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Zillow posts revenue of $127.3 million in first quarter

Trulia acquisition costs drag down net income

Zillow Group (Z) reported revenue of $127.3 million in the first quarter of 2015, with the costs of the executed acquisition of Trulia dragging down its net financial results.

Zillow reported marketplace revenue of $108.9 million, including real estate revenue of $93.3 million, mortgages revenue of $9.6 million, Trulia's Market Leader revenue of $6.1 million and display revenue of $18.3 million in the first quarter.

But Zillow posted basic and diluted GAAP net loss per share of $1.19 in the first quarter, which included the impact of $0.25 on basic and diluted GAAP net loss per share from acquisition-related costs and $0.51 on basic and diluted GAAP net loss per share from restructuring costs due to the company's February 2015 acquisition of Trulia and the related restructuring plan, Zillow said in a release.

"The combined team at Zillow Group is executing extremely well across all of our brands and marketplaces," said Zillow Group CEO Spencer Rascoff. "Our already massive audience of home shoppers continues to grow throughout our network of brands, and we are rapidly recognizing the benefits of scale. We have integrated the Zillow mortgage and rentals products into Trulia, giving our advertisers and partners access to an even wider consumer audience. And most importantly, we are on track to combine our agent advertising business by the end of 2015, setting us up to fully realize the potential of Zillow Group's huge and growing audience."

Zillow also reported several “operating and business highlights,” including:

  • In March 2015, nearly 140 million unique users visited Zillow Group consumer brands Zillow, Trulia, StreetEasy and HotPads.
  • The integration of Trulia began quickly after the transaction closed on Feb. 17. Within weeks, Zillow's and Trulia's display media business, as well as mortgages and rentals products, were all integrated under Zillow Group, bringing the benefits of increased audience to Zillow Group's advertisers and partners.    
  • As discussed on the April 14 investor call, Zillow Group expects all aspects of the agent advertising products to be integrated between Zillow and Trulia by the end of 2015. By the beginning of 2016, agents will buy media from the combined Zillow Group family of brands.
  • Zillow and Trulia now receive 100% of listings directly, and coverage of for-sale-by-agent has increased for the two brands. Zillow Group continues to add MLS partners. Since the operating call four weeks ago, 47 new MLSs have started sending direct listings. 
  • Zillow Group's various brands are the clear category leaders on mobile devices across third-party measurement services.Nearly two-thirds of its flagship brand Zillow's usage occurs on a mobile device; on weekends it's more than 70%. In March, more than half a billion homes were viewed on Zillow Mobile – that's 228 homes per second.  
  • At the end of the first quarter, Zillow Group had a total of 103,415 agent advertisers. This number includes organic additions throughout the quarter as well as the addition of Trulia's agent advertisers, de-duplicated across Zillow and Trulia, but excluding Market Leader-only subscribers. Agent advertisers spent a record amount with Zillow Group in the first quarter of 2015. The combination of increased impression inventory and advertiser count resulted in average monthly revenue per advertiser (ARPA) of $354 during the quarter (excluding revenue generated by Market Leader and Market Leader-only subscribers).
  • Same-agent sales remained strong in the first quarter, with over 50% of ARPA growth coming from advertisers that have been with Zillow for a year or more. In addition, more than 60% of orders for advertising packages were to existing advertisers buying more impressions.
  • The Zillow Group Rental Network over the past year has added more multifamily partners, increasing new partnerships 84% year-over-year. Today, nearly 90% of the National Multifamily Housing Council's 50 largest apartment managers are Zillow Group Rentals customers.

Excluding share-based compensation expense, acquisition-related costs and restructuring costs, Zillow posted basic and diluted non-GAAP net income per share of $0.04 and $0.05, respectively, in the first quarter.

Given that the Trulia acquisition was finalized in the middle of the quarter, Zillow also provided pro forma financial results to allow for year-over-year comparisons. Those pro forma results assume the February 2015 acquisition of Trulia occurred on January 1, 2014, the beginning of the comparable prior year reporting period.

According to Zillow, its pro forma revenue increased 35% to $162.5 million from $120.7 million in the first quarter of 2014. Pro forma revenue excluding Market Leader Revenue increased 41% to $149.0 million from $105.5 million in the first quarter of 2014, Zillow said.

Additionally, Zillow said its pro forma marketplace revenue increased 42% to $136.9 million from $96.3 million in the first quarter of 2014; pro forma real estate revenue grew 54% to $113.4 million from $73.5 million in the first quarter of 2014; pro forma mortgages revenue grew 33% to $10 million from $7.5 million in the first quarter of 2014; pro forma Market Leader revenue decreased 11% to $13.6 million from $15.3 million in the first quarter of 2014; and pro forma display revenue increased 5% to $25.6 million from $24.5 million in the first quarter of 2014.

Zillow also reported its pro forma basic and diluted net loss per share was $0.31 in the first quarter of 2015 compared to pro forma basic and diluted net loss per share of $0.42 in the same period last year.

Additionally, pro forma net loss was $17.9 million in the first quarter of 2015 compared to pro forma net loss of $23.8 million in the same period last year. Also, pro forma adjusted EBITDA was $24.5 million in the first quarter of 2015, or 15% of pro forma revenue, which was an increase from $12.1 million in the first quarter of 2014, or 10% of pro forma revenue.

Zillow also reaffirmed its previously announced outlook of pro forma revenue of $690 million, which includes Market Leader's expected revenue of $40 million. The company expects pro forma adjusted EBITDA to be in the range of $80 million to $85 million.

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