Agent now, is focused on building this rentals business for us and building that out. On the Display side, we have this trade-off every single day, where we debate and have to decide between the user experience on the one hand and maximizing Display revenue on the other. And so we make decisions everyday that typically prioritize the user experience over maximizing Display revenue. And in light of that, given those constraints, the product team and I place on the Display sales team, I'm incredibly proud of 30% year-over-year growth on the Display side of the business. Said succinctly, if we wanted to grow Display faster, we could, but we choose not to, because we think that devoting more space to Display inventory would jeopardize or potentially jeopardize the user experience and have longer-term implications on the engagement metric that we're trying to drive through the website and mobile apps.
We'll move to another mobile question -- or sorry, another social media question. This one is from Mike Graham with Canaccord Genuity. Any updates on how the recovering real estate market impacts your business? I would describe the housing recovery, which we are absolutely in the throes off -- this is a full-blown recovery right now -- as a nice tailwind to the business. It's a cherry on top to our already stellar results. It's not what's driving the business results, but it is a tailwind. So that's how we describe it. And specifically, the way that it rolls through the business, is on I would generally describe it as agent optimism. Real estate agents are making money. They're closing deals. They're growth-oriented. They're leaning forward, not leaning leading back. They're looking at ways to grow their business and invest. They're hiring assistants, transaction coordinators. They're doing deals, and that puts them in growth mode and then makes them more confident to spend media money with us.
Next question, also from Twitter, is from Brett Proctor, @opsguy. He writes how do rising interest rates affect your bottom line? Has there been a correlation in the past? Interest rates have come up -- gosh, almost 100 basis points now for a 30-year fixed over the last couple of months. The impact that had is in some markets that is slowing the rate of appreciation. And we've seen some markets up 20% year-over-year and rising interest rates are slowing that to but still unsustainably high plus-10% type year-over-year range. What's happening is investor buyers, cash buyers are moving out of the market and they're becoming a smaller portion of the market as mortgage rates move up. But we're not seeing an impact of rising interest rates impacting our business negatively. In fact, we hear from Premier Agents all the time that because inventory is moving so quickly, it can be hard for them working with a traditional buyer to get a deal done because inventory keeps getting snatched up by investor buyers. So on some level, there's actually something of a benefit of the rising interest rates, getting cash buyers or rather getting investor buyers out of the market and helping more through the normal homebuyers win offers, and that, of course, helps the Premier Agent ROI.
Operator, we'll go back to the conference call, please. Good questions.
The next question comes from James Cakmak with Telsey Advisory Group.
James Cakmak - Telsey Advisory Group LLC
So, I guess, going back to the advertising commentary that you made. I understand that you really can't provide a quantitative kind of outlook going forward. But you are seeing the successes, and they're clearly evidenced by your results this quarter. But as we do look forward, the white space is so huge right now. I mean, what type of milestones kind of are you looking to hit with your advertising spend, where you can say, okay, we've reached this kind of level and at this point, we feel comfortable with where we are, and we will be inclined to pull back? And then secondly, with the mortgage business, it's accelerating here, as we've seen in 2Q. As we look, I guess, kind of a couple of years out, how big of a proportion of the business do you see mortgage being?
Spencer M. Rascoff
Okay. So on advertising, just to paraphrase your question or as I understand it, you're trying to get a sort of long-term margin or medium-term margin and when might we pull back on advertising or when might advertising as a percent of revenue start to decline. Not sure. It definitely doesn't feel like now is the time. It feels like we're still very much in the low hanging fruit phase. You can certainly see that in the kind of the metrics that we've shared. You can see it in a lot of the metrics that we haven't shared. The philosophy going into 2014 will frankly be to think about what an appropriate full year EBITDA might be for 2014, to model what we think the revenue for 2014 will be, to see what sort of plug that leaves open for advertising and then to run that through the model to sort of strap test what type of revenue and EBITDA would come at the bottom. And to sort of feel if that -- if those 3 numbers start to feel right relative to one another. Okay, what if for full year we went plus 10 on EBITDA? What if for full year we went minus 10 on EBITDA? How much more would that free up for advertising and what impact would that on our revenue, et cetera? And that's effectively how we arrived at this $20 million number for 2013, and that's the process that will go through late this year as we create 2014. So I guess, at a high level, 2013 and probably not 2014 are not the times to be timid on advertising. This is still very early days in terms of brand growth, and I don't see that changing in the near future. On mortgages, the mortgages is around a $25 million business, and we're quite focused on how do we grow that 10x, how can that become a $250 million plus business for us. And I think we have a lot of the building blocks in place. We have incredible consumer experience, so we have great relationships with our lenders, both through the Zillow Mortgage Marketplace products but also through Mortech. We have a challenge though, frankly, on the mortgage business, which is, how do we grow awareness for Zillow Mortgage Marketplace? How do we convince people that Zillow is a great place to shop for mortgage? It's not just a place to find out the Zestimate for your house, not just a place to shop for -- to buy a home, not just to place to get rentals but also a great place to get a mortgage. And that, if we can succeed in crossing that chasm, then we can create a very big business, a 10x or 20x type business in mortgages. And if we can't, then mortgages will be a nice business, a very profitable business but won't ever be a breakout $0.5 billion type of revenue business for us. So I think that is the question for us on mortgages. And we've had good success to date of getting where we have, and a lot of it's been through mobile, where around 1/3 of Zillow Mortgage Marketplace business now comes from mobile, pretty much a white space, competitively speaking, where we've been able to really build great leadership. But now we also have to do it on the desktop in terms of brand awareness in the U.S., for Zillow Mortgage Marketplace.
Our next question will come from Mark May with Citi.
Mark May - Citigroup Inc, Research Division
A question on the TV advertising campaign. To the extent that you've been able to isolate like a cohort of customers that you get from this program, I wondered if you could share with us any statistics in terms of comparing that typical user from users that you're acquiring from other channels, maybe the time they spend on the site, their propensity to repeat or their propensity to send out leads? And then how that compares to the kind of customers you acquire from other channels? Another question on the impression-based transition. I was trying to reconcile or just understand, I think the ARPU, blended ARPU, has been relatively stable for a few quarters here. I think it was up 3%, I believe you said. I believe in your prepared remarks, you also mentioned around 50% of new bookings from existing customers. So the question I'm trying to ask is maybe, could give us some color of what a new agent looks like in terms of their average spend versus what kind of an existing agent looks like today?
Spencer M. Rascoff
Sure. Thanks, Mark. I'll take the first question on advertising, and then Chad will take the ARPU question. The -- let's see -- the TV visitors look like serious home shoppers in terms of the number of page used per session propensity to contact a Premier Agent per session, propensity to become a registered user, sign up for e-mail alert, et cetera. And so in that regard, whether it be a free home shopper visitor that comes to us organic, through SEO, for example, or a paid home shopper that comes to us through SEM, for example, TV visitors look very similar. So these are great visitors, and we're happy to have them. And I guess, the only statistic that we offered up for us today on this regard is that lead volumes are up even higher than unique users. Chad, on ARPU?
Chad M. Cohen
On ARPU, I think you remember back, Mark, a couple of years ago, about 30% of our bookings went to existing agents buying more inventory. That started to grow to about 40% this time last year. And then as you mentioned in our prepared remarks, that number sort of peaked at about just north of 50%. So existing agents, obviously finding a lot of value in the Premier Agent Platinum program are continuing to buy more. The second question about sort of how does a new agent -- juxtapose the new agent's ARPU versus an existing agent's, well, existing agents are generally spending north of the average, where our new agents, largely because they have a platform now on an impression basis that allows them to come in with a much smaller buy, they're no longer fixed into 25% increment and not to when they buy by an additional 25%. They can come in with a much smaller buy, systemize their approach to the platform and continue to buy up. So new agents are coming in underneath the average ARPU of 266. We haven't given a number before, but just know that it's significantly less than 266.
Mark May - Citigroup Inc, Research Division
That's helpful. Maybe a good follow-up. Any interesting data points now that you've been on impression for a while, of like a typical agent that signed up early in the process and a new agent that came onboard at the lower entry-level bite-sized impression and how that typical agent has scaled today?
Chad M. Cohen
Yes. I mean, the typical trend that we see, the longer the agent stays on the program, the more they're able to systemize their approach, and as Greg put it at the Investor Day, king-making that agent, so the more success they have in the program at working on 10 to 20 contacts that we send them every month. And so as Spencer mentioned earlier was that we tended to see the conversion rates, move up slightly for those agents that stay on program longer, where they're no longer at the average of 3% average conversion rates but they're moving further up in the, say, low double-digit conversion rates.
Spencer M. Rascoff
Back to your couple of social media questions. Connor [ph] asks, when do you start to separate out rentals monetization? Not for a while. Not until it becomes a significant portion. I think we waited on mortgages to break that out until it was greater 10% of the total revenues. So that's a probably good milestone for us to focus on for rentals.
A question from Brian Bolan from Zacks. Can you give some color on how Premier Agents are buying? Is it becoming a shorter decision time cycle for them than a year ago? It's really hard to know. I will say that there's no question that among the many benefits of advertising, one is a higher level of relevance to Premier Agents, to real estate agents, that we see all the time now in social media or in online message boards or when we talk to agents, sort of sensitive, of fait accompli of Zillow's leadership in terms of the audience. That, okay, now it's time for me to become a Premier Agent. I've seen your ads. My clients have been talking to me about Zillow and Zestimates for several years. All these other agents in my office are Premier Agents already. Okay, I'm in. And so I do feel that has accelerated as compared with a year or 2 ago. But I can't -- I don't have data to prove it.
Next question was from first adoptor; one, agent; and others, about EPS just to sort of clarify the EPS number. So GAAP EPS was negative $0.30 for the quarter versus consensus of negative $0.40. So we beat on GAAP EPS pretty handily. And then pro forma EPS, which is pro forma for stock based comp, consensus was negative $0.11. And although, we don't actually report it, it will be about $0.01 EPS, a $0.01 profit, so we beat it by $0.12 on pro forma EPS. So we beat on both measures of EPS, GAAP or pro forma.
Operator, we're starting to run out of time. Are there other questions from conference call we can answer?
We do have one currently -- one additional line left in the queue, and it comes from Chad Bartley with Pacific Crest.
Chad Bartley - Pacific Crest Securities, Inc., Research Division
I'll keep it to one. After the strength in Q2 and then looking at seasonality last year in Q3, Q4, I just wanted to ask about the guidance. It seems a bit on the conservative side if you look at kind of the midpoint and what that implies for sequential growth, Q3, Q4. So anything in particular you guys are factoring in or anything we should think about?
Chad M. Cohen
This is Chad. As we mentioned we're raising our outlook for the full year, to $186 million to $188 million. And at the midpoint of the third quarter numbers, we're looking at about 57% growth. I think what you're doing is you're backing into sort of implied Q4 revenue number, which is around $51 million, $52 million. And I think when you look at those implied numbers, you have to just take into consideration the level of visibility that we have with Q4 Display, also at this point of time. We have very limited visibility given that most of the iOS that we signed are about 3 months in length, and so we have to temper that guidance with our level of visibility into the Display business, which is still about 20% of our revenue. So I would say $186 million to $188 million. We're very happy and pleased to be raising our full year revenue range to that level. And to the extent that we just execute and aggressively go after those targets over the next couple of quarters, hopefully, we can beat them. But that's what we're comfortable in terms of providing guidance for today.
Spencer M. Rascoff
Thank you, operator. Thanks, very much to the shareholders on the call for owning Zillow. And for those interested in the story, thank you for supporting Zillow as we work hard to build an enduring household brand. We really believe that the company that serves the consumer best wins the largest sustainable audience, is well positioned to take the lion's share of the media revenue and profit in the category. We have a lot of work to do, and we're in very early days, but we're excited. And thank you very much for joining the call.
Thank you, gentlemen, and thank you, ladies and gentlemen. Again, this does conclude today's call. Thank you for your participation, and have a wonderful day. Attendees, you may now disconnect.
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decided: May 15, 1984.
CUMBERLAND COUNTY NURSING HOME, PETITIONERv.COMMONWEALTH OF PENNSYLVANIA, UNEMPLOYMENT COMPENSATION BOARD OF REVIEW, RESPONDENT
Appeal from the Order of the Unemployment Compensation Board of Review in case of In re: Claim of Shirley Hockley, No. B-212558-B.
Douglas B. Marcello, Mancke, Lightman & Wagner, for petitioner.
James R. Humer, for intervenor, Shirley Hockley.
Judges MacPhail, Doyle and Blatt, sitting as a panel of three. Opinion by Judge Doyle.
[ 82 Pa. Commw. Page 429]
Petitioner, Cumberland County Nursing Home (Employer), appeals from a decision of the Unemployment Compensation Board of Review (Board) which granted compensation to Shirley Hockley, finding no ineligibility under Section 402(e) of the Pennsylvania Unemployment Compensation Law.*fn1
Shirley Hockley (Claimant) was employed by the Nursing Home as a practical nurse, when, on February 2, 1982, she injured her ankle and was granted a six-month leave of absence. During the absence, Claimant remained in communication with her employer, and indicated that her physician had not given her a date on which she would be able to return to work. On July 26, 1982, the employer informed Claimant by letter that because she would not be able to return to work by the end of her leave of absence, her position would be terminated on that date.
Claimant was terminated at the end of her leave, and was later granted unemployment benefits by the Office of Employment Security. This award of benefits was reversed by the referee, whose decision was subsequently affirmed by the Board. On appeal to this Court, the matter was remanded upon stipulation
[ 82 Pa. Commw. Page 430]
of the parties for the taking of additional evidence. The Board directed that a new hearing be held, and, upon a review of the entire transcript, issued its present decision allowing benefits.
In its present appeal, the employer argues that the Board erred in failing to find Claimant guilty of willful misconduct. Initially, we note that our scope of review in cases where the party with the burden of proof has not prevailed before the Board*fn2 is limited to a determination of whether the findings of fact can be sustained without capricious disregard of competent evidence and are consistent with each other and with the conclusions of law. Bono v. Unemployment Compensation Board of Review, 77 Pa. Commonwealth Ct. 31, 464 A.2d 710 (1983). Although employer has erroneously addressed its argument to whether there exists substantial evidence to support the findings of fact, we shall review the claim in light of the appropriate standard.
The employer argues that there is no evidence to support the Board's finding that the Claimant indicated her readiness to work prior to her termination on August 2. The employer argues that the Board disregarded evidence which established not only that Claimant consistently indicated her inability to work, but further that she failed to notify her employer upon learning from her physician of a date on which she could return to work.
A review of the record reveals some merit to the claim that the Board capriciously disregarded the evidence on this issue. We cannot agree, however, that such a conclusion would require a reversal or remand of the Board's decision, for even had the Board found
[ 82 Pa. Commw. Page 431]
the facts as asserted by the employer, such findings would not constitute willful misconduct as a matter of law. Willful misconduct has been defined by this Court to include disregard of standards of behavior which the employer has the right to expect of his employees. Dudash v. Unemployment Compensation Board of Review, 61 Pa. Commonwealth Ct. 186, 432 A.2d 1150 (1981). We have held that an employer has a right to expect that an employee on sick leave will report to work once he is cleared to do so by his physician, or that he will notify his employer of his reasons for failing to return. Dudash, Edwards v. Unemployment Compensation Board of Review, 51 Pa. Commonwealth Ct. 556, 414 A.2d 1124 (1980); Bajor v. Unemployment Compensation Board of Review, 37 Pa. Commonwealth Ct. 401, 390 A.2d 890 (1978).
In the present case, the Claimant was given clearance by her physician on July 29 to begin work on August 16, two weeks after the end of her sick leave. At the time she received the clearance, however, she had already been informed that she would be terminated at the end of her leave because of her inability to return to work by that date. Thus, at the date of her termination on August 2, Claimant was still unable to report to work, and could not be expected to do so. In addition, the Claimant could not be expected to notify her employer of her clearance for work when such clearance would not become effective until after her position had been terminated. Therefore we conclude that such facts, even had they been found by the Board, would not constitute willful misconduct.
Since the remaining findings of fact by the Board are supported by the evidence and are consistent with the conclusion of law, we shall affirm the award of benefits, and direct that such benefits be calculated from August 16, 1982, the date of Claimant's initial availability.
[ 82 Pa. Commw. Page 432]
Now, May 15, 1984, the order of the Unemployment Compensation Board of Review in the above referenced matter, No. B-212558-B, dated May 27, 1983, is hereby affirmed. The matter is remanded for a calculation of benefits consistent with this opinion.
Jurisdiction relinquished.
Affirmed. Case remanded.
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