Zillow Q1: iBuying Selloff Going Well and IMT Grows 10% as Mortgages Segment Struggles

The U.S. real estate marketplace operator Zillow has released a report on the results of its Q1 activities. Highlights from the report include:

• Revenue of $4.3 billion, inflated as the company sells off homes bought through its iBuying program
• Consolidated net income of $16 million
• IMT segment revenue increased by 10% year-on-year to $490 million

Commenting on the results, Zillow co-founder and CEO Rich Barton said:

“While the housing market outlook may be choppy in the near term, today’s first-quarter results, together with our strong brand,
audience, and balance sheet, demonstrate how well-positioned and prepared Zillow is to forge ahead. We are buoyed by a strong cash position and a high-margin, positive-cash-flow-generating core business. While mindful of macro challenges, our eyes are focused on the future as we develop new products and services that bring us closer to realizing the housing super app vision of delivering an integrated end-to-end experience for our customers and partners.”

Zillow's IMT segment saw a 9% increase in revenue compared to the corresponding period in 2021. The $490 million generated over Q1 was above the midpoint of the company's outlook range period. Zillow's flagship Premier Agent listings product also grew 9% year-on-year recording $363 million in revenue.

The company is keen to get back to what it does best after its iBuying fiasco and has big ambitions for its IMT segment and Premier Agent product in particular. According to comments from Barton made in Zillow's latest annual report, the company is looking to use the product and its much-heralded 'housing super app' to power growth that will see Zillow generate " $5 billion in annual revenue and 45% EBITDA margin by the end of 2025".

No mention was made in the company's missive to shareholders of a potentially significant shift of Zillow's IMT segment towards a "post pay" business model. Two weeks ago the company announced that in Denver and Raleigh it would be experimenting with only allowing the commission-based flex model and deprecating the basic pay-per-lead Premier Agent model.

Rental revenues actually fell by 5% year-on-year to $61m. Bosses at CoStar will surely have taken notice of the performance of their rival's rentals performance and may feel emboldened to push their controversial advertising claims in this sector in more marketing channels.

As for the wind-down of Zillow's iBuying, its Homes segment generated $3.7 billion in revenue as the company sold off the properties on its books without committing to purchase any new ones. As a result, the segment was adjusted EBITDA positive ($23m) for the first time since an iBuying freeze in the first quarter of 2020. Zillow's quarterly report told investors that operations to tie the knot in its iBuying activities were going "faster than expected".

The Seattle-based company's Mortgage segment continued to struggle amid considerable market headwinds. The segment recorded revenue of $46 million and an adjusted EBITDA loss of $12m as rising interest rate constricted refinancing originations.

Interestingly, traffic to Zillow's app and website in terms of average monthly unique users was down 5% year-on-year at 211 million but the number of overall visits was up 5% at 2.6 billion. The numbers perhaps suggest more engaged users visiting more regularly as they get closer to transacting on their home moving journey with Barton remarking in comments to shareholders that "page views per listing were at record highs in Q1".

Zillow's Board of Directors has approved an additional $1 billion share repurchase authorization. Long-term shareholders continue to suffer however as the stock fell around 9% in after-hours trading and, along with most tech stocks, is being dragged down by the pessimism surrounding an increasingly hawkish Fed. Having peaked at $203 per share in February 2021, at the time of writing Zillow shares were worth $39.