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Zillow Group's FY17 Results

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An analysis of Zillow Groups's full year 2017 results. Includes lots of charts!

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Zillow Group's FY17 Results

  1. 1. Zillow Group’s FY17 Results February 2018 Prepared by Mike DelPrete
  2. 2. Zillow’s FY17 results show impressive revenue gains, cracking $1 billion in annual revenue. Note: when calculating expenses, I’ve backed out a one-time non-cash impairment charge of $174 million relating to Trulia. $- $200 $400 $600 $800 $1,000 $1,200 Revenue Expenses Millions Zillow's Revenue and Expenses FY16 FY17 www.mikedp.com
  3. 3. When we back out FY16’s $142.5 million litigation charge, we see a true comparison of expenses. $- $200 $400 $600 $800 $1,000 $1,200 Revenue Expenses Millions Zillow's Revenue and Expenses FY16 FY17 www.mikedp.com
  4. 4. With Zillow’s FY18 guidance, we can see yearly revenue growth slowing, which is to be expected. FY16 FY17 FY18E Revenue Growth 31% 27% 22% Expense Growth 31% 19% 17%
  5. 5. This all trends towards profitability, which is good news for Zillow. $0 $200 $400 $600 $800 $1,000 $1,200 $1,400 2012 2013 2014 2015 2016 2017 2018F Millions Zillow's Yearly Revenue and Expenses Revenue Expenses
  6. 6. As above, if we back out the litigation charge in FY16, the expense line flattens further. $0 $200 $400 $600 $800 $1,000 $1,200 $1,400 2012 2013 2014 2015 2016 2017 2018F Millions Zillow's Yearly Revenue and Expenses Revenue Expenses
  7. 7. Compared to its international peers, Zillow dominates on revenue but falls short with profit. $0 $200 $400 $600 $800 $1,000 $1,200 REA Group Immobilien Scout24 Rightmove Zillow Group SeLoger Domain Zoopla Property Services Immoweb Immowelt Trade Me Property Hemnet Move Millions(USD) Full Year Financial Comparison Revenues EBITDA www.mikedp.com
  8. 8. Zillow’s revenue growth still tops the big international peers. Move has slipped a bit. 6.7% 7.3% 8.5% 9.0% 10.3% 14.0% 14.5% 15.0% 15.9% 27.0% 39.0% 45.0% 55.0% 0% 10% 20% 30% 40% 50% 60% Immobilien Scout24 Trade Me Property Zoopla Property Services Domain SeLoger REA Group Rightmove Move Immoweb Zillow Group Hemnet Ingatlan Otodom Year on Year Revenue Growth
  9. 9. Zillow’s profit margins are on the low end of its peers, but it’s business model is different. 0% 10% 20% 30% 40% 50% 60% 70% 80% iProperty Zillow Group Immowelt Hemnet Domain Zoopla Property Services SeLoger Immobilien Scout24 REA Group Trade Me Property Immoweb Rightmove EBITDA Profit Margins Note: I have included stock-based compensation as a true expense from Zillow’s reported adjusted EBITDA numbers.
  10. 10. Zillow’s results show an improvement in efficiency as measured by revenue per employee. $0 $100,000 $200,000 $300,000 $400,000 $500,000 $600,000 Zoopla Property Services Trade Me Property REA Group Zillow Group Domain Move Hemnet Immoweb Immobilien Scout24 Rightmove Revenue per Employee Up about $20k
  11. 11. Zillow’s traffic lead over Realtor.com has narrowed slightly, but not materially so. 3.1x 3.2x 3.1x 3.2x 3.1x 3.2x 3.0x 3.1x 3.2x 3.0x 0x 1x 2x 3x 4x 0 40 80 120 160 200 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 AverageMonthlyUniques(millions) Top Portal Traffic Lead in U.S. Traffic Lead Zillow Realtor.com www.mikedp.com
  12. 12. Zillow’s strategy favors deeply-integrated lead gen via mortgage over display advertising. $0 $10 $20 $30 $40 $50 $60 $70 $80 $90 $100 FY12 FY13 FY15 FY16 FY17 Millions Zillow's Ancillary Revenue Growth Mortgages Display www.mikedp.com
  13. 13. Premier agent dominates Zillow’s continued revenue growth, with rentals (other) growing. $0 $100 $200 $300 $400 $500 $600 $700 $800 FY12 FY13 FY15 FY16 FY17 Millions Zillow's Revenue Sources Premier Agent Other Mortgages Display www.mikedp.com
  14. 14. Zillow’s overall revenue growth continues to outpace Realtor.com. $0 $50 $100 $150 $200 $250 $300 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Millions U.S. Portal Revenue Growth Zillow Realtor.com www.mikedp.com
  15. 15. After last year’s big change, growth in the mortgage business is slowing. $44 $71 $81 46.8 29.9 29.9 $0.00 $1.00 $2.00 $3.00 $4.00 $5.00 0 20 40 60 80 100 FY15 FY16 FY17 Millions Zillow's Mortgage Business Revenue Leads ARPL www.mikedp.com Note: I have assumed similar traffic levels as last year until the final numbers are confirmed.

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