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Zillow Group (ZG) Q1 Earnings and Revenues Beat Estimates

Zacks Equity Research
·6 min read

Zillow Group ZG reported first-quarter 2020 non-GAAP loss of 25 cents per share, narrower than the Zacks Consensus Estimate of a loss of 35 cents. However, the company had reported a loss of 2 cents in the year-ago quarter.

Total revenues soared 148% year over year to $1.126 billion and surpassed the Zacks Consensus Estimate by 6.5%.

Strong improvement in Homes segment sales and momentum in Premier Agent business primarily drove year-over-year growth. Further, robust demand for Zillow Offers led to top-line improvement.

Further, management is banking on platform capabilities like proprietary Zillow 3D Home technology to enable virtual home tours for Zillow-owned homes and virtual consultations from the company’s broker and Premier Agents as prospective buyers opt for social distancing amid the pandemic.



Notably, shares of Zillow Group have returned 43.5% in the past year, against the industry’s decline of 1.6%.

Revenue Details

Homes segment revenues (68.4% of total revenues) came in at $769.9 million, soaring 499% from the year-ago quarter’s $128.5 million.

During the quarter, Zillow Group bought 1,479 homes and sold 2,394 through Zillow Offers, ending the quarter with 1,791 homes in inventory, down from 2,707 homes at the end of the fourth quarter.

Notably on Mar 23, Zillow Group announced that it will temporarily stop home buying for Zillow Offers in all its markets due to the coronavirus pandemic. The company stated that operations for Zillow Offers will resume once the crisis has been dealt with. The move to halt the purchase of homes was made with the aim of reducing spending in this time of crisis and to ensure the safety and health of all stakeholders in the company. This led to the decline in inventory.

Zillow Offers revenues came in at $769.1 million, while Other Homes segment revenues were reported at $0.8 million. Notably, Other Homes segment revenues include revenues generated through Zillow Closing Services.

Internet, Media & Technology or IMT segment revenues (29.4% of total revenues) improved 11% year over year and came in at $330.7 million during the reported quarter on the robust performance of Premier Agent and Rentals businesses.

Premier Agent revenues came in at $242.1 million, improving 11% year over year.

Other IMT segment revenues increased 10% on a year-over-year basis to $88.6 million. Other IMT segment revenue includes revenues generated by rentals, new construction and display, and, other marketing and business products and services to real estate professionals.

Mortgages segment revenues (2.2% of total revenues) decreased 8% year over year to $25.3 million.

Key Metrics

Traffic increased 6% year over year to 192.5 million average monthly unique users for the three months ended Mar 31, 2020. Visits were 2.1 billion, up 5% year over year.

Operating Details

Average Zillow Offers gross profit per home in the first quarter improved 10.2% year over year to $16.1K. Moreover, the average return on homes sold before interest expense was $336K per home.

Adjusted EBITDA was $5.1 million, down 78.6% year over year. Homes adjusted EBITDA loss was $75 million, wider than the year-ago quarter’s loss of $34.5 million. Mortgages adjusted EBITDA loss was $5.6 million, wider than the year-ago quarter’s loss of $2.6 million. However, IMT reported adjusted EBITDA of $85.7 million, up 40.4% year over year.

Zillow Group Inc Price, Consensus and EPS Surprise

Zillow Group Inc Price, Consensus and EPS Surprise
Zillow Group Inc Price, Consensus and EPS Surprise

Zillow Group Inc price-consensus-eps-surprise-chart | Zillow Group Inc Quote

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Sales & marketing expenses increased 26.6% year over year to $204.6 million. Technology & development expenses rose 25.2% year over year to $134.9 million. General & administrative expenses down 3.6% year over year to $92.3 million. Total operating expenses climbed 18% year over year to $432 million due to expansion ofHomes segment.

Zillow Group’s net loss was reported at $163.3 million, wider than the year-ago quarter’s loss of $67.5 million.

Balance Sheet

As of Mar 31, 2020, cash & cash equivalents and short-term investments came in at $2.6 billion compared with $2.4 billion, as of Dec 31, 2019.

Long-term debt, as of Mar 31, was $1.57 billion compared with $1.54 billion, as of Dec 31, 2019.

Cash flow from operating activities was $302 million, compared with $145.5 million utilized in the year-ago quarter.

Guidance

For second-quarter 2020, total revenues are expected between $577 million and $620 million. The Zacks Consensus Estimate for revenues is pegged at $842.3 million.

IMT segment revenues are expected in the $235-$250 million range, with Premier Agent revenues between $165 million and $175 million.

Homes revenues are expected between $325 million and $350 million. Mortgages revenues are anticipated in the $17-$20 million range.

Moreover, adjusted EBITDA loss is expected between $72 million and $49 million.

For 2020, the company has withdrawn guidance due to COVID-19 related uncertainties prevailing in the market.

Zacks Rank and Other Stocks to Consider

Zillow Group currently carries a Zacks Rank #2 (Buy).

ASE Technology Holding Co., Ltd. ASX, Twilio Inc. TWLO and InterDigital, Inc. IDCC are some other top-ranked stocks worth considering in the broader computer and technology sector, each flaunting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for ASE Technology, Twilio and InterDigital is pegged at 26.63%, 26.61% and 15%, respectively.

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