Zillow Group, Inc. (NASDAQ:ZG) has demonstrated remarkable resilience and adaptability in the face of a challenging housing market and industry dynamics. As the most visited real estate website in the United States, the company has continued to execute on its strategic growth pillars, delivering strong financial results that outpace the broader residential real estate industry.

Financials

For the fiscal year ended December 31, 2023, Zillow Group reported annual revenue of $1,945 million, a testament to the strength of its diversified business model. Despite the headwinds, the company generated annual net income of -$158 million, annual operating cash flow of $354 million, and annual free cash flow of $189 million. These financial metrics underscore Zillow Group's ability to navigate the evolving market conditions while investing in key growth initiatives.

In the first quarter of 2024, Zillow Group continued to demonstrate its resilience, reporting revenue of $529 million, a 13% increase compared to the same period in the prior year. This outperformance was driven by strong growth across the company's three primary revenue categories: Residential, Rentals, and Mortgages.

Revenue Breakdown

Residential revenue, which includes the company's Premier Agent and new construction marketplaces, as well as revenue from StreetEasy, ShowingTime+, and the recently acquired Follow Up Boss, grew 9% year-over-year to $393 million. This growth was fueled by improvements in the company's top and mid-funnel experiences, which drove better connection rates, as well as accelerating growth in the new construction business and contributions from the Follow Up Boss acquisition.

Rentals revenue, which includes advertising and tools sold to property managers, grew an impressive 31% year-over-year to $97 million. This growth was primarily driven by a 46% increase in Multifamily revenue, as Zillow continued to expand its Multifamily property count, which reached a record 40,000 at the end of the first quarter.

Mortgages revenue, which includes revenue from Zillow Home Loans and advertising sold to mortgage lenders, increased 19% year-over-year to $31 million. This growth was driven by a 131% increase in purchase loan origination volume, as Zillow Home Loans continued to gain traction and integrate more closely with the company's Premier Agent network.

Despite the challenging macroeconomic environment, Zillow Group's first-quarter EBITDA margin expanded by 200 basis points year-over-year to 24%, demonstrating the company's ability to effectively manage costs while investing in key growth initiatives.

Outlook

Looking ahead, Zillow Group provided guidance for the second quarter of 2024, expecting total revenue to be between $525 million and $540 million, representing a year-over-year increase of 5% at the midpoint. The company expects Rentals revenue to grow in the mid-20% range, while Mortgages revenue is expected to accelerate with high-20% year-over-year growth.

For the full year 2024, Zillow Group reiterated its expectation for double-digit revenue growth, driven by continued execution on its growth pillars, including Touring, Financing, Seller Solutions, Enhancing the Partner Network, and Integrating Services. The company also expects modest EBITDA margin expansion for the year, as it continues to balance investments in growth initiatives with disciplined cost management.

Business Overview

One of the key drivers of Zillow Group's performance has been its focus on enhancing the customer experience and integrating its services to create a seamless, end-to-end solution for home buyers, sellers, renters, and mortgage borrowers. The company's "Zillow Housing Super App" strategy has been a critical component of this effort, as it works to digitize and streamline the entire moving process.

Zillow Group's strategic acquisitions, such as the recent purchase of Follow Up Boss, a customer relationship management system for real estate professionals, have also played a crucial role in strengthening the company's product offerings and enhancing its ability to serve its customers and partners.

Furthermore, the company's investments in technology, including its proprietary 3D home tour capabilities and the Listing Showcase product, have helped differentiate Zillow Group's offerings and drive increased engagement and conversion rates among its users.

Conclusion

Despite the industry-wide challenges, Zillow Group has demonstrated its ability to navigate the evolving real estate landscape. The company's focus on providing exceptional customer experiences, leveraging its strong brand and audience, and investing in innovative technologies has positioned it well to continue delivering value to its shareholders.

As the real estate industry continues to evolve, Zillow Group's resilience, adaptability, and commitment to innovation will be key factors in its ability to maintain its leadership position and capitalize on the significant growth opportunities that lie ahead.