Zillow Hits a Q2 Home Run with results "even better than we had hoped for"

On the day that Rightmove announced some underwhelming results and REA Group announced some largely decent results fellow portal giant Zillow has announced a bumper set of results that has seen its stock price surge. Highlights of the Q2 results include:

• Total consolidated revenue grew 148% year over year to $1.1 billion.

• Segment loss before income taxes was $41.5 million, $98 million and $13.1 million for the IMT, Homes and Mortgages segments, respectively.

• Adjusted EBITDA beat company expectations for all three segments.

• The company exited the quarter with a strong balance sheet, growing cash and investments to $2.6 billion from $2.4 billion as of the end of 2019.

• Zillow’s advertising revenues from its main advertising product ‘Primer Agent’ saw year-over-year revenue growth accelerated to 11% from 6% in Q4 2019.

• The iBuying segment’s revenue and Adjusted EBITDA outperformed company expectations significantly, delivering nearly $770 million in revenue. The company achieved the highest sales velocity since Zillow Offers launched.

• During the quarter, the company sold 2,394 homes and purchased 1,479 homes through Zillow Offers, ending Q1 with 1,791 homes in inventory, intentionally down from 2,707 homes at the end of the fourth quarter.

• Traffic to Zillow Group's mobile apps and websites reached 192.5 million average monthly unique users, an increase of 6% year over year, driving 2.1 billion visits during the quarter.

Speaking about the results, Zillow CEO Rich Barton said:

"Zillow’s second quarter results are even better than we had hoped, and firm up our belief that powerful tailwinds in both real estate and technology are rapidly converging, with Zillow at the nexus".

Obviously the revenue numbers need to be taken in the context of iBuying being a very capital intensive business model, but that said, the results are pretty impressive all around.

Zillow’s market dominance in its core business of marketing houses already seemed unassailable and now with record traffic to both the portal website and app as well as increased revenue the position is only enhanced. As with both Rightmove and REA Group, revenue from Zillow’s core product dropped for the quarter which likewise can be chalked up as a result of the discounts offered to struggling customers. Given the circumstances and drastic outlook at the height of the lockdown, a 17% drop for the quarter to $192 million doesn’t seem too much of a drop-off.

As for adjacent revenue streams that Zillow has been trying to get into that are closer to property transactions, the “moon shot” of iBuying looks like it might be back on track to turn a profit after being shut down during lockdown before being restored to all 24 pre-pandemic cities this week. Zillow’s goal of becoming a one-stop-shop for property transactions seems one step closer to a reality.

As a true west coast tech company CEO, Barton, who recently let employees work remotely indefinitely, was quick to espouse the importance of the work culture at the company and praised how well Zillow has coped as a company with external circumstances.

“Even more important than the business results is the way our team has responded over the past several months, as we all grapple with fear, loss, protest, and anger through a health crisis and social reckoning. We’ve managed through all of this with a strong commitment that we can and will do more to support our communities and address systemic barriers in real estate."