Zillow Group is roughly six months into its plan to focus primarily on buying and selling homes, and so far the move has supercharged growth for the real estate giant as the new business alone is already approaching $1 billion in annual revenue. However, Zillow stock is dropped as much as 13 percent in after-hours trading as the company projected big losses from the home sales business.
Revenue: Zillow reported $599.6 million in revenue in the second quarter, a spike of 84 percent that came in ahead of analyst expectations of $583.2 million. Zillow’s traditional advertising and media businesses grew only 6 percent, but the home sales division brought in nearly $249 million in revenue that wasn’t there a year ago as the company seeks to quickly scale up that part of the company. The home sales segment of the business brought in 41.5 percent of Zillow’s revenue for the quarter, a rapid rise considering it didn’t even exist a year ago.
Profits: Zillow reported a net loss just shy of $72 million — or $0.35 per share — a drastic jump from the $3.1 million loss the year prior, primarily due to the costs of buying homes through the Zillow Offers home sales business. However, when adjusting for factors like interest and taxes, Zillow’s losses narrowed to $0.14 per share, which is in-line with analyst expectations.
Zillow Offers: The company is plowing resources into the home sales business, bringing it to new markets and buying and selling more houses all the time. Zillow bought 1,535 homes in the quarter, up 71 percent over the prior quarter and sold 786, doubling sales from the first quarter.
The company ended the quarter with 1,743 homes on its books with a value of $552.8 million. Zillow said the sales were profitable on a per home basis before interest expenses, but the division as a whole took a loss of $56.5 million.
Zillow announced four new Zillow Offers markets that will go live by mid 2020: Tucson, Cincinnati, Oklahoma City, and Jacksonville. Earlier this week, the program debuted in Nashville, the 15th market so far for Zillow Offers.
Zillow Offers has high expectations. The company projected earlier this year the business could bring $20 billion in annual revenue on its own in three to five years while buying up 5,000 homes per month.
Looking ahead: In the third quarter, Zillow expects to bring revenue of $694 million to $727 million, ahead of analyst expectations of $649.8 million. Losses for Zillow Offers will continue, with the company projecting deficits of $70 million to $80 million next quarter.
“Our second quarter results reflect the momentum we are seeing across our businesses,” Rich Barton, Zillow co-founder and CEO said in a statement. “The demand signal for Zillow Offers is incredibly impressive as seen in the annualized revenue run rate going from zero to $1 billion in just a year. Our Premier Agent business is performing well, and our partnerships with the highest performing and most client-focused agents position us well to deliver a truly seamless transaction experience for home buyers and sellers. We’re in the early stages of a bold expansion of our company that opens up exciting opportunities for our customers, partners, shareholders and employees. We are uniquely advantaged by our brand awareness, audience size, technology, data science, industry partnerships, and operational know-how and are well on our way to rewire real estate.