Yahoo Finance Zillow Group Inc (Z) (Q1 2024) Earnings Call Transcript Highlights: Navigating Market ...
Revenue: $529 million, up 13% year-over-year.
Net Loss: $23 million, representing 4% of revenue.
EBITDA: $125 million, 24% margin, up 200 basis points year-over-year.
Rentals Revenue: $97 million, up 31% year-over-year.
Mortgages Revenue: $31 million, up 19% year-over-year.
Purchase Mortgage Volume: $601 million, up over 130% year-over-year.
Cash and Investments: Ended Q1 with $2.9 billion.
Convertible Debt: $1.6 billion outstanding.
Share Repurchases: $9 million in Q1; additional $91 million in April.
Release Date: May 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Zillow Group Inc (NASDAQ:Z) reported strong revenue growth, with Q1 revenue of $529 million, a 13% year-over-year increase, outperforming the residential real estate market growth.
Rentals business continued to show robust growth, with revenue up 31% year-over-year to $97 million, driven by an increase in multifamily property count.
Mortgages revenue increased by 19% year-over-year to $31 million, with purchase mortgage origination volume growing more than 130% year-over-year.
Zillow Group Inc (NASDAQ:Z) is leveraging its large, engaged audience and strong brand trust to experiment with and evolve business models, enhancing consumer and partner experiences.
The company is making significant progress in digitally transforming the real estate industry through its Zillow housing super app, integrating various services to streamline the moving process.
Negative Points
Despite overall strong performance, Zillow Group Inc (NASDAQ:Z) faces challenges in a tough rate environment, impacting the broader housing market.
The company's reliance on the continuation of high engagement and organic traffic growth poses risks if market dynamics shift unexpectedly.
Zillow Group Inc (NASDAQ:Z) is still in the process of converting its massive audience into revenue, indicating potential underutilization of its platform.
The ongoing class action suit against NAR and select brokerages, although reaching a proposed settlement, continues to create industry uncertainty.
First-time homebuyer activity has underperformed due to recent spikes in interest rates, posing a potential risk to future growth in the residential sector.
Q & A Highlights
Q: Can you discuss the impact of the NAR settlement on Zillow's operations and how it might affect the industry? A: (Jeremy Wacksman - COO, Zillow Group, Inc.) The NAR settlement is seen as an evolutionary rather than revolutionary change, promoting more educated and transparent consumers, which should lead to higher quality, higher intent leads and connections for our partners. This aligns with Zillow's principles of consumer education and transparency, potentially leading to more productive interactions between consumers and agents.
Q: What is driving the underperformance of first-time homebuyers, and how is this affecting Zillow? A: (Jeremy Hofmann - CFO, Zillow Group, Inc.) The primary factor is the recent rapid increase in mortgage rates, which has a more pronounced impact on first-time homebuyers. This has created a temporary headwind for Zillow, affecting the Residential revenue outlook for Q2. However, this is viewed as a navigable issue, and the company remains optimistic about reacceleration in the second half of the year.
Q: How significant is the role of touring in Zillow's strategy to increase transaction share from 3% to 6%? A: (Jeremy Wacksman - COO, Zillow Group, Inc.) Touring is crucial as it is the primary activity that customers engage in and a strong indicator of serious intent to transact. Enhancements in both physical and virtual touring are expected to improve the quality of customer interactions with agents, thereby driving transaction share growth.
Q: Can you provide an update on the integration of Follow Up Boss with Zillow's Premier Agent business and its impact on conversion rates? A: (Jeremy Wacksman - COO, Zillow Group, Inc.) The integration is still in the early stages, with significant opportunities ahead. Initial feedback from agents has been positive, and there's excitement about using Follow Up Boss to enhance agent productivity and customer conversion rates across Zillow's platforms.
Q: What are Zillow's expectations for the Rentals business, particularly regarding the growth trajectory and revenue potential? A: (Jeremy Hofmann - CFO, Zillow Group, Inc.) The Rentals business is viewed as a sustainable long-term opportunity with a potential to exceed $1 billion in revenue. The focus for 2024 is on adding more properties and increasing demand, rather than adjusting pricing strategies. The strategy includes enhancing both the single-family and multifamily segments under the unified Zillow brand.
Q: How is Zillow handling the recent challenges in the Residential segment, particularly with the slowdown in first-time homebuyer activity? A: (Jeremy Hofmann - CFO, Zillow Group, Inc.) The company is navigating through these challenges by maintaining a focus on long-term strategies rather than reacting strongly to short-term fluctuations. The slowdown is attributed mainly to recent spikes in interest rates, which have temporarily impacted buyer activity. Zillow remains committed to supporting its partners during these fluctuations and anticipates a recovery and acceleration in revenue growth in the latter half of the year.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
