Zillow Q2 Earnings Per Share Miss, Revenue Beats Expectations

Revenue for the quarter came in at $78.7 million, better than the $76.6 that was expected.

Zilllow also raised its full-year revenue outlook to $321-$323 million, up from a prior view of $304-$308 million.

Additionally, Zillow raised its full-year adjusted EBITDA outlook to $52-$54 million from $48-$50 million.

In after hours trade following the deal, Zillow shares were down about 3%.

This is Zillow's first quarterly report since announced a $3.5 billion deal to acquire rival Trulia.

Here's the full release from Zillow:

Zillow, Inc. Reports Record Second Quarter 2014 Results, Raises Full Year Outlook

• Record quarterly Revenue of $78.7 million, up 68% over second quarter 2013.
• Record quarterly and all-time traffic, with a new monthly record in July 2014 of nearly 89 million unique users on mobile and Web.
• Record Premier Agent Revenue up 82% and bookings up 101% year over year.
• Full-year revenue outlook raised to a range of $321.0 million to $323.0 million.
• Full-year Adjusted EBITDA outlook raised to range of $52.0 million to $54.0 million.

SEATTLE, Aug. 5, 2014 (GLOBE NEWSWIRE) -- Zillow, Inc. (Nasdaq:Z), the leading real estate and home-related marketplace, today announced record financial results for the quarter ended June 30, 2014.

"We had our strongest quarter yet with record consumer traffic and record revenue and bookings by Premier Agent advertisers," said Spencer Rascoff, Zillow CEO. "Our deliberate focus on high-performing agents and their teams drove the significant increase in orders, and has prompted us to increase our full-year outlook. Advertisers are clearly following audience, and we're continuing to reinvest in the business to get the flywheel to spin even faster.

"Additionally, last week we announced our entry into an agreement to acquire Trulia, a move that we believe will allow us to combine our resources and achieve even more impressive innovation for consumers and advertisers."

Second Quarter 2014 Financial Highlights

• Revenue increased 68% to a record $78.7 million from $46.9 million in the second quarter of 2013.
  
  • Marketplace Revenue increased 72% to a record $62.6 million from $36.5 million in the second quarter of 2013.
    
    • Real Estate Revenue grew 83% to a record $56.1 million from $30.6 million in the second quarter of 2013. Premier Agent advertisers spent 82% more in the quarter compared to one year ago, and 21% more compared to the first quarter of 2014.
    • Mortgages Revenue grew 13% to $6.6 million from $5.8 million in the second quarter of 2013.
  • Display Revenue increased 53% to a record $16.1 million from $10.5 million in the second quarter of 2013.
• Basic and diluted GAAP net loss per share was $0.26 in the second quarter of 2014 compared to basic and diluted GAAP net loss per share of $0.30 in the same period last year. As a result of the record-high Premier Agent bookings during the quarter, which were driven by an increase in impressions available to sell, sales commissions were $0.9 million higher than projected. The higher-than-expected sales commissions increased basic and diluted GAAP net loss per share in the second quarter by $0.02; however, the related revenue will be recognized primarily in future periods.
• Basic and diluted non-GAAP net loss per share was $0.05 in the second quarter of 2014 compared to basic and diluted non-GAAP net income per share of $0.01 in the same period last year, which excludes share-based compensation expense. The $0.9 million higher-than-expected sales commissions increased basic and diluted non-GAAP net loss per share in the second quarter by $0.02.
  
• Adjusted EBITDA was $6.2 million in the second quarter of 2014, or 8% of revenue, which was an increase from $5.3 million in the second quarter of 2013, or 11% of revenue. The higher-than-expected sales commissions decreased Adjusted EBITDA in the second quarter by $0.9 million. The year-over-year decrease in Adjusted EBITDA as a percentage of revenue was driven by previously announced plans to invest heavily in advertising to grow brand awareness.

Operating and Business Highlights

• Zillow continues to grow its audience with a record 81.1 million average monthly unique users during the second quarter of 2014, up 49% year-over-year. In July, traffic broke an all-time record with nearly 89 million monthly unique users, an increase of 45% year-over-year.
• During the second quarter of 2014, visits to Zillow via a mobile device nearly doubled year-over-year, and in July 2014, more than 568 million homes were viewed on Zillow via a mobile device, which equates to 212 homes per second. In June, Zillow was a featured launch partner on the Kindle Fire phone, and the Zillow app was demonstrated by Amazon CEO Jeff Bezos during the unveiling.
• Premier Agent advertisers spent a record amount with Zillow in the second quarter of 2014. Zillow added 3,850 Premier Agent advertisers in the second quarter for a total of 56,818, with average revenue per agent reaching a record $320, up from $266 in the same period last year. Premier Agent advertisers who have been on the platform more than 12 months spent 62% more in the second quarter this year than they did a year ago.
• Last week, Zillow announced its plans to acquire Trulia in a stock-for-stock transaction. The combined company will maintain both the Zillow and Trulia consumer brands, offering buyers, sellers, homeowners and renters access to vital information about homes and real estate for free, and providing advertising and software solutions that help real estate professionals grow their business. The acquisition is expected to close in 2015.
• In June, Zillow announced it was beginning to power the real estate search for MSN Real Estate, one of the largest websites in the category. Zillow also powers Yahoo! Homes, AOL and HGTV's Frontdoor.com.
• Zillow recently announced a number of new partnerships with real estate brokers, multiple listing services, and industry technology partners:
  
  • In June, Zillow announced a strategic marketing partnership with Douglas Elliman, New York City's largest residential brokerage and one of the largest real estate brokerages in the nation.
  • In June, MLSListings Inc. of Northern California joined the Zillow Partnership Platform, which sends MLS data directly to Zillow as often as every 15 minutes, ensuring that current, active listings are up to date, correct and in sync with the MLS data. In July, the Northwest Minnesota Association of Realtors also joined the program.
  • In July, the Zillow Tech Connect program, which allows technology companies to seamlessly connect their preferred CRM systems with Zillow, surpassed 25 partners. Since the launch of Zillow Tech Connect in November 2013, more than 100,000 contacts have passed through the program directly into the agents' chosen platform.
  • In July, Zillow announced that the Zillow Pro for Brokers program has enrolled nearly 2,000 partners nationwide, nearly doubling the program's size since May of this year.
• In July, Zillow announced the acquisition of Vancouver, BC -based Retsly™, a software company that normalizes real estate data from multiple listing services so developers can build data-driven mobile- and web-based products for the real estate industry. The acquisition is an extension of Zillow's efforts to provide innovative software and productivity tools to help brokers, agents, franchisors and MLSs be more successful.
• In June, Zillow won a 2014 Effie Award for its "Find Your Way Home" brand advertising campaign. The award honors the most effective marketing communication campaigns in North America.
• Zillow Mortgage Marketplace continued its growth in the quarter, even as the mortgage market as a whole contracted. Consumers submitted nearly 5.5 million loan requests in the second quarter, up 3% year-over-year, while overall loan originations in the United States were down 50% versus the same period last year, according to the Mortgage Bankers Association. Zillow now has corporate relationships with several large national lenders that quote live rates in the marketplace. Zillow's new pre-approval product is steadily growing, and pre-approval functionality is being added to all Zillow iOS apps, providing incremental contact volume to lenders in Zillow Mortgage Marketplace.
• In the quarter, Zillow launched Zillow Rent Connect, a partnership program that provides high-quality, certified contacts to multi-family property managers through the Zillow Rental Network, the largest rental network on the Web1. The Zillow Rent Connect contact generation process is SOC 3SM-certified by Ernst & Young, an independent certified public accounting firm, which means that the technology provides multifamily property management marketers with only high-quality contacts, saving time and money. In July,Zillow announced MyNewPlace, RealPage's rental website, will join the Zillow Rental Network. Under the agreement, multifamily rental companies that market their listings on Zillow will have the option to have their listings appear on MyNewPlace.

Business Outlook - Third Quarter and Full Year 2014

In the third quarter of 2014, Zillow expects revenue to be in the range of $87.0 million to $88.0 million, which represents a 64% increase over third quarter of 2013 revenue at the midpoint of the range.

Zillow expects Adjusted EBITDA to be in the range of $14.0 million to $15.0 million, which represents a $10.4 million increase over third quarter of 2013 Adjusted EBITDA at the midpoint of the range. This outlook excludes anticipated transaction-related costs resulting from our planned acquisition of Trulia, which are estimated to be $7.0 million to $10.0 million in the period. Estimated reconciling adjustment ranges for Adjusted EBITDA are $9.0 million to $10.0 million for depreciation and amortization and $7.0 million to $8.0 million for share-based compensation expense.

For full year 2014, Zillow is increasing its outlook for revenue to a range of $321.0 million to $323.0 million, up from a range of $304.0 millionto $308.0 million, which represents a year-over-year increase of $124.5 million, or 63%, at the midpoint of the range.

Zillow is raising its outlook for Adjusted EBITDA to a range of $52.0 million to $54.0 million, up from the previous range of $48.0 million to$50.0 million for the full year. This represents a year-over-year increase of 78% at the midpoint of the range. Estimated reconciling adjustment ranges for Adjusted EBITDA are $35.0 million to $38.0 million for depreciation and amortization and $32.0 million to $34.0 millionfor share-based compensation expense.