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Research Alert: Zg Beats Q1 Ebitda But Guides Q2 Profitability Lower On Legal And Ad Costs

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-- CFRA, an independent research provider, has providedwith the following research alert. Analysts at CFRA have summarized their opinion as follows:

ZG's Q1 revenue of $708M exceeded consensus and grew 18% Y/Y, driven by Mortgages (+56%) and Rentals (+42%) segments, while core Residential grew a modest 8%. Adjusted EBITDA of $182M beat consensus $168.39M despite 160-bp margin headwind from legal expenses, supported by strong cost control and 44% Y/Y adjusted free cash flow growth. However, Q2 adjusted EBITDA guidance of $150M-$165M fell substantially short of consensus $190.55M due to front-loaded advertising spend and $20M in incremental legal costs. Management reiterated full-year mid-teens revenue growth and margin expansion, implying significant 2H recovery. We believe legal risks create meaningful uncertainty, with ongoing litigation pressures coinciding with moderating internal traffic metrics (average monthly users down 3% Y/Y) and reduced cash position of $788M vs $1.3B in Q4. In our view, the company faces execution risk navigating legal headwinds while maintaining growth momentum in a challenging environment.

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