In a third quarter earnings call Nov. 1, Zillow Group reported better-than-expected revenue growth of $496 million, up 3% year-over-year, with an 88% year-over-year increase in purchase loan origination volume. But within the quarter, Zillow suffered a net loss of $28 million, better than Q3 2022, when it lost $53 million, and the second quarter this year, when losses were $35 million.
Traffic-wise, Zillow had a significant dropoff, both monthly and yearly, perhaps due to hard-charging Homes.com, which has taken over second place in the portal wars. Traffic to Zillow’s mobile apps and websites in Q3 was 224 million average monthly unique users, down 5% year-over-year. Visits during Q3 were 2.6 billion, down 5% year-over-year.
“Despite a residential real estate industry that is down 14% from last year, Zillow is reporting positive growth: 3% in our total revenue, 34% in our rentals revenue and 88% in our purchase mortgage origination business,” said Zillow CEO Rich Barton. “We have strong momentum across the board, and it’s because we’re focused on building a better, more integrated real estate transaction experience for both movers and partners.”
During the same conference call, Barton announced the company’s agreement to acquire Follow Up Boss, a customer relationship management (CRM) system for real estate professionals. The cost was $400 million in cash upon closing and up to $100 million in cash earnouts over a three-year period.
Follow Up Boss gives teams and agents a central hub to stay organized, engage customers, close deals and grow their production. The company plans to continue investing in its five growth pillars: touring, financing, seller solutions, integrating services and enhancing its partner network. It will remain an independent brand and will continue to build its client base as a standalone product offering while serving all existing clients, regardless of whether an agent engages with other Zillow Group platforms.
“Follow Up Boss is beloved by agents across the industry, including many Zillow Premier Agent partners and ShowingTime+ clients,” said Zillow President Susan Daimler. “Zillow Group continues to invest in tech solutions to help agents deliver an increasingly seamless experience for our shared customers.”
Zillow’s stock price of $35.78 remained virtually unchanged after the report.
Q3 highlights include:
- Zillow Group’s third quarter results exceeded the company’s outlook for revenue and Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization).
- Q3 revenue was $496 million, up 3% year-over-year and above the midpoint of the company’s outlook range by $24 million.
- Residential revenue of $362 million outperformed both the industry total transaction dollar decline of 14% and the high end of the company’s expectations, decreasing 3% year-over-year. The outperformance was primarily driven by connections growth to Premier Agent partners, which grew faster than the overall industry.
- Rentals revenue of $99 million increased 34% year-over-year, driven primarily by the company’s multifamily revenue, which grew 42% year-over-year in Q3 2023.
- Mortgage revenue of $24 million decreased 8% year-over-year, due primarily to higher interest rates that impacted demand for the mortgage marketplace. Q3 purchase loan origination volume grew 88% year-over-year from Q3 2022.
- On a GAAP basis, net loss was $28 million in Q3.
- Q3 Adjusted EBITDA was $107 million, $30 million above the midpoint of the company’s outlook range, driven primarily by strong Rentals revenue, higher-than-expected Residential revenue and lower-than-expected operating expenses.
- Cash and investments of $3.3 billion at the end of Q3 were flat compared to the end of Q2, after $100 million in share repurchases in Q3. Available repurchase authorization was $914 million at the end of Q3.
