iBuying
For both Zillow and Redfin, the current market has brought not just more customers but also increased traffic to their websites.
Capital Thinking • Issue #721 • View online
Zillow (NASDAQ: ZG) (NASDAQ: Z) and Redfin (NASDAQ: RDFN) reported their third-quarter earnings within hours of each other, and each had a very strong quarter driven by the boom in activity in the residential real estate market. Both focused heavily on iBuying and the ways it's driving growth in the companies.
-Deidre Woollard
What Zillow and Redfin's Q3 Earnings Say About the Future of iBuying
Deidre Woollard | MillionAcres:
Zillow and Redfin by the numbers
Both Zillow and Redfin beat third-quarter estimates. Zillow's reported consolidated revenue was $657 million, but what is more interesting is how it breaks down by division.
Zillow's IMT (Internet, Media, and Technology) division grew revenue by 24%. Homes revenue, the iBuying segment, decreased 51% to $187 million. Mortgage revenue grew by 114% to $54 million.
Adjusted EBITDA exceeded the high end of the company’s outlook for all three segments, resulting in a consolidated adjusted EBITDA of $152 million. Zillow exited the quarter with $3.8 billion in cash and investments.
While Redfin's revenue was down, that was partly due to its iBuying stoppage.
Revenue from traditional brokerage sales was up 36% year over year. Its gross profit was $93 million, an increase of 74% from $53 million in the third quarter of 2019. Real estate services gross profit was $92 million, an increase of 70% from $54 million in the third quarter of 2019.
Its market share of 1.04% of U.S. existing home sales by value in the third quarter of 2020 was an increase of .08 percentage points from the third quarter of 2019.
For both Zillow and Redfin, the current market has brought not just more customers but also increased traffic to their websites.
Zillow reported that traffic to its mobile apps, and websites reached a record 236 million average monthly unique users, an increase of 21% year over year, driving 2.8 billion visits during the quarter, an increase of 32% year over year.
Redfin's average monthly users were up 38% year over year to an average of 49.2 million users.
iBuying, when losing is winning
Neither Zillow or Redfin is making money on iBuying at this point.
In the third quarter, Zillow bought 808 homes and sold 583 homes through its iBuying program, Zillow Offers.
It now has 665 homes in inventory, up from 440 homes at the end of Q2. Zillow attributed part of its loss in revenue to the fact that it couldn't buy homes fast enough to meet demand.
Zillow added its 25th iBuying city recently, bringing Jacksonville, Florida, into the mix. This makes it the leader in the number of cities where it transacts iBuying.
According to OpenDoor's website, it only has 21 markets that it serves through iBuying, although it currently does a higher volume than Zillow.
Redfin only had 17 homes to sell in Q3. It is also in fewer markets than either Zillow or OpenDoor, just 15 markets, including most recently Sacramento.
While the company is actively buying homes again, it doesn't expect to have very many homes to sell until the first quarter of 2021. For Redfin, the RedfinNow iBuying program serves as a feeder for the brokerage business.
Matthew DiLallo
*Photo credit: Austin Distel on Unsplash | www.distel.co