Zillow Sees Better Than Expected Q4 Results and Hails Arrival of 'Super App'

The U.S. real estate portal giant Zillow has announced its earnings for Q4 of the 2023 financial year. Highlights from the Seattle-based company's report for the period include:

• Q4 revenue was $474m, up 9% year over year and above the midpoint of the company's outlook range by $31m.
• Net loss was stable year-on-year at $72m for Q4 while for the year the figure stood at $158m.
• Q4 Adjusted EBITDA was $69 million, $19m above the midpoint of our outlook range.
• $2.8 billion cash and equivalents was down from $3.3 at the end of Q3 because of the $400m closing cash purchase price for the acquisition of Follow Up Boss in Q3 and $88m in share repurchases.
• Traffic was stable at 2.2 billion visits in Q4.

While losses widened and revenue decreased 5% on a yearly basis, the results represent better-than-expected performance for Zillow amid a depressed U.S. housing market. A company press release was keen to point out that Zillow's Q4 results outperformed both the wider housing market and the company's expectations. Zillow shares surged nearly 6% in after-hours trading.

“We reported great revenue numbers across the whole of our increasingly diversified and growing business. This is evidence of the progress we’re making to transform the way people buy, sell, finance and rent homes by continually adding more functionality, software and services to Zillow’s housing super app,” said Zillow co-founder and CEO Rich Barton.

“Our progress in crafting an integrated customer experience in our early markets has given us the confidence to press on the accelerator and expand this experience to more markets in 2024. We have the leading real estate audience and a brand that is a household name, and we have barely scratched the surface on a real estate market with $2 trillion of total transaction value.”

Zillow's Residential segment continued to account for nearly three quarters of total revenue and despite the flat year-on-year performance of its flagship product Premier Agent, outperformed a market that saw transaction volumes drop 17% over the course of 2023.

The segment is set to be boosted in 2024 by revenues from the company's Listings Showcase product which uses a model common among international portals in seeing agents pay extra for enhanced listings with enhanced visibility.

Listings Showcase was introduced in June and according to a shareholder report has seen significant demand from listing agents and significant engagement with consumers. Zillow is aiming for 5–10% overall penetration for the product which the company believes represents a $150–$300 million annual revenue opportunity.

The other significant, although not unexpected, news from Zillow's Residential segment is that the company plans to expand the number of its so-called 'enhanced markets' from 9 to 40 by the end of 2024. The enhanced markets see the portal work exclusively on a commission-share basis with a reduced number of agent clients.

Zillow's rentals business continued to see excellent growth in Q4 and throughout 2023. Revenue was up 37% at $93 million with the company expecting further growth in 2024, especially in the Multifamily category which has traditionally been dominated by CoStar-owned Apartments.com.

The company's mortgage business continues to be severely hampered by a downturn in the market, especially in the valuable refinancing segment. Revenue for the year was down 19% ($96 million) but was up 22% on a quarterly year-on-year basis as purchase loan origination volume picked up. Significantly, the company noted that it was beginning to see the long-awaited mortgage attachment rates of 15% in some of its original enhanced markets (Atlanta, Phoenix, Raleigh, Denver).

Although Zillow's results came only two days after the launch of its rival's billion-dollar marketing campaign, neither the letter to shareholders nor a press release contained any mention of CoStar or its bid to supplant Zillow. Instead, shareholders were simply reminded of the company's brand power in a small section near the bottom of the release.

As for the much talked about 'Super App' that Zillow has been promising will connect customers to all stages of their home journey for a few years now, apparently it's already available.

"The housing super app is here today. It’s called Zillow."

The company released an updated investor strategy presentation outlining its plans to make its existing app into a one-stop-shop for buyers, sellers, renters and agents.