Zillow Group (Z) Financials

Zillow Group's financials over the last four years reveal a challenging profitability situation but with improving trends in recent quarters.

Positive financial trends and highlights:

• In Q1 2025, Zillow finally reported a net income of $8 million, a significant improvement from losses exceeding $20 million to $70 million in quarters of 2023 and 2024.
• Operating cash flows remain strong and positive, with $104 million generated in Q1 2025, consistent with a robust cash flow profile over recent quarters.
• Depreciation and amortization expenses consistently add back large non-cash charges, supporting healthier operating cash flows despite net losses.
• Total revenue showed growth from $492 million in Q1 2023 to $615 million in Q1 2025, indicating potential top-line expansion.
• Reduction in long-term debt in recent quarters from more than $1.6 billion (early 2023) to $497 million as of Q3 2024, reflecting debt management efforts.
• Balance sheet remains solid with significant cash and equivalents increasing from $1.39 billion in Q1 2023 to $914 million in Q1 2025, providing liquidity.
• Consistent investments in property, equipment, and securities suggest continued investment in business operations and growth opportunities.

Neutral observations:

• Marketing expenses remain very high, ranging around $300 million to $362 million per quarter, indicating large spending to support growth, but warrant efficiency monitoring.
• Non-interest expenses remain elevated near $600 million quarterly, requiring ongoing control to improve margins.
• Effective tax expense has been minimal or zero in recent quarters, likely due to net losses or tax credits, which might affect future tax liabilities.

Negative financial concerns:

• Zillow has reported continuous net losses from Q1 2023 through Q4 2024, with Q4 2023 showing a loss of $73 million and Q4 2024 a loss of $52 million before turning slightly positive in Q1 2025.
• Impairment and restructuring charges, while moderate, increased in some quarters (e.g., $10 million impairment in Q4 2023), which could signal asset write-downs or operational challenges.
• Share repurchases have been significant, with $250 million spent in Q1 2025 and hundreds of millions in prior quarters, which could pressure cash reserves given ongoing losses.
• Total liabilities remain substantial, generally around $2 billion, with significant short-term debt obligations ($600-$1,200 million), posing refinancing risks if cash flows weaken.
• Diluted earnings per share have been negative every quarter except Q1 2025, reaching lows of -$0.32 in Q4 2023, reflecting shareholder value erosion during the loss periods.

Overall, Zillow is showing signs of potential recovery based on the latest quarterly results with a return to profitability and strong cash flow. However, extended history of losses, high operating expenses, and substantial debt levels suggest investors should watch closely for sustained earnings improvements and expense control.