The report wasn't that great and as usual CEO Spencer Rascoff hyped up 'great success' without mentioning that GAAP Loss for the quarter was $47.6M compared to same quarter a year ago when loss was $58.4M, but that included $37.5M of Acquisition & Restructuring Costs.
Even if an adjustment of $15M for the Move Litigation costs in 1st quarter is made it means that operational performance deteriorated by $12M despite Pro-Forma Revenues being 25% higher. It adds to the Citron research argument that Zillows business model is fundamentally flawed and it is a call center sweatshop cold calling Realtors to generate revenues. Last quarter Rascoff said Sales Costs would increase at a slower rate than revenues but this did not happen and a response to a Twitter question made matters worst as the CFO advised that Commissions on higher March revenue haven't been booked in the quarter.
Having spent $27M in the 4th quarter of 2015 on defense Litigation costs in the Theft of Trade Secrets action brought by Move Inc and NAR, the CFO also added that the full year Litigation Costs are in the range $50M to $55M which is going to make a big dent on loss making Zillow. With Move looking for punitive damages approaching $2Bn the future for Zillow is not looking good. The Jury Trial starts on June 6th so interesting how that spins out, In the Evidenciary Hearings last month the situation looked bleak for Zillow as the excuses by the poached Move executives were as plausible as 'the dog ate my homework'. It amazes me that NO questions on this potentially damaging case were raised by the Analysts on the Earnings Call. Zillow may not exist in its current form if the punitive damages claimed by Move are awarded. The court case could signal the begining of the end.