EX-99.1 3 d233466dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

 

LOGO

 

Contacts:   
Raymond Jones    Katie Curnutte
Investor Relations    Public Relations
206-470-7137   

press@zillow.com

ir@zillow.com   

ZILLOW GROUP REPORTS SECOND QUARTER 2016 RESULTS

 

    Record Revenue of $208.4 million increased 31% year-over-year, excluding revenue from Market Leader, which was divested in the third quarter of 2015.

 

    Marketplace Revenue of $191.6 million increased 44% year-over-year, excluding revenue from Market Leader.

 

    All-time high of more than 171 million unique users in May to Zillow Group consumer brands Zillow®, Trulia®, StreetEasy®, HotPads® and Naked Apartments®.

 

    Zillow Group captured 78% market share of the mobile-only category.

SEATTLE – August 4, 2016 – Zillow Group, Inc. (NASDAQ:Z) (NASDAQ:ZG), which houses a portfolio of the largest and most vibrant real estate and home-related brands on mobile and web, today announced its consolidated financial results for the three months ended June 30, 2016.

“Record revenue and traffic growth were highlights of Zillow Group’s tremendous second quarter,” said Zillow Group CEO Spencer Rascoff. “We continue to command significant category leadership on mobile and web, reaching an all-time high of unique users in May and achieving our largest market share of the real estate category. It is clear that our monetization on mobile is benefiting from our significant market leadership, which now captures 78% of the mobile-only category. We are executing well against our long-term strategic priorities to increase our audience size, grow our Premier Agent and emerging marketplaces, and attract and retain the best talent in the industry.”

Second Quarter 2016 Financial Highlights

Throughout this release, certain historical financial results and year-over-year comparisons are presented on a pro forma basis. Pro forma results exclude items described in the reconciliation tables below and assume the February 2015 acquisition of Trulia occurred on January 1, 2014, the beginning of the comparable reporting period for the year prior to the year of acquisition. The pro forma results are presented in order to provide additional insights into the underlying trends in the business. Financial information for the three and six month periods ended June 30, 2016 is presented in this release on an as-reported basis. Reported results were prepared in accordance with U.S. generally accepted accounting principles (GAAP) unless otherwise noted.

 

    Revenue increased 31% to $208.4 million from $158.7 million in the second quarter of 2015, excluding revenue from Market Leader, which was divested in the third quarter of 2015.


    Marketplace Revenue increased 44% to $191.6 million from $133.0 million in the second quarter of 2015, excluding revenue from Market Leader.

 

    Premier Agent Revenue increased 28% to $147.1 million from $115.2 million in the second quarter of 2015.

 

    Other Real Estate Revenue1 increased 254% to $26.1 million from $7.4 million in the second quarter of 2015.

 

    Mortgages Revenue increased 77% to $18.4 million from $10.4 million in the second quarter of 2015.

 

    Display Revenue decreased 35% to $16.8 million from $25.8 million in the second quarter of 2015. The decrease is primarily a result of the company’s strategy to deemphasize display advertising and improve the user experience.

 

    GAAP net loss was $156.1 million in the second quarter of 2016, which includes the impact of a $130.0 million litigation settlement and $12.5 million in related legal costs, compared to GAAP net loss of $38.7 million in the same period last year.

 

    Adjusted EBITDA was $(101.3) million in the second quarter of 2016, which was a decrease from $21.0 million, or 12% of Revenue, in the second quarter of 2015. Adjusted EBITDA in the second quarter of 2016 includes the impact of a $130.0 million litigation settlement and $12.5 million in related legal costs. Excluding the impact of the $130.0 million litigation settlement, Adjusted EBITDA in the second quarter of 2016 would have been $28.7 million, or 14% of Revenue.

Operating and Business Highlights

 

    More than 168 million average monthly unique users for the second quarter of 2016.

 

    All-time high of more than 171 million unique users in May to Zillow Group consumer brands Zillow, Trulia, StreetEasy, HotPads and Naked Apartments, an increase of 20% year-over-year.

 

    In June, Zillow Group’s market share was up 4 percentage points since March 2016, capturing 67% of the mobile and web real estate audience. 2

 

    When looking at mobile-only, Zillow Group’s market share is even larger, capturing 78% of the category.2

 

    Leads to Zillow Group Premier Agent® Advertisers for the second quarter of 2016 grew nearly 50% year over year to more than 4 million.

 

    The Premier Agent marketplace continues to accelerate as top performing agents realize the benefits of advertising on Zillow Group’s mobile applications and websites.

 

    Total sales to Premier Agent Advertisers who have been customers for more than one year increased 57% year-over-year.

 

 

1  Other Real Estate Revenue includes agent services, dotloop, StreetEasy, Naked Apartments, rentals and other offerings to endemic advertisers that are not traditional display advertising.
2  comScore data June 2016

 

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    Sales to existing Premier Agent Advertisers accounted for 70% of total bookings.

 

    Premier Agent Advertisers who spend more than $5,000 per month:

 

    Increased 73% year-over-year on a total dollar basis.

 

    Increased 68% year-over-year in the number of agent advertisers.

Business Outlook - Third Quarter and Full Year 2016

For full year 2016, Zillow Group is increasing its outlook for Revenue to a range of $830 million to $840 million, up from a range of $825 million to $835 million. The 2016 Revenue outlook represents a 30% year-over-year increase at the midpoint of the range, compared to a 24% increase from 2014 to 2015, on a pro forma basis and excluding revenue from Market Leader, which was divested in 2015.

The following table presents Zillow Group’s business outlook for the periods presented (in millions):

 

     Three Months Ending    Year Ending

Zillow Group Outlook as of August 4, 2016

   September 30, 2016    December 31, 2016
(in millions)          

Revenue

   $217 to $222    $830 to $840

Premier Agent revenue

   $156 to $158    $597 to $602

Display revenue

   $15 to $16    $60 to $62

Operating expenses

   $220 to $225    ***

Adjusted EBITDA (1)

   $48 to $53    $125 to $135

Depreciation and amortization

   $24 to $26    $97 to $102

Share-based compensation expense

   $26 to $28    $105 to $110

Capital expenditures

   ***    $44 to $46

Weighted average shares outstanding — basic

   179.5 to 181.5    179.0 to 181.0

Weighted average shares outstanding — diluted

   196.0 to 198.0    195.5 to 197.5

 

*** Outlook not provided
(1) Forecasted Adjusted EBITDA for the year ending December 31, 2016 in the table above excludes the impact of a $130.0 million litigation settlement and includes $28.2 million in related legal costs. Including the impact of the $130.0 million litigation settlement and $28.2 million in related legal costs, forecasted Adjusted EBITDA for the year ending December 31, 2016 is $0. A reconciliation of forecasted Adjusted EBITDA (including the impact of the $130.0 million litigation settlement and $28.2 million in related legal costs) to forecasted net loss is provided below in this press release.

Conference Call and Webcast Information

Zillow Group’s CEO Spencer Rascoff and CFO Kathleen Philips will host a live conference call and webcast to discuss the results today at 2 p.m. Pacific Time (5 p.m. Eastern Time). A copy of

 

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management’s prepared remarks will be made available on the investor relations section of Zillow Group, Inc.’s website at http://investors.zillowgroup.com/results.cfm prior to the live conference call and webcast to allow analysts and investors additional time to review the details of the results.

Zillow Group’s management will first read the prepared remarks and then answer questions submitted via Twitter® during the live conference call, in addition to answering questions from dialed-in participants. Questions can be submitted to the @ZillowGroup Twitter® handle using #ZEarnings.

A link to the live webcast of the conference call will be available on the investor relations section of Zillow Group, Inc.’s website at http://investors.zillowgroup.com/results.cfm. The live call may also be accessed via phone at (877) 643-7152 toll-free domestically and at (443) 863-7921 internationally, with conference ID# 42951979. Following completion of the call, a recorded replay of the webcast will be available on the investor relations section of Zillow Group, Inc.’s website.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 that involve risks and uncertainties, including, without limitation, statements regarding our business outlook, strategic priorities, and operational plans for 2016. Statements containing words such as “may,” “believe,” “anticipate,” “expect,” “intend,” “plan,” “project,” “will,” “projections,” “continue,” “business outlook,” “estimate,” “outlook,” or similar expressions constitute forward-looking statements. Differences in Zillow Group’s actual results from those described in these forward-looking statements may result from actions taken by Zillow Group as well as from risks and uncertainties beyond Zillow Group’s control. Factors that may contribute to such differences include, but are not limited to, Zillow Group’s ability to successfully integrate and realize the benefits of our past or future strategic acquisitions or investments; Zillow Group’s ability to maintain and effectively manage an adequate rate of growth; Zillow Group’s ability to maintain or establish relationships with listings and data providers; the impact of the real estate industry on Zillow Group’s business; Zillow Group’s ability to innovate and provide products and services that are attractive to its users and advertisers; Zillow Group’s ability to increase awareness of the Zillow Group brands; Zillow Group’s ability to attract consumers to Zillow Group’s mobile applications and websites; Zillow Group’s ability to compete successfully against existing or future competitors; the reliable performance of Zillow Group’s network infrastructure and content delivery processes; and Zillow Group’s ability to protect its intellectual property. The foregoing list of risks and uncertainties is illustrative, but is not exhaustive. For more information about potential factors that could affect Zillow Group’s business and financial results, please review the “Risk Factors” described in Zillow Group’s Annual Report on Form 10-K for the year ended December 31, 2015 filed with the Securities and Exchange Commission, or SEC, and in Zillow Group’s other filings with the SEC. Except as may be required by law, Zillow Group does not intend, and undertakes no duty, to update this information to reflect future events or circumstances.

Use of Non-GAAP Financial Measures

To provide investors with additional information regarding our financial results, this press release includes references to certain pro forma financial results, Adjusted EBITDA and non-GAAP net income (loss) per share, all of which are non-GAAP financial measures. We have provided a reconciliation of pro

 

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forma Adjusted EBITDA to pro forma net loss, Adjusted EBITDA to net loss, the most directly comparable GAAP financial measure, and a reconciliation of net income (loss), adjusted, to net loss, as reported on a GAAP basis, and the calculations of non-GAAP net income (loss) per share – basic and diluted and pro forma weighted-average shares outstanding – basic and diluted, within this earnings release.

The pro forma financial results included in this press release, although helpful in illustrating the financial characteristics of Zillow Group under one set of assumptions, are not true historical financial results. They are provided for informational purposes and do not attempt to represent Zillow Group’s actual financial condition if the February 2015 acquisition of Trulia had been completed on the applicable dates of the financial statements presented herein, or to predict or suggest future results.

Adjusted EBITDA is a key metric used by our management and board of directors to measure operating performance and trends, and to prepare and approve our annual budget. In particular, the exclusion of certain expenses in calculating Adjusted EBITDA facilitates operating performance comparisons on a period-to-period basis.

Our use of Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:

 

    Adjusted EBITDA does not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments;

 

    Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;

 

    Adjusted EBITDA does not consider the potentially dilutive impact of share-based compensation;

 

    Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements;

 

    Adjusted EBITDA does not reflect acquisition-related costs;

 

    Adjusted EBITDA does not reflect restructuring costs;

 

    Adjusted EBITDA does not reflect interest expense or other income;

 

    Adjusted EBITDA does not reflect the impact of income taxes; and

 

    Other companies, including companies in our own industry, may calculate Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure.

Because of these limitations, you should consider Adjusted EBITDA alongside other financial performance measures, including various cash flow metrics, net loss and our other GAAP results.

Our presentation of non-GAAP net income (loss) per share excludes the impact of share-based compensation expense, acquisition-related costs, restructuring costs and income taxes. This measure is not a key metric used by our management and board of directors to measure operating performance or otherwise manage the business. However, we provide non-GAAP net income (loss) per share as supplemental information to investors, as we believe the exclusion of share-based compensation expense, acquisition-related costs, restructuring costs and income taxes facilitates investors’ operating performance comparisons on a period-to-period basis. You should not consider these metrics in isolation or as substitutes for analysis of our results as reported under GAAP.

 

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About Zillow Group

Zillow Group (NASDAQ:Z) (NASDAQ:ZG) houses a portfolio of the largest real estate and home-related brands on mobile and the web. The company’s brands focus on all stages of the home lifecycle: renting, buying, selling, financing and home improvement. Zillow Group is committed to empowering consumers with unparalleled data, inspiration and knowledge around homes, and connecting them with the right local professionals to help. The Zillow Group portfolio of consumer brands includes real estate and rental marketplaces Zillow®, Trulia®, StreetEasy®, HotPads® and Naked Apartments®. In addition, Zillow Group works with tens of thousands of real estate agents, lenders and rental professionals, helping maximize business opportunities and connect to millions of consumers. The company operates a number of business brands for real estate, rental and mortgage professionals, including Mortech®, dotloop® and Retsly®. The company is headquartered in Seattle.

Please visit http://investors.zillowgroup.com, www.zillowgroup.com/ir-blog, and www.twitter.com/zillowgroup, where Zillow Group discloses information about the company, its financial information, and its business which may be deemed material.

The Zillow Group logo is available at http://zillowgroup.mediaroom.com/logos-photos.

Zillow, Premier Agent, Mortech, StreetEasy, Retsly and HotPads are registered trademarks of Zillow, Inc. Trulia is a registered trademark of Trulia, LLC. dotloop is a registered trademark of DotLoop, LLC. Naked Apartments is a registered trademark of Naked Apartments, Inc.

Twitter is a registered trademark of Twitter, Inc.

(ZFIN)

 

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Pro Forma Financial Information

The following financial information for the three and six month periods ended June 30, 2015 is presented on a pro forma basis and gives effect to the February 2015 acquisition of Trulia as if it were consummated on January 1, 2014, the beginning of the comparable reporting period for the year prior to the year of acquisition. For ease of year-over-year comparison, this pro forma financial information is presented with financial information for the three and six month periods ended June 30, 2016, which is presented on an as-reported basis (in thousands, except per share data, unaudited):

 

     Three Months Ended     Six Months Ended  
     June 30,     June 30,  
     2016 (1)     2015 (2)     2016 (1)     2015 (3)  

Pro forma revenue

   $ 208,403      $ 171,269      $ 394,385      $ 333,800   

Pro forma net loss

   $ (156,149   $ (26,731   $ (203,754   $ (44,585

Pro forma net loss per share — basic and diluted

   $ (0.87   $ (0.15   $ (1.14   $ (0.25

Pro forma weighted-average shares outstanding — basic and diluted

     179,451        176,142        179,067        175,290   

Other Financial Data:

        

Pro forma Adjusted EBITDA (4)

   $ (101,260   $ 21,039      $ (99,386   $ 45,540   

 

(1) The financial information for the three and six month periods ended June 30, 2016 is presented on an as-reported basis.
(2) The pro forma net loss for the three months ended June 30, 2015 includes pro forma adjustments for $6.7 million to eliminate restructuring costs associated with the acquisition of Trulia reflected in the historical financial statements, $3.7 million to eliminate share-based compensation expense attributable to substituted equity awards and $1.7 million to eliminate direct and incremental acquisition-related costs reflected in the historical financial statements.
(3) The pro forma net loss for the six months ended June 30, 2015 includes pro forma adjustments for $47.9 million to eliminate direct and incremental acquisition-related costs reflected in the historical financial statements, $37.3 million to eliminate share-based compensation expense attributable to substituted equity awards and to record additional share-based compensation expense attributable to substituted equity awards, $31.9 million to eliminate restructuring costs associated with the acquisition of Trulia reflected in the historical financial statements, $2.4 million to record additional amortization expense for acquired intangible assets and $1.1 million to eliminate Trulia’s historical amortization of capitalized website development costs.
(4) See below for a reconciliation of pro forma Adjusted EBITDA to pro forma net loss. For the three and six month periods ended June 30, 2016, Adjusted EBITDA includes the impact of a $130.0 million litigation settlement. Adjusted EBITDA for the three and six month periods ended June 30, 2016 also includes $12.5 million and $28.2 million, respectively, in related legal costs.

The basic and diluted pro forma net loss per share is based on the weighted-average number of shares of Zillow Group common stock and Class C capital stock outstanding for the period presented and adjusted for the number of shares of Class A common stock issued in connection with the February 2015 acquisition of Trulia, assuming for the purposes of the unaudited pro forma condensed combined

 

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statements of operations that the closing date of the acquisition was January 1, 2014. The calculation of the number of shares used in the computation of pro forma basic and diluted net loss per share is as follows (in thousands, unaudited):

 

     Three Months Ended      Six Months Ended  
     June 30,      June 30,  
     2016      2015      2016      2015  

Weighted-average shares outstanding — basic and diluted (1)

     127,671         124,362         127,287         123,510   

Class A common stock issued in connection with the acquisition of Trulia

     51,780         51,780         51,780         51,780   
  

 

 

    

 

 

    

 

 

    

 

 

 

Pro forma weighted-average shares outstanding — basic and diluted

     179,451         176,142         179,067         175,290   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) Amounts exclude shares of Zillow Group Class A common stock issued in connection with the acquisition of Trulia.    

The following table presents a reconciliation of pro forma Adjusted EBITDA to pro forma net loss for the three and six month periods ended June 30, 2015. For ease of year-over-year comparison, this pro forma financial information is presented with financial information for the three and six month periods ended June 30, 2016, which is presented on an as-reported basis (in thousands, unaudited):

 

     Three Months Ended     Six Months Ended  
     June 30,     June 30,  
     2016 (1)     2015     2016 (1)     2015  

Reconciliation of Pro Forma Adjusted EBITDA to Pro Forma Net Loss:

        

Pro forma net loss

   $ (156,149   $ (26,731   $ (203,754   $ (44,585

Pro forma other income

     (753     (450     (1,434     (752

Pro forma depreciation and amortization expense

     25,550        20,419        49,357        40,281   

Pro forma share-based compensation expense

     28,316        26,221        53,867        47,457   

Pro forma acquisition-related costs

     204        —          797        —     

Pro forma interest expense

     1,572        1,580        3,145        3,139   

Pro forma income tax benefit

     —          —          (1,364     —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Pro forma Adjusted EBITDA

   $ (101,260   $ 21,039      $ (99,386   $ 45,540   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) The financial information for the three and six month periods ended June 30, 2016 is presented on an as-reported basis. For the three and six month periods ended June 30, 2016, Adjusted EBITDA includes the impact of a $130.0 million litigation settlement. Adjusted EBITDA for the three and six month periods ended June 30, 2016 also includes $12.5 million and $28.2 million, respectively, in related legal costs.

 

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The following table presents our pro forma revenue by type for the six months ended June 30, 2015. For ease of year-over-year comparison, the pro forma financial information is presented with financial information for the three and six month periods ended June 30, 2016, which is presented on an as-reported basis (in thousands, unaudited):

 

     Three Months Ended      Six Months Ended  
     June 30,      June 30,  
     2016 (1)      2015 (1)      2016 (1)      2015  

Pro Forma Revenue:

           

Pro forma Marketplace revenue:

           

Real estate:

           

Premier Agent

   $ 147,106       $ 115,185       $ 281,635       $ 222,342   

Other real estate

     26,070         7,373         44,048         13,612   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total pro forma Real estate revenue

     173,176         122,558         325,683         235,954   

Mortgages

     18,392         10,393         34,846         20,343   

Market Leader

     —           12,530         —           26,111   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total pro forma Marketplace revenue

     191,568         145,481         360,529         282,408   

Pro forma Display revenue

     16,835         25,788         33,856         51,392   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total pro forma revenue

   $ 208,403       $ 171,269       $ 394,385       $ 333,800   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) The financial information for the three months ended June 30, 2015 and for the three and six month periods ended June 30, 2016 is presented on an as-reported basis.

 

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Reported Consolidated Results

ZILLOW GROUP, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

 

     June 30, 2016     December 31, 2015  

Assets

    

Current assets:

    

Cash and cash equivalents

   $ 155,210      $ 229,138   

Short-term investments

     264,933        291,151   

Accounts receivable, net

     35,494        29,789   

Prepaid expenses and other current assets

     15,728        24,016   
  

 

 

   

 

 

 

Total current assets

     471,365        574,094   

Restricted cash

     1,053        3,015   

Property and equipment, net

     98,799        89,639   

Goodwill

     1,919,777        1,909,167   

Intangible assets, net

     539,965        554,765   

Other assets

     6,142        5,020   
  

 

 

   

 

 

 

Total assets

   $ 3,037,101      $ 3,135,700   
  

 

 

   

 

 

 

Liabilities and shareholders’ equity

    

Current liabilities:

    

Accounts payable

   $ 17,144      $ 3,361   

Accrued expenses and other current liabilities

     48,475        43,047   

Accrued compensation and benefits

     24,303        11,392   

Deferred revenue

     25,651        21,450   

Deferred rent, current portion

     1,215        1,172   
  

 

 

   

 

 

 

Total current liabilities

     116,788        80,422   

Deferred rent, net of current portion

     15,020        13,743   

Long-term debt

     230,000        230,000   

Deferred tax liabilities and other long-term liabilities

     132,521        132,482   
  

 

 

   

 

 

 

Total liabilities

     494,329        456,647   

Shareholders’ equity:

    

Class A common stock

     5        5   

Class B common stock

     1        1   

Class C capital stock

     12        12   

Additional paid-in capital

     3,022,736        2,956,111   

Accumulated other comprehensive income (loss)

     377        (471

Accumulated deficit

     (480,359     (276,605
  

 

 

   

 

 

 

Total shareholders’ equity

     2,542,772        2,679,053   
  

 

 

   

 

 

 

Total liabilities and shareholders’ equity

   $ 3,037,101      $ 3,135,700   
  

 

 

   

 

 

 

 

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ZILLOW GROUP, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

 

     Three Months Ended     Six Months Ended  
     June 30,     June 30,  
     2016     2015     2016     2015  

Revenue

   $ 208,403      $ 171,269      $  394,385      $ 298,542   

Costs and expenses:

        

Cost of revenue (exclusive of amortization) (1)(2)

     17,220        17,037        33,672        30,056   

Sales and marketing (2)

     99,256        87,942        198,016        147,228   

Technology and development (2)

     67,421        51,740        131,838        89,065   

General and administrative (2)

     179,632        43,810        233,469        81,834   

Acquisition-related costs

     204        1,679        797        14,156   

Restructuring costs (2)

     —          6,652        —          31,717   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total costs and expenses

     363,733        208,860        597,792        394,056   
  

 

 

   

 

 

   

 

 

   

 

 

 

Loss from operations

     (155,330     (37,591     (203,407     (95,514

Other income

     753        450        1,434        719   

Interest expense

     (1,572     (1,580     (3,145     (2,310
  

 

 

   

 

 

   

 

 

   

 

 

 

Loss before income taxes

     (156,149     (38,721     (205,118     (97,105

Income tax benefit

     —          —          1,364        —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss

   $ (156,149   $ (38,721   $ (203,754   $ (97,105
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss per share — basic and diluted

   $ (0.87   $ (0.22   $ (1.14   $ (0.60

Weighted-average shares outstanding — basic and diluted

     179,451        176,142        179,067        161,847   

 

        

(1)    Amortization of website development costs and intangible assets included in technology and development

   $ 20,845      $ 17,117      $ 40,904      $ 28,899   

(2)    Includes share-based compensation expense as follows:

        

Cost of revenue

   $ 1,627      $ 1,110      $ 2,846      $ 2,062   

Sales and marketing

     6,395        8,784        11,598        12,993   

Technology and development

     8,366        7,005        15,125        12,771   

General and administrative

     11,928        12,981        24,298        25,061   

Restructuring costs

     —          3,584        —          14,004   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

   $ 28,316      $ 33,464      $ 53,867      $ 66,891   
  

 

 

   

 

 

   

 

 

   

 

 

 

Other Financial Data:

        

Adjusted EBITDA (3)

   $ (101,260   $ 21,039      $ (99,386   $ 37,693   

 

(3) See above for more information regarding our presentation of Adjusted EBITDA.

 

11


ZILLOW GROUP, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

 

     Six Months Ended  
     June 30,  
     2016     2015  

Operating activities

    

Net loss

   $ (203,754   $ (97,105

Adjustments to reconcile net loss to net cash provided by (used in) operating activities, net of amounts assumed in connection with acquisitions:

    

Depreciation and amortization

     49,357        34,447   

Share-based compensation expense

     53,867        52,887   

Restructuring costs

     —          18,147   

Release of valuation allowance on certain deferred tax assets

     1,364        —     

Loss on disposal of property and equipment

     2,170        499   

Bad debt expense

     927        1,605   

Deferred rent

     1,321        2,310   

Amortization of bond premium

     808        1,593   

Changes in operating assets and liabilities:

    

Accounts receivable

     (6,608     (5,026

Prepaid expenses and other assets

     7,122        8,494   

Accounts payable

     13,743        (2,516

Accrued expenses and other current liabilities

     5,005        13   

Accrued compensation and benefits

     12,877        (3,259

Accrued restructuring costs

     (169     1,425   

Deferred revenue

     4,190        (366

Other long-term liabilities

     (2,749     2,998   
  

 

 

   

 

 

 

Net cash provided by (used in) operating activities

     (60,529     16,146   

Investing activities

    

Proceeds from maturities of investments

     105,440        165,723   

Purchases of investments

     (83,976     (164,718

Proceeds from sales of investments

     4,795        4,979   

Decrease in restricted cash, net of amounts assumed in connection with an acquisition

     1,962        312   

Purchases of property and equipment

     (33,393     (25,546

Purchases of intangible assets

     (3,321     (8,006

Cash acquired in acquisition, net

     —          173,406   

Cash paid for acquisition, net

     (12,357     —     
  

 

 

   

 

 

 

Net cash provided by (used in) investing activities

     (20,850     146,150   

Financing activities

    

Proceeds from exercise of stock options

     7,737        14,722   

Value of equity awards withheld for tax liability

     (286     (511
  

 

 

   

 

 

 

Net cash provided by financing activities

     7,451        14,211   

Net increase (decrease) in cash and cash equivalents during period

     (73,928     176,507   

Cash and cash equivalents at beginning of period

     229,138        125,765   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 155,210      $ 302,272   
  

 

 

   

 

 

 

Supplemental disclosures of cash flow information

    

Cash paid for interest

   $ 3,163      $ 3,163   

Noncash transactions:

    

Value of Class A common stock issued in connection with an acquisition

   $ —        $ 1,883,728   

Capitalized share-based compensation

   $ 5,304      $ 4,783   

Write-off of fully depreciated property and equipment

   $ 9,986      $ 13,001   

 

12


Adjusted EBITDA

The following table presents a reconciliation of Adjusted EBITDA to net loss, the most directly comparable GAAP financial measure, for each of the periods presented (in thousands, unaudited):

 

     Three Months Ended      Six Months Ended  
     June 30,      June 30,  
     2016      2015      2016      2015  

Reconciliation of Adjusted EBITDA to Net Loss:

           

Net loss

   $ (156,149    $ (38,721    $ (203,754    $ (97,105

Other income

     (753      (450      (1,434      (719

Depreciation and amortization expense

     25,550         20,419         49,357         34,447   

Share-based compensation expense

     28,316         29,880         53,867         52,887   

Acquisition-related costs

     204         1,679         797         14,156   

Restructuring costs

     —           6,652         —           31,717   

Interest expense

     1,572         1,580         3,145         2,310   

Income tax benefit

     —           —           (1,364      —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted EBITDA (1)

   $ (101,260    $ 21,039       $ (99,386    $ 37,693   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) For the three and six month periods ended June 30, 2016, Adjusted EBITDA includes the impact of a $130.0 million litigation settlement. Adjusted EBITDA for the three and six month periods ended June 30, 2016 also includes $12.5 million and $28.2 million, respectively, in related legal costs. Excluding the $130.0 million litigation settlement, Adjusted EBITDA in the second quarter of 2016 would have been $28.7 million.

The following table presents a reconciliation of forecasted Adjusted EBITDA to forecasted net loss for each of the periods presented (in thousands, unaudited):

 

     Three Months Ending     Year Ending  
     September 30, 2016     December 31, 2016  

Reconciliation of Forecasted Adjusted EBITDA to Forecasted Net Loss:

    

Forecasted Net loss

   $ (3,100   $ (210,900

Forecasted Other income

     (700     (2,800

Forecasted Depreciation and amortization expense

     25,000        99,500   

Forecasted Share-based compensation expense

     27,000        107,500   

Forecasted Acquisition-related costs

     600        1,600   

Forecasted Interest expense

     1,600        6,300   

Forecasted Income tax expense (benefit)

     100        (1,200
  

 

 

   

 

 

 

Forecasted Adjusted EBITDA

   $ 50,500      $ —     
  

 

 

   

 

 

 

 

13


Non-GAAP Net Income (Loss) per Share

The following table presents a reconciliation of net income (loss), adjusted, to net loss, as reported on a GAAP basis, and the calculation of non-GAAP net income (loss) per share - basic and diluted, for each of the periods presented (in thousands, except per share data, unaudited):

 

     Three Months Ended      Six Months Ended  
     June 30,      June 30,  
     2016      2015      2016      2015  

Net loss, as reported

   $ (156,149    $ (38,721    $ (203,754    $ (97,105

Share-based compensation expense

     28,316         29,880         53,867         52,887   

Acquisition-related costs

     204         1,679         797         14,156   

Restructuring costs

     —           6,652         —           31,717   

Income tax benefit

     —           —           (1,364      —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Net income (loss), adjusted

   $ (127,629    $ (510    $ (150,454    $ 1,655   
  

 

 

    

 

 

    

 

 

    

 

 

 

Non-GAAP net income (loss) per share - basic

   $ (0.71    $ (0.00    $ (0.84    $ 0.01   

Non-GAAP net income (loss) per share - diluted

   $ (0.71    $ (0.00    $ (0.84    $ 0.02   

Weighted-average shares outstanding - basic

     179,451         176,142         179,067         161,847   

Weighted-average shares outstanding - diluted

     179,451         176,142         179,067         179,876   

 

14


Revenue by Type

The following tables present our revenue by type and as a percentage of total revenue for each of the periods presented (in thousands, unaudited):

 

     Three Months Ended     Six Months Ended  
     June 30,     June 30,  
     2016     2015     2016     2015  

Revenue:

        

Marketplace revenue:

        

Real estate:

        

Premier Agent

   $ 147,106      $ 115,185      $ 281,635      $ 203,077   

Other real estate

     26,070        7,373        44,048        12,793   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total Real estate revenue

     173,176        122,558        325,683        215,870   

Mortgages

     18,392        10,393        34,846        19,951   

Market Leader

     —          12,530        —          18,587   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total Marketplace revenue

     191,568        145,481        360,529        254,408   

Display revenue

     16,835        25,788        33,856        44,134   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total revenue

   $ 208,403      $ 171,269      $ 394,385      $ 298,542   
  

 

 

   

 

 

   

 

 

   

 

 

 
     Three Months Ended     Six Months Ended  
     June 30,     June 30,  
     2016     2015     2016     2015  

Percentage of Total Revenue:

        

Marketplace revenue:

        

Real estate:

        

Premier Agent

     71     67     71     68

Other real estate

     13     4     11     4
  

 

 

   

 

 

   

 

 

   

 

 

 

Total Real estate revenue

     83     72     83     72

Mortgages

     9     6     9     7

Market Leader

     0     7     0     6
  

 

 

   

 

 

   

 

 

   

 

 

 

Total Marketplace revenue

     92     85     91     85

Display revenue

     8     15     9     15
  

 

 

   

 

 

   

 

 

   

 

 

 

Total revenue

     100     100     100     100
  

 

 

   

 

 

   

 

 

   

 

 

 

Unique Users

The following table sets forth our average monthly unique users for each of the periods presented:

 

     Average Monthly Unique Users for the
Three Months Ended June 30,
     2015 to 2016  
     2016      2015      % Change  
     (in thousands)         

Unique Users

     168,700         140,959         20

Unique users source: We measure Zillow unique users with Google Analytics and Trulia unique users with Omniture analytical tools.

 

15