Zillow Suffers Litigation Drag on EBITDA Amid Growth

Anna Game Lopata

August 5, 2016

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Zillow CEO Spencer Rascoff in court this June. Image credit Geek Wire

Zillow Group reported record revenue results of $208.4 million for quarter ending 30 June 2016, an increase of 31 per cent year-over-year, excluding revenue from Market Leader, which was divested in the third quarter of 2015.

The USA’s number one real estate marketplace posted an all-time high of more than 171 million unique users in May recorded by  Zillow Group consumer brands Zillow®, Trulia®, StreetEasy®, HotPads®and Naked Apartments®.

Zillow Group also says it captured 78 per cent market share of the mobile-only category.

Leads to Zillow Group Premier Agent® Advertisers for the second quarter of 2016 grew nearly 50 per cent year over year to more than 4 million.

Cost of  litigation

However the ongoing litigation between Realtor.com and Zillow, which finally ended this year, took its toll in the quarter.

Zillow reported a GAAP net loss of $156.1 million in the second quarter of 2016, which includes the impact of a $130.0 million litigation settlement and$12.5 million in related legal costs, compared to GAAP net loss of $38.7 million in the same period last year.

As a result, adjusted EBITDA was $101.3 million in the second quarter of 2016,reflecting a 12 per cent decrease from $21.0 million the previous year.

Excluding the impact of the $130.0 million litigation settlement, Zillow says adjusted EBITDA in the second quarter of 2016 would have been $28.7 million, or 14 per cent of Revenue.

Record growth

“Record revenue and traffic growth were highlights of Zillow Group’s tremendous second quarter,” says Zillow Group CEO Spencer Rascoff.

“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% of the mobile-only category,” he says.

“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.”

Second Quarter 2016 Financial Highlights

  • Revenue increased 31% to $208.4 million from $158.7 million in the second quarter of 2015, excluding revenue from Market Leader, which was divested in the third quarter of 2015.

  • Marketplace Revenue increased 44% to $191.6 million from $133.0 million in the second quarter of 2015, excluding revenue from Market Leader.

    • Premier Agent Revenue increased 28% to $147.1 million from $115.2 million in the second quarter of 2015.
    • Other Real Estate Revenue1 increased 254% to $26.1 million from $7.4 million in the second quarter of 2015.
    • Mortgages Revenue increased 77% to $18.4 million from $10.4 million in the second quarter of 2015.

    • Display Revenue decreased 35% to $16.8 million from $25.8 million in the second quarter of 2015. The decrease is primarily a result of the company’s strategy to deemphasize display advertising and improve the user experience.

Operating and Business Highlights

  • More than 168 million average monthly unique users for the second quarter of 2016.

    • All-time high of more than 171 million unique users in May to Zillow Group consumer brands Zillow, Trulia, StreetEasy, HotPads and Naked Apartments, an increase of 20% year-over-year.
    • In June, Zillow Group’s market share was up 4 percentage points since March 2016, capturing 67% of the mobile and web real estate audience.2
    • When looking at mobile-only, Zillow Group’s market share is even larger, capturing 78% of the category.

  • The Premier Agent marketplace continues to accelerate  

    • Total sales to Premier Agent Advertisers who have been customers for more than one year increased 57% year-over-year.
    • Sales to existing Premier Agent Advertisers accounted for 70% of total bookings.
    • Premier Agent Advertisers who spend more than $5,000 per month:

      • Increased 73% year-over-year on a total dollar basis.
      • Increased 68% year-over-year in the number of agent advertisers.

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Acerca de Lucas Vargas:

  • Empezó en Grupo ZAP como el VP de Sales y en 2016 cuando la empresa tenía 60 empleados. Fue nombrado COO de VivaReal tomando el mando de Brian Requarth el Co-Fundador. VivaReal lanzó en Colombia y se trasladó a Brasil. En 2017 se hizo CEO del Grupo ZAP.
  • Ha trabajado en Mexico en PWC y en el Banco Santander
  • Tiene un Master de Business Administration de Harvard
  • En noviembre este año después de la fusión de OLX Brasil y Grupo ZAP fue nombrado el CEO del OLX Business Unit. Lidera la empresa junto con Andries Oudshoorn y Marcos Leite
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Simon Baker is the Founder and Executive Chairman of Online Marketplaces and Property Portal Watch. Involved with property portals for 15 years, he’s a well-recognized expert and industry consultant.
As former CEO/MD of the REA Group for 8 years, Simon led the group to its current market-leading position. When he joined REA Group in 2001, it had $4m in revenues, $6m in losses and an $8m market cap.
By 2008, the company presided over $155m in revenues, $35m in EBITDA and enjoyed a peak market cap of $1b. Simon is currently Chairman of the Mitula Group and Real Estate Investar and a serial portal founder and, investor.