In its Q2 earnings call this week, Zillow claims that the quarterly results for revenue and adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) “exceeded (its) outlook.”
The posted results are a year-over-year-decline from Q2 2022—that period was a market boom, but now the bill comes due for real estate businesses (Zillow included) via these declines. That said, the Q2 results show some marginal improvement from Q1 2023.
Key financial details:
- Zillow’s reported revenue in Q2 2023 was $506 million. This is near halving from the $1 billion reported in Q2 2022, but a slight increase from Q1 2023, when revenue was reported at $469 million.
- Adjusted EBITDA was $111 million, $40 million more than the company had projected.
- Zillow’s revenue and EBITDA has outperformed its internal projections two quarters straight; in Q2, this was attributed to the residential category overperforming.
- Revenue was divided upon the following categories:
- Residential: $380 million; 3% drop from 2022 ($392 million)
- Rentals: $91 million; 28% increase from 2022 ($71 million)
- Mortgages: $24 million; 17% drop from 2022 ($29 million)
- Other: $11 million; 8% drop from 2022 ($12 million)
- Revenue from Zillow’s Premier Agent program posted a 4% year-over-year decline compared to their stated projections of 9% – 13%.
- Gross profit was $402 million, a mere 1% decline year-over-year from $407 million.
- Zillow operated at a net income loss of $35 million, per the GAAP basis.
- This is a higher loss than Q1 2023 ($22 million) and a negative turnaround year-over-year, when Zillow’s net income was $8 million.
- Zillow’s cash and investments on-hand at the end of Q2 2023 were $3.3 million, down slightly from $3.4 million at the end of the previous quarter.
- The day of the earnings call, Zillow announced a repurchase authorization of $750 million.
- Available authorizations are now $1 billion compared to Zillow’s total repurchase authorization of $2.5 million.
- The company’s convertible debt now stands at $1.7 billion.
As a digital platform, Zillow’s business model is contingent upon visitors to its website and mobile app. In Q2 2023, the company reported 226 million unique users visited Zillow, down 3% year-over-year. Those visitors totaled out at 2.7 billion users (8% decline). These declines are small enough to suggest the hunger for home buying never goes away, even if market conditions aren’t as favorable for it as they were this time in 2022.
The second quarter also saw an executive-level shake-up at Zillow when Jeremy Hofmann was named the company’s new chief financial officer, succeeding Allen Parker. Hofmann’s tenure as CFO, which began this past May, is too new to evaluate with respect to these quarterly results.
In a letter to Zillow shareholders, Hofmann and CEO Rich Barton reaffirmed Zillow’s goal to be a “housing super app.” The pair attributed these quarterly results to “(its) focus on cost management and favorable relative housing macroeconomic tailwinds despite an ongoing tough housing environment.”
Zillow has consistently posted net losses at end-of-year reports, peaking at a $528 million loss in 2021—this was brought down to only $101 million at the end of 2022. Despite some promising signs, 2023 does not appear to be the year the company reaches into profit.
Read the full Zillow shareholders’ letter here.
