Segment Information and Revenue

6 Months Ended

Jun. 30, 2020

Segment Reporting [Abstract]

Segment Information and Revenue

Segment Information and Revenue

We have three operating and reportable segments, which have been identified based on the way in which 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 for the Homes, Internet, Media & Technology (“IMT”) and Mortgages segments.

The Homes segment includes the financial results from Zillow Group’s purchase and sale of homes directly through Zillow Offers and the financial results from title and escrow services through Zillow Closing Services. The IMT segment includes the financial results for the Premier Agent, rentals and new construction marketplaces, dotloop and display, as well as revenue from the sale of various other marketing and business products and services to real estate professionals. The Mortgages segment includes financial results for advertising sold to mortgage lenders and other mortgage professionals, mortgage originations through Zillow Home Loans and the sale of mortgages on the secondary market, as well as Mortech mortgage software solutions.

Revenue and costs are directly attributed to our segments when possible. However, due to the integrated structure of our business, certain costs incurred by one segment may benefit the other segments. These costs primarily include headcount-related expenses, general and administrative expenses including executive, finance, accounting, legal, human resources, recruiting and facilities costs, product development and data acquisition costs and marketing and advertising costs. These costs are allocated to each segment based on the estimated benefit each segment receives from such expenditures.

The chief executive officer reviews information about our revenue categories as well as statement of operations data inclusive of income (loss) before income taxes by segment. This information is included in the following tables for the periods presented (in thousands):

	Three Months Ended June 30, 2020						Three Months Ended June 30, 2019
	Homes		IMT		Mortgages		Homes		IMT		Mortgages
Revenue:
Zillow Offers	$	453,816	$	—	$	—	$	248,924	$	—	$	—
Premier Agent	—		191,962		—		—		231,961		—
Other	436		88,377		—		—		91,708		—
Mortgages	—		—		33,761		—		—		26,985
Total revenue	454,252		280,339		33,761		248,924		323,669		26,985
Costs and expenses:
Cost of revenue	431,788		23,387		5,896		240,732		26,059		4,430
Sales and marketing	47,877		96,026		11,695		37,409		135,440		14,584
Technology and development	28,918		93,176		6,763		18,198		94,261		7,871
General and administrative	21,902		53,884		9,725		17,808		54,671		10,360
Integration costs	—		—		—		—		—		293
Total costs and expenses	530,485		266,473		34,079		314,147		310,431		37,538
Income (loss) from operations	(76,233)		13,866		(318)		(65,223)		13,238		(10,553)
Segment other income	—		5,300		385		—		—		402
Segment interest expense	(3,825)		—		(307)		(5,899)		—		(287)
Income (loss) before income taxes (1)	$	(80,058)	$	19,166	$	(240)	$	(71,122)	$	13,238	$	(10,438)

	Six Months Ended June 30, 2020						Six Months Ended June 30, 2019
	Homes		IMT		Mortgages		Homes		IMT		Mortgages
Revenue:
Zillow Offers	$	1,222,928	$	—	$	—	$	377,396	$	—	$	—
Premier Agent	—		434,068		—		—		449,696		—
Other	1,197		176,937		—		—		172,245		—
Mortgages	—		—		59,043		—		—		54,345
Total revenue	1,224,125		611,005		59,043		377,396		621,941		54,345
Costs and expenses:
Cost of revenue	1,163,987		47,705		11,051		363,151		50,310		9,108
Sales and marketing	119,466		216,199		24,581		58,271		262,094		28,655
Technology and development	61,456		188,204		14,115		30,479		182,230		15,391
General and administrative	45,323		112,638		19,835		32,165		125,521		20,927
Impairment costs	—		73,900		2,900		—		—		—
Integration costs	—		—		—		—		—		645
Total costs and expenses	1,390,232		638,646		72,482		484,066		620,155		74,726
Income (loss) from operations	(166,107)		(27,641)		(13,439)		(106,670)		1,786		(20,381)
Segment other income	—		5,300		587		—		—		715
Segment interest expense	(11,909)		—		(533)		(9,657)		—		(388)
Income (loss) before income taxes (1)	$	(178,016)	$	(22,341)	$	(13,385)	$	(116,327)	$	1,786	$	(20,054)

(1) The following table presents the reconciliation of total segment loss before income taxes to consolidated loss before income taxes for the periods presented (in thousands, unaudited):

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
Total segment loss before income taxes	$	(61,132)	$	(68,322)	$	(213,742)	$	(134,595)
Corporate interest expense	(33,458)		(12,711)		(62,740)		(25,318)
Corporate other income	4,430		9,056		13,821		17,911
Gain on partial extinguishment of 2021 Notes	6,391		—		6,391		—
Consolidated loss before income taxes	$	(83,769)	$	(71,977)	$	(256,270)	$	(142,002)

Certain corporate items are not directly attributable to any of our segments, including the gain on the partial extinguishment of the 2021 Notes, interest income earned on our short-term investments included in Other income and interest costs on our convertible senior notes included in Interest expense.