Zillow Group (ZG -1.99%) just technically turned in mixed first-quarter results, but this time things aren't quite as simple as they usually are.
Based on generally accepted accounting principles, Zillow Group's quarterly revenue climbed 92.1% year over year, to $127.3 million, including Marketplace revenue of $108.9 million, and Display revenue of $18.3 million. First-quarter adjusted earnings before interest, taxes, depreciation and amortization was $16.7 million, which translated to adjusted net income of $0.05 per diluted share.
Analysts, on average, were expecting Zillow to achieve an adjusted net loss of $0.12 per share, but on higher revenue of $135.7 million.
You might recall, however, that almost exactly one month ago shares of Zillow sank when the company offered weaker-than-expected guidance during an operational update. At the time, CEO Spencer Rascoff called 2015 a "transition year" following its February acquisition of Trulia. The FTC took longer than Zillow expected to approve the enormous purchase. In Rascoff's words, that meant Zillow was "trending a couple quarters behind where we'd like to be."
Nonetheless, Zillow still attracted nearly 140 million unique users to its four sites, which now include Zillow, Trulia, StreetEasy, and Hotpads. And Zillow continues to expect all aspects of agent advertising products to be integrated between Zillow and Trulia by the end of the year. What's more, following last month's expiration of its contract to receive some MLS listings from ListHub -- which is owned by competitor and Move parent News Corp. -- Zillow now receives 100% of its listings directly. In fact, Zillow has signed 105 new direct MLS partners over the past six weeks, including 47 since last month's operational update.
Zillow also still receives nearly two-thirds of its traffic from mobile devices, with the number exceeding 70% on weekends. In March alone, over half a billion homes were viewed on Zillow through mobile devices, or roughly 228 per second.
And advertisers are continuing to follow that traffic. Keeping in mind that Zillow alone boasted 62,305 at the end of 2014, the new Zillow Group had 103,415 agent advertisers at the end of the first quarter. Its latest figure includes organic Zillow additions and Trulia's agent advertisers, and it excludes those who only subscribe to Market Leader -- a software company Zillow inherited in the acquisition and is seeking to either divest or integrate. Average monthly revenue per advertiser came in at $354, down down from $359 last quarter, but up from $286 in the same year-ago period. Roughly half that growth came from advertisers who have been with Zillow for at least a year, and over 60% of orders were to existing advertisers buying more impressions.
Next, Zillow reminded investors of its traction in the massive rental space, where Zillow Group's Rental Network increased new multifamily partners by 85% year over year. As it stands, almost 90% of the 50 largest National Multifamily Housing Council's apartment managers are already Zillow Group Rentals customers.
For additional perspective ...
But because of the FTC delays, Zillow is also providing "pro forma" results. This gives investors a deeper look into how its combination with Trulia is progressing by assuming the acquisition would have closed at the beginning of 2015.
Pro forma revenue during the first quarter increased 35% year over year to $162.5 million, including 42% growth in Marketplace revenue and a 5% increase in Display revenue. Excluding revenue from Market Leader, pro forma revenue would have increased 41% to $149 million. In addition, pro forma adjusted EBITDA more than doubled year over year to $24.5 million, or to 15% of pro forma revenue. Pro forma net loss narrowed to $17.9 million, or $0.31 per diluted share.
Finally, Zillow reiterated the full-year guidance it provided last month, calling for 2015 pro forma revenue of $690 million, including $40 million from Market Leader. 2015 adjusted EBITDA is also still expected to be $80 million to $85 million. That's good for EBITDA margin over 20% and leaves Zillow on track to eventually reach its long-term target of 40%.
In the end, despite delays with its acquisition, Zillow has continued to steadily march forward with its plans for online real estate domination. Considering Zillow and Trulia have still grabbed only a small slice of the $12 billion that real estate professionals spend every year marketing their services to consumers, I still think Zillow stock is poised to handsomely reward patient investors over the long term.