Zillow Group (NASDAQ:Z) (NASDAQ:ZG) reported second-quarter results on Aug. 6. The leading online real estate platform is seeing strong early demand for its new homebuying business, but closing delays prompted it to scale back its full-year revenue and earnings guidance.

Zillow Group results: The raw numbers

Metric

Q2 2018

Q2 2017

Year-Over-Year Change

Revenue

$325.25 million

$266.85 million

22%

Net loss

$3.09 million

$21.85 million

N/A

Adjusted EBITDA

$56 million

$39.7 million

41%

Data source: Zillow Group Q2 2018 earnings press release. EBITDA = earnings before interest, taxes, depreciation, and amortization.

What happened with Zillow Group this quarter?

Zillow's services continue to grow more popular with home hunters.

Average monthly unique users of Zillow Group's mobile apps and websites grew 4% year over year to more than 186 million in the quarter, including an all-time high of 188 million in April. Moreover, visits to Zillow Group's apps and websites (Zillow, Trulia, StreetEasy, and RealEstate.com) jumped 14% to 1.9 billion.

Ad dollars follow eyeballs, and real estate agents have been willing to pay up to advertise on Zillow's platform. Premier Agent revenue jumped 22% to $230.9 million in the second quarter.

Better still, rentals revenue surged 40% to $33.3 million. And other revenue -- which includes Zillow Group's new construction marketplaces and display ad business -- climbed 29% to $41.8 million. Mortgages revenue, however, fell 8% to $19.3 million, as higher interest rates continue to weigh on refinance volume. 

Zillow also began reporting results for its new homes segment, which includes its Zillow Offers home-flipping business. It generated a pre-tax loss of $12.2 million in the second quarter, as Zillow began buying houses directly from homeowners in Phoenix and Las Vegas.

CEO Spencer Rascoff commented on the early success of this new business line in prepared remarks:

Zillow Offers empowers sellers to receive a cash offer directly from Zillow. So far, the launch has gone extremely well. Almost every aspect of Zillow Offers -- from seller demand, to managing renovations, to promptly reselling the houses we own -- is going according to, or better than, plan. We are encouraged by the quantity of seller demand for a Zillow Offer, which has exceeded our expectations. Since launch, we have received more than 10,000 offer requests from potential sellers, representing an estimated $2.8 billion of real estate.

Looking ahead

Yet despite these strong early results, Rascoff noted that home sellers are taking longer than anticipated to close after they accept an offer from Zillow. As such, Zillow scaled back its forecast of homes in its inventory for resale at year's end from between 300 and 1,000 to between 300 and 550. The company also lowered its full-year homes segment revenue guidance to $20 million to $40 million, down from $125 million to $255 million. 

A person handing house keys to another person

It's taking sellers more time to hand over their house keys than Zillow expected. Image source: Getty Images.

In turn, Zillow cut its full-year guidance for total revenue to a range of $1.32 billion to $1.35 billion -- down from $1.43 billion to $1.58 billion -- and adjusted EBITDA to $237 million to $253 million, down from a previous estimate of $260 million to $285 million.

For the third quarter, Zillow expects total revenue of $337 million to $347 million and adjusted EBITDA of $65 million to $73 million.

Zillow also announced that it reached an agreement to acquire Mortgage Lenders of America, as part of its goal to simplify the process of buying homes through Zillow Offers.

"Getting a mortgage can be the toughest, most painstaking and time-consuming part of the home-buying process," Zillow Group President Greg Schwartz said. "Now that we are buying and selling homes through Zillow Offers, we believe that having our own mortgage origination service as an option for consumers will allow us to streamline the process for people who buy a Zillow-owned home."

Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Zillow Group (A shares) and Zillow Group (C shares). The Motley Fool has a disclosure policy.