Zillow revenues are up, but losses are widening as it pivots to home-flipping

Earnings report comes as Spencer Rascoff steps aside as CEO

Feb.February 21, 2019 07:21 PM

Spencer Rascoff and Richard Barton (Credit: iStock)

New Zillow CEO Rich Barton is shooting for the moon, but the company’s latest financials might have him crashing down to earth.

On the same day that Spencer Rascoff stepped aside as CEO, Zillow disclosed in an earnings report that it collected a record $1.33 billion in revenue last year, a 24 percent gain over 2017. But the Seattle-based real estate tech firm also racked up a net loss of $120 million in 2018, well above the $94 million loss in 2017.

It also suffered setbacks to its primary revenue stream, the advertising program Premier Agent, and saw its stock drop more than 25 percent in value year over year.

On the earnings call, new CEO Rich Barton acknowledged that 2018 was a volatile year for the company, as Zillow shifted from a housing search website to focusing on purchasing and flipping properties.

“Zillow is a very different company from where we started the year,” Barton told investors. “We are really in the process of remaking Zillow Group right now and formulating a new mission, one where we’re looking at the sky, we’re looking at the moon and saying: we want to walk on that thing.”

True to the lofty language, the company aims to massively expand its home-buying arm Zillow Offers to 14 markets by the end of 2019, with a projected annual revenue of $20 billion within five years. Still, it disclosed that its profit margins in the fourth quarter were tiny. Zillow made an average of just $1,723 (0.5 percent) per home sold in the fourth quarter (it posted better results earlier in the year).

If Zillow Offers is the future of the company, Premier Agent is very much the present. The advertising program again accounted for the bulk of Zillow’s profits. It was responsible for about $898 million in revenue in 2018, an 18 percent uptick from the year prior. But changes to the program — which agents said reduced the number of leads — resulted in increased cancelations.

“These changes have been well-received and the churn rate has started to return to historical norms as conversion and transaction rates are growing,” the company said in its earnings statement. “However, the mid-year challenges led to a projected cumulative annual recurring revenue shortfall in Premier Agent revenue entering 2019, or an estimated 6 month sell-through gap to close.”

Zillow projects Premier Agent to bring in between $905 million and $930 million in 2019.

In his call with investors, Barton said the leadership transition from Rascoff was a smooth one.

“We’ve collectively decided it’s time to turn our leadership triangle on its side and shuffle our seats.”

Related Articles

With a cooling trade war, stocks perform well, including real estate. (Credit: iStock)

Real estate stocks push up this week as U.S.-China trade tensions ease

416 West 25th Street and Maverick Real Estate Partners principal David Aviram (Credit: Google Maps and LinkedIn)

Chelsea landlord claims “predatory” lender is charging a crippling interest rate as punishment after losing foreclosure case

Zillow CEO Spencer Rascoff is stepping down as his co-founder takes over

Zillow CEO Spencer Rascoff is stepping down as his co-founder takes over

From left: 1407 Broadway, 805 Third Avenue and 195 Broadway (Credit: Google Maps)

These were the 10 largest Manhattan real estate loans in November

The Tel Aviv Stock Exchange (Credit: Getty Images)

All Year’s Israeli bonds tumble on $41M loss

From left: the Ritz-Carlton, 32 East 1st Street, 560 West 24th Street, 301 East 80th Street and 32 West 85th Street

Five priciest homes new to market include 1897 townhouse

Alex Sapir and the NoMo Soho hotel at 9 Crosby Street (Credit: NoMo SoHo)

Sapir Corp.’s stock drops in Tel Aviv

REBNY pivots on politics; Newark sues NYC for sending homeless

REBNY pivots on politics; Newark sues NYC for sending homeless