Zillow Group, Inc. (NASDAQ:Z) (NASDAQ:ZG), which is transforming
how people buy, sell, rent, and finance homes, today announced its
consolidated financial results for the three months ended March 31,
2019. Complete financial results can be found in the investor
relations section of Zillow Group’s website and in its quarterly
letter to shareholders
at: https://investors.zillowgroup.com/financials/quarterly-results/default.aspx.
“We delivered strong first quarter results that met or exceeded
our own expectations in all segments as our plan to streamline the
real estate transaction comes together,” said Rich Barton,
co-founder and CEO of Zillow Group, Inc. “Zillow Offers’ incredible
consumer demand and rapid growth gives us confidence we’re in the
early stages of something important. I’m quite pleased with our
whole team’s execution and overall consumer and industry response
to the investments we’re making in Premier Agent, Zillow Offers,
and now Zillow Home Loans. The Zillow Group portfolio is more than
just the sum of our business segments. We are aligning our entire
portfolio to deliver a seamless, integrated transaction experience
to help today’s on-demand consumers buy, sell, rent and finance
homes faster and easier than ever before.”
Recent highlights include:
- Consolidated Q1 2019 revenue increased 51% year over year to
$454.1 million, exceeding the company’s outlook, primarily driven
by outperformance in the Homes segment due to strong demand for
Zillow Offers™.
- Zillow sold 414 homes in Q1, an increase of nearly 200% over
Q4, contributing to $128.5 million in Homes segment revenue. The
company purchased 898 homes, up 80% sequentially.
- Accelerating Zillow Offers market expansion with 6 new planned
markets, announced separately today, bringing the total planned
markets to 20 by the end of the first quarter of 2020.
- Internet, Media & Technology segment reported $298.3
million in revenue in Q1, up 6% year over year, as the Premier
Agent® marketplace is stabilizing and churn is returning to
historical levels.
- Q1 Mortgages segment revenue of $27.4 million was up 44% year
over year.
- Launched Zillow Home Loans, a critical step toward integrating
a digital payments platform for mortgage financing to Zillow Offers
consumers and other borrowers.
- Reached more than 181 million average monthly unique users and
a record 2 billion visits across Zillow Group’s mobile apps and
websites during Q1.
First Quarter 2019 Financial
Highlights
The following table sets forth Zillow Group’s financial
highlights for the periods presented (in thousands, unaudited):
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
|
|
|
|
March 31, |
|
2018 to 2019 |
|
|
|
|
|
2019 |
|
|
|
2018 |
|
|
% Change |
|
|
|
Revenue: |
|
|
|
|
|
|
|
|
IMT segment: |
|
|
|
|
|
|
|
|
Premier Agent |
$ |
217,735 |
|
|
$ |
213,732 |
|
|
2 |
% |
|
|
|
Rentals |
|
37,838 |
|
|
|
29,063 |
|
|
30 |
% |
|
|
|
Other (1) |
|
42,699 |
|
|
|
38,061 |
|
|
12 |
% |
|
|
|
Total IMT segment revenue |
|
298,272 |
|
|
|
280,856 |
|
|
6 |
% |
|
|
|
Homes segment |
|
128,472 |
|
|
|
- |
|
|
N/A |
|
|
|
Mortgages segment |
|
27,360 |
|
|
|
19,023 |
|
|
44 |
% |
|
|
|
Total revenue |
$ |
454,104 |
|
|
$ |
299,879 |
|
|
51 |
% |
|
|
|
Other Financial Data: |
|
|
|
|
|
|
|
|
Segment loss before income taxes: |
|
|
|
|
|
|
|
|
IMT segment |
$ |
(11,452 |
) |
|
$ |
(6,616 |
) |
|
|
|
|
|
Homes segment |
$ |
(45,205 |
) |
|
$ |
(4,390 |
) |
|
|
|
|
|
Mortgages segment |
$ |
(9,616 |
) |
|
$ |
(358 |
) |
|
|
|
|
|
Net loss |
$ |
(67,525 |
) |
|
$ |
(18,591 |
) |
|
|
|
|
|
Adjusted EBITDA (2): |
|
|
|
|
|
|
|
|
IMT segment |
$ |
61,047 |
|
|
$ |
46,683 |
|
|
|
|
|
|
Homes segment |
|
(34,524 |
) |
|
|
(3,513 |
) |
|
|
|
|
|
Mortgages segment |
|
(2,601 |
) |
|
|
3,140 |
|
|
|
|
|
|
Total Adjusted EBITDA |
$ |
23,922 |
|
|
$ |
46,310 |
|
|
|
|
|
|
Percentage of Revenue: |
|
|
|
|
|
|
|
|
Segment loss before income taxes: |
|
|
|
|
|
|
|
|
IMT segment |
|
(4)% |
|
|
|
(2)% |
|
|
|
|
|
|
Homes segment |
|
(35)% |
|
|
N/A |
|
|
|
|
|
|
Mortgages segment |
|
(35)% |
|
|
|
(2)% |
|
|
|
|
|
|
Net loss |
|
(15)% |
|
|
|
(6)% |
|
|
|
|
|
|
Adjusted EBITDA: |
|
|
|
|
|
|
|
|
IMT segment |
|
20% |
|
|
|
17% |
|
|
|
|
|
|
Homes segment |
|
(27)% |
|
|
N/A |
|
|
|
|
|
|
Mortgages segment |
|
(10)% |
|
|
|
17% |
|
|
|
|
|
|
Total Adjusted EBITDA |
|
5% |
|
|
|
15% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Other revenue
primarily includes revenue generated by new construction and
display, as well as revenue from the sale of various other
marketing and business products and services to real estate
professionals. |
|
|
|
(2) Adjusted EBITDA
is a non-GAAP financial measure; it is not calculated or presented
in accordance with U.S. generally accepted accounting principles,
or GAAP. See below for more information regarding our presentation
of Adjusted EBITDA, including a reconciliation of Adjusted EBITDA
to the most directly comparable GAAP financial measure, which is
net loss on a consolidated basis and loss before income taxes for
each segment, for each of the periods presented. |
|
|
Business Outlook – Second Quarter and Full Year
2019
Zillow Group’s Q2 2019 consolidated revenue guidance range
implies approximately 79% growth year over year at the mid point,
driven primarily by the strong performance of the Homes
segment.
In Q2, we expect Homes segment revenue to be $230 to $245
million, reflecting anticipated sequential quarter-over-quarter
growth of 85% at the mid point. For Q2, we expect Homes segment
Adjusted EBITDA to be a loss of $49 to $55 million as we continue
to invest in scaling the business.* We are not providing full year
Homes segment revenue and Adjusted EBITDA outlook since we are in
the early stages of Zillow Offers and quickly scaling the business,
which make longer term forecasts challenging.
We are raising the low end of our IMT and Premier Agent full
year 2019 revenue guidance ranges to reflect our confidence in the
anticipated continued stabilization of the Premier Agent
marketplace. We raised our full year IMT segment Adjusted EBITDA
guidance range to $280 to $300 million from $241 to $266 million to
reflect updates to the expected timing of recognition of certain
headcount-related expenses and a reduction in our estimated legal
liabilities.*
We are maintaining our full-year 2019 Mortgages segment revenue
and Adjusted EBITDA outlook as we are in the early stages of
transitioning our mortgage loan origination business. The
following table presents Zillow Group’s business outlook for the
periods presented (in millions, unaudited):
|
Zillow Group Outlook as of May 9, 2019 |
|
Three Months Ending June 30, 2019 |
|
Year Ending December 31, 2019 |
|
|
|
|
|
|
|
Revenue: |
|
|
|
|
|
|
|
|
|
IMT segment: |
|
|
|
|
|
|
|
|
|
Premier Agent |
|
$228.0 |
to |
$233.0 |
|
$910.0 |
to |
$930.0 |
|
Total IMT segment revenue |
|
$314.0 |
to |
$322.0 |
|
$1,253.0 |
to |
$1,281.0 |
|
Homes segment |
|
$230.0 |
to |
$245.0 |
|
*** |
|
Mortgages segment |
|
$24.0 |
to |
$27.0 |
|
$100.0 |
to |
$115.0 |
|
Total revenue |
|
$568.0 |
to |
$594.0 |
|
*** |
|
Adjusted
EBITDA*: |
|
|
|
|
|
|
|
|
|
IMT segment |
|
$60.0 |
to |
$66.0 |
|
$280.0 |
to |
$300.0 |
|
Homes segment |
|
$(55.0) |
to |
$(49.0) |
|
*** |
|
Mortgages segment |
|
$(10.0) |
to |
$(6.0) |
|
$(32.0) |
to |
$(22.0) |
|
Total Adjusted EBITDA |
|
$(5.0) |
to |
$11.0 |
|
*** |
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares
outstanding — basic |
|
205.0 |
to |
207.0 |
|
205.5 |
to |
207.5 |
|
Weighted average shares
outstanding — diluted |
|
208.5 |
to |
210.5 |
|
209.0 |
to |
211.0 |
|
|
|
|
|
|
|
|
|
|
|
*** Outlook not provided |
|
|
|
|
|
|
|
|
* Zillow Group has not provided a quantitative reconciliation of
forecasted GAAP net loss to forecasted total Adjusted EBITDA or of
forecasted GAAP segment loss before income taxes to forecasted
segment Adjusted EBITDA within this earnings release because the
company is unable, without making unreasonable efforts, to
calculate certain reconciling items with confidence. These items
include, but are not limited to: income taxes which are directly
impacted by unpredictable fluctuations in the market price of the
company’s capital stock; depreciation and amortization expense from
new acquisitions; impairments of assets; and acquisition-related
costs. These items, which could materially affect the computation
of forward-looking GAAP net loss and segment loss before income
taxes, are inherently uncertain and depend on various factors, many
of which are outside of Zillow Group’s control. For more
information regarding the non-GAAP financial measure discussed in
this release, please see “Use of Non-GAAP Financial Measure”
below.
Conference Call and Webcast Information
Zillow Group Co-founder & CEO Rich Barton and CFO Allen
Parker will host a live conference call and webcast to discuss the
results today at 2 p.m. Pacific Time (5 p.m. Eastern Time). They
will be joined by Zillow Brand President and Co-head of Zillow
Offers, Jeremy Wacksman, and President of Media & Marketplaces,
Greg Schwartz. A Quarterly Shareholder Letter is available on the
Quarterly Results section of Zillow Group’s investor relations
website at
https://investors.zillowgroup.com/financials/quarterly-results/default.aspx.
A link to the live webcast and recorded replay of the conference
call will be available on the investor relations section
of Zillow Group’s website. The live call may also be accessed
via phone (866) 270-1533 toll-free domestically and at (412)
317-0797 internationally.
Forward-Looking Statements
This press release contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934 that involve
risks and uncertainties, including, without limitation, statements
regarding our business outlook and operational plans for Zillow
Offers and other parts of our business in 2019 and 2020. Statements
containing words such as “may,” “believe,” “anticipate,” “expect,”
“intend,” “plan,” “project,” “will,” “projections,” “continue,”
“business outlook,” “forecast,” “estimate,” “outlook,” “guidance,”
or similar expressions constitute forward-looking statements.
Differences in Zillow Group’s actual results from those described
in these forward-looking statements may result from actions taken
by Zillow Group as well as from risks and uncertainties beyond
Zillow Group’s control. Factors that may contribute to such
differences include, but are not limited to, Zillow Group’s ability
to maintain and effectively manage an adequate rate of growth;
Zillow Group’s ability to innovate and provide products and
services that are attractive to its users and advertisers; Zillow
Group’s ability to compete successfully against existing or future
competitors; Zillow Group’s investment of resources to pursue
strategies that may not prove effective; the impact of the real
estate industry on Zillow Group’s business; the impact of pending
litigation and other legal and regulatory matters; Zillow Group’s
ability to increase awareness of the Zillow Group brands in a
cost-effective manner; Zillow Group’s ability to attract consumers
to Zillow Group’s mobile applications and websites; Zillow Group’s
ability to successfully integrate and realize the benefits of our
past or future strategic acquisitions or investments; the reliable
performance of Zillow Group’s network infrastructure and content
delivery processes; and Zillow Group’s ability to protect its
intellectual property. The foregoing list of risks and
uncertainties is illustrative, but is not exhaustive. For more
information about potential factors that could affect Zillow
Group’s business and financial results, please review the “Risk
Factors” described in Zillow Group’s Annual Report on Form 10-K for
the year ended December 31, 2018 filed with the Securities and
Exchange Commission, or SEC, and in Zillow Group’s other filings
with the SEC. Except as may be required by law, Zillow Group does
not intend, and undertakes no duty, to update this information to
reflect future events or circumstances.
Use of Non-GAAP Financial Measure
To provide investors with additional information regarding our
financial results, this press release includes references to
Adjusted EBITDA, which is a non-GAAP financial measure. We have
provided a reconciliation of Adjusted EBITDA (other than forecasted
Adjusted EBITDA) to the most directly comparable GAAP financial
measure, which is net loss on a consolidated basis and loss before
income taxes for each segment, within this earnings release.
Adjusted EBITDA is a key metric used by our management and board
of directors to measure operating performance and trends, and to
prepare and approve our annual budget. The exclusion of certain
expenses in calculating Adjusted EBITDA facilitates operating
performance comparisons on a period-to-period basis.
Our use of Adjusted EBITDA has limitations as an analytical
tool, and you should not consider it in isolation or as a
substitute for analysis of our results as reported under GAAP. Some
of these limitations are:
- Adjusted EBITDA does not reflect our cash expenditures or
future requirements for capital expenditures or contractual
commitments;
- Adjusted EBITDA does not reflect changes in, or cash
requirements for, our working capital needs;
- Adjusted EBITDA does not consider the potentially dilutive
impact of share-based compensation;
- Although depreciation and amortization are non-cash charges,
the assets being depreciated and amortized may have to be replaced
in the future, and Adjusted EBITDA does not reflect cash capital
expenditure requirements for such replacements or for new capital
expenditure requirements;
- Adjusted EBITDA does not reflect acquisition-related
costs;
- Adjusted EBITDA does not reflect interest expense or other
income;
- Adjusted EBITDA does not reflect income taxes; and
- Other companies, including companies in our own industry, may
calculate Adjusted EBITDA differently than we do, limiting its
usefulness as a comparative measure.
Because of these limitations, you should consider Adjusted
EBITDA alongside other financial performance measures, including
various cash flow metrics, net loss, segment loss before income
taxes, and our other GAAP results. You should not consider Adjusted
EBITDA in isolation or as a substitute for analysis of our results
as reported under GAAP.
About Zillow Group, Inc.
Zillow Group, Inc. (NASDAQ: Z) (NASDAQ: ZG) houses one of the
largest portfolios of real estate brands on mobile and the web that
attracted 181 million average monthly unique users during Q1 2019.
Zillow Group is committed to leveraging its proprietary data,
technology and innovations to make home buying, selling, financing
and renting a seamless, on-demand experience for consumers. As its
flagship brand, Zillow® now offers a fully integrated home shopping
experience that includes access to for sale and rental listings,
Zillow Offers™, which provides a new, hassle-free way to buy and
sell homes directly through Zillow; and Zillow Home Loans, Zillow’s
affiliated lender that provides an easy way to receive mortgage
pre-approvals and financing. Other consumer brands include Trulia®,
StreetEasy®, HotPads®, Naked Apartments®, RealEstate.com and Out
East®. In addition, Zillow Group provides a comprehensive suite of
marketing software and technology solutions to help real estate
professionals maximize business opportunities and connect with
millions of consumers. Zillow Group business brands for real
estate, rental and mortgage professionals include Mortech®,
dotloop®, Bridge Interactive® and New Home Feed®. The company is
headquartered in Seattle, Washington.
Please visit http://investors.zillowgroup.com,
www.zillowgroup.com/ir-blog, and www.twitter.com/zillowgroup, where
Zillow Group discloses information about the company, its financial
information, and its business which may be deemed material.
The Zillow Group logo is available at
http://zillowgroup.mediaroom.com/logos-photos.
Zillow, Premier Agent, Mortech, Bridge Interactive, StreetEasy,
HotPads, Out East and New Home Feed are registered trademarks
of Zillow, Inc. Zillow Offers is a trademark
of Zillow, Inc. Trulia is a registered trademark
of Trulia, LLC. dotloop is a registered trademark
of DotLoop, LLC. Naked Apartments is a registered
trademark of Naked Apartments, LLC. Zillow Home Loans, LLC is
an Equal Housing Lender; NMLS #10287.
(ZFIN)
Adjusted EBITDA
The following tables set forth a reconciliation of Adjusted
EBITDA to the most directly comparable GAAP financial measure,
which is net loss on a consolidated basis and loss before income
taxes for each segment, for each of the periods presented (in
thousands, unaudited):
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
March 31, 2019 |
|
|
IMT |
|
Homes |
|
Mortgages |
|
Corporate Items (2) |
|
Consolidated |
Reconciliation of
Adjusted EBITDA to Net Loss and Loss Before Income
Taxes: |
|
|
|
|
|
|
|
|
|
|
Net loss (1) |
|
N/A |
|
|
N/A |
|
|
N/A |
|
|
N/A |
|
|
$ |
(67,525 |
) |
Income tax benefit |
|
N/A |
|
|
N/A |
|
|
N/A |
|
|
N/A |
|
|
|
(2,500 |
) |
Loss before income taxes |
|
$ |
(11,452 |
) |
|
$ |
(45,205 |
) |
|
$ |
(9,616 |
) |
|
$ |
(3,752 |
) |
|
$ |
(70,025 |
) |
Other income |
|
|
- |
|
|
|
- |
|
|
|
(313 |
) |
|
|
(8,855 |
) |
|
|
(9,168 |
) |
Depreciation and amortization
expense |
|
|
17,594 |
|
|
|
1,321 |
|
|
|
1,610 |
|
|
|
- |
|
|
|
20,525 |
|
Share-based compensation
expense |
|
|
54,905 |
|
|
|
5,602 |
|
|
|
5,617 |
|
|
|
- |
|
|
|
66,124 |
|
Interest expense |
|
|
- |
|
|
|
3,758 |
|
|
|
101 |
|
|
|
12,607 |
|
|
|
16,466 |
|
Adjusted EBITDA |
|
$ |
61,047 |
|
|
$ |
(34,524 |
) |
|
$ |
(2,601 |
) |
|
$ |
- |
|
|
$ |
23,922 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
March 31, 2018 |
|
|
IMT |
|
Homes |
|
Mortgages |
|
Corporate Items (2) |
|
Consolidated |
Reconciliation of
Adjusted EBITDA to Net Loss and Loss Before Income
Taxes: |
|
|
|
|
|
|
|
|
|
|
Net loss (1) |
|
N/A |
|
|
N/A |
|
|
N/A |
|
|
N/A |
|
|
$ |
(18,591 |
) |
Income tax expense |
|
N/A |
|
|
N/A |
|
|
N/A |
|
|
N/A |
|
|
|
2,600 |
|
Loss before income taxes |
|
$ |
(6,616 |
) |
|
$ |
(4,390 |
) |
|
$ |
(358 |
) |
|
$ |
(4,627 |
) |
|
$ |
(15,991 |
) |
Other income |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(2,446 |
) |
|
|
(2,446 |
) |
Depreciation and amortization
expense |
|
|
25,465 |
|
|
|
59 |
|
|
|
1,382 |
|
|
|
- |
|
|
|
26,906 |
|
Share-based compensation
expense |
|
|
27,807 |
|
|
|
818 |
|
|
|
2,116 |
|
|
|
- |
|
|
|
30,741 |
|
Acquisition-related costs |
|
|
27 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
27 |
|
Interest expense |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
7,073 |
|
|
|
7,073 |
|
Adjusted EBITDA |
|
$ |
46,683 |
|
|
$ |
(3,513 |
) |
|
$ |
3,140 |
|
|
$ |
- |
|
|
$ |
46,310 |
|
|
|
|
|
|
|
|
|
|
|
|
(1) We use loss
before income taxes as our profitability measure in making
operating decisions and assessing the performance of our segments,
therefore, net loss and income taxes are calculated and presented
only on a consolidated basis within our financial statements. |
(2) Certain
corporate items are not directly attributable to any of our
segments, including interest income earned on our short-term
investments included in Other income and interest costs on our
convertible senior notes included in Interest expense. |
Contacts:
Raymond JonesInvestor Relationsir@zillowgroup.com
Katie CurnuttePublic Relationspress@zillow.com
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