So far, 2016 has been quite a year for Zillow Group, which operates the real estate portals Zillow, Trulia, StreetEasy, HotPads and Naked Apartments.
The company settled a lawsuit with realtor.com operator Move, Inc., that came with a hefty damages request ($2 billion), rolled out extensive changes to its Premier Agent app, and it just acquired Bridge Interactive — so what’s next?
The company released its second-quarter financial results today, showing revenue at $208.4 million in Q2 and expenses at $363.7 million.
The good news for investors is that the company hit a record-breaking revenue quarter; its revenue increased 31 percent year-over-year — however, it’s still operating at a net loss of $155.3 million.
That’s a hefty number, outpacing last quarter’s $47.6 million net loss, which included $15.7 million in legal costs resulting from the aforementioned lawsuit battle.
Zillow Group estimated that the suit would cost the company a total of $50 million to $55 million in last quarter’s earnings call for investors. The actual cost was a $130 million settlement, which goes a long way toward explaining this quarter’s loss.
The revenue
This was a record-breaking revenue quarter for the company. Marketplace revenue ($191.6 million) increased 44 percent year-over-year, excluding revenue from Market Leader, which Zillow sold last year.
That $191.6 million in marketplace revenue includes:
- Premier Agent revenue — $147.1 million, up 28 percent quarter-over-quarter
- Other real estate revenue — $26.1 million, up 254 percent quarter-over-quarter (this includes agent services, dotloop, StreatEasy, Naked Apartments, rentals and “other offerings to endemic advertisers that are not traditional display advertising”)
- Mortgages revenue — $18.4 million, up 77 percent quarter-over-quarter
- Display revenue — $16.8 million, down 35 percent quarter-over-quarter. “The decrease is primarily a result of the company’s strategy to deemphasize display advertising and improve the user experience,” wrote the company in its earnings statement.
More than 171 million unique visitors came to Zillow Group sites in May — an all-time high, according to the company.
And Zillow Group said that it captured 78 percent market share of the mobile-only category in Q2 2016, too.
“Record revenue and traffic growth were highlights of Zillow Group’s tremendous second quarter,” said Zillow Group CEO Spencer Rascoff in a statement. “We continue to command significant category leadership on mobile and web, reaching an all-time high of unique users in May and achieving our largest market share of the real estate category.
“It is clear that our monetization on mobile is benefiting from our significant market leadership, which now captures 78 percent of the mobile-only category. We are executing well against our long-term strategic priorities to increase our audience size, grow our Premier Agent and emerging marketplaces, and attract and retain the best talent in the industry.”
The losses
The GAAP (generally accepted accounting principles) net loss was $156.1 million, “which includes the impact of a $130.0 million litigation settlement and $12.5 million in related legal costs,” wrote the company in the statement.
Last year’s second-quarter GAAP net loss was $38.7 million.
Adjusted EBITDA (earnings before interest, taxes, deductions and amortizations) was a negative $101.3 million in Q2 2016.
“Excluding the impact of the $130.0 million litigation settlement, adjusted EBIDTA in the second quarter of 2016 would have been $28.7 million, or 14 percent of revenue.”
Premier Agent
Leads to Premier Agent advertisers in Q2 grew to 4 million, a 50 percent year-over-year increase, said Zillow Group, and customers who have been Premier Agent advertisers for more than one year boosted their spending by 57 percent in Q2 2016 than in Q2 2015.
Future forecasts
Zillow Group is increasing its 2016 revenue outlook to between $830 million and $840 million, up from $825 million to $835 million.
