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Zillow Group Revenue Rises 51%

Joe Tenebruso, The Motley Fool

Zillow Group (NASDAQ: Z) (NASDAQ: ZG) is enjoying strong demand for its new home-buying service, as can be seen in the real estate company's solid first-quarter results. 

Zillow Group results: The raw numbers

Metric

Q1 2019

Q1 2018

Year-Over-Year Change

Revenue

$454.1 million

$299.9 million

51%

Net loss

($67.5 million)

($18.6 million)

N/A

Net loss per share

($0.33) 

($0.10)

N/A

Data source: Zillow Group Q1 2019 earnings press release.

What happened with Zillow Group this quarter?

Zillow's revenue surged 51% year over year to $454.1 million, above the company's guidance for revenue of $417 million to $443 million. 

The gains were driven primarily by the rapid growth of Zillow Offers. As part of its new home-buying service, Zillow purchased 898 houses, and sold 414, in the first quarter. That represented growth of 80% and 200%, respectively, compared to the fourth quarter. In turn, Zillow generated $128.5 million in revenue in its homes segment in the first quarter.

"In Q1, we received more than 35,000 seller requests, and that demand is rapidly accelerating," CEO Rich Barton said during a conference call with analysts. "We now receive one request every two minutes, which is nearly $200 million in potential transaction value per day."

A person giving house keys to another person

More people are selling their homes through Zillow Group's new home-buying service. Image source: Getty Images.

Zillow is also enjoying strong demand for its mortgage services. The company's first-quarter mortgages segment revenue leapt 44% to $27.4 million, boosted by its acquisition of a mortgage origination business. "Last month, we rebranded the recently acquired Mortgage Lenders of America as Zillow Home Loans," Barton said. "We've been focused on integrating this loan origination business into our operations while building out a digital mortgage technology platform." 

Premier agent revenue, however, increased only 2%, to $217.7 million. Zillow said that its real estate agent advertising marketplace is "stabilizing" as the company progresses with its plan to shift from a lead-based format to a transaction-based model. Zillow also said that agent churn -- the percentage of customers canceling -- is "returning to historical levels." "Consumer data that we monitor indicates that transactions and conversion are increasing, and agent feedback about the recent changes has been positive," Barton said. 

However, these changes -- along with Zillow's heavy growth investments -- are weighing on the company's profitability. Adjusted EBITDA -- which excludes share-based compensation and acquisition-related costs -- fell 48%, to $23.9 million. And Zillow generated a $67.5 million net loss, compared to a loss of $18.6 million in the year-ago quarter.

Looking ahead

Zillow raised the low end of its revenue guidance for its internet, media, and technology (IMT) segment from $1.246 billion to $1.253 billion, to better reflect management's "confidence in the anticipated continued stabilization of the Premier Agent marketplace."

The company also raised its full-year IMT segment adjusted EBITDA forecast to between $280 million and $300 million -- up from a previous estimate of $241 million to $266 million -- due to lower expected expenses.

Additionally, Zillow said that it will be accelerating the rollout of Zillow Offers into six new markets -- and a total of 20 markets by the end of the first quarter of 2020.

"Zillow Offers' incredible consumer demand and rapid growth give us confidence we're in the early stages of something important," Barton said.

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Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Zillow Group (A shares) and Zillow Group (C shares). The Motley Fool has a disclosure policy.