Zillow Reports 4Q and FY12 Results

Zillow Inc. (Z - Snapshot Report) fourth quarter net earnings of 2 cents breezed past the Zacks Consensus Estimate of negative 6 cents. Results were down 33.3% year over year from 3 cents earned in the year-ago quarter.

Quarterly Operational Update

Total revenues increased 73% year over year to $34.3 million in the fourth quarter. This was driven by solid improvement in both marketplace revenue (up 95.2% year over year to $26.8 million) and display revenue (increasing 22% year over year to $7.5 million). It surpassed the Zacks Consensus Estimate of $31 million.

Total expenses in the quarter increased 78.1% year over year to $33.8 million.

The magnitude of increase in expenses more than offset the magnitude of increase in total revenues, thus causing operating income to decline year-over-year.

In the reported quarter, average unique monthly users increased 47% year over year to 34.5 million.

Premier Agent subscribers also increased by 2,770 in the fourth quarter. Average monthly revenue per subscriber increased 3% year over year to $267.

Earnings before interest tax, depreciation and amortization (EBITDA) increased 106.1% year over year to $6.8 million.

Full Year Highlights

Adjusted earnings were 18 cents per share exceeding the Zacks Consensus Estimate of 10 cents per share. Zillow broke even in 2011.

Total revenues for full year 2012 increased 77% year over year to $116.9 million. This was driven by strong improvement in market place revenue (up 105% year over year to $86.7 million) and display revenue (up 26% year over year to $30.2 million).

Earnings before interest tax, depreciation and amortization (EBITDA) increased 111.8% year over year to $25.2 million.

Premier Agent Subscribers in 2012 numbered 29,473, up 87% year over year.

Financial Position

Zillow exited 2012 with cash and cash equivalents of $150.0 million, up 231.9% year over year.

As of Dec 31, 2012, total assets of the company were $304.2 million, up 160.8% year over year.

Net cash flow from operating activities in 2012 was $32.3 million, up 117.8% year over year.

Shareholders’ equity increased 177% year over year to $280.3 million at 2012 end.

Business Update

In February 2013, Zillow launched Zillow Digs– an online service in home remodeling, which marked an expansion in its existing lines of businesses.

In the reported quarter the company made three acquisitions - Mortech Inc., a software and services company providing CRM and pricing engine to the mortgage industry, HotPads, a site that offers consumer rentals and mobile apps, and Buyfolio, an online and mobile supported shopping means, to fortify its mortgage, rental and real estate businesses.

Earlier this month, Zillow pronounced that Zillow Real Estate Network will be partnering with HGTV. The deal will allow Zillow to provide all real estate listings for HGTV’s Front Door. Zillow Premier Agents which is expected to come into force in the second quarter of 2013 will also be benefited from the partnership.

Zacks Rank

Zillow currently carries a Zacks Rank #4 (Sell). Perion Network Ltd. Ord (PERI), Giant Interactive Group Inc. (GA - Snapshot Report) and American Public Education Inc. (APEI - Analyst Report) with favorable Zacks Rank #1 (Strong Buy) are expected to report their fourth quarter and full year 2012 results shortly.