Zillow Group Inc (NASDAQ:Z), which houses a portfolio of the largest and most vibrant real estate and home-related brands on mobile and Web, today announced its consolidated financial results for the quarter ended June 30, 2015.
“Zillow Group had a strong second quarter, beating our own expectations for revenue and EBITDA,” said Zillow GroupCEO Spencer Rascoff. “We’ve been very focused operationally on the integration of Trulia, and made great progress on a number of fronts. As with most mergers of any scale, it has required a great deal of time, attention and energy. We’re pleased to share today that we will have successfully combined all advertising products by the end of the third quarter, well ahead of the timetable we shared on our May 12th conference call. Most importantly, we believe the strategic rationale for the combination remains extremely strong, as we are already realizing benefits of our combined audience scale.”
Second Quarter 2015 Financial Highlights
Throughout this release, financial results are presented on both a reported and pro forma basis. Reported results were prepared in accordance with generally accepted accounting principles (GAAP). Pro forma results exclude items described in the reconciliation tables below and assume the February 2015 acquisition ofTrulia occurred on January 1, 2014, the beginning of the comparable prior year reporting period. The pro forma results are presented in order to provide additional insights into the underlying trends in the business. Revenue and Adjusted EBITDA for the three months ended June 30, 2015 are presented in this release on an as reported basis.
- Revenue increased 20% to$171.3 million from pro forma revenue of$142.8 million in the second quarter of 2014, exceeding the high end of the company’s outlook by$2.3 million. Excluding Market Leader Revenue, Revenue increased 25% to$158.7 million from$126.8 million in the second quarter of 2014 on a pro forma basis.
- Marketplace Revenue increased 29% to$145.5 million from pro forma revenue of$112.4 million in the second quarter of 2014.
- Real Estate Revenue grew 37% to $122.6 million from pro forma revenue of $89.2 million in the second quarter of 2014.
- Mortgages Revenue grew 44% to $10.4 million from pro forma revenue of $7.2 million in the second quarter of 2014.
- Market Leader Revenue decreased 21% to $12.5 million from pro forma revenue of $16.0 million in the second quarter of 2014. As previously announced, Zillow Group is conducting a strategic review of the Market Leader business.
- Display Revenue decreased 15% to $25.8 million from pro forma revenue of $30.4 million in the second quarter of 2014.
- Pro forma net loss was $26.7 million in the second quarter of 2015 compared to pro forma net loss of $29.6 million in the same period last year.
- GAAP net loss was $38.7 million in the second quarter of 2015, which includes the impact of $1.7 million of acquisition-related costs and $6.7 million of restructuring costs due to the company’s February 2015 acquisition of Trulia and the related restructuring plan.
- Adjusted EBITDA was $21.0 million in the second quarter of 2015, or 12% of Revenue, which was an increase from pro forma Adjusted EBITDA of $5.6 million in the second quarter of 2014, or 4% of pro forma Revenue, and exceeded the company’s outlook by approximately $17 million. The higher than expected result was driven primarily by lower than expected advertising spend to achieve audience growth, integration related cost synergies and better than expected revenue in the quarter.
- Pro forma basic and diluted net loss per share was $0.46 in the second quarter of 2015 compared to pro forma basic and diluted net loss per share of $0.52 in the same period last year.
- Basic and diluted GAAP net loss per share was $0.66 in the second quarter of 2015 compared to basic and diluted GAAP net loss per share of $0.26 in the same period last year. The second quarter of 2015 includes the impact of $0.03 on basic and diluted GAAP net loss per share from acquisition-related costs and$0.11 on basic and diluted GAAP net loss per share from restructuring costs due to the company’s February 2015 acquisition of Trulia and the related restructuring plan.
- Basic and diluted non-GAAP net loss per share was $0.01 in the second quarter of 2015 compared to basic and diluted non-GAAP net loss per share of $0.05 in the same period last year, which excludes share-based compensation expense, acquisition-related costs and restructuring costs.
Operating and Business Highlights
- On August 3, 2015, Zillow Group announced the appointment of Kathleen Philips to the position of Chief Financial Officer, effective August 7, 2015. Philips was previously Zillow Group’s Chief Operating Officer and has played a pivotal role in all of the company’s key corporate and finance initiatives.
- During the second quarter, 141 million average monthly unique users visited Zillow Group consumer brands Zillow, Trulia, StreetEasy and HotPads. According to comScore, Zillow Group brands now represent 72% market share of all mobile exclusive visitors to the category.
- The integration of Zillow’s and Trulia’s rentals and mortgages products, display advertising and corporate infrastructure is complete, and the combination ofZillow’s and Trulia’s agent advertising products is on track for completion in the third quarter, several months ahead of schedule. The Company continues to expect to realize approximately $100 million in cost synergies by the end of 2016.
- Zillow Group is benefitting from the combined audience scale of having several of the largest mobile and online real estate brands under one roof. Since January, more than 300 MLSs have signed agreements to send listings directly to Zillow and Trulia, providing their members access to the largest audience of home shoppers on mobile and Web 1.
- In the second quarter, Zillow Group average monthly revenue per advertiser, or ARPA, was $375, up 18% from $318 compared to the same period last year on a pro forma basis. Zillow Group’s agent advertisers totaled 101,297 as of June 30, 2015. During the quarter, the company strategically ended several of Trulia’sshort-term discounted products and changed the sales team’s incentives to focus on net revenue rather than the number of advertisers. The current advertiser count reflects the Company’s continued strategic focus on high ARPA agents who provide a superior consumer experience. This number of agent advertisers is de-duplicated across Zillow and Trulia and excludes Market Leader-only subscribers. Additional information regarding historical pro forma agent advertisers and pro forma quarterly ARPA can be found on the Zillow Group Investor Relations Blog at www.zillowgroup.com/ir-blog.
- On July 21, 2015, Zillow Group announced a stock dividend of Class C capital stock. All shareholders of record of Zillow Group’s Class A and Class B common stock on July 31, 2015, the record date for the dividend, will receive two shares of Class C capital stock for each share of Class A and Class B common stock held by them as of the record date. This is an extension of the company’s dual-class share structure and is intended to enable management to continue its focus on long-term growth and innovation, while maintaining the flexibility to issue additional stock for strategic business decisions and to retain and attract the best employees.
- On July 22, 2015 Zillow Group announced the planned acquisition of DotLoop, a Cincinnati-based company that simplifies real estate transactions by enabling real estate professionals and their clients to share, edit, sign, and store documents digitally. The acquisition aligns with the company’s mission to provide value-add productivity tools and products to its partner brokers and their agents and is expected to close in the third quarter. (Original Source)
Following the 2Q15 results, shares of Zillow are trading at $74.01, down $2.49 or 3.25%. Z has a 1-year high of $148.54 and a 1-year low of $73.75. The stock’s 50-day moving average is $84.41 and its 200-day moving average is $96.63.
On the ratings front, Zillow has been the subject of a number of recent research reports. In a report issued on July 31, Cowen analyst Thomas Champion downgraded Z to Sell, with a price target of $60, which represents a potential downside of 19.1% from where the stock is currently trading. Separately, on July 20, Barclays’ Christopher Merwin downgraded the stock to Sell and has a price target of $70.
According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Thomas Champion and Christopher Merwin have a total average return of 27.2% and -5.2% respectively. Champion has a success rate of 100.0% and is ranked #1529 out of 3724 analysts, while Merwin has a success rate of 50.0% and is ranked #3262.
Overall, 5 research analysts have assigned a Hold rating and 4 research analysts have given a Buy rating to the stock. When considering if perhaps the stock is under or overvalued, the average price target is $127.60 which is 72.0% above where the stock opened today.
Zillow Group Incoperates the real estate and home-related information marketplaces on mobile and the Web, with a complementary portfolio of brands and products to help people find vital information about homes and connect with local professionals.