Real estate tech giant Zillow Group posted a net loss of $492,000 in the third quarter of 2018, much lower than its more than $9 million loss in the same quarter of last year, according to its third-quarter earnings report. Revenue for the real estate technology giant was at $343.1 million – a 22 percent increase – but fell short of the consensus estimate of $344.3 million.
Zillow’s top moneymaker remains its Premier Agent program, which pulled in $232 million in the third quarter, a year-over-year increase of 18 percent. However, not all is well with the Premier Agent program, as company executives clarified on the earnings call.
In a separate announcement, Zillow said it hired Allen Parker as its new chief financial officer. Parker spent the last 13 years at Amazon, where he served as vice president of finance, Amazon Devices, Appstore & Amazon Pay. While at Amazon, Parker worked on the acquisition of Whole Foods.
The CFO role had been vacant since Kathleen Philips retired in May. Philips joined Zillow as general counsel in 2010 and was appointed to the CFO position in 2015.
“Zillow Group is undergoing a period of transformational innovation, including our new Premier Agent lead validation and distribution process, Zillow Offers, and now mortgage origination, which together will provide more of an end-to-end real estate transaction experience for consumers,” Zillow Group CEO Spencer Rascoff said in a statement.
“We believe that these changes will have positive long-term effects for consumers, our industry partners and our business. It will take time for advertisers to adapt to these changes, but we are confident that they set us up for long-term growth.”
Zillow beat its own estimate, generating $11 million from its Zillow Offers program. At the end of the second quarter, it had estimated revenue from the program would fall between $2 million and $7 million.
Zillow purchased 168 homes and sold 36 homes through Zillow Offers in the third quarter of 2018. But on an earnings call Rascoff noted it’s growing quickly. In October alone, Zillow has already purchased 130 homes and sold 32 homes.
“We’re now doing in a month basically what we did in all of Q3 and we’ll be doing in a week all of what we did in Q3.”
The Seattle-based company also officially completed its acquisition of Mortgage Lenders of America to streamline the buying process through Zillow Offers, which it announced at the end of the second quarter.
Mobile apps and websites from Zillow’s portfolio of brands hit an all-time high of 195 million unique visitors in July 2018. Overall, the apps and websites averaged more than 186 monthly users during the third quarter, an increase of 7 percent, year-over-year.
Zillow fourth-quarter guidance also came in below the consensus estimate. Zillow Group is projecting revenues between $340 million to $357 million, below the estimated $367.8 million.
Zillow Group’s stock has dropped nearly 20 percent in after-hours trading since announcing it missed earnings estimates and announced its fourth quarter guidance.
Zillow made significant changes to its Premier Agent program, which it announced in April. Instead of providing agents with a high volume of low-quality email leads, it would first vet the veracity of the lead then connect that lead with an agent.
The changes came at a time when home sales were declining nationwide.
“Our third quarter Premier Agent revenue was lower than our guidance because of higher than expected advertiser churn,” said Rascoff. “Not all of the changes we made were well-received by our advertisers.”
In an effort to address this shortfall, Zillow is tweaking its new Premier Agent program by reducing the number of screening questions it asks prospective consumers and re-introducing its up-funnel email leads of consumers that are not yet ready to transact.
“We’re letting agents follow up on those consumers, incubate them and nurture their leads,” Rascoff added.
