Zillow reported record second-quarter revenue but slipped into a loss after booking a $36 million restructuring charge tied to this week’s layoffs, illustrating how workforce reductions can temporarily weigh on earnings even when the underlying business is growing.
The Seattle-based real estate company generated $772 million in revenue during the quarter, an 18% increase from a year ago. Net income, however, swung to a $4 million loss from a $2 million profit in the same period last year after the company recorded severance and related costs for cutting more than 500 employees, or about 7% of its workforce.
The restructuring is not yet complete. Zillow expects total layoff-related costs of $59 million to $64 million, meaning another $23 million to $28 million is expected to be recognized during the third quarter.
Operationally, the business continued to outperform the broader housing market. Revenue from Zillow’s for-sale business rose 14% to $549 million, residential revenue increased 7% to $465 million, mortgage revenue surged 75% to $84 million, and rental revenue climbed 31% to $209 million. Company executives said Zillow continued gaining market share despite a sluggish U.S. housing market.
For the first six months of the year, Zillow remained profitable, reporting $42 million in net income compared with $10 million during the same period last year, highlighting that the quarterly loss was driven primarily by one-time restructuring expenses.
Chief Executive Jeremy Wacksman said the layoffs were intended to create a leaner organization better positioned for long-term growth in a challenging housing environment. The company previously eliminated about 200 positions earlier this year as part of its annual performance review process.
One area investors continue to watch is user traffic. Average monthly unique users declined 3% to 220 million, while total visits also fell 3% to 2.3 billion. Despite lower traffic, Zillow generated higher revenue through improved monetization of its platform.
The company also faces an upcoming legal challenge. Zillow and Redfin are scheduled to go to trial later this month in an antitrust lawsuit brought by the Federal Trade Commission and five state attorneys general concerning a rental listings agreement. Zillow spent $10 million on litigation during the second quarter and has incurred $26 million in related legal expenses so far this year.
Excluding restructuring, litigation and certain other one-time expenses, Zillow reported adjusted net income of $118 million, underscoring the difference between its reported accounting results and its underlying operating performance.
For investors, the key question is whether the company’s workforce reductions and cost savings will position Zillow for stronger profitability if the U.S. housing market begins to recover.
JBizNews Desk
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