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Zillow Reports Loss in Q3, Misses Rev - Analyst Blog

Posted: 11/6/2013 1:00:00 PM
Referenced Stocks: AAPL;CALD;FB;SPRT;Z

Zillow Inc. ( Z ) reported loss of 3 cents in the third quarter of 2013 compared to earnings of 7 cents per share in the year-ago quarter.

Quarter Details

Revenues surged 67.0% year over year to $53.3 million, which lagged the Zacks Consensus Estimate. The year-over-year growth was driven by 73.1% surge in marketplace revenues (76.7% of revenues) and 49.8% jump in display revenues (23.3% of revenues).

Real estate marketplace (consists of Premier Agent, Diverse Solutions, Rentals and StreetEasy product lines) revenues soared 67.3% year over year to $35.1 million. The year-over-year growth was driven by strong agent additions. Premier agent subscribers increased by 5,942 to reach 44,749 at the end of the quarter.

Zillow acquired StreetEasy, a well known online real estate brand in New York City, during the quarter.

Mortgages marketplace revenues surged 119.7% year over year to $5.7 million in the quarter. The mortgage marketplace division received more than 5.9 million loan requests in the last quarter.

Average monthly unique users jumped 69.0% year over year to 61.1 million. Traffic reached a record 63.7 million in the month of August. Mobile traffic doubled year over year in the last quarter as approximately 60.0% user visits to Zillow's website were through mobile.

In September, Zillow launched the newly designed Zillow Real Estate App for Apple (AAPL)'s iPhone and iPad. Most recently, the company launched the Zillow Digs app for iPhone.

The strong growth in display revenues was due to significant growth across most of the verticals, including builders, banking and brokerages.

Zillow reported adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $4.1 million compared with $7.6 million in the year-ago quarter.

Total costs and expenses increased 98.6% year over year to $58.8 million, driven by a 41.2% increase in cost of revenues, 121.0% jump in sales & marketing, 82.0% surge in technology and development and a 99.5% increase in general and administrative expenses.

Higher level of investment hurt profitability as Zillow reported operating loss (including stock based compensation) of $5.52 million, compared to operating profit of $2.29 million in the year-ago quarter.

Net loss was $5.45 million compared with net income of $2.33 million reported in the year-ago quarter. Loss per share including stock based compensation but excluding income tax benefit was 15 cents compared with earnings of 7 cents in the year-ago quarter. Loss per share was much narrower than the Zacks Consensus Estimate of 18 cents.

Zillow exited the third quarter with $365.0 million in cash & cash equivalents.


Zillow expects revenues to be in the range of $55.0 million to $56.0 million for the fourth quarter of 2013. Total expenses are expected to be in the range of $25.5 million to $26.0 million.  Adjusted EBITDA is expected to be in the range of $8.5 million to $9.0 million.

For full year 2013, revenues are now expected to be in the range of $194.0 million to $195.0 million (up from $186.0 million to $188.0 million). Total expenses are expected to be $11.0 million, while EBITDA is pegged at $23.0 million (up $3.0 million from earlier guidance).

Our Take

Zillow offers mobile and web solutions that enable users to find important information about homes. Although the company reported a mixed third quarter, it provided positive fourth quarter and fiscal year guidance. We believe that the strong growth in traffic, frequent new product launches and growing Premier Agent business are the positives for the company going forward.

Additionally, continuing investments in marketing activities will boost traffic going forward. However, these investments will hurt profitability in the near term.

Currently, Zillow has a Zacks Rank #3 (Hold). Other stocks that are performing well at the current levels include Inc ( SPRT ) , Callidus Software ( CALD ) and Facebook ( FB ) . All these stocks carry a Zacks Rank #1 (Strong Buy).

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