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Zillow Group (ZG) Q2 Earnings & Revenues Beat Estimates

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Zillow Group ZG reported second-quarter 2021 non-GAAP earnings of 44 cents per share, which beat the Zacks Consensus Estimate by 93.3%. The company had reported a loss of 17 cents per share in the year-ago quarter.

Total revenues of $1.31 billion surpassed the Zacks Consensus Estimate by 3.4% and surged 70% year over year, driven by growth across all the segments.

Top-Line Details

Total Homes segment revenues (59.3% of total revenues) were $777.1 million, up 71.1% year over year. Zillow Offers revenues were $772 million, up 70% year over year. Other segment revenues amounted to $5.1 million compared with $0.4 million in the year-ago quarter.

During the quarter, Zillow bought 3,805 homes and sold 2,086 through Zillow Offers. The company ended the second quarter with 3,142 homes in its inventory.

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

Internet, Media & Technology (“IMT”) segment revenues (36.3% of total revenues) soared 69.8% year over year to $471 million in the reported quarter. Premier Agent revenues totaled $348.8 million, up 82% year over year. Other revenues surged 44% on a year-over-year basis to $127.3 million.

The upside can be primarily attributed to increasing Premier Agent connections, higher demand for services in Other IMT segment marketplaces and housing industry tailwinds.

Mortgages segment revenues (4.3% of total revenues) increased 68.1% year over year to $56.7 million on improving mortgage origination revenues.

Key Metrics

Traffic on mobile apps and websites increased 5% year over year to 229 million average monthly unique users for the three months ended Jun 30, 2021. Visits were 2.8 billion, up 10% year over year.

Operating Details

In second-quarter 2021, Zillow’s gross profit surged 92% year over year to $538.4 million. Gross margin expanded 450 basis points (bps) year over year to 41.1%.

The year-over-year growth in gross profit was driven primarily by the increase in Premier Agent revenues that benefited from improvements in Zillow’s connections, strong Zillow Offers business and incremental profits from the company’s adjacent services and supporting marketplaces.

Total operating expenses increased 39% year over year to $477 million. The increase was attributed to additional headcount-related costs and marketing expenses across Zillow’s segments. Increased holding and selling costs in the Homes segment due to increased sales volume from the company’s Zillow Offers business also drove up expenses.

Adjusted EBITDA was $182.8 million in the second quarter, significantly up from $15.8 million reported in the year-ago quarter.

Homes’ adjusted EBITDA loss was $29 million, narrower than the year-ago quarter’s loss of $61 million. Mortgages’ adjusted EBITDA loss was $6 million against the year-ago quarter’s income of $5 million. However, IMT reported adjusted EBITDA of $217.7 million, up 203% year over year.

Balance Sheet

As of Jun 30, 2021, cash & cash equivalents and short-term investments were $4.6 billion compared with $4.7 billion as of Mar 31, 2021.

Guidance

For third-quarter 2021, Zillow expects total revenues between $1.927 billion and $2.047 billion. The Zacks Consensus Estimate for the same is pegged at $1.43 billion, indicating 117.2% growth from the figure reported in the year-ago quarter.

IMT segment revenues are expected in the range of $472-$485 million, with Premier Agent revenues between $352 million and $360 million. IMT revenues are expected to increase 15% year over year, driven by continued strength in customer traffic and partner demand.

Homes revenues are expected between $1.40 billion and $1.50 billion. Mortgages revenues are anticipated in the $55-$62 million range.

Adjusted EBITDA is expected between $94 million and $126 million.

Zacks Rank & Stocks to Consider

Zillow currently carries a Zacks Rank #3 (Hold).

Better-ranked stocks in the broader technology sector include Avnet AVT, CyberArk Software CYBR and Agilent Technologies A. While Avnet sports a Zacks Rank #1 (Strong Buy), both CyberArk and Agilent carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Avnet, CyberArk and Agilent are set to report their earnings results on Aug 11, 12 and 17, respectively.


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