Zillow Swings To A $158 Million Loss After $165 Million Zillow Offers Settlement Charge
Revenue rose 7% to $724 million as rentals and mortgages grew, but the settlement over its wound-down home-flipping unit erased the profit.
Zillow Group, which runs the Zillow, Trulia and StreetEasy home-search sites, posted a $158 million net loss for the third quarter, or $0.70 a share, against net income of $10 million a year earlier. The company pointed to a $165 million charge, net of expected insurance recoveries, to settle a securities class action tied to its wound-down Zillow Offers business, in results released Wednesday.
Rentals and mortgages carry the quarter
Revenue rose 7% to $724 million, even as the company said the housing market proved weaker than it expected. Rentals revenue climbed 26% to $220 million, led by 35% growth in multifamily. Mortgages revenue rose 32% to $70 million on a 55% jump in purchase loan origination volume to $2.0 billion.
Residential revenue, the agent advertising line, fell 4% to $419 million, which the company blamed on higher-than-expected mortgage rates that pressured transaction volume. For Sale revenue overall was flat at $489 million.
Excluding the settlement and other items, adjusted net income was $124 million, or $0.55 a share, against $0.44 a year ago. Adjusted EBITDA, a measure of operating profit before certain costs, was $182 million, a 25% margin. Impairment and restructuring costs of $32 million also weighed on the reported loss.
"Q3 highlighted Zillow's durability," CEO Jeremy Wacksman said, citing growth "during one of the toughest housing markets in a generation."
Preferred shift muddies For Sale revenue
Zillow is moving agents from its legacy advertising model to Preferred, where partners pay on closed transactions. In the third quarter, two-thirds of buyer connections went to Preferred partners, up from about one-third a year ago, and the company expects 100% in the first half of 2027.
Preferred connections generate 35% more revenue per connection than the old model, according to the shareholder letter. The shift also cost an estimated 200 basis points of For Sale revenue growth in the quarter, because mortgage revenue arrives six to twelve months after a connection.
Rentals now make up 30% of total revenue, up from 21% two years ago, the letter said. Traffic slipped 3% to 215 million average monthly unique users.
Fourth-quarter outlook points lower
Zillow guided fourth-quarter revenue of $635 million to $665 million and adjusted EBITDA of $100 million to $135 million. It expects both For Sale and Residential revenue to decline roughly 9% to 15% year over year, and now sees industry purchase mortgage originations falling 10% to 15% after the recent rise in mortgage rates.
For the full year, it expects revenue growth of approximately 10% to 11% and adjusted EBITDA of $655 million to $690 million. Cash and investments stood at $707 million, and about $1.1 billion remains on its buyback authorizations, the company said. A webcast on the results was set for 5 p.m. Eastern Wednesday.
Zillow's own fourth-quarter guidance calls for For Sale revenue to fall 9% to 15%, after the quarter just reported was flat.
Sources
- 8-K Filing — ZILLOW GROUP, INC. (ZG) — SEC EDGAR
- Exhibit q32026991.htm — ZILLOW GROUP, INC. 8-K exhibit — SEC EDGAR
- Exhibit exhibit992.htm — ZILLOW GROUP, INC. 8-K exhibit — SEC EDGAR
- Zillow CEO: Preferred Will Handle All Buyer Connections By Early 2027 | Inman Real Estate News — inman.com
- Zillow posts $158 million loss as Q3 traffic declines — housingwire.com
