Zillow Group, Inc. (Z) reported strong first quarter 2024 results, outperforming the broader residential real estate market despite a challenging macroeconomic environment. The company's revenue grew 13% year-over-year to $529 million, while net loss for the quarter was $23 million. Zillow's annual revenue for 2023 was $1.945 billion, with a net loss of $158 million. The company generated $354 million in annual operating cash flow and $189 million in annual free cash flow.

Business Overview

Zillow's performance in the first quarter was driven by growth across its key business segments. Residential revenue, which includes the company's Premier Agent and new construction offerings, increased 9% year-over-year to $393 million. Rentals revenue grew 31% to $97 million, while Mortgages revenue rose 19% to $31 million.

In the Residential segment, the company's investments in its top and mid-funnel experiences, such as Real Time Touring, drove improvements in connection rates with Premier Agent partners. Additionally, Zillow's growth was bolstered by accelerating revenue from its new construction business, ShowingTime+, and the recent acquisition of Follow Up Boss.

Zillow's Rentals business continued its strong performance, with Multifamily revenue growing 46% year-over-year. The company has been successful in expanding its Multifamily property count, which reached 40,000 at the end of the first quarter, up from 37,000 at the end of 2023. Zillow's strategy of building a comprehensive two-sided marketplace for renters and property managers is resonating, as the company estimates it now has more than 50% of all rental listings in the country.

In the Mortgages segment, Zillow Home Loans' purchase loan origination volume grew more than 130% year-over-year, driven by the company's efforts to further integrate its mortgage business with the Premier Agent network. Zillow expects this integration to continue driving growth in its mortgage origination revenue going forward.

Outlook

Looking ahead, Zillow 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 see accelerated growth in the high 20% range.

Zillow's EBITDA margin for the first quarter was 24%, a 200-basis-point improvement year-over-year. For the second quarter, the company expects EBITDA to be between $85 million and $100 million, representing a margin of 17% at the midpoint. Zillow reiterated its expectation for double-digit revenue growth and modest EBITDA margin expansion for the full year 2024.

Growth Pillars and Market Position

The company's strong execution across its growth pillars, including Touring, Financing, Seller Solutions, Partner Network Enhancements, and Rentals, has positioned Zillow well to navigate the current housing market challenges. The company's focus on delivering exceptional customer experiences and providing valuable technology solutions to its real estate partners has been a key driver of its outperformance.

Zillow's Rentals business, in particular, represents a significant long-term opportunity for the company. By building a comprehensive two-sided marketplace for renters and property managers, Zillow is digitally organizing a large, fragmented local market that is highly valued by all participants. The company's investments in Longtail and Multifamily rental listings, as well as its recent partnership with Realtor.com, are expected to drive continued growth in this segment.

In the Mortgages business, Zillow's strategy to further integrate Zillow Home Loans with its Premier Agent network is paying dividends, as evidenced by the strong growth in purchase loan origination volume. The company's ability to leverage its large, engaged audience and provide a seamless financing experience is a key competitive advantage.

Conclusion

Zillow's focus on executing its growth strategy, despite the challenging macroeconomic environment, is a testament to the company's resilience and the strength of its business model. By continuing to invest in innovative products and services, enhancing its partner network, and expanding its Rentals and Mortgages offerings, Zillow is well-positioned to capitalize on the long-term opportunities in the residential real estate market.