Zillow begins 'critical' year with mounting losses, falling Q1 revenue

Source: inman | JIM DALRYMPLE II

Zillow brought in $469M in revenue, according to an earnings call Wednesday, falling 13% from the $536M it brought in a year earlier during a period that preceded the rate hikes and sluggish sales.

A sluggish housing market and lukewarm economy appear to have dinged portal giant Zillow this year, with the company’s latest earnings report revealing that between January and March revenue sank while losses rose.

The report, out Wednesday, shows that in the first quarter of 2022 Zillow brought in $469 million in revenue. That’s down 13 percent from the $536 million Zillow brought in during the first quarter of 2022 — a period that notably preceded the rate hikes and sales slowdowns that came to dominate last year.

Zillow also lost $22 million between January and March. That’s a reversal from the net profit of $16 million that the company earned in the first quarter of 2022. On the other hand, the loss was an improvement over the final three months of 2022, when Zillow burned through $72 million.

Broken down by segment, Zillow’s mortgage business took the biggest hit, with revenue falling 43 percent year over year in the first quarter of 2023. Revenue from Zillow’s residential segment — which includes the Premier Agent lead generation program for real estate professionals — fell 14 percent, to $361 million.

The drop in residential revenue was “driven primarily by lower Premier Agent revenue as a result of weakness in the overall housing market,” the report goes on to explain. Despite the dip in revenue, however, Zillow actually expected Premier Agent revenue to fall as much as 28 percent — meaning the company outperformed its own expectations, the report notes.

Either way, a first-quarter highlight for Zillow was its rental business, which saw revenue increase 21 percent compared to the same period a year earlier. The report notes that Zillow continues to “see strong traffic and growth in multifamily properties.”

Despite the falling revenue and rising losses, Zillow CEO Rich Barton struck an optimistic tone in the report, saying that “we’re starting to see our investments pay off, with first-quarter financial results that outperformed the top end of our outlook.”

“We’re capturing more customer demand and connecting more of that demand to our strengthening partner network, and these numerous incremental improvements have added up to make a real impact on our business,” Barton continued. “Our powerful brand and strong balance sheet put us on solid footing as we build the housing super app and help get more and more people home.”

In a statement, the company also said that “2023 is critical for Zillow,” and that it is focused on building its “super app.” Barton reiterated that point during a call with investors Wednesday afternoon, adding that “we continue to live in a very challenging macro housing environment with no indications of a turn.”

“While we may see rates come down at any time,” he added, “we are certainly not counting on it.”

Heading into Wednesday’s earnings, Zillow shares were trading in the low $40 range. That was down slightly for the day and week, but up nearly $10 compared to six months ago.

Zillow shares surged in after-hours trading immediately following the publication of the company’s earnings report.