Zillow improved revenue, reduced losses despite annual declines
The Seattle-based company beat analyst expectations for the first quarter and is entering a crucial period as it unveils new products.
Despite a big drop in revenue compared to the start of 2022, Zillow ended the first quarter with better-than-expected results — including a notable improvement over the previous quarter — as it focused on developing and unveiling new products.
The Seattle-based company reported $469 million in first quarter revenue, which was about 10% higher than the midpoint of its outlook range. Analysts were expecting revenue to be in the $424 million range.
In a letter to shareholders, Zillow Co-Founder and CEO Rich Barton attributed the relatively favorable numbers to the company's reorientation in early 2022 and some positive tailwinds during a tough housing environment.
A year ago, however, the company raked in $536 million in revenue. And although earnings beat expectations, Zillow reported a net loss of $22 million for the quarter.
"We're starting to see our investments pay off, with Q1 financial results that outperformed the top end of our outlook," said Barton. "We're capturing more customer demand and connecting more of that demand to our strengthening partner network, and these numerous incremental improvements have added up to make a real impact on our business."
Still, the company's core residential division saw a 14% drop in year-over-year revenue, primarily due to declines in the Premier Agent business resulting from a weaker housing market. The mortgage division, which includes Zillow Home Loans and the company's mortgage marketplace, posted a 43% decline as elevated interest rates led to a dropoff in applications.
The rental business continues to be a bright spot, with revenue rising 21% to $74 million.
Investors appeared to be pleased with the report, as Zillow shares jumped around 5% in after-hours trading.
Revenue: $469 million in the first quarter, a 12.5% decrease compared to a year ago, but up $34 million from the previous quarter.
Cash and cash equivalents: $3.4 billion at the end of March 2023, which was flat compared to the end of 2022.
Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization): $104 million for the first quarter of 2023, down 37% compared to the same period last year, but up significantly from $73 million in Q4 2022.
Net loss: $22 million, compared to a net income of $16 in the first quarter of 2022. Losses improved markedly from the previous quarter when the company posted a loss of $72 million.
Traffic: Traffic to Zillow Group's mobile apps and websites in Q1 was 212 million average monthly unique users, which was flat year over year. Visits during Q1 were 2.5 billion, down 5% from a year ago.
Since leaving the iBuying business more than a year ago, Zillow has been focused on developing its "super app," a product that streamlines many aspects of the homebuying experience. In a letter to shareholders, Barton said he expects the products through the ShowingTime+ app to grow customer transactions 3-6% by the end of 2025.
For 2023, the company is focusing on rolling out these products, several of which are currently in test markets. Zillow recently announced that Listing Media Services, which launched in January, is now available in 25 markets.