x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT 1934 |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Washington | 47-1645716 | |
(State or other jurisdiction of | (I.R.S. Employer | |
incorporation or organization) | Identification No.) |
1301 Second Avenue, Floor 31, Seattle, Washington | 98101 | |
(Address of principal executive offices) | (Zip Code) |
Large accelerated filer | x | Accelerated filer | ☐ | |||
Non-accelerated filer | ☐ (Do not check if a smaller reporting company) | Smaller reporting company | ☐ | |||
Emerging growth company | ☐ |
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Item 2. | ||
Item 3. | ||
Item 4. | ||
Item 1. | ||
Item 1A. | ||
Item 2. | ||
Item 6. | ||
• | Zillow Group Investor Relations Webpage (http://investors.zillowgroup.com) |
• | Zillow Group Investor Relations Blog (http://www.zillowgroup.com/ir-blog) |
• | Zillow Group Twitter Account (https://twitter.com/zillowgroup) |
March 31, 2018 | December 31, 2017 | ||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 397,393 | $ | 352,095 | |||
Short-term investments | 425,593 | 410,444 | |||||
Accounts receivable, net of allowance for doubtful accounts of $4,917 and $5,341 at March 31, 2018 and December 31, 2017, respectively | 54,558 | 54,396 | |||||
Prepaid expenses and other current assets | 44,703 | 24,590 | |||||
Total current assets | 922,247 | 841,525 | |||||
Contract cost assets | 42,465 | — | |||||
Property and equipment, net | 114,828 | 112,271 | |||||
Goodwill | 1,931,076 | 1,931,076 | |||||
Intangible assets, net | 307,919 | 319,711 | |||||
Other assets | 25,602 | 25,934 | |||||
Total assets | $ | 3,344,137 | $ | 3,230,517 | |||
Liabilities and shareholders’ equity | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 5,194 | $ | 3,587 | |||
Accrued expenses and other current liabilities | 55,034 | 61,373 | |||||
Accrued compensation and benefits | 22,746 | 19,109 | |||||
Deferred revenue | 35,297 | 31,918 | |||||
Deferred rent, current portion | 2,426 | 2,400 | |||||
Total current liabilities | 120,697 | 118,387 | |||||
Deferred rent, net of current portion | 18,214 | 21,330 | |||||
Long-term debt | 389,624 | 385,416 | |||||
Deferred tax liabilities and other long-term liabilities | 47,161 | 44,561 | |||||
Total liabilities | 575,696 | 569,694 | |||||
Commitments and contingencies (Note 16) | |||||||
Shareholders’ equity: | |||||||
Preferred stock, $0.0001 par value; 30,000,000 shares authorized; no shares issued and outstanding | — | — | |||||
Class A common stock, $0.0001 par value; 1,245,000,000 shares authorized; 57,288,985 and 56,629,103 shares issued and outstanding as of March 31, 2018 and December 31, 2017, respectively | 6 | 6 | |||||
Class B common stock, $0.0001 par value; 15,000,000 shares authorized; 6,217,447 shares issued and outstanding as of March 31, 2018 and December 31, 2017 | 1 | 1 | |||||
Class C capital stock, $0.0001 par value; 600,000,000 shares authorized; 129,437,894 and 127,268,598 shares issued and outstanding as of March 31, 2018 and December 31, 2017, respectively | 13 | 13 | |||||
Additional paid-in capital | 3,340,387 | 3,254,146 | |||||
Accumulated other comprehensive loss | (1,454 | ) | (1,100 | ) | |||
Accumulated deficit | (570,512 | ) | (592,243 | ) | |||
Total shareholders’ equity | 2,768,441 | 2,660,823 | |||||
Total liabilities and shareholders’ equity | $ | 3,344,137 | $ | 3,230,517 |
Three Months Ended March 31, | |||||||
2018 | 2017 | ||||||
Revenue | $ | 299,879 | $ | 245,775 | |||
Costs and expenses: | |||||||
Cost of revenue (exclusive of amortization) (1) | 23,919 | 20,232 | |||||
Sales and marketing | 137,291 | 105,940 | |||||
Technology and development | 93,933 | 72,868 | |||||
General and administrative | 56,073 | 45,466 | |||||
Acquisition-related costs | 27 | 105 | |||||
Total costs and expenses | 311,243 | 244,611 | |||||
Income (loss) from operations | (11,364 | ) | 1,164 | ||||
Other income | 2,446 | 953 | |||||
Interest expense | (7,073 | ) | (6,723 | ) | |||
Loss before income taxes | (15,991 | ) | (4,606 | ) | |||
Income tax expense | (2,600 | ) | — | ||||
Net loss | $ | (18,591 | ) | $ | (4,606 | ) | |
Net loss per share — basic and diluted | $ | (0.10 | ) | $ | (0.03 | ) | |
Weighted-average shares outstanding — basic and diluted | 191,464 | 183,158 | |||||
____________________ (1) Amortization of website development costs and intangible assets included in technology and development | $ | 22,549 | $ | 23,261 |
Three Months Ended March 31, | |||||||
2018 | 2017 | ||||||
Net loss | $ | (18,591 | ) | $ | (4,606 | ) | |
Other comprehensive loss: | |||||||
Unrealized losses on investments | (332 | ) | (25 | ) | |||
Currency translation adjustments | (22 | ) | — | ||||
Total other comprehensive loss | (354 | ) | (25 | ) | |||
Comprehensive loss | $ | (18,945 | ) | $ | (4,631 | ) |
Three Months Ended March 31, | |||||||
2018 | 2017 | ||||||
Operating activities | |||||||
Net loss | $ | (18,591 | ) | $ | (4,606 | ) | |
Adjustments to reconcile net loss to net cash provided by operating activities: | |||||||
Depreciation and amortization | 26,906 | 27,135 | |||||
Share-based compensation expense | 30,741 | 26,395 | |||||
Amortization of contract cost assets | 9,296 | — | |||||
Amortization of discount and issuance costs on 2021 Notes | 4,708 | 4,353 | |||||
Deferred income taxes | 2,600 | — | |||||
Loss on disposal of property and equipment | 1,803 | 999 | |||||
Bad debt expense | (267 | ) | 718 | ||||
Deferred rent | (3,090 | ) | 190 | ||||
Amortization of bond premium | (137 | ) | 223 | ||||
Changes in operating assets and liabilities: | |||||||
Accounts receivable | 105 | (2,059 | ) | ||||
Prepaid expenses and other assets | (19,923 | ) | 4,737 | ||||
Contract cost assets | (11,440 | ) | — | ||||
Accounts payable | 1,672 | 53 | |||||
Accrued expenses and other current liabilities | (6,747 | ) | 4,683 | ||||
Accrued compensation and benefits | 3,637 | 2,539 | |||||
Deferred revenue | 3,379 | 1,598 | |||||
Net cash provided by operating activities | 24,652 | 66,958 | |||||
Investing activities | |||||||
Proceeds from maturities of investments | 61,386 | 49,107 | |||||
Purchases of investments | (76,729 | ) | (84,008 | ) | |||
Purchases of property and equipment | (15,791 | ) | (14,163 | ) | |||
Purchases of intangible assets | (1,098 | ) | (5,308 | ) | |||
Proceeds from divestiture of a business | — | 579 | |||||
Cash paid for acquisition, net | — | (6,002 | ) | ||||
Net cash used in investing activities | (32,232 | ) | (59,795 | ) | |||
Financing activities | |||||||
Proceeds from exercise of stock options | 52,906 | 11,006 | |||||
Value of equity awards withheld for tax liability | (28 | ) | (237 | ) | |||
Net cash provided by financing activities | 52,878 | 10,769 | |||||
Net increase in cash and cash equivalents during period | 45,298 | 17,932 | |||||
Cash and cash equivalents at beginning of period | 352,095 | 243,592 | |||||
Cash and cash equivalents at end of period | $ | 397,393 | $ | 261,524 | |||
Supplemental disclosures of cash flow information | |||||||
Noncash transactions: | |||||||
Capitalized share-based compensation | $ | 2,120 | $ | 2,868 | |||
Write-off of fully depreciated property and equipment | $ | 7,379 | $ | 3,446 | |||
Write-off of fully amortized intangible assets | $ | 10,687 | $ | 5,280 |
Computer equipment | 2 to 3 years |
Office equipment, furniture and fixtures | 5 to 7 years |
Leasehold improvements | Shorter of expected useful life or lease term |
New Guidance | Prior Guidance | Change | ||||||||||
Condensed Consolidated Statement of Operations: | ||||||||||||
Sales and marketing | $ | 137,291 | $ | 139,434 | $ | (2,143 | ) | |||||
Total costs and expenses | 311,243 | 313,386 | (2,143 | ) | ||||||||
Loss from operations | (11,364 | ) | (13,507 | ) | 2,143 | |||||||
Loss before income taxes | (15,991 | ) | (18,134 | ) | 2,143 | |||||||
Income tax expense | (2,600 | ) | (3,290 | ) | 690 | |||||||
Net loss | (18,591 | ) | (21,424 | ) | 2,833 | |||||||
Net loss per share - basic and diluted | (0.10 | ) | (0.11 | ) | 0.01 | |||||||
Condensed Consolidated Balance Sheet: | ||||||||||||
Contract cost assets | 42,465 | — | 42,465 | |||||||||
Total assets | 3,344,137 | 3,301,672 | 42,465 | |||||||||
Deferred tax liabilities and other long-term liabilities | 47,161 | 47,851 | (690 | ) | ||||||||
Total liabilities | 575,696 | 576,386 | (690 | ) | ||||||||
Accumulated deficit | (570,512 | ) | (613,667 | ) | 43,155 | |||||||
Total shareholders’ equity | 2,768,441 | 2,725,286 | 43,155 | |||||||||
Total liabilities and shareholders’ equity | 3,344,137 | 3,301,672 | 42,465 |
• | Level 1—Quoted prices in active markets for identical assets or liabilities. |
• | Level 2—Assets and liabilities valued based on observable market data for similar instruments, such as quoted prices for similar assets or liabilities. |
• | Level 3—Unobservable inputs that are supported by little or no market activity; instruments valued based on the best available data, some of which is internally developed, and considers risk premiums that a market participant would require. |
March 31, 2018 | |||||||||||
Total | Level 1 | Level 2 | |||||||||
Cash equivalents: | |||||||||||
Money market funds | $ | 233,712 | $ | 233,712 | $ | — | |||||
Commercial paper | 7,483 | — | 7,483 | ||||||||
U.S. government agency securities | 3,999 | — | 3,999 | ||||||||
Certificates of deposit | 249 | — | 249 | ||||||||
Short-term investments: | |||||||||||
U.S. government agency securities | 320,930 | — | 320,930 | ||||||||
Commercial paper | 40,264 | — | 40,264 | ||||||||
Corporate notes and bonds | 39,870 | — | 39,870 | ||||||||
Municipal securities | 15,616 | — | 15,616 | ||||||||
Certificates of deposit | 8,913 | — | 8,913 | ||||||||
Total | $ | 671,036 | $ | 233,712 | $ | 437,324 |
December 31, 2017 | |||||||||||
Total | Level 1 | Level 2 | |||||||||
Cash equivalents: | |||||||||||
Money market funds | $ | 233,508 | $ | 233,508 | $ | — | |||||
Corporate notes and bonds | 6,199 | — | 6,199 | ||||||||
Commercial paper | 3,987 | — | 3,987 | ||||||||
U.S. government agency securities | 1,748 | — | 1,748 | ||||||||
Certificates of deposit | 249 | — | 249 | ||||||||
Short-term investments: | |||||||||||
U.S. government agency securities | 298,758 | — | 298,758 | ||||||||
Corporate notes and bonds | 44,607 | — | 44,607 | ||||||||
Commercial paper | 39,325 | — | 39,325 | ||||||||
Municipal securities | 11,459 | — | 11,459 | ||||||||
Certificates of deposit | 10,297 | — | 10,297 | ||||||||
Foreign government securities | 5,998 | — | 5,998 | ||||||||
Total | $ | 656,135 | $ | 233,508 | $ | 422,627 |
March 31, 2018 | |||||||||||||||
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Market Value | ||||||||||||
Cash | $ | 151,950 | $ | — | $ | — | $ | 151,950 | |||||||
Cash equivalents: | |||||||||||||||
Money market funds | 233,712 | — | — | 233,712 | |||||||||||
Commercial paper | 7,483 | — | — | 7,483 | |||||||||||
U.S. government agency securities | 3,999 | — | — | 3,999 | |||||||||||
Certificates of deposit | 249 | — | — | 249 | |||||||||||
Short-term investments: | |||||||||||||||
U.S. government agency securities | 322,244 | — | (1,314 | ) | 320,930 | ||||||||||
Commercial paper | 40,264 | — | — | 40,264 | |||||||||||
Corporate notes and bonds | 39,972 | — | (102 | ) | 39,870 | ||||||||||
Municipal securities | 15,677 | — | (61 | ) | 15,616 | ||||||||||
Certificates of deposit | 8,914 | 1 | (2 | ) | 8,913 | ||||||||||
Total | $ | 824,464 | $ | 1 | $ | (1,479 | ) | $ | 822,986 |
December 31, 2017 | |||||||||||||||
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Market Value | ||||||||||||
Cash | $ | 106,404 | $ | — | $ | — | $ | 106,404 | |||||||
Cash equivalents: | |||||||||||||||
Money market funds | 233,508 | — | — | 233,508 | |||||||||||
Corporate notes and bonds | 6,200 | — | (1 | ) | 6,199 | ||||||||||
Commercial paper | 3,987 | — | — | 3,987 | |||||||||||
U.S. government agency securities | 1,748 | — | — | 1,748 | |||||||||||
Certificates of deposit | 249 | — | — | 249 | |||||||||||
Short-term investments: | |||||||||||||||
U.S. government agency securities | 299,814 | — | (1,056 | ) | 298,758 | ||||||||||
Corporate notes and bonds | 44,661 | 1 | (55 | ) | 44,607 | ||||||||||
Commercial paper | 39,325 | — | — | 39,325 | |||||||||||
Municipal securities | 11,494 | — | (35 | ) | 11,459 | ||||||||||
Certificates of deposit | 10,296 | 2 | (1 | ) | 10,297 | ||||||||||
Foreign government securities | 6,000 | — | (2 | ) | 5,998 | ||||||||||
Total | $ | 763,686 | $ | 3 | $ | (1,150 | ) | $ | 762,539 |
Amortized Cost | Estimated Fair Market Value | ||||||
Due in one year or less | $ | 341,729 | $ | 340,800 | |||
Due after one year through two years | 85,342 | 84,793 | |||||
Total | $ | 427,071 | $ | 425,593 |
Balance as of January 1, 2018 | $ | 5,341 | |
Bad debt expense | (267 | ) | |
Less: write-offs, net of recoveries and other adjustments | (157 | ) | |
Balance as of March 31, 2018 | $ | 4,917 |
March 31, 2018 | December 31, 2017 | ||||||
Website development costs | $ | 137,479 | $ | 130,072 | |||
Leasehold improvements | 54,170 | 47,321 | |||||
Computer equipment | 28,267 | 30,071 | |||||
Construction-in-progress | 23,700 | 28,150 | |||||
Office equipment, furniture and fixtures | 23,406 | 22,887 | |||||
Property and equipment | 267,022 | 258,501 | |||||
Less: accumulated amortization and depreciation | (152,194 | ) | (146,230 | ) | |||
Property and equipment, net | $ | 114,828 | $ | 112,271 |
March 31, 2018 | |||||||||||
Cost | Accumulated Amortization | Net | |||||||||
Purchased content | $ | 35,395 | $ | (22,980 | ) | $ | 12,415 | ||||
Software | 19,496 | (9,985 | ) | 9,511 | |||||||
Customer relationships | 103,900 | (50,038 | ) | 53,862 | |||||||
Developed technology | 111,980 | (60,010 | ) | 51,970 | |||||||
Trade names and trademarks | 4,900 | (4,208 | ) | 692 | |||||||
Intangibles-in-progress | 2,469 | — | 2,469 | ||||||||
Total | $ | 278,140 | $ | (147,221 | ) | $ | 130,919 |
December 31, 2017 | |||||||||||
Cost | Accumulated Amortization | Net | |||||||||
Purchased content | $ | 35,260 | $ | (20,480 | ) | $ | 14,780 | ||||
Software | 18,957 | (8,899 | ) | 10,058 | |||||||
Customer relationships | 103,900 | (46,365 | ) | 57,535 | |||||||
Developed technology | 113,380 | (56,664 | ) | 56,716 | |||||||
Trade names and trademarks | 4,900 | (3,943 | ) | 957 | |||||||
Advertising relationships | 9,000 | (8,525 | ) | 475 | |||||||
Intangibles-in-progress | 2,190 | — | 2,190 | ||||||||
Total | $ | 287,587 | $ | (144,876 | ) | $ | 142,711 |
Balance as of January 1, 2018 | $ | 31,918 | |
Deferral of revenue | 238,121 | ||
Less: Revenue recognized | (234,742 | ) | |
Balance as of March 31, 2018 | $ | 35,297 |
Outstanding Principal Amount | Unamortized Debt Discount and Debt Issuance Costs | Carrying Value | |||||||||
March 31, 2018 | $ | 460,000 | $ | (80,013 | ) | $ | 379,987 | ||||
December 31, 2017 | $ | 460,000 | $ | (84,721 | ) | $ | 375,279 |
Number of Shares Subject to Existing Options | Weighted- Average Exercise Price Per Share | Weighted- Average Remaining Contractual Life (Years) | Aggregate Intrinsic Value (in thousands) | |||||||||
Outstanding at January 1, 2018 | 26,645,206 | $ | 27.70 | 5.72 | $ | 355,739 | ||||||
Granted | 4,515,423 | 53.61 | ||||||||||
Exercised | (2,414,214 | ) | 21.91 | |||||||||
Forfeited or cancelled | (262,467 | ) | 32.44 | |||||||||
Outstanding at March 31, 2018 | 28,483,948 | 32.25 | 6.35 | 615,484 | ||||||||
Vested and exercisable at March 31, 2018 | 13,868,461 | 26.69 | 4.59 | 376,592 |
Three Months Ended March 31, | |||
2018 | 2017 | ||
Expected volatility | 43%-45% | 48%-49% | |
Expected dividend yield | — | — | |
Risk-free interest rate | 2.52%-2.65% | 1.75%-1.84% | |
Weighted-average expected life | 4.50-5.00 years | 4.25-4.75 years | |
Weighted-average fair value of options granted | $20.88 | $14.21 |
Restricted Stock Units | Weighted- Average Grant- Date Fair Value | |||||
Unvested outstanding at January 1, 2018 | 4,016,405 | $ | 33.22 | |||
Granted | 1,916,215 | 52.90 | ||||
Vested | (394,844 | ) | 31.60 | |||
Forfeited or cancelled | (191,376 | ) | 36.70 | |||
Unvested outstanding at March 31, 2018 | 5,346,400 | 40.29 |
Three Months Ended March 31, | |||||||
2018 | 2017 | ||||||
Cost of revenue | $ | 955 | $ | 903 | |||
Sales and marketing | 5,162 | 5,530 | |||||
Technology and development | 11,542 | 8,491 | |||||
General and administrative | 13,082 | 11,471 | |||||
Total | $ | 30,741 | $ | 26,395 |
Three Months Ended March 31, | |||||
2018 | 2017 | ||||
Weighted-average Class A common stock and Class C capital stock option awards outstanding | 25,222 | 27,994 | |||
Weighted-average Class A common stock and Class C capital stock restricted stock units outstanding | 4,346 | 4,042 | |||
Class A common stock issuable upon conversion of the 2020 Notes | 403 | 444 | |||
Class C capital stock issuable related to conversion spread on the 2021 Notes | 235 | — | |||
Total Class A common stock and Class C capital stock equivalents | 30,206 | 32,480 |
Three Months Ended March 31, | |||||||
2018 | 2017 | ||||||
Premier Agent | $ | 213,732 | $ | 175,301 | |||
Rentals | 29,063 | 21,545 | |||||
Mortgages | 19,023 | 20,270 | |||||
Other | 38,061 | 28,659 | |||||
Total revenue | $ | 299,879 | $ | 245,775 |
2018 | $ | — | |
2019 | 764 | ||
2020 | 2,318 | ||
2021 | 2,397 | ||
2022 | 2,477 | ||
All future years | 5,190 | ||
Total future minimum lease payments | $ | 13,146 |
Three Months Ended March 31, | 2017 to 2018 % Change | |||||||
2018 | 2017 | |||||||
(in millions) | ||||||||
Average Monthly Unique Users | 175.5 | 166.6 | 5 | % |
Three Months Ended March 31, | 2017 to 2018 % Change | |||||||
2018 | 2017 | |||||||
(in millions) | ||||||||
Visits | 1,764.8 | 1,533.0 | 15 | % |
Three Months Ended March 31, | |||||||
2018 | 2017 | ||||||
(in thousands, except per share data, unaudited) | |||||||
Statements of Operations Data: | |||||||
Revenue | $ | 299,879 | $ | 245,775 | |||
Costs and expenses: | |||||||
Cost of revenue (exclusive of amortization) (1)(2) | 23,919 | 20,232 | |||||
Sales and marketing (1) | 137,291 | 105,940 | |||||
Technology and development (1) | 93,933 | 72,868 | |||||
General and administrative (1) | 56,073 | 45,466 | |||||
Acquisition-related costs | 27 | 105 | |||||
Total costs and expenses | 311,243 | 244,611 | |||||
Income (loss) from operations | (11,364 | ) | 1,164 | ||||
Other income | 2,446 | 953 | |||||
Interest expense | (7,073 | ) | (6,723 | ) | |||
Loss before income taxes | (15,991 | ) | (4,606 | ) | |||
Income tax expense | (2,600 | ) | — | ||||
Net loss | $ | (18,591 | ) | $ | (4,606 | ) | |
Net loss per share — basic and diluted | $ | (0.10 | ) | $ | (0.03 | ) | |
Weighted-average shares outstanding — basic and diluted | 191,464 | 183,158 | |||||
Other Financial Data: | |||||||
Adjusted EBITDA (3) | $ | 46,310 | $ | 54,799 |
Three Months Ended March 31, | |||||||
2018 | 2017 | ||||||
(in thousands, unaudited) | |||||||
(1) Includes share-based compensation as follows: | |||||||
Cost of revenue | $ | 955 | $ | 903 | |||
Sales and marketing | 5,162 | 5,530 | |||||
Technology and development | 11,542 | 8,491 | |||||
General and administrative | 13,082 | 11,471 | |||||
Total | $ | 30,741 | $ | 26,395 | |||
(2) Amortization of website development costs and intangible assets included in technology and development | $ | 22,549 | $ | 23,261 | |||
(3) See “Adjusted EBITDA” below for more information and for a reconciliation of Adjusted EBITDA to net loss, the most directly comparable financial measure calculated and presented in accordance with U.S. generally accepted accounting principles, or GAAP. |
Three Months Ended March 31, | |||||
2018 | 2017 | ||||
(unaudited) | |||||
Percentage of Revenue: | |||||
Revenue | 100 | % | 100 | % | |
Costs and expenses: | |||||
Cost of revenue (exclusive of amortization) | 8 | 8 | |||
Sales and marketing | 46 | 43 | |||
Technology and development | 31 | 30 | |||
General and administrative | 19 | 18 | |||
Acquisition-related costs | — | — | |||
Total costs and expenses | 104 | 100 | |||
Income (loss) from operations | (4 | ) | — | ||
Other income | 1 | — | |||
Interest expense | (2 | ) | (3 | ) | |
Loss before income taxes | (5 | ) | (2 | ) | |
Income tax expense | (1 | ) | 0 | ||
Net loss | (6 | )% | (2 | )% |
• | 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 interest expense or other income; |
• | Adjusted EBITDA does not reflect 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. |
Three Months Ended March 31, | |||||||
2018 | 2017 | ||||||
(in thousands, unaudited) | |||||||
Reconciliation of Adjusted EBITDA to Net Loss: | |||||||
Net loss | $ | (18,591 | ) | $ | (4,606 | ) | |
Other income | (2,446 | ) | (953 | ) | |||
Depreciation and amortization expense | 26,906 | 27,135 | |||||
Share-based compensation expense | 30,741 | 26,395 | |||||
Acquisition-related costs | 27 | 105 | |||||
Interest expense | 7,073 | 6,723 | |||||
Income tax expense | 2,600 | — | |||||
Adjusted EBITDA | $ | 46,310 | $ | 54,799 |
Three Months Ended March 31, | 2017 to 2018 % Change | |||||||||
2018 | 2017 | |||||||||
(in thousands, unaudited) | ||||||||||
Revenue: | ||||||||||
Premier Agent | $ | 213,732 | $ | 175,301 | 22 | % | ||||
Rentals | 29,063 | 21,545 | 35 | % | ||||||
Mortgages | 19,023 | 20,270 | (6 | )% | ||||||
Other | 38,061 | 28,659 | 33 | % | ||||||
Total revenue | $ | 299,879 | $ | 245,775 | 22 | % |
Three Months Ended March 31, | |||||
2018 | 2017 | ||||
(unaudited) | |||||
Percentage of Total Revenue: | |||||
Premier Agent | 71 | % | 71 | % | |
Rentals | 10 | 9 | |||
Mortgages | 6 | 8 | |||
Other | 13 | 12 | |||
Total revenue | 100 | % | 100 | % |
Three Months Ended March 31, | |||||||
2018 | 2017 | ||||||
(in thousands, unaudited) | |||||||
Cash Flow Data: | |||||||
Net cash provided by operating activities | $ | 24,652 | $ | 66,958 | |||
Net cash used in investing activities | (32,232 | ) | (59,795 | ) | |||
Net cash provided by financing activities | 52,878 | 10,769 |
• | increase the number of consumers who use our products and services, provide them with tools to promote engagement between real estate market participants, and enhance their user experience so we can retain them; |
• | offer an attractive return on investment to our advertisers for their advertising spending with us; |
• | continue to develop our advertising products and services to increase adoption by and engagement with advertising customers; |
• | keep pace with and anticipate changes in technology to provide industry-leading products and services to advertisers and consumers; and |
• | compete effectively for advertising dollars with other online media companies. |
• | diversion of management time and focus from operating our business to acquisition integration challenges; |
• | consumer and industry acceptance of products and services offered by the acquired company; |
• | implementation or remediation of controls, procedures and policies at the acquired company; |
• | coordination of product, engineering and sales and marketing functions; |
• | retention of employees from the acquired company; |
• | liability for activities of the acquired company before the acquisition; |
• | litigation or other claims arising in connection with the acquired company; and |
• | impairment charges associated with goodwill and other acquired intangible assets. |
• | product development; |
• | sales and marketing; |
• | technology infrastructure; |
• | strategic opportunities, including commercial relationships and acquisitions; and |
• | general and administrative expenses, including legal and accounting expenses related to being a public company. |
• | actual or anticipated fluctuations in our financial condition and results of operations; |
• | changes in projected operational and financial results; |
• | addition or loss of significant customers; |
• | actual or anticipated changes in our growth rate relative to that of our competitors; |
• | announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital-raising activities or commitments; |
• | announcements of technological innovations or new offerings by us or our competitors; |
• | additions or departures of key personnel; |
• | changes in laws or regulations applicable to our services; |
• | fluctuations in the valuation of companies perceived by investors to be comparable to us; |
• | the inclusion, exclusion, or deletion of our Class A common stock and Class C capital stock from any trading indices, such as the S&P 500 Index; |
• | issuance of new or updated research or reports by securities analysts; |
• | sales of our Class A common stock and Class C capital stock by us or our shareholders; |
• | issuances of our Class A common stock upon conversion of the 2020 Notes and issuances of our Class C capital stock upon conversion of our 2021 Notes; |
• | stock price and volume fluctuations attributable to inconsistent trading volume levels of our shares; and |
• | general economic and market conditions. |
• | set forth the structure of our capital stock, which concentrates voting control of matters submitted to a vote of our shareholders with the holders of our Class B common stock, which is held or controlled by our founders; |
• | authorize our board of directors to issue, without further action by our shareholders, up to 30,000,000 shares of undesignated preferred stock, subject, prior to the threshold date, to the approval rights of the holders of our Class B common stock; |
• | establish that our board of directors will be divided into three classes, Class I, Class II and Class III, with each class serving three-year staggered terms; |
• | prohibit cumulative voting in the election of directors; |
• | provide that, after the threshold date, our directors may be removed only for cause; |
• | provide that, after the threshold date, vacancies on our board of directors may be filled only by the affirmative vote of a majority of directors then in office or by the sole remaining director; |
• | provide that only our board of directors may change the board’s size; |
• | specify that special meetings of our shareholders can be called only by the chair of our board of directors, our board of directors, our chief executive officer, our president or, prior to the threshold date, holders of at least 25% of all the votes entitled to be cast on any issue proposed to be considered at any such special meeting; |
• | establish an advance notice procedure for shareholder proposals to be brought before a meeting of shareholders, including proposed nominations of persons for election to our board of directors; |
• | require the approval of our board of directors or the holders of at least two-thirds of all the votes entitled to be cast by shareholders generally in the election of directors, voting together as a single group, to amend or repeal our bylaws; and |
• | require the approval of not less than two-thirds of all the votes entitled to be cast on a proposed amendment, voting together as a single group, to amend certain provisions of our articles of incorporation. |
Exhibit Number | Description | |
10.1* | ||
31.1 | ||
31.2 | ||
32.1 | ||
32.2 | ||
101.INS | XBRL Instance Document. | |
101.SCH | XBRL Taxonomy Extension Schema Document. | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document. | |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document. | |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document. | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document. | |
* | Indicates a management contract or compensatory plan or arrangement. |
Dated: | May 8, 2018 | ZILLOW GROUP, INC. | ||
By: | /s/ KATHLEEN PHILIPS | |||
Name: | Kathleen Philips | |||
Title: | Chief Financial Officer, Chief Legal Officer, and Secretary |
Signature | |
FULL NAME (print or type) |
By | ||
Its Chief Operating Officer |
Title | Date | Identifying Number or Brief Description | ||
Signature of Employee: |
Print Name of Employee: |
Date: |
Signature of Employee: |
Print Name of Employee: |
Date: |
Signature of Employee: |
Print Name of Employee: |
Date: |
1. | I have reviewed this report on Form 10-Q of Zillow Group, Inc. for the fiscal quarter ended March 31, 2018; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
By: | /s/ SPENCER M. RASCOFF | |
Name: | Spencer M. Rascoff | |
Title: | Chief Executive Officer | |
Date: | May 8, 2018 |
1. | I have reviewed this report on Form 10-Q of Zillow Group, Inc. for the fiscal quarter ended March 31, 2018; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
By: | /s/ KATHLEEN PHILIPS | |
Name: | Kathleen Philips | |
Title: | Chief Financial Officer, Chief Legal Officer, and Secretary | |
Date: | May 8, 2018 |
1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
By: | /s/ SPENCER M. RASCOFF | |
Name: | Spencer M. Rascoff | |
Title: | Chief Executive Officer | |
Date: | May 8, 2018 |
1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
By: | /s/ KATHLEEN PHILIPS | |
Name: | Kathleen Philips | |
Title: | Chief Financial Officer, Chief Legal Officer, and Secretary | |
Date: | May 8, 2018 |
Document and Entity Information - shares |
3 Months Ended | |
---|---|---|
Mar. 31, 2018 |
May 01, 2018 |
|
Document Information [Line Items] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Mar. 31, 2018 | |
Document Fiscal Year Focus | 2018 | |
Document Fiscal Period Focus | Q1 | |
Trading Symbol | ZG | |
Entity Registrant Name | Zillow Group, Inc. | |
Entity Central Index Key | 0001617640 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Class A Common Stock | ||
Document Information [Line Items] | ||
Entity Common Stock, Shares Outstanding | 57,322,533 | |
Class B Common Stock | ||
Document Information [Line Items] | ||
Entity Common Stock, Shares Outstanding | 6,217,447 | |
Class C Capital Stock | ||
Document Information [Line Items] | ||
Entity Common Stock, Shares Outstanding | 129,809,624 |
Condensed Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | |||
---|---|---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
|||
Income Statement [Abstract] | ||||
Revenue | $ 299,879 | $ 245,775 | ||
Costs and expenses: | ||||
Cost of revenue (exclusive of amortization) | [1] | 23,919 | 20,232 | |
Sales and marketing | 137,291 | 105,940 | ||
Technology and development | 93,933 | 72,868 | ||
General and administrative | 56,073 | 45,466 | ||
Acquisition-related costs | 27 | 105 | ||
Total costs and expenses | 311,243 | 244,611 | ||
Income (loss) from operations | (11,364) | 1,164 | ||
Other income | 2,446 | 953 | ||
Interest expense | (7,073) | (6,723) | ||
Loss before income taxes | (15,991) | (4,606) | ||
Income tax expense | (2,600) | 0 | ||
Net loss | $ (18,591) | $ (4,606) | ||
Net loss per share - basic and diluted (usd per share) | $ (0.10) | $ (0.03) | ||
Weighted-average shares outstanding - basic and diluted (in shares) | 191,464 | 183,158 | ||
Amortization of website development costs and intangible assets included in technology and development | $ 22,549 | $ 23,261 | ||
|
Condensed Consolidated Statements of Comprehensive Loss - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
|
Statement of Comprehensive Income [Abstract] | ||
Net loss | $ (18,591) | $ (4,606) |
Other comprehensive loss: | ||
Unrealized losses on investments | (332) | (25) |
Currency translation adjustments | (22) | 0 |
Total other comprehensive loss | (354) | (25) |
Comprehensive loss | $ (18,945) | $ (4,631) |
Organization and Description of Business |
3 Months Ended |
---|---|
Mar. 31, 2018 | |
Accounting Policies [Abstract] | |
Organization and Description of Business | Organization and Description of Business Zillow Group, Inc. operates the leading real estate and home-related information marketplaces on mobile and the web, with a complementary portfolio of brands and products to help consumers find vital information about homes and connect with local professionals. Zillow Group’s brands focus on all stages of the home lifecycle: renting, buying, selling and financing. The Zillow Group portfolio of consumer brands includes real estate and rental marketplaces Zillow, Trulia, StreetEasy, HotPads, Naked Apartments, RealEstate.com and OutEast.com. In addition, Zillow Group provides a comprehensive suite of marketing software and technology solutions to help real estate, rental and mortgage professionals maximize business opportunities and connect with millions of consumers. The Zillow Instant Offers marketplace provides homeowners with the opportunity to receive offers from buyers, including Zillow starting in April of 2018, in some metropolitan areas. When Zillow buys a home, it will make necessary updates and list the home for resale on the open market. We also own and operate a number of business brands for real estate, rental and mortgage professionals, including Mortech, dotloop, Bridge Interactive and New Home Feed. Zillow, Inc. was incorporated as a Washington corporation in December 2004, and we launched the initial version of our website, Zillow.com, in February 2006. Zillow Group, Inc. was incorporated as a Washington corporation in July 2014 in connection with our acquisition of Trulia, Inc. (“Trulia”). Upon the closing of the Trulia acquisition in February 2015, each of Zillow, Inc. and Trulia became wholly owned subsidiaries of Zillow Group. Certain Significant Risks and Uncertainties We operate in a dynamic industry and, accordingly, can be affected by a variety of factors. For example, we believe that changes in any of the following areas could have a significant negative effect on us in terms of our future financial position, results of operations or cash flows: rates of revenue growth; our ability to manage advertising inventory or pricing; engagement and usage of our products; our investment of resources to pursue strategies that may not prove effective; competition in our market; the stability of the residential real estate market; changes in government regulation affecting our business; outcomes of legal proceedings; natural disasters and catastrophic events; scaling and adaptation of existing technology and network infrastructure; management of our growth; our ability to attract and retain qualified employees and key personnel; our ability to successfully integrate and realize the benefits of our past or future strategic acquisitions or investments; protection of customers’ information and other privacy concerns; protection of our brand and intellectual property; and intellectual property infringement and other claims, among other things. |
Summary of Significant Accounting Policies |
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Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Basis of Presentation The accompanying condensed consolidated financial statements include Zillow Group, Inc. and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. These condensed consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Accordingly, these interim condensed consolidated financial statements should be read in conjunction with the audited financial statements and accompanying notes included in Zillow Group, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2017, which was filed with the SEC on February 15, 2018. The condensed consolidated balance sheet as of December 31, 2017, included herein, was derived from the audited financial statements of Zillow Group, Inc. as of that date. The unaudited condensed consolidated interim financial statements, in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments, necessary to present fairly our financial position as of March 31, 2018, our results of operations, comprehensive loss and cash flows for the three month periods ended March 31, 2018 and 2017. The results of the three month period ended March 31, 2018 are not necessarily indicative of the results to be expected for the year ending December 31, 2018 or for any interim period or for any other future year. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and the related disclosures at the date of the financial statements, as well as the reported amounts of revenue and expenses during the periods presented. On an ongoing basis, we evaluate our estimates, including those related to the amortization period and recoverability of contract cost assets, website and software development costs, recoverability of long-lived assets and intangible assets with definite lives, share-based compensation, income taxes, business combinations, and the recoverability of goodwill and indefinite-lived intangible assets, among others. To the extent there are material differences between these estimates, judgments, or assumptions and actual results, our financial statements will be affected. Concentrations of Credit Risk Financial instruments, which potentially subject us to concentrations of credit risk, consist primarily of cash and cash equivalents, investments and accounts receivable. We place cash and cash equivalents and investments with major financial institutions, which management assesses to be of high credit quality, in order to limit exposure of our investments. Credit risk with respect to accounts receivable is dispersed due to the large number of customers. Further, our credit risk on accounts receivable is mitigated by the relatively short payment terms that we offer. Collateral is not required for accounts receivable. We maintain an allowance for doubtful accounts such that receivables are stated at net realizable value. Cash and Cash Equivalents Cash includes demand deposits with banks or financial institutions. Cash equivalents include short-term, highly liquid investments that are both readily convertible to known amounts of cash, and so near their maturity that they present minimal risk of changes in value because of changes in interest rates. Our cash equivalents include only investments with original maturities of three months or less. We regularly maintain cash in excess of federally insured limits at financial institutions. Short-term Investments Our investments consist of fixed income securities, which include U.S. and foreign government agency securities, corporate notes and bonds, commercial paper, municipal securities and certificates of deposit, and are classified as available-for-sale securities. As the investments are available to support current operations, our available-for-sale securities are classified as short-term investments. Available-for-sale securities are carried at fair value with unrealized gains and losses reported as a component of accumulated other comprehensive loss in shareholders’ equity, while realized gains and losses and other-than-temporary impairments are reported as a component of net loss based on specific identification. An impairment charge is recorded in the consolidated statements of operations for declines in fair value below the cost of an individual investment that are deemed to be other than temporary. We assess whether a decline in value is temporary based on the length of time that the fair market value has been below cost, the severity of the decline and the intent and ability to hold or sell the investment. We did not identify any investments as other-than-temporarily impaired as of March 31, 2018 or December 31, 2017. Accounts Receivable and Allowance for Doubtful Accounts Accounts receivable represent our unconditional right to consideration. Accounts receivable are generally due within 30 days and are recorded net of the allowance for doubtful accounts. We consider accounts outstanding longer than the contractual terms past due. We review accounts receivable on a regular basis and estimate an amount of losses for uncollectible accounts based on our historical collections experience, age of the receivable, knowledge of the customer and the condition of the general economy and industry as a whole. We record changes in our estimate to the allowance for doubtful accounts through bad debt expense and relieve the allowance when accounts are ultimately determined to be uncollectible. Bad debt expense is included in general and administrative expenses. Contract Cost Assets We capitalize certain incremental costs of obtaining contracts with customers which we expect to recover. These costs relate to commissions paid to sales personnel, primarily for our Premier Agent and Premier Broker programs. As a practical expedient, we recognize the incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset that we otherwise would have recognized is one year or less. Capitalized commission costs are recorded as contract cost assets in our condensed consolidated balance sheets. Contract cost assets are amortized to expense on a straight-line basis over a period that is consistent with the transfer to the customer of the products or services to which the asset relates, generally the estimated life of the customer relationship. Amortization expense related to contract cost assets is included in sales and marketing expenses in our condensed consolidated statements of operations. In determining the estimated life of our customer relationships, we consider quantitative and qualitative data, including, but not limited to, historical customer data, recent changes or expected changes in product or service offerings, and changes in how we monetize our products and services. The amortization period for capitalized contract costs related to our Premier Agent and Premier Broker programs ranges from two to three years. Property and Equipment Property and equipment is recorded at cost and depreciated using the straight-line method over the estimated useful lives of the related assets. The useful lives are as follows:
Maintenance and repair costs are charged to expense as incurred. Major improvements, which extend the useful life of the related asset, are capitalized. Upon disposal of a fixed asset, we record a gain or loss based on the difference between the proceeds received and the net book value of the disposed asset. Website and Software Development Costs The costs incurred in the preliminary stages of development are expensed as incurred. Once an application has reached the development stage, internal and external costs, if direct and incremental and deemed by management to be significant, are capitalized in property and equipment and amortized on a straight-line basis over their estimated useful lives. Maintenance and enhancement costs, including those costs in the post-implementation stages, are typically expensed as incurred, unless such costs relate to substantial upgrades and enhancements to the website or software that result in added functionality, in which case the costs are capitalized and amortized on a straight-line basis over the estimated useful lives. Amortization expense related to capitalized website and software development costs is included in technology and development expense. Capitalized development activities placed in service are amortized over the expected useful lives of those releases, currently estimated at one to three years. The estimated useful lives of website and software development activities are reviewed frequently and adjusted as appropriate to reflect upcoming development activities that may include significant upgrades and/or enhancements to the existing functionality. Construction-in-progress primarily consists of website development costs that are capitalizable, but for which the associated applications had not been placed in service. Recoverability of Goodwill and Indefinite-Lived Intangible Assets Goodwill represents the excess of the cost of an acquired business over the fair value of the assets acquired at the date of acquisition, and is not amortized. We assess the impairment of goodwill on an annual basis, in our fourth quarter, or whenever events or changes in circumstances indicate that goodwill may be impaired. Typically, we choose to forgo the initial qualitative assessment and perform a quantitative analysis to assist in our annual evaluation. If impairment exists, the carrying value of the goodwill is reduced to fair value through an impairment charge recorded in our statements of operations. Our indefinite-lived intangible asset is not amortized, and we assess the asset for impairment on an annual basis, in our fourth quarter, or whenever events or changes in circumstances indicate that the asset may be impaired. On an interim basis, we consider if there are any events and circumstances that could affect the significant inputs used to determine the fair value of the indefinite-lived intangible asset, including, but not limited to, costs that could have a negative effect on future expected earnings and cash flows, changes in certain key performance metrics, and changes in management, key personnel, strategy or customers. In our evaluation of our trade names and trademarks indefinite-lived intangible asset, we typically first perform a qualitative assessment to determine whether the fair value of the indefinite-lived intangible asset is more likely than not impaired. If so, we perform a quantitative assessment and an impairment charge is recorded in our statements of operations for the excess of the carrying value of the indefinite-lived intangible asset over its fair value. Intangible Assets We purchase and license data content from multiple data providers. This data content consists of U.S. county data about home details (e.g., the number of bedrooms, bathrooms, square footage) and other information relating to the purchase price of homes, both current and historical, as well as imagery, mapping and parcel data that is displayed on our mobile applications and websites. Our home details data not only provides information about a home and its related transactions which is displayed on our mobile applications and websites, but is also used in our proprietary valuation algorithms to produce Zestimates, Rent Zestimates and Zillow Home Value Indexes. License agreement terms vary by vendor. In some instances, we retain perpetual rights to this information after the contract ends; in other instances, the information and data are licensed only during the fixed term of the agreement. Additionally, certain data license agreements provide for uneven payment amounts throughout the contract term. We capitalize payments made to third parties for data licenses that we expect to provide future economic benefit through the recovery of the costs of these arrangements via the generation of our revenue and margins. For data license contracts that include uneven payment amounts, we capitalize the payments as they are made as an intangible asset and the total contract value is typically amortized on a straight-line basis over the term of the contract, which is equivalent to the estimated useful life of the asset. We evaluate data content contracts for potential capitalization at the inception of the arrangement as well as each time periodic payments to third parties are made. The amortization period for the capitalized purchased content is based on our best estimate of the useful life of the asset, which is approximately five years. The determination of the useful life includes consideration of a variety of factors including, but not limited to, our assessment of the expected use of the asset and contractual provisions that may limit the useful life, as well as an assessment of when the data is expected to become obsolete based on our estimates of the diminishing value of the data over time. We evaluate the useful life of the capitalized purchased data content each reporting period to determine whether events and circumstances warrant a revision to the remaining useful life. If we determine the estimate of the asset’s useful life requires modification, the carrying amount of the asset is amortized prospectively over the revised useful life. The capitalized purchased data content is amortized on a straight-line basis as the pattern of delivery of the economic benefits of the data cannot reliably be determined because we do not have the ability to reliably predict future traffic to our mobile applications and websites. Under certain other data agreements, the underlying data is obtained on a subscription basis with consistent monthly or quarterly recurring payment terms over the contractual period. Upon the expiration of such arrangements, we no longer have the right to access the related data, and therefore, the costs incurred under such contracts are not capitalized and are expensed as payments are made. We would immediately lose rights to data under these arrangements if we were to cancel the subscription and/or cease making payments under the subscription arrangements. We also capitalize costs related to the license of certain internal-use software from third parties, including certain licenses of software in cloud computing arrangements. Additionally, we capitalize costs incurred during the application development stage related to the development of internal-use software and enterprise cloud computing services. We expense costs as incurred related to the planning and post-implementation phases of development. Capitalized internal-use software costs are amortized over the estimated useful life of the asset, which is currently one to three years, on a straight-line basis. Intangibles-in-progress consist of purchased content and software that are capitalizable but have not been placed in service. We also have intangible assets for developed technology, customer relationships, trade names and trademarks and advertising relationships which we recorded in connection with acquisitions. Purchased intangible assets with a determinable economic life are carried at cost, less accumulated amortization. These intangible assets are amortized over the estimated useful life of the asset on a straight-line basis. Recoverability of Intangible Assets with Definite Lives and Other Long-Lived Assets We evaluate intangible assets and other long-lived assets for impairment whenever events or circumstances indicate that they may not be recoverable. Recoverability is measured by comparing the carrying amount of an asset group to future undiscounted net cash flows expected to be generated. We group assets for purposes of such review at the lowest level for which identifiable cash flows of the asset group are largely independent of the cash flows of the other groups of assets and liabilities. If this comparison indicates impairment, the amount of impairment to be recognized is calculated as the difference between the carrying value and the fair value of the asset group. Deferred Revenue Deferred revenue consists of prepaid advertising fees received or billed in advance of satisfying our performance obligations and prepaid but unrecognized subscription revenue. Deferred revenue is recognized when or as we satisfy our obligations under contracts with customers. Deferred Rent For our operating leases, we recognize rent expense on a straight-line basis over the terms of the leases and, accordingly, we record the difference between cash rent payments and the recognition of rent expense as a deferred rent liability. For office space under an operating lease that is subleased to a third party for which we intend to reoccupy the space at a future date, rent expense is recognized net of sublease income. Landlord-funded leasehold improvements are also recorded as deferred rent liabilities and are amortized as a reduction of rent expense over the non-cancelable term of the related operating lease. Business Combinations We recognize identifiable assets acquired and liabilities assumed at their acquisition date fair values. Goodwill as of the acquisition date is measured as the excess of consideration transferred over the net of the acquisition date fair values of the assets acquired and the liabilities assumed. While we use our best estimates and assumptions for the purchase price allocation process to value assets acquired and liabilities assumed at the acquisition date, our estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, we record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill to the extent that we identify adjustments to the preliminary purchase price allocation. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to our condensed consolidated statements of operations. We recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. Revenue Recognition We recognize revenue when (or as) we satisfy our performance obligations by transferring control of the promised products or services to our customers in an amount that reflects the consideration to which we expect to be entitled in exchange for those products or services. We generate revenue from the sale of advertising services and our suite of marketing software and technology solutions to businesses and professionals primarily associated with the residential real estate, rental and mortgage industries. These professionals include real estate, rental and mortgage professionals and brand advertisers. Our four primary revenue categories are Premier Agent, Rentals, Mortgages and Other. As a practical expedient, we do not adjust the promised amount of consideration for the effects of a significant financing component as the period between our transfer of a promised product or service to a customer and when the customer pays for that product or service is one year or less. We do not disclose the transaction price related to remaining performance obligations for (i) contracts with an original expected duration of one year or less and (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for performance completed to date. The remaining duration of our performance obligations is generally less than one year. Premier Agent Revenue. Premier Agent revenue is derived from our Premier Agent and Premier Broker programs. Our Premier Agent and Premier Broker programs offer a suite of marketing and business technology products and services to help real estate agents and brokers achieve their advertising goals, while growing and managing their businesses and brands. All Premier Agents and Premier Brokers receive access to a dashboard portal on our mobile application or website that provides individualized program performance analytics, our customer relationship management, or CRM, tool that captures detailed information about each contact made with a Premier Agent or Premier Broker through our mobile and web platforms and our account management tools. We have concluded that the marketing and business technology products and services promised to Premier Agents and Premier Brokers represent distinct performance obligations. We offer our Premier Agent and Premier Broker advertising products on a cost per impression basis. Payment is received prior to the delivery of impressions. Impressions are delivered when a sold advertisement appears on pages viewed by users of our mobile applications and websites. We determine the cost per impression delivered in each zip code using an auction-based pricing method in consideration of the total amount spent by Premier Agents and Premier Brokers to purchase impressions in the zip code during the month. A Premier Agent’s or Premier Broker’s share of voice in a zip code is determined by their proportional monthly budgeted spend in that zip code as a percentage of the total monthly budgeted spend of all Premier Agents and Premier Brokers in that zip code. The cost per impression that we charge is dynamic - as demand for impressions in a zip code increases or decreases, the cost per impression in that zip code may be increased or decreased accordingly. The price paid for each impression is representative of the price at which we would sell an impression separately to a customer, or the stand-alone selling price. We have not allocated the transaction price to each performance obligation as the amounts recognized would be the same irrespective of any allocation. As such, we recognize revenue related to the Premier Agent and Premier Broker products and services based on the contractual spend recognized on a straight-line basis during the contractual period over which the products and services are provided. This methodology best depicts how we satisfy our performance obligations to customers, as we continuously transfer control of the performance obligations to the customer throughout the contractual period. Rentals Revenue. Rentals revenue includes our rentals marketplace and suite of tools for rental professionals. Rentals revenue primarily includes revenue generated by advertising sold to property managers and other rental professionals on a cost per lead, cost per click or cost per lease generated basis. We recognize revenue as leads or clicks are provided to rental professionals, which is the amount for which we have the right to invoice. The number of leases generated through our rentals marketplace during the period is accounted for as variable consideration, and we estimate these amounts based on the expected number of qualified leases secured during the period. We do not believe that a significant reversal in the amount of cumulative revenue recognized will occur once the uncertainty related to the number of leases secured is subsequently resolved. Mortgages Revenue. Mortgages revenue primarily includes marketing products sold to mortgage professionals on a cost per lead basis, including our Long Form and Custom Quote services. For our Long Form and Custom Quote cost per lead mortgage marketing products, participating qualified mortgage professionals typically make a prepayment to gain access to consumers interested in connecting with mortgage professionals. Mortgage professionals who exhaust their initial prepayment prepay additional funds to continue to participate in the marketplace. In Zillow Group’s Long Form platform, consumers answer a series of questions to find a local lender, and mortgage professionals receive consumer contact information, or leads, when the consumer chooses to share their information with a lender. Consumers who request rates for mortgage loans in Custom Quotes are presented with customized quotes from participating mortgage professionals. We recognize revenue when a user contacts a mortgage professional through Zillow Group’s mortgages platform, which is the amount for which we have the right to invoice. Mortgages revenue also includes revenue generated by Mortech, which provides subscription-based mortgage software solutions, including a product and pricing engine and lead management platform, for which we recognize revenue on a straight-line basis during the contractual period over which the services are provided. Other Revenue. Other revenue primarily includes revenue generated by new construction and display, as well as revenue from the sale of various other marketing and business products and services to real estate professionals. Our new construction marketing solutions allow home builders to showcase their available inventory to home shoppers. New construction revenue primarily includes revenue generated by advertising sold to builders on a cost per residential community basis, and revenue is recognized on a straight-line basis during the contractual period over which the communities are advertised on our mobile applications and websites. Consideration is billed in arrears. Display revenue primarily consists of graphical mobile and web advertising sold on a cost per thousand impressions or cost per click basis to advertisers promoting their brands on our mobile applications and websites. We recognize display revenue as clicks occur or as impressions are delivered to users interacting with our mobile applications or websites, which is the amount for which we have the right to invoice. Cost of Revenue Our cost of revenue consists of expenses related to operating our mobile applications and websites, including associated headcount expenses, such as salaries and benefits and share-based compensation expense and bonuses, as well as credit card fees, ad serving costs paid to third parties, revenue-sharing costs related to our commercial business relationships, depreciation expense and costs associated with the operation of our data center and mobile applications and websites. Technology and Development Technology and development expenses consist of headcount expenses, including salaries, benefits, share-based compensation expense and bonuses for salaried employees and contractors engaged in the design, development and testing of our mobile applications and websites, and equipment and maintenance costs. Technology and development expenses also include amortization costs related to capitalized website and development activities, amortization of software, amortization of certain intangibles and other data agreement costs related to the purchase of data used to populate our mobile applications and websites, amortization of intangible assets recorded in connection with acquisitions, including developed technology and customer relationships, amongst others, and depreciation expense. Share-Based Compensation We measure compensation expense for all share-based awards at fair value on the date of grant and recognize compensation expense over the service period on a straight-line basis for awards expected to vest. We use the Black-Scholes-Merton option-pricing model to determine the fair value for option awards. In valuing our option awards, we make assumptions about risk-free interest rates, dividend yields, volatility, and weighted-average expected lives. We account for forfeitures as they occur. Risk-free interest rates are derived from U.S. Treasury securities as of the option award grant date. Expected dividend yield is based on our historical cash dividend payments, which have been zero to date. The expected volatility for our Class A common stock and Class C capital stock is estimated using our historical volatility. The weighted-average expected life of the option awards is estimated based on our historical exercise data. For issuances of restricted stock units and restricted units, we determine the fair value of the award based on the market value of our Class A common stock or Class C capital stock, as applicable, at the date of grant. Advertising Costs Advertising costs are expensed as incurred. Advertising costs are recorded in sales and marketing expenses. Income Taxes We use the asset and liability approach for accounting and reporting income taxes, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial statement and tax bases of assets and liabilities at the applicable enacted tax rates. A valuation allowance against deferred tax assets would be established if, based on the weight of available evidence, it is more likely than not (a likelihood of more than 50%) that some or all of the deferred tax assets are not expected to be realized. We establish reserves for tax-related uncertainties based on estimates of whether, and the extent to which, additional taxes will be due. We adjust these reserves in light of changing facts and circumstances, such as the closing of a tax audit, new tax legislation or the change of an estimate. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will affect the provision for income taxes in the period in which such determination is made. Interest and penalties related to unrecognized tax benefits are recorded as income tax expense. On December 22, 2017, the U.S. government enacted comprehensive tax legislation under the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act makes broad and complex changes to the U.S. tax code, including but not limited to: (1) reducing the U.S. federal corporate tax rate from 35 percent to 21 percent; (2) requiring companies to pay a one-time transition tax on certain unrepatriated earnings of foreign subsidiaries; (3) generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries; (4) eliminating the corporate alternative minimum tax (“AMT”) and how AMT credits are utilized; (5) the additional limitations on deducting executive compensation under IRC Section 162(m); and (6) changing rules related to uses and limitations of net operating loss carryforwards created in tax years beginning after December 31, 2017. Shortly after enactment, implementation guidance was released by the Securities and Exchange Commission that requires a company to reflect the income tax effects of those aspects of the Tax Act for which the accounting under the accounting rules is complete. To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but the company is able to determine a reasonable estimate, it should record a provisional estimate in the financial statements. Further, the implementation guidance also provides for a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete their accounting pursuant to the accounting rules. Recently Adopted Accounting Standards In December 2016, the Financial Accounting Standards Board (“FASB”) issued guidance to narrow the definition of a business. This guidance assists entities with evaluating when a set of transferred assets and activities is a business. This guidance is effective for interim and annual reporting periods beginning after December 15, 2017, and early adoption is permitted. This guidance must be applied prospectively to transactions occurring within the period of adoption. We adopted this guidance on January 1, 2018. The adoption of this guidance did not have an impact on our financial position, results of operations or cash flows. In January 2016, the FASB issued guidance on the recognition and measurement of financial instruments. This guidance generally requires equity investments, except those accounted for under the equity method of accounting or those that result in consolidation of the investee, to be measured at fair value with changes in fair value recognized in net income (loss). An entity may elect to measure equity securities that do not have readily determinable fair values and do not qualify for the net asset value per share practical expedient at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. The guidance also requires the separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheet or the accompanying notes to the financial statements. This guidance is effective for interim and annual reporting periods beginning after December 15, 2017, early adoption is permitted, and the guidance must be applied prospectively to equity investments that exist as of the adoption date. We adopted this guidance, and the February 2018 amendment to this guidance, effective January 1, 2018. The adoption of this guidance did not have any impact on our financial position, results of operations or cash flows. In May 2014, the FASB issued guidance on revenue from contracts with customers. The guidance states that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those products or services. It also states that an entity should recognize as an asset the incremental costs of obtaining a contract that the entity expects to recover and amortize the costs consistent with the transfer to the customer of the products or services to which the asset relates. The guidance requires more detailed disclosures to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. We adopted this guidance effective January 1, 2018 using the modified retrospective transition approach applied to all contracts at the date of initial application. We recorded an adjustment of $40.3 million to decrease accumulated deficit as of January 1, 2018 related to the accounting for the cost of sales commissions, primarily related to sales commissions for our Premier Agent and Premier Broker advertising products. Historically, we expensed these sales commission costs as incurred, but under the new guidance, the cost of certain sales commissions is recorded as a contract cost asset and recognized as an operating expense over the period that we expect to recover the costs. The amount by which each financial statement line item is affected by the application of this guidance as of and for the three months ended March 31, 2018 is as follows (in thousands, except per share data):
Recently Issued Accounting Standards Not Yet Adopted In February 2018, the FASB issued guidance on income tax accounting related to the Tax Act. This guidance permits a reclassification from accumulated other comprehensive income (loss) to accumulated deficit for the adjustment of deferred taxes due to the reduction of the historical corporate income tax rate to the newly enacted corporate income tax rate under the Tax Act. It also requires certain disclosures regarding these reclassifications. The guidance is effective for interim and annual reporting periods beginning after December 15, 2018, and early adoption is permitted. This guidance must be applied either on a prospective basis in the period of adoption or retrospectively to each period in which the effect of the change in the corporate income tax rate is recognized. We expect to adopt this guidance on January 1, 2019. The adoption of this guidance is not expected to have a material impact on our financial position, results of operations or cash flows. In March 2017, the FASB issued guidance related to the premium amortization on purchased callable debt securities. This guidance shortens the amortization period for certain callable debt securities purchased at a premium by requiring that the premium be amortized to the earliest call date. This guidance is effective for interim and annual reporting periods beginning after December 15, 2018, and early adoption is permitted. This guidance must be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. We expect to adopt this guidance on January 1, 2019. We have not yet determined the impact the adoption of this guidance will have on our financial position, results of operations or cash flows. In June 2016, the FASB issued guidance on the measurement of credit losses on financial instruments. This guidance requires the use of an expected loss impairment model for instruments measured at amortized cost. For available-for-sale debt securities, an entity is required to recognize credit losses through an allowance for credit losses rather than as a write-down. This guidance is effective for interim and annual reporting periods beginning after December 15, 2019, and early adoption is permitted for interim and annual reporting periods beginning after December 15, 2018. The adoption of this guidance requires a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. We expect to adopt this guidance on January 1, 2020. We have not yet determined the impact the adoption of this guidance will have on our financial position, results of operations or cash flows. In February 2016, the FASB issued guidance on leases. This guidance requires the recognition of a right-of-use asset and lease liability on the balance sheet for all leases. This guidance also requires more detailed disclosures to enable users of financial statements to understand the amount, timing, and uncertainty of cash flows arising from leases. This guidance is effective for interim and annual reporting periods beginning after December 15, 2018 and should be applied through a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, and early adoption is permitted. We expect to adopt this guidance on January 1, 2019. We anticipate this guidance will have a material impact on our financial position, primarily due to our office space operating leases, as we will be required to recognize lease assets and lease liabilities on our condensed consolidated balance sheet. We continue to assess the potential impacts of this guidance, including the impact the adoption of this guidance will have on our results of operations and cash flows. |
Fair Value Measurements |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements | Fair Value Measurements Accounting standards define fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market in an orderly transaction between market participants on the measurement date. The standards also establish a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. There are three levels of inputs that may be used to measure fair value:
We applied the following methods and assumptions in estimating our fair value measurements: Cash equivalents — The fair value measurement of money market funds is based on quoted market prices in active markets. The fair value measurement of corporate notes and bonds, commercial paper, U.S. government agency securities and certificates of deposit is based on observable market-based inputs or inputs that are derived principally from or corroborated by observable market data by correlation or other means. Short-term Investments — The fair value measurement of our short-term investments is based on observable market-based inputs or inputs that are derived principally from or corroborated by observable market data by correlation or other means. The following tables present the balances of assets measured at fair value on a recurring basis, by level within the fair value hierarchy, as of the dates presented (in thousands):
See Note 11 for the carrying amount and estimated fair value of the Company’s Convertible Senior Notes due in 2021 and Trulia’s Convertible Senior Notes due in 2020. We did not have any Level 3 assets as of March 31, 2018 or December 31, 2017. There were no liabilities measured at fair value on a recurring basis as of March 31, 2018 or December 31, 2017. |
Cash and Cash Equivalents and Short-term Investments |
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Cash and Cash Equivalents and Short-term Investments | Cash and Cash Equivalents and Short-term Investments The following tables present the amortized cost, gross unrealized gains and losses, and estimated fair market value of our cash and cash equivalents and available-for-sale investments as of the dates presented (in thousands):
The following table presents available-for-sale investments by contractual maturity date as of March 31, 2018 (in thousands):
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Accounts Receivable, net |
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Accounts Receivable, net | Accounts Receivable, net The opening balance of accounts receivable, net was $54.4 million as of January 1, 2018. The following table presents the changes in the allowance for doubtful accounts (in thousands):
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Contract Cost Assets |
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Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||
Contract Cost Assets | Contract Cost Assets As of March 31, 2018, we had $42.5 million of contract cost assets. During the three months ended March 31, 2018, we recorded no impairment losses and $9.3 million of amortization expense related to contract cost assets. Deferred Revenue The following table presents the changes in deferred revenue (in thousands):
During the three months ended March 31, 2018, we recognized as revenue a total of $28.2 million pertaining to amounts that were recorded in deferred revenue as of December 31, 2017. |
Property and Equipment, Net |
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Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property and Equipment, Net | Property and Equipment, net The following table presents the detail of property and equipment as of the dates presented (in thousands):
We recorded depreciation expense related to property and equipment (other than website development costs) of $4.2 million and $3.9 million, respectively, during the three months ended March 31, 2018 and 2017. We capitalized $8.6 million and $12.5 million, respectively, in website development costs during the three months ended March 31, 2018 and 2017. Amortization expense for website development costs included in technology and development expenses was $9.5 million and $10.1 million, respectively, during the three months ended March 31, 2018 and 2017. |
Equity Investments |
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Mar. 31, 2018 | |
Text Block [Abstract] | |
Equity Investments | Equity Investments In June 2017, we purchased an equity interest in a privately held corporation for approximately $10.0 million. In October 2016, we purchased a 10% equity interest in a privately held variable interest entity within the real estate industry for $10.0 million. The entity is financed through its business operations. We are not the primary beneficiary of the entity, as we do not direct the activities that most significantly impact the entity’s economic performance. Therefore, we do not consolidate the entity. Our maximum exposure to loss is $10.0 million, the carrying amount of the investment as of March 31, 2018. These investments are equity securities without readily determinable fair values which we account for at cost minus any impairment, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments of the same issuer. There have been no impairments or upward or downward adjustments as of March 31, 2018 that would impact the carrying amount of either investment. These investments are classified within other assets in the condensed consolidated balance sheet. |
Intangible Assets, net |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Intangible Assets, net | Intangible Assets, net The following tables present the detail of intangible assets subject to amortization as of the dates presented (in thousands):
Amortization expense recorded for intangible assets for the three months ended March 31, 2018 and 2017 was $13.0 million and $13.1 million, respectively, and these amounts are included in technology and development expenses. We have an indefinite-lived intangible asset that we recorded in connection with our February 2015 acquisition of Trulia for Trulia’s trade names and trademarks that is not subject to amortization. The carrying value of the Trulia trade names and trademarks intangible asset was $177.0 million as of March 31, 2018 and December 31, 2017. |
Deferred Revenue |
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Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||
Deferred Revenue | Contract Cost Assets As of March 31, 2018, we had $42.5 million of contract cost assets. During the three months ended March 31, 2018, we recorded no impairment losses and $9.3 million of amortization expense related to contract cost assets. Deferred Revenue The following table presents the changes in deferred revenue (in thousands):
During the three months ended March 31, 2018, we recognized as revenue a total of $28.2 million pertaining to amounts that were recorded in deferred revenue as of December 31, 2017. |
Convertible Senior Notes |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Convertible Senior Notes | Convertible Senior Notes Convertible Senior Notes due in 2021 On December 12, 2016, Zillow Group issued $460.0 million aggregate principal amount of 2.00% Convertible Senior Notes due 2021 (the “2021 Notes”), which amount includes the exercise in full of the $60.0 million over-allotment option, to Citigroup Global Markets Inc. as the initial purchaser of the 2021 Notes in a private offering to the initial purchaser in reliance on the exemption from the registration requirements provided by Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”) for resale to qualified institutional buyers as defined in, and pursuant to, Rule 144A under the Securities Act. The 2021 Notes bear interest at a fixed rate of 2.00% per year, payable semiannually in arrears on June 1 and December 1 of each year. The 2021 Notes are convertible into cash, shares of our Class C capital stock or a combination thereof, at the Company’s election. The 2021 Notes will mature on December 1, 2021, unless earlier repurchased, redeemed, or converted in accordance with their terms. The net proceeds from the issuance of the 2021 Notes were approximately $447.8 million, after deducting fees and expenses. The Company used approximately $370.2 million of the net proceeds from the issuance of the 2021 Notes to repurchase a portion of the outstanding 2020 Notes (see additional information below under “Trulia’s Convertible Senior Notes due 2020”) in privately negotiated transactions. In addition, the Company used approximately $36.6 million of the net proceeds from the issuance of the 2021 Notes to pay the cost of the capped call transactions with the initial purchaser of the 2021 Notes and two additional financial institutions (“Capped Call Confirmations”) as discussed further below. The Company used the remainder of the net proceeds for general corporate purposes. Prior to the close of business on the business day immediately preceding September 1, 2021, the 2021 Notes are convertible at the option of the holders of the 2021 Notes only under certain conditions, none of which conditions have been satisfied as of March 31, 2018. On or after September 1, 2021, until the close of business on the second scheduled trading day immediately preceding the maturity date, holders of the 2021 Notes may convert their 2021 Notes at their option at the conversion rate then in effect, irrespective of these conditions. The Company will settle conversions of the 2021 Notes by paying or delivering, as the case may be, cash, shares of Class C capital stock, or a combination of cash and shares of Class C capital stock, at its election. The conversion rate will initially be 19.0985 shares of Class C capital stock per $1,000 principal amount of 2021 Notes (equivalent to an initial conversion price of approximately $52.36 per share of Class C capital stock). The conversion rate is subject to customary adjustments upon the occurrence of certain events. The Company may redeem for cash all or part of the 2021 Notes, at its option, on or after December 6, 2019, under certain circumstances at a redemption price equal to 100% of the principal amount of the 2021 Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date (as defined in the indenture governing the 2021 Notes). The conversion option does not meet the criteria for separate accounting as a derivative as it is indexed to our own stock. If the Company undergoes a fundamental change (as defined in the indenture governing the 2021 Notes), holders of the 2021 Notes may require the Company to repurchase for cash all or part of their 2021 Notes at a repurchase price equal to 100% of the principal amount of the 2021 Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date (as defined in the indenture governing the 2021 Notes). In addition, if certain fundamental changes occur, the Company may be required in certain circumstances to increase the conversion rate for any 2021 Notes converted in connection with such fundamental changes by a specified number of shares of its Class C capital stock. Certain events are also considered “Events of Default,” which may result in the acceleration of the maturity of the 2021 Notes, as described in the indenture governing the notes. There are no financial covenants associated with the 2021 Notes. We may not redeem the 2021 Notes prior to December 6, 2019. We may redeem the 2021 Notes for cash, at our option, in whole or in part on or after December 6, 2019, if the last reported sale price per share of our Class C capital stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period. Interest expense related to the 2021 Notes for the three months ended March 31, 2018 was $7.0 million, which is comprised of approximately $4.7 million related to the amortization of debt discount and debt issuance costs and $2.3 million for the contractual coupon interest. Interest expense related to the 2021 Notes for the three months ended March 31, 2017 was $6.7 million, which is comprised of approximately $4.4 million related to the amortization of debt discount and debt issuance costs and $2.3 million for the contractual coupon interest. The effective interest rate on the liability component of the 2021 Notes for the three months ended March 31, 2018 is 7.44%. Accrued interest related to the 2021 Notes as of March 31, 2018 and December 31, 2017 was $3.1 million and $0.8 million, respectively, and is recorded in accrued expenses and other current liabilities in the condensed consolidated balance sheet. The following table presents the outstanding principal amount and carrying value of the 2021 Notes as of the dates presented (in thousands):
As of March 31, 2018, the unamortized debt discount and debt issuance costs for the 2021 Notes will be amortized to interest expense over a remaining period of approximately 44 months. The estimated fair value of the 2021 Notes was $558.9 million and $509.0 million, respectively, as of March 31, 2018 and December 31, 2017. The estimated fair value of the 2021 Notes was determined through consideration of quoted market prices. The fair value is classified as Level 3 due to the limited trading activity for the 2021 Notes. The Capped Call Confirmations are expected generally to reduce the potential dilution of our Class C capital stock upon any conversion of 2021 Notes and/or offset the cash payments the Company is required to make in excess of the principal amount of the 2021 Notes in the event that the market price of the Class C capital stock is greater than the strike price of the Capped Call Confirmations (which initially corresponds to the initial conversion price of the 2021 Notes and is subject to certain adjustments under the terms of the Capped Call Confirmations), with such reduction and/or offset subject to a cap based on the cap price of the Capped Call Confirmations. The Capped Call Confirmations have an initial cap price of $69.19 per share, which represents a premium of approximately 85% over the closing price of the Company’s Class C capital stock on The Nasdaq Global Select Market on December 6, 2016, and is subject to certain adjustments under the terms of the Capped Call Confirmations. The Capped Call Confirmations will cover, subject to anti-dilution adjustments substantially similar to those applicable to the 2021 Notes, the number of shares of Class C capital stock that will underlie the 2021 Notes. In addition, the Capped Call Confirmations provide for the Company to elect, subject to certain conditions, for the Capped Call Confirmations to remain outstanding (with certain modifications) following its election to redeem the 2021 Notes, notwithstanding any conversions of 2021 Notes in connection with such redemption. The Capped Call Confirmations do not meet the criteria for separate accounting as a derivative as they are indexed to our own stock. The premiums paid for the Capped Call Confirmations have been included as a net reduction to additional paid-in capital within shareholders’ equity. Trulia’s Convertible Senior Notes due in 2020 In connection with the February 2015 acquisition of Trulia, a portion of the total purchase price was allocated to Trulia’s Convertible Senior Notes due in 2020 (the “2020 Notes”), which are unsecured senior obligations. Pursuant to and in accordance with the Merger Agreement, Zillow Group entered into a supplemental indenture in respect of the 2020 Notes in the aggregate principal amount of $230.0 million, which supplemental indenture provides, among other things, that, at the effective time of the Trulia Merger, (i) each outstanding 2020 Note is no longer convertible into shares of Trulia common stock and is convertible solely into shares of Zillow Group Class A common stock, pursuant to, and in accordance with, the terms of the indenture governing the 2020 Notes, and (ii) Zillow Group guaranteed all of the obligations of Trulia under the 2020 Notes and related indenture. In December 2016, the Company used approximately $370.2 million of the net proceeds from the issuance of the 2021 Notes discussed above to repurchase $219.9 million aggregate principal of the 2020 Notes in privately negotiated transactions. The aggregate principal amount of the 2020 Notes is due on December 15, 2020 if not earlier converted or redeemed. Interest is payable on the 2020 Notes at the rate of 2.75% semi-annually on June 15 and December 15 of each year. Holders of the 2020 Notes may convert all or any portion of their notes, in multiples of $1,000 principal amount, at their option at any time prior to the close of business on the business day immediately preceding the maturity date. Regarding the supplemental indenture in respect of the 2020 Notes, the conversion ratio immediately prior to the effective time of the Trulia Merger of 27.8303 shares of Trulia common stock per $1,000 principal amount of notes was adjusted to 12.3567 shares of our Class A common stock per $1,000 principal amount of notes based on the exchange ratio of 0.444 per the Merger Agreement. This was equivalent to an initial conversion price of approximately $80.93 per share of our Class A common stock. Regarding the August 2015 distribution of shares of our Class C capital stock as a dividend to our Class A and Class B common shareholders, the conversion ratio has been further adjusted to 41.4550 shares of Class A common stock per $1,000 principal amount of notes, which is equivalent to a conversion price of approximately $24.12 per share of our Class A common stock. The conversion ratio will be adjusted for certain dilutive events and will be increased in the case of corporate events that constitute a “Make-Whole Fundamental Change” (as defined in the indenture governing the notes). The conversion option of the 2020 Notes has no cash settlement provisions. The conversion option does not meet the criteria for separate accounting as a derivative as it is indexed to our own stock. The holders of the 2020 Notes will have the ability to require us to repurchase the notes in whole or in part upon the occurrence of an event that constitutes a “Fundamental Change” (as defined in the indenture governing the notes, including such events as a “change in control” or “termination of trading”, subject to certain exceptions). In such case, the repurchase price would be 100% of the principal amount of the 2020 Notes plus accrued and unpaid interest, if any, to, but excluding, the Fundamental Change repurchase date. Certain events are also considered “Events of Default,” which may result in the acceleration of the maturity of the 2020 Notes, as described in the indenture governing the notes. There are no financial covenants associated with the 2020 Notes. The 2020 Notes are redeemable, at our option, in whole or in part on or after December 20, 2018, if the last reported sale price per share of our Class A common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period. The carrying value of the 2020 Notes was $9.6 million and $10.1 million, respectively, as of March 31, 2018 and December 31, 2017. The estimated fair value of the 2020 Notes was $16.7 million and $17.6 million, respectively, as of March 31, 2018 and December 31, 2017. The estimated fair value of the 2020 Notes was determined through consideration of quoted market prices. The fair value is classified as Level 3 due to the limited trading activity for the 2020 Notes. |
Income Taxes |
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Mar. 31, 2018 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes We are subject to federal and state income taxes in the United States and in Canada. As of March 31, 2018 and December 31, 2017, we have provided a valuation allowance against our net deferred tax assets that we believe, based on the weight of available evidence, are not more likely than not to be realized. Therefore, no material current tax liability or expense has been recorded in the condensed consolidated financial statements. We have accumulated federal tax losses of approximately $1,014.0 million as of December 31, 2017, which are available to reduce future taxable income. We have accumulated state tax losses of approximately $21.4 million (tax effected) as of December 31, 2017. We recorded income tax expense of $2.6 million for the three months ended March 31, 2018. Our income tax expense for the period was calculated using an estimate of our annual effective tax rate of (32.2)% applied to our loss before income taxes of $16.0 million for the three months ended March 31, 2018. This was partially offset by a discrete tax benefit of $2.6 million as a result of our estimated impact from the Tax Act. Our estimated annual effective tax rate for the three months ended March 31, 2018 is primarily impacted by the release in valuation allowance resulting from indefinite-lived deferred tax assets and their ability to offset indefinite-lived intangible deferred tax liabilities. As of March 31, 2018, we have not completed our accounting for the income tax effects related to the deduction limitations on compensation under the Tax Act, and we have recorded provisional adjustments where we were able to make reasonable estimates of the effects for which our analysis is not yet complete. The provisional adjustments relate to the grandfathering of our executive compensation under Section 162(m) of the Internal Revenue Code. We expect the Internal Revenue Service to provide further guidance in applying the written binding contracts requirement under the Tax Act. We believe the clarifications of this rule could impact our financial position and results of operations by an estimated $2.0 million to $5.0 million. |
Shareholders' Equity |
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Mar. 31, 2018 | |
Equity [Abstract] | |
Shareholders' Equity | Shareholders’ Equity Preferred Stock Our board of directors has the authority to fix and determine and to amend the number of shares of any series of preferred stock that is wholly unissued or to be established and to fix and determine and to amend the designation, preferences, voting powers and limitations, and the relative, participating, optional or other rights, of any series of shares of preferred stock that is wholly unissued or to be established, subject in each case to certain approval rights of holders of our outstanding Class B common stock. There was no preferred stock issued and outstanding as of March 31, 2018 or December 31, 2017. Common and Capital Stock Our Class A common stock has no preferences or privileges and is not redeemable. Holders of Class A common stock are entitled to one vote for each share. Our Class B common stock has no preferences or privileges and is not redeemable. At any time after the date of issuance, each share of Class B common stock, at the option of the holder, may be converted into one share of Class A common stock, or automatically converted into Class A common stock upon the affirmative vote by or written consent of holders of a majority of the shares of the Class B common stock. During the three months ended March 31, 2018 and the year ended December 31, 2017, no shares of Class B common stock were converted into Class A common stock at the option of the holders. Holders of Class B common stock are entitled to 10 votes for each share. Our Class C capital stock has no preferences or privileges, is not redeemable and, except in limited circumstances, is non-voting. |
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Share-Based Awards | Share-Based Awards In connection with our February 2015 acquisition of Trulia, we assumed the obligations of Zillow and Trulia outstanding under pre-existing stock plans. We intend that future equity grants will be made under Zillow Group’s 2011 Amended and Restated Incentive Plan (as amended and/or restated from time to time, the “2011 Plan”) only (or a successor thereto). Zillow Group, Inc. Amended and Restated 2011 Incentive Plan On July 19, 2011, the 2011 Plan became effective. In addition to the share reserve of 18,400,000 shares, the number of shares available for issuance under the 2011 Plan automatically increases on the first day of each of our fiscal years by a number of shares equal to the least of (a) 3.5% of our outstanding Class A common stock, Class B common stock, and Class C capital stock on a fully diluted basis as of the end of our immediately preceding fiscal year, (b) 10,500,000 shares, and (c) a lesser amount determined by our board of directors; provided, however, that any shares from any increases in previous years that are not actually issued will continue to be available for issuance under the 2011 Plan. In addition, shares previously available for grant under Zillow, Inc.’s 2005 Equity Incentive Plan (the “2005 Plan”), but not issued or subject to outstanding awards under the 2005 Plan as of July 19, 2011, and shares subject to outstanding awards under the 2005 Plan that subsequently cease to be subject to such awards (other than by reason of exercise of the awards) are available for grant under the 2011 Plan. The 2011 Plan is administered by the compensation committee of the board of directors. The board of directors has also authorized certain senior executive officers to grant equity awards under the 2011 Plan, within limits prescribed by our board of directors. The 2011 Plan provides that in the event of a stock dividend, stock split or similar event, the maximum number and kind of securities available for issuance under the plan will be proportionally adjusted. Options under the 2011 Plan are granted with an exercise price per share not less than 100% of the fair market value of our stock on the date of grant, with the exception of substituted option awards granted in connection with acquisitions, and are exercisable at such times and under such conditions as determined by the compensation committee. Any portion of an option that is not vested and exercisable on the date of a participant’s termination of service expires on such date. Employees generally forfeit their rights to exercise vested options 3 months following their termination of employment or 12 months following termination by reason of death, disability or retirement. Options granted under the 2011 Plan typically expire seven or ten years from the grant date and typically vest either 25% after 12 months and ratably thereafter over the next 36 months or quarterly over a period of four years, though certain options have been granted with alternative vesting schedules. Restricted stock units granted under the 2011 Plan typically vest either 25% after 12 months and quarterly thereafter over the next three years, quarterly over a period of four years, or 12.5% after 6 months and quarterly thereafter for the next 3.5 years. Any portion of a restricted stock unit that is not vested on the date of a participant’s termination of service expires on such date. Option Awards The following table summarizes option award activity for the three months ended March 31, 2018:
The fair value of options granted is estimated at the date of grant using the Black-Scholes-Merton option-pricing model, assuming no dividends and with the following assumptions for the periods presented:
As of March 31, 2018, there was a total of $214.6 million in unrecognized compensation cost related to unvested stock options. Restricted Stock Units The following table summarizes activity for restricted stock units for the three months ended March 31, 2018:
The fair value of outstanding restricted stock units will be recorded as share-based compensation expense over the vesting period. As of March 31, 2018, there was $203.7 million of total unrecognized compensation cost related to unvested restricted stock units. Share-Based Compensation Expense The following table presents the effects of share-based compensation in our condensed consolidated statements of operations during the periods presented (in thousands):
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Loss Per Share | Net Loss Per Share Basic net loss per share is computed by dividing net loss by the weighted-average number of shares (including Class A common stock, Class B common stock and Class C capital stock) outstanding during the period. In the calculation of basic net loss per share, undistributed earnings are allocated assuming all earnings during the period were distributed. Diluted net loss per share is computed by dividing net loss by the weighted-average number of shares (including Class A common stock, Class B common stock and Class C capital stock) outstanding during the period and potentially dilutive Class A common stock and Class C capital stock equivalents, except in cases where the effect of the Class A common stock or Class C capital stock equivalent would be antidilutive. Potential Class A common stock and Class C capital stock equivalents consist of Class A common stock and Class C capital stock issuable upon exercise of stock options and Class A common stock and Class C capital stock underlying unvested restricted stock units using the treasury stock method. Potential Class A common stock equivalents also include Class A common stock issuable upon conversion of the 2020 Notes using the if-converted method. Since the Company expects to settle the principal amount of the outstanding 2021 Notes in cash, the Company uses the treasury stock method for calculating any potential dilutive effect of the conversion spread on diluted net income per share, if applicable. The conversion spread of approximately 8.8 million shares has a dilutive impact on diluted net income per share when the market price of the Company’s Class C capital stock at the end of a period exceeds the conversion price of $52.36 per share for the 2021 Notes. For the periods presented, the following Class A common stock and Class C capital stock equivalents were excluded from the calculations of diluted net loss per share because their effect would have been antidilutive (in thousands):
In the event of liquidation, dissolution, distribution of assets or winding-up of the Company, the holders of all classes of common and capital stock have equal rights to receive all the assets of the Company after the rights of the holders of preferred stock have been satisfied. We have not presented net loss per share under the two-class method for our Class A common stock, Class B common stock and Class C capital stock because it would be the same for each class due to equal dividend and liquidation rights for each class. |
Commitments and Contingencies |
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Mar. 31, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies Lease Commitments We have entered into various non-cancelable operating lease agreements for certain of our office space and equipment with original lease periods expiring between 2018 and 2024. We are committed to pay a portion of the related operating expenses under certain of these lease agreements. Certain of these arrangements have free rent periods or escalating rent payment provisions, and we recognize rent expense under such arrangements on a straight-line basis. Operating lease expense for the three months ended March 31, 2018 and 2017 was $5.8 million and $5.0 million, respectively. Purchase Commitments We have entered into various non-cancelable purchase commitments for content related to our mobile applications and websites. See Note 2 under “Intangible Assets” for additional information regarding our purchase commitments. Surety Bonds In the course of business, we are required to provide financial commitments in the form of surety bonds to third parties as a guarantee of our performance on and our compliance with certain obligations. If we were to fail to perform or comply with these obligations, any draws upon surety bonds issued on our behalf would then trigger our payment obligation to the surety bond issuer. We have outstanding surety bonds issued for our benefit of approximately $3.7 million as of March 31, 2018 and December 31, 2017. Legal Proceedings We are involved in a number of legal proceedings concerning matters arising in connection with the conduct of our business activities, some of which are at preliminary stages and some of which seek an indeterminate amount of damages. We regularly evaluate the status of legal proceedings in which we are involved to assess whether a loss is probable or there is a reasonable possibility that a loss or additional loss may have been incurred to determine if accruals are appropriate. We further evaluate each legal proceeding to assess whether an estimate of possible loss or range of loss can be made if accruals are not appropriate. For certain cases described below, management is unable to provide a meaningful estimate of the possible loss or range of possible loss because, among other reasons, (i) the proceedings are in preliminary stages; (ii) specific damages have not been sought; (iii) damages sought are, in our view, unsupported and/or exaggerated; (iv) there is uncertainty as to the outcome of pending appeals or motions; (v) there are significant factual issues to be resolved; and/or (vi) there are novel legal issues or unsettled legal theories presented. For these cases, however, management does not believe, based on currently available information, that the outcomes of these proceedings will have a material effect on our financial position, results of operations or cash flow. In July 2015, VHT, Inc. (“VHT”) filed a complaint against us in the U.S. District Court for the Western District of Washington alleging copyright infringement of VHT’s images on the Zillow Digs site. In January 2016, VHT filed an amended complaint alleging copyright infringement of VHT’s images on the Zillow Digs site as well as the Zillow listing site. In December 2016, the court granted a motion for partial summary judgment that dismissed VHT’s claims with respect to the Zillow listing site. A federal jury trial began on January 23, 2017, and on February 9, 2017, the jury returned a verdict finding that the Company had infringed VHT’s copyrights in images displayed or saved to the Digs site. The jury awarded VHT $79,875 in actual damages and approximately $8.2 million in statutory damages. In March 2017, the Company filed motions in the district court seeking judgment for the Company on certain claims that are the subject of the verdict, and for a new trial on others. On June 20, 2017, the judge ruled and granted in part our motions, finding that VHT failed to present sufficient evidence to prove direct copyright infringement for a portion of the images, reducing the total damages to approximately $4.1 million. On October 26, 2017, the Company filed an appeal with the Ninth Circuit Court of Appeals seeking review of the final judgment and certain prior rulings entered by the district court. We have recorded an estimated liability for approximately $4.1 million as of March 31, 2018 and December 31, 2017. We do not believe there is a reasonable possibility that a material loss in excess of amounts accrued may be incurred. In April 2017, we received a Civil Investigative Demand from the Consumer Financial Protection Bureau (“CFPB”) requesting information related to our March 2017 response to the CFPB’s February 2017 Notice and Opportunity to Respond and Advise (“NORA”) letter. The NORA letter notified us that the CFPB’s Office of Enforcement was considering whether to recommend that the CFPB take legal action against us, alleging that we violated Section 8 of the Real Estate Settlement Procedures Act (“RESPA”) and Section 1036 of the Consumer Financial Protection Act (“CFPA”). This notice stemmed from an inquiry that commenced in 2015 when we received and responded to an initial Civil Investigative Demand from the CFPB. Based on correspondence from the CFPB in August 2017, we understand that it has concluded its investigation. The CFPB invited us to discuss a possible settlement and indicated that it intended to pursue further action if those discussions do not result in a settlement. We continue to believe that our acts and practices are lawful and that our co-marketing program allows lenders and agents to comply with RESPA, and we will vigorously defend against any allegations to the contrary. Should the CFPB commence an action against us, it may seek restitution, disgorgement, civil monetary penalties, injunctive relief or other corrective action. We cannot provide assurance that the CFPB will not commence a legal action against us in this matter, nor are we able to predict the likely outcome of any such action. As of March 31, 2018 and December 31, 2017, we have recorded an accrual for an immaterial amount in connection with this matter. There is a reasonable possibility that a loss in excess of amounts accrued may be incurred; however, the possible loss or range of loss is not estimable. In August and September 2017, two purported class action lawsuits were filed against us and certain of our executive officers, alleging, among other things, violations of federal securities laws on behalf of a class of those who purchased our common stock between February 12, 2016 and August 8, 2017. One of those purported class actions, captioned Vargosko v. Zillow Group, Inc. et al, was brought in the U.S. District Court for the Central District of California. The other purported class action lawsuit, captioned Shotwell v. Zillow Group, Inc. et al, was brought in the U.S. District Court for the Western District of Washington. The complaints allege, among other things, that during the period between February 12, 2016 and August 8, 2017, we issued materially false and misleading statements regarding our business practices. The complaints seek to recover, among other things, alleged damages sustained by the purported class members as a result of the alleged misconduct. In November 2017, an amended complaint was filed against us and certain of our executive officers in the Shotwell v. Zillow Group class action lawsuit, extending the beginning of the class period to November 17, 2014. In January 2018, the Vargosko v. Zillow Group purported class action lawsuit was transferred to the U.S. District Court for the Western District of Washington and consolidated with the Shotwell v. Zillow Group purported class action lawsuit. In February 2018, the plaintiffs filed a consolidated amended complaint, and in April 2018, we filed our motion to dismiss the consolidated amended complaint. We have denied the allegations of wrongdoing and intend to vigorously defend the claims in this lawsuit. We have not recorded an accrual related to this lawsuit as of March 31, 2018 and December 31, 2017, as we do not believe a loss is probable. In October and November 2017 and January and February 2018, four shareholder derivative lawsuits were filed in the U.S. District Court for the Western District of Washington and the Superior Court of the State of Washington, against certain of our executive officers and directors seeking unspecified damages on behalf of the Company and certain other relief, such as reform to corporate governance practices. The plaintiffs in the derivative suits (in which the Company is a nominal defendant) allege, among other things, the defendants breached their fiduciary duties in connection with oversight of public statements and legal compliance, and as a result of the breach of such fiduciary duties, the Company was damaged, and defendants were unjustly enriched. Certain of the plaintiffs also allege, among other things, violations of Section 14(a) of the Securities Exchange Act of 1934 and waste of corporate assets. All four of the shareholder derivative lawsuits have been stayed until after the court has ruled on our pending motion to dismiss the consolidated securities class action lawsuit discussed above. The defendants intend to deny the allegations of wrongdoing and vigorously defend the claims in these lawsuits. We have not recorded an accrual related to these lawsuits as of March 31, 2018 and December 31, 2017, as we do not believe a loss is probable. In addition to the matters discussed above, from time to time, we are involved in litigation and claims that arise in the ordinary course of business. Although we cannot be certain of the outcome of any such litigation or claims, nor the amount of damages and exposure that we could incur, we currently believe that the final disposition of such matters will not have a material effect on our business, financial position, results of operations or cash flow. Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors. Indemnifications In the ordinary course of business, we enter into contractual arrangements under which we agree to provide indemnification of varying scope and terms to business partners and other parties with respect to certain matters, including, but not limited to, losses arising out of the breach of such agreements and out of intellectual property infringement claims made by third parties. In addition, we have agreements that indemnify certain issuers of surety bonds against losses that they may incur as a result of executing surety bonds on our behalf. For our indemnification arrangements, payment may be conditional on the other party making a claim pursuant to the procedures specified in the particular contract. Further, our obligations under these agreements may be limited in terms of time and/or amount, and in some instances, we may have recourse against third parties for certain payments. In addition, we have indemnification agreements with certain of our directors and executive officers that require us, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors or officers. The terms of such obligations may vary. |
Self-Insurance |
3 Months Ended |
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Mar. 31, 2018 | |
Insurance [Abstract] | |
Self-Insurance | Self-Insurance We are self-insured for medical benefits, and beginning on January 1, 2018 for dental benefits, for all qualifying Zillow Group employees. The medical plan carries a stop-loss policy which will protect when cumulative medical claims exceed 125% of expected claims for the plan year with a limit of $1.0 million and from individual claims during the plan year exceeding $150,000. We record estimates of the total costs of claims incurred based on an analysis of historical data and independent estimates. Our liability for self-insured claims is included within accrued compensation and benefits in our condensed consolidated balance sheets and was $2.8 million and $2.0 million, respectively, as of March 31, 2018 and December 31, 2017. |
Employee Benefit Plan |
3 Months Ended |
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Mar. 31, 2018 | |
Retirement Benefits [Abstract] | |
Employee Benefit Plan | Employee Benefit Plan We have a defined contribution 401(k) retirement plan covering Zillow Group employees who have met certain eligibility requirements (“the Zillow Group 401(k) Plan”). Eligible employees may contribute pretax compensation up to a maximum amount allowable under the Internal Revenue Service limitations. Employee contributions and earnings thereon vest immediately. We currently match up to 4% of employee contributions under the Zillow Group 401(k) Plan. The total expense related to the Zillow Group 401(k) Plan for the three months ended March 31, 2018 and 2017 was $3.8 million and $2.9 million, respectively. |
Segment Information and Revenue |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Information and Revenue | Segment Information and Revenue We have one operating and reportable segment which has been identified based on how our chief operating decision-maker manages our business, makes operating decisions and evaluates operating performance. The chief executive officer acts as the chief operating decision-maker and reviews financial and operational information on an entity-wide basis. There are no segment managers who are held accountable for operations, operating results or plans for levels or components. The chief executive officer reviews information about our revenue categories. The following table presents the balances of our revenue categories during the periods presented (in thousands):
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Subsequent Events |
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Subsequent Events [Abstract] | |||||||||||||||||||||||||||||||||||||
Subsequent Events | Subsequent Events In April 2018, we announced Zillow Group’s participation as a purchaser of homes in the Instant Offers marketplace. Through Instant Offers, interested home sellers submit information about their home and receive investor offers for a sale alongside a real estate agent’s analysis of what the home might sell for on the open market. Each time Zillow Group purchases a home it intends to quickly update and resell the home on the open market. As a participant in the Instant Offers marketplace, Zillow Group began buying homes in May of 2018. Beginning in the second quarter of 2018, Zillow Group will report financial results for two reportable segments: the Internet, Media & Technology (“IMT”) segment and the Homes segment. The IMT segment will include the financial results for the Premier Agent, Rentals, Mortgages and new construction marketplaces, as well as dotloop, display and other advertising and business software solutions. The Homes segment will include the financial results from Zillow Group’s buying and selling of homes directly. In April 2018, we entered into a lease agreement for additional office space for our corporate headquarters in Seattle, Washington. Pursuant to the terms of the lease, we will lease an additional 79,038 square feet, and we are obligated to make escalating monthly lease payments that begin in September 2019 and continue through December 2024. Future minimum payments under the operating lease for this new space are as follows (in thousands):
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Summary of Significant Accounting Policies (Policies) |
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Accounting Policies [Abstract] | |||||||||||||
Basis of Presentation | Basis of Presentation The accompanying condensed consolidated financial statements include Zillow Group, Inc. and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. These condensed consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Accordingly, these interim condensed consolidated financial statements should be read in conjunction with the audited financial statements and accompanying notes included in Zillow Group, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2017, which was filed with the SEC on February 15, 2018. The condensed consolidated balance sheet as of December 31, 2017, included herein, was derived from the audited financial statements of Zillow Group, Inc. as of that date. The unaudited condensed consolidated interim financial statements, in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments, necessary to present fairly our financial position as of March 31, 2018, our results of operations, comprehensive loss and cash flows for the three month periods ended March 31, 2018 and 2017. The results of the three month period ended March 31, 2018 are not necessarily indicative of the results to be expected for the year ending December 31, 2018 or for any interim period or for any other future year. |
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Use of Estimates | Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and the related disclosures at the date of the financial statements, as well as the reported amounts of revenue and expenses during the periods presented. On an ongoing basis, we evaluate our estimates, including those related to the amortization period and recoverability of contract cost assets, website and software development costs, recoverability of long-lived assets and intangible assets with definite lives, share-based compensation, income taxes, business combinations, and the recoverability of goodwill and indefinite-lived intangible assets, among others. To the extent there are material differences between these estimates, judgments, or assumptions and actual results, our financial statements will be affected. |
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Concentrations of Credit Risk | Concentrations of Credit Risk Financial instruments, which potentially subject us to concentrations of credit risk, consist primarily of cash and cash equivalents, investments and accounts receivable. We place cash and cash equivalents and investments with major financial institutions, which management assesses to be of high credit quality, in order to limit exposure of our investments. Credit risk with respect to accounts receivable is dispersed due to the large number of customers. Further, our credit risk on accounts receivable is mitigated by the relatively short payment terms that we offer. Collateral is not required for accounts receivable. We maintain an allowance for doubtful accounts such that receivables are stated at net realizable value. |
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Cash and Cash Equivalents | Cash and Cash Equivalents Cash includes demand deposits with banks or financial institutions. Cash equivalents include short-term, highly liquid investments that are both readily convertible to known amounts of cash, and so near their maturity that they present minimal risk of changes in value because of changes in interest rates. Our cash equivalents include only investments with original maturities of three months or less. We regularly maintain cash in excess of federally insured limits at financial institutions. |
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Short-term Investments | Short-term Investments Our investments consist of fixed income securities, which include U.S. and foreign government agency securities, corporate notes and bonds, commercial paper, municipal securities and certificates of deposit, and are classified as available-for-sale securities. As the investments are available to support current operations, our available-for-sale securities are classified as short-term investments. Available-for-sale securities are carried at fair value with unrealized gains and losses reported as a component of accumulated other comprehensive loss in shareholders’ equity, while realized gains and losses and other-than-temporary impairments are reported as a component of net loss based on specific identification. An impairment charge is recorded in the consolidated statements of operations for declines in fair value below the cost of an individual investment that are deemed to be other than temporary. We assess whether a decline in value is temporary based on the length of time that the fair market value has been below cost, the severity of the decline and the intent and ability to hold or sell the investment. We did not identify any investments as other-than-temporarily impaired as of March 31, 2018 or December 31, 2017. |
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Accounts Receivable and Allowance for Doubtful Accounts | Accounts Receivable and Allowance for Doubtful Accounts Accounts receivable represent our unconditional right to consideration. Accounts receivable are generally due within 30 days and are recorded net of the allowance for doubtful accounts. We consider accounts outstanding longer than the contractual terms past due. We review accounts receivable on a regular basis and estimate an amount of losses for uncollectible accounts based on our historical collections experience, age of the receivable, knowledge of the customer and the condition of the general economy and industry as a whole. We record changes in our estimate to the allowance for doubtful accounts through bad debt expense and relieve the allowance when accounts are ultimately determined to be uncollectible. Bad debt expense is included in general and administrative expenses. |
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Contract Cost Assets | Contract Cost Assets We capitalize certain incremental costs of obtaining contracts with customers which we expect to recover. These costs relate to commissions paid to sales personnel, primarily for our Premier Agent and Premier Broker programs. As a practical expedient, we recognize the incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset that we otherwise would have recognized is one year or less. Capitalized commission costs are recorded as contract cost assets in our condensed consolidated balance sheets. Contract cost assets are amortized to expense on a straight-line basis over a period that is consistent with the transfer to the customer of the products or services to which the asset relates, generally the estimated life of the customer relationship. Amortization expense related to contract cost assets is included in sales and marketing expenses in our condensed consolidated statements of operations. In determining the estimated life of our customer relationships, we consider quantitative and qualitative data, including, but not limited to, historical customer data, recent changes or expected changes in product or service offerings, and changes in how we monetize our products and services. The amortization period for capitalized contract costs related to our Premier Agent and Premier Broker programs ranges from two to three years. |
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Property and Equipment | Property and Equipment Property and equipment is recorded at cost and depreciated using the straight-line method over the estimated useful lives of the related assets. The useful lives are as follows:
Maintenance and repair costs are charged to expense as incurred. Major improvements, which extend the useful life of the related asset, are capitalized. Upon disposal of a fixed asset, we record a gain or loss based on the difference between the proceeds received and the net book value of the disposed asset. |
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Website and Software Development Costs | Website and Software Development Costs The costs incurred in the preliminary stages of development are expensed as incurred. Once an application has reached the development stage, internal and external costs, if direct and incremental and deemed by management to be significant, are capitalized in property and equipment and amortized on a straight-line basis over their estimated useful lives. Maintenance and enhancement costs, including those costs in the post-implementation stages, are typically expensed as incurred, unless such costs relate to substantial upgrades and enhancements to the website or software that result in added functionality, in which case the costs are capitalized and amortized on a straight-line basis over the estimated useful lives. Amortization expense related to capitalized website and software development costs is included in technology and development expense. Capitalized development activities placed in service are amortized over the expected useful lives of those releases, currently estimated at one to three years. The estimated useful lives of website and software development activities are reviewed frequently and adjusted as appropriate to reflect upcoming development activities that may include significant upgrades and/or enhancements to the existing functionality. Construction-in-progress primarily consists of website development costs that are capitalizable, but for which the associated applications had not been placed in service. |
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Recoverability of Goodwill and Indefinite-Lived Intangible Assets | Recoverability of Goodwill and Indefinite-Lived Intangible Assets Goodwill represents the excess of the cost of an acquired business over the fair value of the assets acquired at the date of acquisition, and is not amortized. We assess the impairment of goodwill on an annual basis, in our fourth quarter, or whenever events or changes in circumstances indicate that goodwill may be impaired. Typically, we choose to forgo the initial qualitative assessment and perform a quantitative analysis to assist in our annual evaluation. If impairment exists, the carrying value of the goodwill is reduced to fair value through an impairment charge recorded in our statements of operations. Our indefinite-lived intangible asset is not amortized, and we assess the asset for impairment on an annual basis, in our fourth quarter, or whenever events or changes in circumstances indicate that the asset may be impaired. On an interim basis, we consider if there are any events and circumstances that could affect the significant inputs used to determine the fair value of the indefinite-lived intangible asset, including, but not limited to, costs that could have a negative effect on future expected earnings and cash flows, changes in certain key performance metrics, and changes in management, key personnel, strategy or customers. In our evaluation of our trade names and trademarks indefinite-lived intangible asset, we typically first perform a qualitative assessment to determine whether the fair value of the indefinite-lived intangible asset is more likely than not impaired. If so, we perform a quantitative assessment and an impairment charge is recorded in our statements of operations for the excess of the carrying value of the indefinite-lived intangible asset over its fair value. |
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Intangible Assets | Intangible Assets We purchase and license data content from multiple data providers. This data content consists of U.S. county data about home details (e.g., the number of bedrooms, bathrooms, square footage) and other information relating to the purchase price of homes, both current and historical, as well as imagery, mapping and parcel data that is displayed on our mobile applications and websites. Our home details data not only provides information about a home and its related transactions which is displayed on our mobile applications and websites, but is also used in our proprietary valuation algorithms to produce Zestimates, Rent Zestimates and Zillow Home Value Indexes. License agreement terms vary by vendor. In some instances, we retain perpetual rights to this information after the contract ends; in other instances, the information and data are licensed only during the fixed term of the agreement. Additionally, certain data license agreements provide for uneven payment amounts throughout the contract term. We capitalize payments made to third parties for data licenses that we expect to provide future economic benefit through the recovery of the costs of these arrangements via the generation of our revenue and margins. For data license contracts that include uneven payment amounts, we capitalize the payments as they are made as an intangible asset and the total contract value is typically amortized on a straight-line basis over the term of the contract, which is equivalent to the estimated useful life of the asset. We evaluate data content contracts for potential capitalization at the inception of the arrangement as well as each time periodic payments to third parties are made. The amortization period for the capitalized purchased content is based on our best estimate of the useful life of the asset, which is approximately five years. The determination of the useful life includes consideration of a variety of factors including, but not limited to, our assessment of the expected use of the asset and contractual provisions that may limit the useful life, as well as an assessment of when the data is expected to become obsolete based on our estimates of the diminishing value of the data over time. We evaluate the useful life of the capitalized purchased data content each reporting period to determine whether events and circumstances warrant a revision to the remaining useful life. If we determine the estimate of the asset’s useful life requires modification, the carrying amount of the asset is amortized prospectively over the revised useful life. The capitalized purchased data content is amortized on a straight-line basis as the pattern of delivery of the economic benefits of the data cannot reliably be determined because we do not have the ability to reliably predict future traffic to our mobile applications and websites. Under certain other data agreements, the underlying data is obtained on a subscription basis with consistent monthly or quarterly recurring payment terms over the contractual period. Upon the expiration of such arrangements, we no longer have the right to access the related data, and therefore, the costs incurred under such contracts are not capitalized and are expensed as payments are made. We would immediately lose rights to data under these arrangements if we were to cancel the subscription and/or cease making payments under the subscription arrangements. We also capitalize costs related to the license of certain internal-use software from third parties, including certain licenses of software in cloud computing arrangements. Additionally, we capitalize costs incurred during the application development stage related to the development of internal-use software and enterprise cloud computing services. We expense costs as incurred related to the planning and post-implementation phases of development. Capitalized internal-use software costs are amortized over the estimated useful life of the asset, which is currently one to three years, on a straight-line basis. Intangibles-in-progress consist of purchased content and software that are capitalizable but have not been placed in service. We also have intangible assets for developed technology, customer relationships, trade names and trademarks and advertising relationships which we recorded in connection with acquisitions. Purchased intangible assets with a determinable economic life are carried at cost, less accumulated amortization. These intangible assets are amortized over the estimated useful life of the asset on a straight-line basis. |
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Recoverability of Intangible Assets with Definite Lives and Other Long-Lived Assets | Recoverability of Intangible Assets with Definite Lives and Other Long-Lived Assets We evaluate intangible assets and other long-lived assets for impairment whenever events or circumstances indicate that they may not be recoverable. Recoverability is measured by comparing the carrying amount of an asset group to future undiscounted net cash flows expected to be generated. We group assets for purposes of such review at the lowest level for which identifiable cash flows of the asset group are largely independent of the cash flows of the other groups of assets and liabilities. If this comparison indicates impairment, the amount of impairment to be recognized is calculated as the difference between the carrying value and the fair value of the asset group. |
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Deferred Revenue | Deferred Revenue Deferred revenue consists of prepaid advertising fees received or billed in advance of satisfying our performance obligations and prepaid but unrecognized subscription revenue. Deferred revenue is recognized when or as we satisfy our obligations under contracts with customers. |
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Deferred Rent | Deferred Rent For our operating leases, we recognize rent expense on a straight-line basis over the terms of the leases and, accordingly, we record the difference between cash rent payments and the recognition of rent expense as a deferred rent liability. For office space under an operating lease that is subleased to a third party for which we intend to reoccupy the space at a future date, rent expense is recognized net of sublease income. Landlord-funded leasehold improvements are also recorded as deferred rent liabilities and are amortized as a reduction of rent expense over the non-cancelable term of the related operating lease. |
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Business Combinations | Business Combinations We recognize identifiable assets acquired and liabilities assumed at their acquisition date fair values. Goodwill as of the acquisition date is measured as the excess of consideration transferred over the net of the acquisition date fair values of the assets acquired and the liabilities assumed. While we use our best estimates and assumptions for the purchase price allocation process to value assets acquired and liabilities assumed at the acquisition date, our estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, we record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill to the extent that we identify adjustments to the preliminary purchase price allocation. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to our condensed consolidated statements of operations. We recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. |
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Revenue Recognition | Revenue Recognition We recognize revenue when (or as) we satisfy our performance obligations by transferring control of the promised products or services to our customers in an amount that reflects the consideration to which we expect to be entitled in exchange for those products or services. We generate revenue from the sale of advertising services and our suite of marketing software and technology solutions to businesses and professionals primarily associated with the residential real estate, rental and mortgage industries. These professionals include real estate, rental and mortgage professionals and brand advertisers. Our four primary revenue categories are Premier Agent, Rentals, Mortgages and Other. As a practical expedient, we do not adjust the promised amount of consideration for the effects of a significant financing component as the period between our transfer of a promised product or service to a customer and when the customer pays for that product or service is one year or less. We do not disclose the transaction price related to remaining performance obligations for (i) contracts with an original expected duration of one year or less and (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for performance completed to date. The remaining duration of our performance obligations is generally less than one year. Premier Agent Revenue. Premier Agent revenue is derived from our Premier Agent and Premier Broker programs. Our Premier Agent and Premier Broker programs offer a suite of marketing and business technology products and services to help real estate agents and brokers achieve their advertising goals, while growing and managing their businesses and brands. All Premier Agents and Premier Brokers receive access to a dashboard portal on our mobile application or website that provides individualized program performance analytics, our customer relationship management, or CRM, tool that captures detailed information about each contact made with a Premier Agent or Premier Broker through our mobile and web platforms and our account management tools. We have concluded that the marketing and business technology products and services promised to Premier Agents and Premier Brokers represent distinct performance obligations. We offer our Premier Agent and Premier Broker advertising products on a cost per impression basis. Payment is received prior to the delivery of impressions. Impressions are delivered when a sold advertisement appears on pages viewed by users of our mobile applications and websites. We determine the cost per impression delivered in each zip code using an auction-based pricing method in consideration of the total amount spent by Premier Agents and Premier Brokers to purchase impressions in the zip code during the month. A Premier Agent’s or Premier Broker’s share of voice in a zip code is determined by their proportional monthly budgeted spend in that zip code as a percentage of the total monthly budgeted spend of all Premier Agents and Premier Brokers in that zip code. The cost per impression that we charge is dynamic - as demand for impressions in a zip code increases or decreases, the cost per impression in that zip code may be increased or decreased accordingly. The price paid for each impression is representative of the price at which we would sell an impression separately to a customer, or the stand-alone selling price. We have not allocated the transaction price to each performance obligation as the amounts recognized would be the same irrespective of any allocation. As such, we recognize revenue related to the Premier Agent and Premier Broker products and services based on the contractual spend recognized on a straight-line basis during the contractual period over which the products and services are provided. This methodology best depicts how we satisfy our performance obligations to customers, as we continuously transfer control of the performance obligations to the customer throughout the contractual period. Rentals Revenue. Rentals revenue includes our rentals marketplace and suite of tools for rental professionals. Rentals revenue primarily includes revenue generated by advertising sold to property managers and other rental professionals on a cost per lead, cost per click or cost per lease generated basis. We recognize revenue as leads or clicks are provided to rental professionals, which is the amount for which we have the right to invoice. The number of leases generated through our rentals marketplace during the period is accounted for as variable consideration, and we estimate these amounts based on the expected number of qualified leases secured during the period. We do not believe that a significant reversal in the amount of cumulative revenue recognized will occur once the uncertainty related to the number of leases secured is subsequently resolved. Mortgages Revenue. Mortgages revenue primarily includes marketing products sold to mortgage professionals on a cost per lead basis, including our Long Form and Custom Quote services. For our Long Form and Custom Quote cost per lead mortgage marketing products, participating qualified mortgage professionals typically make a prepayment to gain access to consumers interested in connecting with mortgage professionals. Mortgage professionals who exhaust their initial prepayment prepay additional funds to continue to participate in the marketplace. In Zillow Group’s Long Form platform, consumers answer a series of questions to find a local lender, and mortgage professionals receive consumer contact information, or leads, when the consumer chooses to share their information with a lender. Consumers who request rates for mortgage loans in Custom Quotes are presented with customized quotes from participating mortgage professionals. We recognize revenue when a user contacts a mortgage professional through Zillow Group’s mortgages platform, which is the amount for which we have the right to invoice. Mortgages revenue also includes revenue generated by Mortech, which provides subscription-based mortgage software solutions, including a product and pricing engine and lead management platform, for which we recognize revenue on a straight-line basis during the contractual period over which the services are provided. Other Revenue. Other revenue primarily includes revenue generated by new construction and display, as well as revenue from the sale of various other marketing and business products and services to real estate professionals. Our new construction marketing solutions allow home builders to showcase their available inventory to home shoppers. New construction revenue primarily includes revenue generated by advertising sold to builders on a cost per residential community basis, and revenue is recognized on a straight-line basis during the contractual period over which the communities are advertised on our mobile applications and websites. Consideration is billed in arrears. Display revenue primarily consists of graphical mobile and web advertising sold on a cost per thousand impressions or cost per click basis to advertisers promoting their brands on our mobile applications and websites. We recognize display revenue as clicks occur or as impressions are delivered to users interacting with our mobile applications or websites, which is the amount for which we have the right to invoice. |
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Cost of Revenue | Cost of Revenue Our cost of revenue consists of expenses related to operating our mobile applications and websites, including associated headcount expenses, such as salaries and benefits and share-based compensation expense and bonuses, as well as credit card fees, ad serving costs paid to third parties, revenue-sharing costs related to our commercial business relationships, depreciation expense and costs associated with the operation of our data center and mobile applications and websites. |
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Technology and Development | Technology and Development Technology and development expenses consist of headcount expenses, including salaries, benefits, share-based compensation expense and bonuses for salaried employees and contractors engaged in the design, development and testing of our mobile applications and websites, and equipment and maintenance costs. Technology and development expenses also include amortization costs related to capitalized website and development activities, amortization of software, amortization of certain intangibles and other data agreement costs related to the purchase of data used to populate our mobile applications and websites, amortization of intangible assets recorded in connection with acquisitions, including developed technology and customer relationships, amongst others, and depreciation expense. |
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Share-Based Compensation | Share-Based Compensation We measure compensation expense for all share-based awards at fair value on the date of grant and recognize compensation expense over the service period on a straight-line basis for awards expected to vest. We use the Black-Scholes-Merton option-pricing model to determine the fair value for option awards. In valuing our option awards, we make assumptions about risk-free interest rates, dividend yields, volatility, and weighted-average expected lives. We account for forfeitures as they occur. Risk-free interest rates are derived from U.S. Treasury securities as of the option award grant date. Expected dividend yield is based on our historical cash dividend payments, which have been zero to date. The expected volatility for our Class A common stock and Class C capital stock is estimated using our historical volatility. The weighted-average expected life of the option awards is estimated based on our historical exercise data. For issuances of restricted stock units and restricted units, we determine the fair value of the award based on the market value of our Class A common stock or Class C capital stock, as applicable, at the date of grant. |
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Advertising Costs | Advertising Costs Advertising costs are expensed as incurred. Advertising costs are recorded in sales and marketing expenses. |
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Income Taxes | Income Taxes We use the asset and liability approach for accounting and reporting income taxes, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial statement and tax bases of assets and liabilities at the applicable enacted tax rates. A valuation allowance against deferred tax assets would be established if, based on the weight of available evidence, it is more likely than not (a likelihood of more than 50%) that some or all of the deferred tax assets are not expected to be realized. We establish reserves for tax-related uncertainties based on estimates of whether, and the extent to which, additional taxes will be due. We adjust these reserves in light of changing facts and circumstances, such as the closing of a tax audit, new tax legislation or the change of an estimate. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will affect the provision for income taxes in the period in which such determination is made. Interest and penalties related to unrecognized tax benefits are recorded as income tax expense. On December 22, 2017, the U.S. government enacted comprehensive tax legislation under the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act makes broad and complex changes to the U.S. tax code, including but not limited to: (1) reducing the U.S. federal corporate tax rate from 35 percent to 21 percent; (2) requiring companies to pay a one-time transition tax on certain unrepatriated earnings of foreign subsidiaries; (3) generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries; (4) eliminating the corporate alternative minimum tax (“AMT”) and how AMT credits are utilized; (5) the additional limitations on deducting executive compensation under IRC Section 162(m); and (6) changing rules related to uses and limitations of net operating loss carryforwards created in tax years beginning after December 31, 2017. Shortly after enactment, implementation guidance was released by the Securities and Exchange Commission that requires a company to reflect the income tax effects of those aspects of the Tax Act for which the accounting under the accounting rules is complete. To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but the company is able to determine a reasonable estimate, it should record a provisional estimate in the financial statements. Further, the implementation guidance also provides for a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete their accounting pursuant to the accounting rules. |
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Recently Issued Accounting Standards | Recently Adopted Accounting Standards In December 2016, the Financial Accounting Standards Board (“FASB”) issued guidance to narrow the definition of a business. This guidance assists entities with evaluating when a set of transferred assets and activities is a business. This guidance is effective for interim and annual reporting periods beginning after December 15, 2017, and early adoption is permitted. This guidance must be applied prospectively to transactions occurring within the period of adoption. We adopted this guidance on January 1, 2018. The adoption of this guidance did not have an impact on our financial position, results of operations or cash flows. In January 2016, the FASB issued guidance on the recognition and measurement of financial instruments. This guidance generally requires equity investments, except those accounted for under the equity method of accounting or those that result in consolidation of the investee, to be measured at fair value with changes in fair value recognized in net income (loss). An entity may elect to measure equity securities that do not have readily determinable fair values and do not qualify for the net asset value per share practical expedient at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. The guidance also requires the separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheet or the accompanying notes to the financial statements. This guidance is effective for interim and annual reporting periods beginning after December 15, 2017, early adoption is permitted, and the guidance must be applied prospectively to equity investments that exist as of the adoption date. We adopted this guidance, and the February 2018 amendment to this guidance, effective January 1, 2018. The adoption of this guidance did not have any impact on our financial position, results of operations or cash flows. In May 2014, the FASB issued guidance on revenue from contracts with customers. The guidance states that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those products or services. It also states that an entity should recognize as an asset the incremental costs of obtaining a contract that the entity expects to recover and amortize the costs consistent with the transfer to the customer of the products or services to which the asset relates. The guidance requires more detailed disclosures to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. We adopted this guidance effective January 1, 2018 using the modified retrospective transition approach applied to all contracts at the date of initial application. We recorded an adjustment of $40.3 million to decrease accumulated deficit as of January 1, 2018 related to the accounting for the cost of sales commissions, primarily related to sales commissions for our Premier Agent and Premier Broker advertising products. Historically, we expensed these sales commission costs as incurred, but under the new guidance, the cost of certain sales commissions is recorded as a contract cost asset and recognized as an operating expense over the period that we expect to recover the costs. Recently Issued Accounting Standards Not Yet Adopted In February 2018, the FASB issued guidance on income tax accounting related to the Tax Act. This guidance permits a reclassification from accumulated other comprehensive income (loss) to accumulated deficit for the adjustment of deferred taxes due to the reduction of the historical corporate income tax rate to the newly enacted corporate income tax rate under the Tax Act. It also requires certain disclosures regarding these reclassifications. The guidance is effective for interim and annual reporting periods beginning after December 15, 2018, and early adoption is permitted. This guidance must be applied either on a prospective basis in the period of adoption or retrospectively to each period in which the effect of the change in the corporate income tax rate is recognized. We expect to adopt this guidance on January 1, 2019. The adoption of this guidance is not expected to have a material impact on our financial position, results of operations or cash flows. In March 2017, the FASB issued guidance related to the premium amortization on purchased callable debt securities. This guidance shortens the amortization period for certain callable debt securities purchased at a premium by requiring that the premium be amortized to the earliest call date. This guidance is effective for interim and annual reporting periods beginning after December 15, 2018, and early adoption is permitted. This guidance must be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. We expect to adopt this guidance on January 1, 2019. We have not yet determined the impact the adoption of this guidance will have on our financial position, results of operations or cash flows. In June 2016, the FASB issued guidance on the measurement of credit losses on financial instruments. This guidance requires the use of an expected loss impairment model for instruments measured at amortized cost. For available-for-sale debt securities, an entity is required to recognize credit losses through an allowance for credit losses rather than as a write-down. This guidance is effective for interim and annual reporting periods beginning after December 15, 2019, and early adoption is permitted for interim and annual reporting periods beginning after December 15, 2018. The adoption of this guidance requires a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. We expect to adopt this guidance on January 1, 2020. We have not yet determined the impact the adoption of this guidance will have on our financial position, results of operations or cash flows. In February 2016, the FASB issued guidance on leases. This guidance requires the recognition of a right-of-use asset and lease liability on the balance sheet for all leases. This guidance also requires more detailed disclosures to enable users of financial statements to understand the amount, timing, and uncertainty of cash flows arising from leases. This guidance is effective for interim and annual reporting periods beginning after December 15, 2018 and should be applied through a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, and early adoption is permitted. We expect to adopt this guidance on January 1, 2019. We anticipate this guidance will have a material impact on our financial position, primarily due to our office space operating leases, as we will be required to recognize lease assets and lease liabilities on our condensed consolidated balance sheet. We continue to assess the potential impacts of this guidance, including the impact the adoption of this guidance will have on our results of operations and cash flows. |
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Fair Value Measurements | Accounting standards define fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market in an orderly transaction between market participants on the measurement date. The standards also establish a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. There are three levels of inputs that may be used to measure fair value:
We applied the following methods and assumptions in estimating our fair value measurements: Cash equivalents — The fair value measurement of money market funds is based on quoted market prices in active markets. The fair value measurement of corporate notes and bonds, commercial paper, U.S. government agency securities and certificates of deposit is based on observable market-based inputs or inputs that are derived principally from or corroborated by observable market data by correlation or other means. Short-term Investments — The fair value measurement of our short-term investments is based on observable market-based inputs or inputs that are derived principally from or corroborated by observable market data by correlation or other means. |
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Net Income (Loss) Per Share | Basic net loss per share is computed by dividing net loss by the weighted-average number of shares (including Class A common stock, Class B common stock and Class C capital stock) outstanding during the period. In the calculation of basic net loss per share, undistributed earnings are allocated assuming all earnings during the period were distributed. Diluted net loss per share is computed by dividing net loss by the weighted-average number of shares (including Class A common stock, Class B common stock and Class C capital stock) outstanding during the period and potentially dilutive Class A common stock and Class C capital stock equivalents, except in cases where the effect of the Class A common stock or Class C capital stock equivalent would be antidilutive. Potential Class A common stock and Class C capital stock equivalents consist of Class A common stock and Class C capital stock issuable upon exercise of stock options and Class A common stock and Class C capital stock underlying unvested restricted stock units using the treasury stock method. Potential Class A common stock equivalents also include Class A common stock issuable upon conversion of the 2020 Notes using the if-converted method. |
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Segment Reporting | We have one operating and reportable segment which has been identified based on how our chief operating decision-maker manages our business, makes operating decisions and evaluates operating performance. The chief executive officer acts as the chief operating decision-maker and reviews financial and operational information on an entity-wide basis. There are no segment managers who are held accountable for operations, operating results or plans for levels or components. |
Summary of Significant Accounting Policies (Tables) |
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Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Effect of Application of New Guidance | The amount by which each financial statement line item is affected by the application of this guidance as of and for the three months ended March 31, 2018 is as follows (in thousands, except per share data):
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Fair Value Measurements (Tables) |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Balances of Cash Equivalents and Investments | The following tables present the balances of assets measured at fair value on a recurring basis, by level within the fair value hierarchy, as of the dates presented (in thousands):
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Cash and Cash Equivalents and Short-term Investments (Tables) |
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Cash and Cash Equivalents [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Amortized Cost, Gross Unrealized Gains and Losses, and Estimated Fair Market Value of Cash and Cash Equivalents and Available-for-Sale Investments | The following tables present the amortized cost, gross unrealized gains and losses, and estimated fair market value of our cash and cash equivalents and available-for-sale investments as of the dates presented (in thousands):
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Available-for-Sale Investments by Contractual Maturity | The following table presents available-for-sale investments by contractual maturity date as of March 31, 2018 (in thousands):
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Accounts Receivable, net (Tables) |
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Receivables [Abstract] | |||||||||||||||||||||||||
Schedule of Accounts Receivable, Net | The following table presents the changes in the allowance for doubtful accounts (in thousands):
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Property and Equipment, Net (Tables) |
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Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Detail of Property and Equipment | The following table presents the detail of property and equipment as of the dates presented (in thousands):
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Intangible Assets, net (Tables) |
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Mar. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Intangible Assets | The following tables present the detail of intangible assets subject to amortization as of the dates presented (in thousands):
|
Deferred Revenue (Tables) |
3 Months Ended | ||||||||||||||||||||||||
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Mar. 31, 2018 | |||||||||||||||||||||||||
Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||
Schedule of Change in Deferred Revenue | The following table presents the changes in deferred revenue (in thousands):
|
Convertible Senior Notes (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Outstanding Principal Amount and Carrying Value | The following table presents the outstanding principal amount and carrying value of the 2021 Notes as of the dates presented (in thousands):
|
Share-Based Awards (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Option Award Activity | The following table summarizes option award activity for the three months ended March 31, 2018:
|
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Fair Value of Options Granted, Estimated at Date of Grant Using Black Scholes Merton Option Pricing Model | The fair value of options granted is estimated at the date of grant using the Black-Scholes-Merton option-pricing model, assuming no dividends and with the following assumptions for the periods presented:
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Summary of Restricted Stock Units Activity | The following table summarizes activity for restricted stock units for the three months ended March 31, 2018:
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Effects of Share Based Compensation in Consolidated Statements of Operations | The following table presents the effects of share-based compensation in our condensed consolidated statements of operations during the periods presented (in thousands):
|
Net Loss Per Share (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Antidilutive Securities Excluded from Computation of Earnings Per Share | For the periods presented, the following Class A common stock and Class C capital stock equivalents were excluded from the calculations of diluted net loss per share because their effect would have been antidilutive (in thousands):
|
Segment Information and Revenue (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue Categories | The following table presents the balances of our revenue categories during the periods presented (in thousands):
|
Subsequent Events (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||
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Mar. 31, 2018 | |||||||||||||||||||||||||||||||||||||
Subsequent Events [Abstract] | |||||||||||||||||||||||||||||||||||||
Schedule of Future Minimum Payments Under Operating Lease | Future minimum payments under the operating lease for this new space are as follows (in thousands):
|
Fair Value Measurements - Additional Information (Detail) - USD ($) |
Mar. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Fair Value, Measurements, Recurring | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Liabilities measured at fair value | $ 0 | $ 0 |
Fair Value, Inputs, Level 3 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Assets measured at fair value | $ 0 | $ 0 |
Cash and Cash Equivalents and Short-term Investments - Available-for-Sale Investments by Contractual Maturity (Detail) $ in Thousands |
Mar. 31, 2018
USD ($)
|
---|---|
Cash and Cash Equivalents [Abstract] | |
Amortized Cost, Due in one year or less | $ 341,729 |
Amortized Cost, Due after one year through two years | 85,342 |
Total | 427,071 |
Estimated Fair Market Value, Due in one year or less | 340,800 |
Estimated Fair Market Value, Due after one year through two years | 84,793 |
Total | $ 425,593 |
Accounts Receivable, net (Details) - USD ($) $ in Thousands |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
Dec. 31, 2017 |
|
Receivables [Abstract] | |||
Accounts receivable, net | $ 54,558 | $ 54,396 | |
Allowance for Doubtful Accounts Receivable [Roll Forward] | |||
Balance as of January 1, 2018 | 5,341 | ||
Bad debt expense | (267) | $ 718 | |
Less: write-offs, net of recoveries and other adjustments | (157) | ||
Balance as of March 31, 2018 | $ 4,917 |
Contract Cost Assets (Details) - USD ($) |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
Dec. 31, 2017 |
|
Revenue from Contract with Customer [Abstract] | |||
Contract cost assets | $ 42,465,000 | $ 0 | |
Impairment of contract cost assets | 0 | ||
Amortization of contract cost assets | $ 9,296,000 | $ 0 |
Property and Equipment, Net - Detail of Property and Equipment (Detail) - USD ($) $ in Thousands |
Mar. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Property, Plant and Equipment [Line Items] | ||
Property and equipment | $ 267,022 | $ 258,501 |
Less: accumulated amortization and depreciation | (152,194) | (146,230) |
Property and equipment, net | 114,828 | 112,271 |
Website development costs | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment | 137,479 | 130,072 |
Leasehold improvements | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment | 54,170 | 47,321 |
Computer equipment | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment | 28,267 | 30,071 |
Construction-in-progress | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment | 23,700 | 28,150 |
Office equipment, furniture and fixtures | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment | $ 23,406 | $ 22,887 |
Property and Equipment, Net - Additional Information (Detail) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
|
Property, Plant and Equipment [Line Items] | ||
Amortization and depreciation expense related to property and equipment other than website development costs | $ 4,200 | $ 3,900 |
Capitalization of website development costs | 8,600 | 12,500 |
Amortization of website development costs and intangible assets included in technology and development | 22,549 | 23,261 |
Technology and development | ||
Property, Plant and Equipment [Line Items] | ||
Amortization of website development costs and intangible assets included in technology and development | 13,000 | 13,100 |
Technology and development | Software Development | ||
Property, Plant and Equipment [Line Items] | ||
Amortization of website development costs and intangible assets included in technology and development | $ 9,500 | $ 10,100 |
Equity Investments - Additional Information (Detail) - USD ($) |
1 Months Ended | ||
---|---|---|---|
Oct. 31, 2016 |
Mar. 31, 2018 |
Jun. 30, 2017 |
|
Schedule of Equity Method Investments [Line Items] | |||
Cumulative impairment | $ 0 | ||
Cumulative upward adjustments | 0 | ||
Cumulative downward adjustments | 0 | ||
Variable Interest Entity, Not Primary Beneficiary | |||
Schedule of Equity Method Investments [Line Items] | |||
Percentage of equity interest in privately held variable interest entity | 10.00% | ||
Maximum exposure to loss in variable interest entity | $ 10,000,000 | ||
Other Assets | |||
Schedule of Equity Method Investments [Line Items] | |||
Equity interest | $ 10,000,000 | ||
Other Assets | Variable Interest Entity, Not Primary Beneficiary | |||
Schedule of Equity Method Investments [Line Items] | |||
Equity interest | $ 10,000,000 |
Intangible Assets, net - Additional Information (Detail) - USD ($) $ in Thousands |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
Dec. 31, 2017 |
|
Indefinite-lived Intangible Assets [Line Items] | |||
Amortization of website development costs and intangible assets included in technology and development | $ 22,549 | $ 23,261 | |
Trade names and trademarks | Trulia | |||
Indefinite-lived Intangible Assets [Line Items] | |||
Indefinite-lived intangible asset | 177,000 | $ 177,000 | |
Technology and development | |||
Indefinite-lived Intangible Assets [Line Items] | |||
Amortization of website development costs and intangible assets included in technology and development | $ 13,000 | $ 13,100 |
Deferred Revenue (Details) $ in Thousands |
3 Months Ended |
---|---|
Mar. 31, 2018
USD ($)
| |
Change in Contract with Customer, Liability [Roll Forward] | |
Balance as of January 1, 2018 | $ 31,918 |
Deferral of revenue | 238,121 |
Less: Revenue recognized | (234,742) |
Balance as of March 31, 2018 | 35,297 |
Revenue recognized, recorded in deferred revenue as of prior period | $ 28,200 |
Convertible Senior Notes - Outstanding Principal Amount and Carrying Value (Detail) - 2.00% Convertible Senior Notes Due 2021 - USD ($) $ in Thousands |
Mar. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Debt Instrument [Line Items] | ||
Outstanding Principal Amount | $ 460,000 | $ 460,000 |
Unamortized Debt Discount and Debt Issuance Costs | (80,013) | (84,721) |
Carrying Value | $ 379,987 | $ 375,279 |
Income Taxes - Additional Information (Detail) - USD ($) $ in Thousands |
3 Months Ended | 12 Months Ended | ||
---|---|---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Schedule Of Income Tax [Line Items] | ||||
Income tax expense | $ 2,600 | $ 0 | ||
Effective tax rate | (32.20%) | |||
Loss before income taxes | $ 15,991 | $ 4,606 | ||
Impact from the Tax Act - expense (benefit) | $ (2,600) | |||
Scenario, Forecast | Minimum | ||||
Schedule Of Income Tax [Line Items] | ||||
Impact from the Tax Act - expense (benefit) | $ 2,000 | |||
Scenario, Forecast | Maximum | ||||
Schedule Of Income Tax [Line Items] | ||||
Impact from the Tax Act - expense (benefit) | $ 5,000 | |||
Federal | ||||
Schedule Of Income Tax [Line Items] | ||||
Net operating loss carryforwards | $ 1,014,000 | |||
State | ||||
Schedule Of Income Tax [Line Items] | ||||
Net operating loss carryforwards | $ 21,400 |
Shareholders' Equity - Additional Information (Detail) |
3 Months Ended | 12 Months Ended |
---|---|---|
Mar. 31, 2018
Vote
shares
|
Dec. 31, 2017
shares
|
|
Class of Stock [Line Items] | ||
Preferred stock, issued (in shares) | 0 | 0 |
Preferred stock, outstanding (in shares) | 0 | 0 |
Class A Common Stock | ||
Class of Stock [Line Items] | ||
Common stock holders voting right | Vote | 1 | |
Conversion of common stock conversion ratio | 1 | |
Number of common stock issued | 0 | |
Class B Common Stock | ||
Class of Stock [Line Items] | ||
Common stock holders voting right | Vote | 10 | |
Number of common stock converted | 0 | 0 |
Class C Capital Stock | ||
Class of Stock [Line Items] | ||
Common stock holders voting right | Vote | 0 |
Share-Based Awards - Option Awards - Additional Information (Detail) $ in Millions |
Mar. 31, 2018
USD ($)
|
---|---|
Option Awards | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Unrecognized cost of unvested share-based compensation awards | $ 214.6 |
Share-Based Awards - Restricted Stock Units - Additional Information (Detail) $ in Millions |
Mar. 31, 2018
USD ($)
|
---|---|
Restricted Stock Units | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Total unrecognized compensation cost | $ 203.7 |
Share-Based Awards - Fair Value of Options Granted, Estimated at Date of Grant Using Black Scholes Merton Option Pricing Model (Detail) - Option Awards - $ / shares |
3 Months Ended | |
---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Expected dividend yield | 0.00% | 0.00% |
Weighted-average fair value of options granted (usd per share) | $ 20.88 | $ 14.21 |
Minimum | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Expected volatility | 43.00% | 48.00% |
Risk-free interest rate | 2.52% | 1.75% |
Weighted-average expected life | 4 years 6 months | 4 years 3 months |
Maximum | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Expected volatility | 45.00% | 49.00% |
Risk-free interest rate | 2.65% | 1.84% |
Weighted-average expected life | 5 years | 4 years 9 months |
Share-Based Awards - Summary of Restricted Stock Units Activity (Detail) - Restricted Stock Units |
3 Months Ended |
---|---|
Mar. 31, 2018
$ / shares
shares
| |
Restricted Stock Units | |
Beginning balance (in shares) | shares | 4,016,405 |
Granted (in shares) | shares | 1,916,215 |
Vested (in shares) | shares | (394,844) |
Forfeited or cancelled (in shares) | shares | (191,376) |
Ending balance (in shares) | shares | 5,346,400 |
Weighted- Average Grant- Date Fair Value | |
Unvested outstanding, beginning balance (usd per share) | $ / shares | $ 33.22 |
Granted (usd per share) | $ / shares | 52.90 |
Vested (usd per share) | $ / shares | 31.60 |
Forfeited or cancelled (usd per share) | $ / shares | 36.70 |
Unvested outstanding, ending balance (usd per share) | $ / shares | $ 40.29 |
Share-Based Awards - Effects of Share Based Compensation in Consolidated Statements of Operations (Detail) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
|
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||
Share-based compensation | $ 30,741 | $ 26,395 |
Cost of revenue | ||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||
Share-based compensation | 955 | 903 |
Sales and marketing | ||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||
Share-based compensation | 5,162 | 5,530 |
Technology and development | ||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||
Share-based compensation | 11,542 | 8,491 |
General and administrative | ||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||
Share-based compensation | $ 13,082 | $ 11,471 |
Net Loss Per Share - Additional Information (Detail) - 2.00% Convertible Senior Notes Due 2021 shares in Millions |
3 Months Ended |
---|---|
Mar. 31, 2018
$ / shares
shares
| |
Earnings Per Share, Diluted, by Common Class, Including Two Class Method [Line Items] | |
Conversion spread, shares | shares | 8.8 |
Class C Capital Stock | |
Earnings Per Share, Diluted, by Common Class, Including Two Class Method [Line Items] | |
Conversion price (usd per share) | $ / shares | $ 52.36 |
Commitments and Contingencies - Additional Information (Detail) - USD ($) |
3 Months Ended | ||||
---|---|---|---|---|---|
Jun. 20, 2017 |
Feb. 09, 2017 |
Mar. 31, 2018 |
Mar. 31, 2017 |
Dec. 31, 2017 |
|
Other Commitments [Line Items] | |||||
Operating lease expense | $ 5,800,000 | $ 5,000,000 | |||
Outstanding surety bonds | 3,700,000 | $ 3,700,000 | |||
VHT Vs Zillow Group Inc. | |||||
Other Commitments [Line Items] | |||||
Jury awarded damages | $ 4,100,000 | $ 79,875 | |||
Estimated immaterial liability in general and administrative expenses | 4,100,000 | $ 4,100,000 | |||
Estimated range of loss | $ 0 | ||||
VHT Vs Zillow Group Inc. | Statutory Damages | |||||
Other Commitments [Line Items] | |||||
Jury awarded damages | $ 8,200,000 |
Self-Insurance - Additional Information (Detail) - USD ($) |
3 Months Ended | |
---|---|---|
Mar. 31, 2018 |
Dec. 31, 2017 |
|
Insurance [Abstract] | ||
Percentage of cumulative medical claim under self insurance plan (percent exceeded) | 125.00% | |
Limit of medical claim under self insurance plan (limit) | $ 1,000,000 | |
Minimum amount of individual claim under self insurance plan | 150,000 | |
Liability for self-insured claims included in accrued compensation and benefits | $ 2,800,000 | $ 2,000,000 |
Employee Benefit Plan - Additional Information (Detail) - Zillow Merger - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
|
Defined Contribution Plan Disclosure [Line Items] | ||
Company's contribution based on employee contribution (up to) | 4.00% | |
Company's expense related to its defined contribution 401(k) retirement plans | $ 3.8 | $ 2.9 |
Segment Information and Revenue - Additional Information (Detail) |
3 Months Ended |
---|---|
Mar. 31, 2018
segment
| |
Segment Reporting [Abstract] | |
Number of reportable segments | 1 |
Segment Information and Revenue - Revenue Categories (Detail) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
|
Revenues: | ||
Total revenue | $ 299,879 | $ 245,775 |
Other | ||
Revenues: | ||
Total Marketplace revenue | 38,061 | 28,659 |
Premier Agent | ||
Revenues: | ||
Total Marketplace revenue | 213,732 | 175,301 |
Rentals | ||
Revenues: | ||
Total Marketplace revenue | 29,063 | 21,545 |
Mortgages | ||
Revenues: | ||
Total Marketplace revenue | $ 19,023 | $ 20,270 |
Subsequent Events (Details) $ in Thousands |
3 Months Ended | ||
---|---|---|---|
Jun. 30, 2018
segment
|
Mar. 31, 2018
segment
|
Apr. 30, 2018
USD ($)
ft²
|
|
Subsequent Event [Line Items] | |||
Number of reportable segments | segment | 1 | ||
Scenario, Forecast | |||
Subsequent Event [Line Items] | |||
Number of reportable segments | segment | 2 | ||
Subsequent Event | |||
Operating Leases, Future Minimum Payments Due, Fiscal Year Maturity [Abstract] | |||
2018 | $ 0 | ||
2019 | 764 | ||
2020 | 2,318 | ||
2021 | 2,397 | ||
2022 | 2,477 | ||
All future years | 5,190 | ||
Total future minimum lease payments | $ 13,146 | ||
Subsequent Event | Corporate headquarters | |||
Subsequent Event [Line Items] | |||
Area of property | ft² | 79,038 |
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