Zillow Group (Z) turned in a strong third quarter, so strong in fact, that the company’s performance exceeded its own projections.
Zillow Group, which is the parent company for the consumer brands Zillow, Trulia, StreetEasy and HotPads, reported revenue of $176.8 million in the third quarter, up 13% year-over-year on a pro forma basis.
Zillow Group presented its earnings on a pro forma basis, allowing a look at the company’s business assuming the acquisition of Trulia happened in 2014, instead of earlier this year. This allows an apples-to-apples comparison of the company’s business in 2015 when compared to 2014.
According to Zillow, its revenue increased 13% to $176.8 million from pro forma revenue of $155.8 million in the third quarter of 2014. Excluding Market Leader revenue, Zillow’s revenue increased 18% to $165.8 million from $140.3 million in the third quarter of 2014 on a pro forma basis.
Zillow excludes Market Leader because the company was sold to the Perseus Division of Constellation Software, an international provider of software and services, in September.
"The third quarter was a remarkable one for Zillow Group, exceeding EBITDA expectations significantly,” Zillow Group CEO Spencer Rascoff said.
“We also completed the unification of Zillow's and Trulia's ad platforms, marking the end of our major transition period of integration,” Rascoff said. “We finished this integration four months ahead of schedule, and are ending 2015 in tremendous shape. Zillow Group will enter 2016 with the potential for robust sustainable growth in the years ahead.”
On the traffic side, Zillow reported another strong quarter.
According to Zillow, more than 142 million average monthly unique users visited Zillow Group and its brands during the third quarter.
Zillow also said that according to comScore, Zillow Group brands now represent more than 70% market share of all mobile-exclusive visitors to the real estate category.
According to Zillow, its adjusted EBITDA was $29.5 million, up 51% year-over-year on a pro forma basis, significantly ahead of its own expectations.
Despite the growth in revenue, the company still reported a pro forma net loss of $21.4 million in the third quarter of 2015 compared to pro forma net loss of $18.6 million in the same period last year.
Zillow’s adjusted EBITDA of $29.5 million in the third quarter of 2015 was 17% of its revenue, which was an increase from pro forma adjusted EBITDA of $19.5 million in the third quarter of 2014, or 13% of pro forma Revenue.
Adjusted EBITDA in the third quarter of 2015 was $11 million higher than the midpoint of the company’s outlook of $18 million to $19 million.
According to Zillow, this outperformance was driven primarily by integration-related cost synergies, lower than expected advertising spend and savings on various expenses reserved for risk-related contingencies that were included in the company’s outlook for the quarter.
On a GAAP basis, Zillow’s net loss was $26.0 million in the third quarter of 2015, which includes the impact of $4.1 million for the loss recorded in connection with the sale of Market Leader.
GAAP net loss in the third quarter of 2015 also includes the impact of $3.4 million of restructuring costs and $2 million of acquisition-related costs, primarily due to the company's February 2015 acquisition of Trulia and the related restructuring plan.
Zillow reported that its marketplace Revenue increased 22% to $153.2 million from pro forma revenue of $125.4 million in the third quarter of 2014. Zillow’s real estate revenue grew 27% to $129.7 million from pro forma revenue of $102.0 million in the third quarter of 2014. Zillow’s mortgages revenue grew 60% to $12.6 million from pro forma revenue of $7.9 million in the third quarter of 2014.
Additionally, in the third quarter, Zillow Group's average monthly revenue per advertiser was $402, up 20% from $334 compared to the same period last year on a pro forma basis.
The increase in ARPA was primarily driven by high-performing agents buying more advertising inventory from Zillow rather than by increasing the price for existing advertising inventory.
Zillow Group's agent advertisers totaled 96,965 as of Sept. 30, 2015. The current advertiser count reflects the company's continued strategic focus on growing participation by high-performing agents who provide a superior consumer experience, Zillow said.
