Zillow (Z)

Q4 2012 Earnings Call

February 13, 2013 05:00 PM ET

Executives

Chad Cohen - CFO

Spencer Rascoff - CEO

Analysts

Neal Doshi - Citigroup

Michael Graham - Canaccord Genuity

Mark May - Barclays

Brad Safalow - PAA Research

Chad Bartley - Pacific Crest Securities

Mitch Bartlett - Craig Hallum

Presentation

Operator

Good day ladies and gentlemen and thank you for standing by. Welcome to Zillow's fourth quarter 2012 earnings conference call. At this time, all participants are in a listen-only mode. Later, we will conduction a question-and-answer session and instructions will follow at that time. (Operator Instructions). As a reminder, today's conference may be recorded. It is now my pleasure to turn the floor over to Raymond Jones, Zillow's Investor Relations officer. Sir, the floor is yours.

Raymond Jones

Thank you. Good afternoon and welcome to Zillow’s fourth-quarter and full year 2012 earnings conference call. Joining me today to talk about our results are Spencer Rascoff, Chief Executive Officer, and Chad Cohen, Chief Financial Officer.

Before we get started, as a reminder, during the course of this call we will make forward-looking statements regarding the future events and the future financial performance of the Company. We caution you to consider the important risk factors that could cause actual results to differ materially from those in the forward-looking statements made in the press release and on this conference call. These risk factors are described in our press release and are more fully detailed under the caption risk factors in our Quarterly Report on Form 10-K filed with the SEC on March 2, 2012.

In addition, please note that the date of this conference call is February 13, 2013, and any forward-looking statements that we make today are based on the assumptions as of this date. We undertake no obligation to update these statements as a result of new information or future events. During this call, we will present both GAAP and non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures is included in today's earnings press release. In our remarks, the non-GAAP financial measure adjusted EBITDA will be referred to simply as EBITDA, which excludes share-based compensation.

This call is being broadcast on the internet, and is available on the Investor Relations section of the investor relations section of the Zillow website at investors.zillow.com. A recording of this call will be available after 8:00 PM Eastern Time today. The earnings press release is available on our website, and after the call, a copy of today’s prepared remarks will also be available on the website. After management's remarks we will host a Q&A session.

I will now turn the call over to Spencer.

Spencer Rascoff

Thank you all for joining the call today to discuss our 2012 fourth quarter and full year results. I’ll start by reviewing some quarterly and full year financial highlights, and then I will outline our strategic priorities for 2013. Next, Chad will discuss our 2012 results in more detail, as well as our outlook for the first quarter and full year 2013. Then we'll open up the call for questions.

The fourth quarter turned out better than we expected. We achieved record revenue while executing a pricing model transition in our Premier Agent business. All during what’s typically the seasonally slowest period of the year in housing. Solid execution on the part of both our Premier Agent sales team and our Display sales teams resulted in Q4 revenue of $34.3 million, up 73% year-over-year. We also successfully closed three acquisitions: Mortech, which provides a CRM and pricing engine to the mortgage industry; HotPads, a consumer rental shopping site and suite of mobile apps; and BuyFolio, a collaborative shopping tool that enhances our Premier Agent offering. These acquisitions each accelerate development of our mortgage, rental and real estate marketplaces.

We ended 2012 on a strong note from Q4, and brought our full year revenue to nearly $117 million, growing 77% over full year 2011. Marketplace revenue reached almost $87 million, up 105% and grew from about 15,800 Premier Agents at the end of 2011 to almost 29,500 Premier Agents at the end of 2012.

Full-year Display Revenue grew 26% and exceeded $30 million for the year. EBITDA for 2012 was $25 million, up 112% year over year, and represented 22% of revenue. We also showed significant earnings growth with $5.9 million in net income, up from $1.1 million in 2011.

In addition to record revenue and profit, in 2012 we extended our usage lead as the largest real estate website and mobile platform. During the year, we hit a high of 37 million monthly unique visitors. We also tipped to mobile, with more monthly visits now coming from Zillow mobile than on the web.

While we are pleased with our fourth quarter and full year 2012 results, we now turn the page to 2013 and the tremendous market opportunities that lie ahead. In 2013, we have three priorities for the year: first, to continue the rapid expansion of our user base on mobile and desktop; second, to substantially grow our Premier Agent business; and third, to accelerate development of our emerging marketplaces in mortgages, rentals and home improvement. I will now spend some time discussing each priority.

Our first priority is to grow our user base and extend our leadership position across mobile and web. We are off to a good start, as January traffic reached nearly 46 million unique users for the first time, with just over half of our visits on a mobile device. Or, to put it another way, mobile traffic in January was larger than all of our traffic to Zillow just three years ago, in January 2010.

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