- Record Revenue of $208.4 million increased 31% year-over-year, excluding revenue from Market Leader, which was divested in the third quarter of 2015.
- Marketplace Revenue of $191.6 million increased 44% year-over-year, excluding revenue from Market Leader.
- All-time high of more than 171 million unique users in May to Zillow Group consumer brands Zillow®, Trulia®, StreetEasy®, HotPads® and Naked Apartments®.
- Zillow Group captured 78% market share of the mobile-only category.
SEATTLE, Aug. 04, 2016 (GLOBE NEWSWIRE) -- Zillow Group, Inc. (NASDAQ:Z) (NASDAQ:ZG), which houses a portfolio of the largest and most vibrant real estate and home-related brands on mobile and web, today announced its consolidated financial results for the three months ended June 30, 2016.
“Record revenue and traffic growth were highlights of Zillow Group’s tremendous second quarter,” said Zillow Group CEO Spencer Rascoff. “We continue to command significant category leadership on mobile and web, reaching an all-time high of unique users in May and achieving our largest market share of the real estate category. It is clear that our monetization on mobile is benefiting from our significant market leadership, which now captures 78% of the mobile-only category. We are executing well against our long-term strategic priorities to increase our audience size, grow our Premier Agent and emerging marketplaces, and attract and retain the best talent in the industry.”
Second Quarter 2016 Financial Highlights
Throughout this release, certain historical financial results and year-over-year comparisons are presented on a pro forma basis. Pro forma results exclude items described in the reconciliation tables below and assume the February 2015 acquisition of Trulia occurred on January 1, 2014, the beginning of the comparable reporting period for the year prior to the year of acquisition. The pro forma results are presented in order to provide additional insights into the underlying trends in the business. Financial information for the three and six month periods ended June 30, 2016 is presented in this release on an as-reported basis. Reported results were prepared in accordance with U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
- Revenue increased 31% to $208.4 million from $158.7 million in the second quarter of 2015, excluding revenue from Market Leader, which was divested in the third quarter of 2015.
- Marketplace Revenue increased 44% to $191.6 million from $133.0 million in the second quarter of 2015, excluding revenue from Market Leader.
- Premier Agent Revenue increased 28% to $147.1 million from $115.2 million in the second quarter of 2015.
- Other Real Estate Revenue1 increased 254% to $26.1 million from $7.4 million in the second quarter of 2015.
- Mortgages Revenue increased 77% to $18.4 million from $10.4 million in the second quarter of 2015.
- Display Revenue decreased 35% to $16.8 million from $25.8 million in the second quarter of 2015. The decrease is primarily a result of the company’s strategy to deemphasize display advertising and improve the user experience.
- Marketplace Revenue increased 44% to $191.6 million from $133.0 million in the second quarter of 2015, excluding revenue from Market Leader.
- GAAP net loss was $156.1 million in the second quarter of 2016, which includes the impact of a $130.0 million litigation settlement and $12.5 million in related legal costs, compared to GAAP net loss of $38.7 million in the same period last year.
- Adjusted EBITDA was $(101.3) million in the second quarter of 2016, which was a decrease from $21.0 million, or 12% of Revenue, in the second quarter of 2015. Adjusted EBITDA in the second quarter of 2016 includes the impact of a $130.0 million litigation settlement and $12.5 million in related legal costs. Excluding the impact of the $130.0 million litigation settlement, Adjusted EBITDA in the second quarter of 2016 would have been $28.7 million, or 14% of Revenue.
Operating and Business Highlights
- More than 168 million average monthly unique users for the second quarter of 2016.
- All-time high of more than 171 million unique users in May to Zillow Group consumer brands Zillow, Trulia, StreetEasy, HotPads and Naked Apartments, an increase of 20% year-over-year.
- In June, Zillow Group’s market share was up 4 percentage points since March 2016, capturing 67% of the mobile and web real estate audience.2
- When looking at mobile-only, Zillow Group’s market share is even larger, capturing 78% of the category.2
- Leads to Zillow Group Premier Agent® Advertisers for the second quarter of 2016 grew nearly 50% year over year to more than 4 million.
- The Premier Agent marketplace continues to accelerate as top performing agents realize the benefits of advertising on Zillow Group’s mobile applications and websites.
- Total sales to Premier Agent Advertisers who have been customers for more than one year increased 57% year-over-year.
- Sales to existing Premier Agent Advertisers accounted for 70% of total bookings.
- Premier Agent Advertisers who spend more than $5,000 per month:
- Increased 73% year-over-year on a total dollar basis.
- Increased 68% year-over-year in the number of agent advertisers.
| |
| 1 Other Real Estate Revenue includes agent services, dotloop, StreetEasy, Naked Apartments, rentals and other offerings to endemic advertisers that are not traditional display advertising. |
| 2 comScore data June 2016 |
Business Outlook - Third Quarter and Full Year 2016
For full year 2016, Zillow Group is increasing its outlook for Revenue to a range of $830 million to $840 million, up from a range of $825 million to $835 million. The 2016 Revenue outlook represents a 30% year-over-year increase at the midpoint of the range, compared to a 24% increase from 2014 to 2015, on a pro forma basis and excluding revenue from Market Leader, which was divested in 2015.
The following table presents Zillow Group’s business outlook for the periods presented (in millions):
| Three Months Ending | Year Ending | ||||||||||||||||
| Zillow Group Outlook as of August 4, 2016 | September 30, 2016 | December 31, 2016 | |||||||||||||||
| (in millions) | |||||||||||||||||
| Revenue | $ | 217 | to | $ | 222 | $ | 830 | to | $ | 840 | |||||||
| Premier Agent revenue | $ | 156 | to | $ | 158 | $ | 597 | to | $ | 602 | |||||||
| Display revenue | $ | 15 | to | $ | 16 | $ | 60 | to | $ | 62 | |||||||
| Operating expenses | $ | 220 | to | $ | 225 | *** | |||||||||||
| Adjusted EBITDA (1) | $ | 48 | to | $ | 53 | $ | 125 | to | $ | 135 | |||||||
| Depreciation and amortization | $ | 24 | to | $ | 26 | $ | 97 | to | $ | 102 | |||||||
| Share-based compensation expense | $ | 26 | to | $ | 28 | $ | 105 | to | $ | 110 | |||||||
| Capital expenditures | *** | $ | 44 | to | $ | 46 | |||||||||||
| Weighted average shares outstanding — basic | 179.5 | to | 181.5 | 179.0 | to | 181.0 | |||||||||||
| Weighted average shares outstanding — diluted | 196.0 | to | 198.0 | 195.5 | to | 197.5 | |||||||||||
| *** Outlook not provided | |||||||||||||||||
(1) Forecasted Adjusted EBITDA for the year ending December 31, 2016 in the table above excludes the impact of a $130.0 million litigation settlement and includes $28.2 million in related legal costs. Including the impact of the $130.0 million litigation settlement and $28.2 million in related legal costs, forecasted Adjusted EBITDA for the year ending December 31, 2016 is $0. A reconciliation of forecasted Adjusted EBITDA (including the impact of the $130.0 million litigation settlement and $28.2 million in related legal costs) to forecasted net loss is provided below in this press release.
Conference Call and Webcast Information
Zillow Group’s CEO Spencer Rascoff and CFO Kathleen Philips will host a live conference call and webcast to discuss the results today at 2 p.m. Pacific Time (5 p.m. Eastern Time). A copy of management’s prepared remarks will be made available on the investor relations section of Zillow Group, Inc.’s website at http://investors.zillowgroup.com/results.cfm prior to the live conference call and webcast to allow analysts and investors additional time to review the details of the results.
Zillow Group’s management will first read the prepared remarks and then answer questions submitted via Twitter® during the live conference call, in addition to answering questions from dialed-in participants. Questions can be submitted to the @ZillowGroup Twitter® handle using #ZEarnings.
A link to the live webcast of the conference call will be available on the investor relations section of Zillow Group, Inc.’s website at http://investors.zillowgroup.com/results.cfm. The live call may also be accessed via phone at (877) 643-7152 toll-free domestically and at (443) 863-7921 internationally, with conference ID# 42951979. Following completion of the call, a recorded replay of the webcast will be available on the investor relations section of Zillow Group, Inc.’s website.
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 that involve risks and uncertainties, including, without limitation, statements regarding our business outlook, strategic priorities, and operational plans for 2016. Statements containing words such as “may,” “believe,” “anticipate,” “expect,” “intend,” “plan,” “project,” “will,” “projections,” “continue,” “business outlook,” “estimate,” “outlook,” or similar expressions constitute forward-looking statements. Differences in Zillow Group’s actual results from those described in these forward-looking statements may result from actions taken by Zillow Group as well as from risks and uncertainties beyond Zillow Group’s control. Factors that may contribute to such differences include, but are not limited to, Zillow Group’s ability to successfully integrate and realize the benefits of our past or future strategic acquisitions or investments; Zillow Group’s ability to maintain and effectively manage an adequate rate of growth; Zillow Group’s ability to maintain or establish relationships with listings and data providers; the impact of the real estate industry on Zillow Group’s business; Zillow Group’s ability to innovate and provide products and services that are attractive to its users and advertisers; Zillow Group’s ability to increase awareness of the Zillow Group brands; Zillow Group’s ability to attract consumers to Zillow Group’s mobile applications and websites; Zillow Group’s ability to compete successfully against existing or future competitors; the reliable performance of Zillow Group’s network infrastructure and content delivery processes; and Zillow Group’s ability to protect its intellectual property. The foregoing list of risks and uncertainties is illustrative, but is not exhaustive. For more information about potential factors that could affect Zillow Group’s business and financial results, please review the “Risk Factors” described in Zillow Group’s Annual Report on Form 10-K for the year ended December 31, 2015 filed with the Securities and Exchange Commission, or SEC, and in Zillow Group’s other filings with the SEC. Except as may be required by law, Zillow Group does not intend, and undertakes no duty, to update this information to reflect future events or circumstances.
Use of Non-GAAP Financial Measures
To provide investors with additional information regarding our financial results, this press release includes references to certain pro forma financial results, Adjusted EBITDA and non-GAAP net income (loss) per share, all of which are non-GAAP financial measures. We have provided a reconciliation of pro forma Adjusted EBITDA to pro forma net loss, Adjusted EBITDA to net loss, the most directly comparable GAAP financial measure, and a reconciliation of net income (loss), adjusted, to net loss, as reported on a GAAP basis, and the calculations of non-GAAP net income (loss) per share - basic and diluted and pro forma weighted-average shares outstanding – basic and diluted, within this earnings release.
The pro forma financial results included in this press release, although helpful in illustrating the financial characteristics of Zillow Group under one set of assumptions, are not true historical financial results. They are provided for informational purposes and do not attempt to represent Zillow Group’s actual financial condition if the February 2015 acquisition of Trulia had been completed on the applicable dates of the financial statements presented herein, or to predict or suggest future results.
Adjusted EBITDA is a key metric used by our management and board of directors to measure operating performance and trends, and to prepare and approve our annual budget. In particular, the exclusion of certain expenses in calculating Adjusted EBITDA facilitates operating performance comparisons on a period-to-period basis.
Our use of Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:
- Adjusted EBITDA does not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments;
- Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;
- Adjusted EBITDA does not consider the potentially dilutive impact of share-based compensation;
- Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements;
- Adjusted EBITDA does not reflect acquisition-related costs;
- Adjusted EBITDA does not reflect restructuring costs;
- Adjusted EBITDA does not reflect interest expense or other income;
- Adjusted EBITDA does not reflect the impact of income taxes; and
- Other companies, including companies in our own industry, may calculate Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure.
Because of these limitations, you should consider Adjusted EBITDA alongside other financial performance measures, including various cash flow metrics, net loss and our other GAAP results.
Our presentation of non-GAAP net income (loss) per share excludes the impact of share-based compensation expense, acquisition-related costs, restructuring costs and income taxes. This measure is not a key metric used by our management and board of directors to measure operating performance or otherwise manage the business. However, we provide non-GAAP net income (loss) per share as supplemental information to investors, as we believe the exclusion of share-based compensation expense, acquisition-related costs, restructuring costs and income taxes facilitates investors’ operating performance comparisons on a period-to-period basis. You should not consider these metrics in isolation or as substitutes for analysis of our results as reported under GAAP.
About Zillow Group
Zillow Group (NASDAQ:Z) (NASDAQ:ZG) houses a portfolio of the largest real estate and home-related brands on mobile and the web. The company's brands focus on all stages of the home lifecycle: renting, buying, selling, financing and home improvement. Zillow Group is committed to empowering consumers with unparalleled data, inspiration and knowledge around homes, and connecting them with the right local professionals to help. The Zillow Group portfolio of consumer brands includes real estate and rental marketplaces Zillow®, Trulia®, StreetEasy®, HotPads® and Naked Apartments®. In addition, Zillow Group works with tens of thousands of real estate agents, lenders and rental professionals, helping maximize business opportunities and connect to millions of consumers. The company operates a number of business brands for real estate, rental and mortgage professionals, including Mortech®, dotloop® and Retsly®. The company is headquartered in Seattle.
Please visit http://investors.zillowgroup.com, www.zillowgroup.com/ir-blog, and www.twitter.com/zillowgroup, where Zillow Group discloses information about the company, its financial information, and its business which may be deemed material.
The Zillow Group logo is available at http://zillowgroup.mediaroom.com/logos-photos.
Zillow, Premier Agent, Mortech, StreetEasy, Retsly and HotPads are registered trademarks of Zillow, Inc. Trulia is a registered trademark of Trulia, LLC. dotloop is a registered trademark of DotLoop, LLC. Naked Apartments is a registered trademark of Naked Apartments, Inc.
Twitter is a registered trademark of Twitter, Inc.
(ZFIN)
Pro Forma Financial Information
The following financial information for the three and six month periods ended June 30, 2015 is presented on a pro forma basis and gives effect to the February 2015 acquisition of Trulia as if it were consummated on January 1, 2014, the beginning of the comparable reporting period for the year prior to the year of acquisition. For ease of year-over-year comparison, this pro forma financial information is presented with financial information for the three and six month periods ended June 30, 2016, which is presented on an as-reported basis (in thousands, except per share data, unaudited):
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2016 (1) | 2015 (2) | 2016 (1) | 2015 (3) | |||||||||||||
| Pro forma revenue | $ | 208,403 | $ | 171,269 | $ | 394,385 | $ | 333,800 | ||||||||
| Pro forma net loss | $ | (156,149 | ) | $ | (26,731 | ) | $ | (203,754 | ) | $ | (44,585 | ) | ||||
| Pro forma net loss per share — basic and diluted | $ | (0.87 | ) | $ | (0.15 | ) | $ | (1.14 | ) | $ | (0.25 | ) | ||||
| Pro forma weighted-average shares outstanding — basic and diluted | 179,451 | 176,142 | 179,067 | 175,290 | ||||||||||||
| _________ | ||||||||||||||||
| Other Financial Data: | ||||||||||||||||
| Pro forma Adjusted EBITDA (4) | $ | (101,260 | ) | $ | 21,039 | $ | (99,386 | ) | $ | 45,540 | ||||||
(1) The financial information for the three and six month periods ended June 30, 2016 is presented on an as-reported basis.
(2) The pro forma net loss for the three months ended June 30, 2015 includes pro forma adjustments for $6.7 million to eliminate restructuring costs associated with the acquisition of Trulia reflected in the historical financial statements, $3.7 million to eliminate share-based compensation expense attributable to substituted equity awards and $1.7 million to eliminate direct and incremental acquisition-related costs reflected in the historical financial statements.
(3) The pro forma net loss for the six months ended June 30, 2015 includes pro forma adjustments for $47.9 million to eliminate direct and incremental acquisition-related costs reflected in the historical financial statements, $37.3 million to eliminate share-based compensation expense attributable to substituted equity awards and to record additional share-based compensation expense attributable to substituted equity awards, $31.9 million to eliminate restructuring costs associated with the acquisition of Trulia reflected in the historical financial statements, $2.4 million to record additional amortization expense for acquired intangible assets and $1.1 million to eliminate Trulia’s historical amortization of capitalized website development costs.
(4) See below for a reconciliation of pro forma Adjusted EBITDA to pro forma net loss. For the three and six month periods ended June 30, 2016, Adjusted EBITDA includes the impact of a $130.0 million litigation settlement. Adjusted EBITDA for the three and six month periods ended June 30, 2016 also includes $12.5 million and $28.2 million, respectively, in related legal costs.
The basic and diluted pro forma net loss per share is based on the weighted-average number of shares of Zillow Group common stock and Class C capital stock outstanding for the period presented and adjusted for the number of shares of Class A common stock issued in connection with the February 2015 acquisition of Trulia, assuming for the purposes of the unaudited pro forma condensed combined statements of operations that the closing date of the acquisition was January 1, 2014. The calculation of the number of shares used in the computation of pro forma basic and diluted net loss per share is as follows (in thousands, unaudited):
| Three Months Ended | Six Months Ended | |||||||
| June 30, | June 30, | |||||||
| 2016 | 2015 | 2016 | 2015 | |||||
| Weighted-average shares outstanding — basic and diluted (1) | 127,671 | 124,362 | 127,287 | 123,510 | ||||
| Class A common stock issued in connection with the acquisition of Trulia | 51,780 | 51,780 | 51,780 | 51,780 | ||||
| Pro forma weighted-average shares outstanding — basic and diluted | 179,451 | 176,142 | 179,067 | 175,290 | ||||
| (1) Amounts exclude shares of Zillow Group Class A common stock issued in connection with the acquisition of Trulia. | ||||||||
The following table presents a reconciliation of pro forma Adjusted EBITDA to pro forma net loss for the three and six month periods ended June 30, 2015. For ease of year-over-year comparison, this pro forma financial information is presented with financial information for the three and six month periods ended June 30, 2016, which is presented on an as-reported basis (in thousands, unaudited):
| Three Months Ended | Six Months Ended | ||||||||||||||||
| June 30, | June 30, | ||||||||||||||||
| 2016 (1) | 2015 | 2016 (1) | 2015 | ||||||||||||||
| Reconciliation of Pro Forma Adjusted EBITDA to Pro Forma Net Loss: | |||||||||||||||||
| Pro forma net loss | $ | (156,149 | ) | $ | (26,731 | ) | $ | (203,754 | ) | $ | (44,585 | ) | |||||
| Pro forma other income | (753 | ) | (450 | ) | (1,434 | ) | (752 | ) | |||||||||
| Pro forma depreciation and amortization expense | 25,550 | 20,419 | 49,357 | 40,281 | |||||||||||||
| Pro forma share-based compensation expense | 28,316 | 26,221 | 53,867 | 47,457 | |||||||||||||
| Pro forma acquisition-related costs | 204 | - | 797 | - | |||||||||||||
| Pro forma interest expense | 1,572 | 1,580 | 3,145 | 3,139 | |||||||||||||
| Pro forma income tax benefit | - | - | (1,364 | ) | - | ||||||||||||
| Pro forma Adjusted EBITDA | $ | (101,260 | ) | $ | 21,039 | $ | (99,386 | ) | $ | 45,540 | |||||||
(1) The financial information for the three and six month periods ended June 30, 2016 is presented on an as-reported basis. For the three and six month periods ended June 30, 2016, Adjusted EBITDA includes the impact of a $130.0 million litigation settlement. Adjusted EBITDA for the three and six month periods ended June 30, 2016 also includes $12.5 million and $28.2 million, respectively, in related legal costs.
The following table presents our pro forma revenue by type for the six months ended June 30, 2015. For ease of year-over-year comparison, the pro forma financial information is presented with financial information for the three and six month periods ended June 30, 2016, which is presented on an as-reported basis (in thousands, unaudited):
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2016 (1) | 2015 (1) | 2016 (1) | 2015 | |||||||||||||
| Pro Forma Revenue: | ||||||||||||||||
| Pro forma Marketplace revenue: | ||||||||||||||||
| Real estate: | ||||||||||||||||
| Premier Agent | $ | 147,106 | $ | 115,185 | $ | 281,635 | $ | 222,342 | ||||||||
| Other real estate | 26,070 | 7,373 | 44,048 | 13,612 | ||||||||||||
| Total pro forma Real estate revenue | 173,176 | 122,558 | 325,683 | 235,954 | ||||||||||||
| Mortgages | 18,392 | 10,393 | 34,846 | 20,343 | ||||||||||||
| Market Leader | - | 12,530 | - | 26,111 | ||||||||||||
| Total pro forma Marketplace revenue | 191,568 | 145,481 | 360,529 | 282,408 | ||||||||||||
| Pro forma Display revenue | 16,835 | 25,788 | 33,856 | 51,392 | ||||||||||||
| Total pro forma revenue | $ | 208,403 | $ | 171,269 | $ | 394,385 | $ | 333,800 | ||||||||
(1) The financial information for the three months ended June 30, 2015 and for the three and six month periods ended June 30, 2016 is presented on an as-reported basis.
Reported Consolidated Results
| ZILLOW GROUP, INC. | ||||||||
| UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||
| (in thousands) | ||||||||
| June 30, 2016 | December 31, 2015 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 155,210 | $ | 229,138 | ||||
| Short-term investments | 264,933 | 291,151 | ||||||
| Accounts receivable, net | 35,494 | 29,789 | ||||||
| Prepaid expenses and other current assets | 15,728 | 24,016 | ||||||
| Total current assets | 471,365 | 574,094 | ||||||
| Restricted cash | 1,053 | 3,015 | ||||||
| Property and equipment, net | 98,799 | 89,639 | ||||||
| Goodwill | 1,919,777 | 1,909,167 | ||||||
| Intangible assets, net | 539,965 | 554,765 | ||||||
| Other assets | 6,142 | 5,020 | ||||||
| Total assets | $ | 3,037,101 | $ | 3,135,700 | ||||
| Liabilities and shareholders’ equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 17,144 | $ | 3,361 | ||||
| Accrued expenses and other current liabilities | 48,475 | 43,047 | ||||||
| Accrued compensation and benefits | 24,303 | 11,392 | ||||||
| Deferred revenue | 25,651 | 21,450 | ||||||
| Deferred rent, current portion | 1,215 | 1,172 | ||||||
| Total current liabilities | 116,788 | 80,422 | ||||||
| Deferred rent, net of current portion | 15,020 | 13,743 | ||||||
| Long-term debt | 230,000 | 230,000 | ||||||
| Deferred tax liabilities and other long-term liabilities | 132,521 | 132,482 | ||||||
| Total liabilities | 494,329 | 456,647 | ||||||
| Shareholders’ equity: | ||||||||
| Class A common stock | 5 | 5 | ||||||
| Class B common stock | 1 | 1 | ||||||
| Class C capital stock | 12 | 12 | ||||||
| Additional paid-in capital | 3,022,736 | 2,956,111 | ||||||
| Accumulated other comprehensive income (loss) | 377 | (471 | ) | |||||
| Accumulated deficit | (480,359 | ) | (276,605 | ) | ||||
| Total shareholders’ equity | 2,542,772 | 2,679,053 | ||||||
| Total liabilities and shareholders’ equity | $ | 3,037,101 | $ | 3,135,700 | ||||
| ZILLOW GROUP, INC. | ||||||||||||||||
| UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||||
| (in thousands, except per share data) | ||||||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||
| Revenue | $ | 208,403 | $ | 171,269 | $ | 394,385 | $ | 298,542 | ||||||||
| Costs and expenses: | ||||||||||||||||
| Cost of revenue (exclusive of amortization) (1)(2) | 17,220 | 17,037 | 33,672 | 30,056 | ||||||||||||
| Sales and marketing (2) | 99,256 | 87,942 | 198,016 | 147,228 | ||||||||||||
| Technology and development (2) | 67,421 | 51,740 | 131,838 | 89,065 | ||||||||||||
| General and administrative (2) | 179,632 | 43,810 | 233,469 | 81,834 | ||||||||||||
| Acquisition-related costs | 204 | 1,679 | 797 | 14,156 | ||||||||||||
| Restructuring costs (2) | - | 6,652 | - | 31,717 | ||||||||||||
| Total costs and expenses | 363,733 | 208,860 | 597,792 | 394,056 | ||||||||||||
| Loss from operations | (155,330 | ) | (37,591 | ) | (203,407 | ) | (95,514 | ) | ||||||||
| Other income | 753 | 450 | 1,434 | 719 | ||||||||||||
| Interest expense | (1,572 | ) | (1,580 | ) | (3,145 | ) | (2,310 | ) | ||||||||
| Loss before income taxes | (156,149 | ) | (38,721 | ) | (205,118 | ) | (97,105 | ) | ||||||||
| Income tax benefit | - | - | 1,364 | - | ||||||||||||
| Net loss | $ | (156,149 | ) | $ | (38,721 | ) | $ | (203,754 | ) | $ | (97,105 | ) | ||||
| Net loss per share — basic and diluted | $ | (0.87 | ) | $ | (0.22 | ) | $ | (1.14 | ) | $ | (0.60 | ) | ||||
| Weighted-average shares outstanding — basic and diluted | 179,451 | 176,142 | 179,067 | 161,847 | ||||||||||||
| _________ | ||||||||||||||||
| (1) Amortization of website development costs and intangible assets included in technology and development | $ | 20,845 | $ | 17,117 | $ | 40,904 | $ | 28,899 | ||||||||
| (2) Includes share-based compensation expense as follows: | ||||||||||||||||
| Cost of revenue | $ | 1,627 | $ | 1,110 | $ | 2,846 | $ | 2,062 | ||||||||
| Sales and marketing | 6,395 | 8,784 | 11,598 | 12,993 | ||||||||||||
| Technology and development | 8,366 | 7,005 | 15,125 | 12,771 | ||||||||||||
| General and administrative | 11,928 | 12,981 | 24,298 | 25,061 | ||||||||||||
| Restructuring costs | - | 3,584 | - | 14,004 | ||||||||||||
| Total | $ | 28,316 | $ | 33,464 | $ | 53,867 | $ | 66,891 | ||||||||
| Other Financial Data: | ||||||||||||||||
| Adjusted EBITDA (3) | $ | (101,260 | ) | $ | 21,039 | $ | (99,386 | ) | $ | 37,693 | ||||||
| (3) See above for more information regarding our presentation of Adjusted EBITDA. | ||||||||||||||||
| ZILLOW GROUP, INC. | |||||||||
| UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||
| (in thousands) | |||||||||
| Six Months Ended | |||||||||
| June 30, | |||||||||
| 2016 | 2015 | ||||||||
| Operating activities | |||||||||
| Net loss | $ | (203,754 | ) | $ | (97,105 | ) | |||
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities, net of amounts assumed in connection with acquisitions: | |||||||||
| Depreciation and amortization | 49,357 | 34,447 | |||||||
| Share-based compensation expense | 53,867 | 52,887 | |||||||
| Restructuring costs | - | 18,147 | |||||||
| Release of valuation allowance on certain deferred tax assets | 1,364 | - | |||||||
| Loss on disposal of property and equipment | 2,170 | 499 | |||||||
| Bad debt expense | 927 | 1,605 | |||||||
| Deferred rent | 1,321 | 2,310 | |||||||
| Amortization of bond premium | 808 | 1,593 | |||||||
| Changes in operating assets and liabilities: | |||||||||
| Accounts receivable | (6,608 | ) | (5,026 | ) | |||||
| Prepaid expenses and other assets | 7,122 | 8,494 | |||||||
| Accounts payable | 13,743 | (2,516 | ) | ||||||
| Accrued expenses and other current liabilities | 5,005 | 13 | |||||||
| Accrued compensation and benefits | 12,877 | (3,259 | ) | ||||||
| Accrued restructuring costs | (169 | ) | 1,425 | ||||||
| Deferred revenue | 4,190 | (366 | ) | ||||||
| Other long-term liabilities | (2,749 | ) | 2,998 | ||||||
| Net cash provided by (used in) operating activities | (60,529 | ) | 16,146 | ||||||
| Investing activities | |||||||||
| Proceeds from maturities of investments | 105,440 | 165,723 | |||||||
| Purchases of investments | (83,976 | ) | (164,718 | ) | |||||
| Proceeds from sales of investments | 4,795 | 4,979 | |||||||
| Decrease in restricted cash, net of amounts assumed in connection with an acquisition | 1,962 | 312 | |||||||
| Purchases of property and equipment | (33,393 | ) | (25,546 | ) | |||||
| Purchases of intangible assets | (3,321 | ) | (8,006 | ) | |||||
| Cash acquired in acquisition, net | - | 173,406 | |||||||
| Cash paid for acquisition, net | (12,357 | ) | - | ||||||
| Net cash provided by (used in) investing activities | (20,850 | ) | 146,150 | ||||||
| Financing activities | |||||||||
| Proceeds from exercise of stock options | 7,737 | 14,722 | |||||||
| Value of equity awards withheld for tax liability | (286 | ) | (511 | ) | |||||
| Net cash provided by financing activities | 7,451 | 14,211 | |||||||
| Net increase (decrease) in cash and cash equivalents during period | (73,928 | ) | 176,507 | ||||||
| Cash and cash equivalents at beginning of period | 229,138 | 125,765 | |||||||
| Cash and cash equivalents at end of period | $ | 155,210 | $ | 302,272 | |||||
| Supplemental disclosures of cash flow information | |||||||||
| Cash paid for interest | $ | 3,163 | $ | 3,163 | |||||
| Noncash transactions: | |||||||||
| Value of Class A common stock issued in connection with an acquisition | $ | - | $ | 1,883,728 | |||||
| Capitalized share-based compensation | $ | 5,304 | $ | 4,783 | |||||
| Write-off of fully depreciated property and equipment | $ | 9,986 | $ | 13,001 | |||||
Adjusted EBITDA
The following table presents a reconciliation of Adjusted EBITDA to net loss, the most directly comparable GAAP financial measure, for each of the periods presented (in thousands, unaudited):
| Three Months Ended | Six Months Ended | ||||||||||||||||
| June 30, | June 30, | ||||||||||||||||
| 2016 | 2015 | 2016 | 2015 | ||||||||||||||
| Reconciliation of Adjusted EBITDA to Net Loss: | |||||||||||||||||
| Net loss | $ | (156,149 | ) | $ | (38,721 | ) | $ | (203,754 | ) | $ | (97,105 | ) | |||||
| Other income | (753 | ) | (450 | ) | (1,434 | ) | (719 | ) | |||||||||
| Depreciation and amortization expense | 25,550 | 20,419 | 49,357 | 34,447 | |||||||||||||
| Share-based compensation expense | 28,316 | 29,880 | 53,867 | 52,887 | |||||||||||||
| Acquisition-related costs | 204 | 1,679 | 797 | 14,156 | |||||||||||||
| Restructuring costs | - | 6,652 | - | 31,717 | |||||||||||||
| Interest expense | 1,572 | 1,580 | 3,145 | 2,310 | |||||||||||||
| Income tax benefit | - | - | (1,364 | ) | - | ||||||||||||
| Adjusted EBITDA (1) | $ | (101,260 | ) | $ | 21,039 | $ | (99,386 | ) | $ | 37,693 | |||||||
(1) For the three and six month periods ended June 30, 2016, Adjusted EBITDA includes the impact of a $130.0 million litigation settlement. Adjusted EBITDA for the three and six month periods ended June 30, 2016 also includes $12.5 million and $28.2 million, respectively, in related legal costs. Excluding the $130.0 million litigation settlement, Adjusted EBITDA in the second quarter of 2016 would have been $28.7 million.
The following table presents a reconciliation of forecasted Adjusted EBITDA to forecasted net loss for each of the periods presented (in thousands, unaudited):
| Three Months Ending | Year Ending | |||||||
| September 30, 2016 | December 31, 2016 | |||||||
| Reconciliation of Forecasted Adjusted EBITDA to Forecasted Net Loss: | ||||||||
| Forecasted Net loss | $ | (3,100 | ) | $ | (210,900 | ) | ||
| Forecasted Other income | (700 | ) | (2,800 | ) | ||||
| Forecasted Depreciation and amortization expense | 25,000 | 99,500 | ||||||
| Forecasted Share-based compensation expense | 27,000 | 107,500 | ||||||
| Forecasted Acquisition-related costs | 600 | 1,600 | ||||||
| Forecasted Interest expense | 1,600 | 6,300 | ||||||
| Forecasted Income tax expense (benefit) | 100 | (1,200 | ) | |||||
| Forecasted Adjusted EBITDA | $ | 50,500 | $ | - | ||||
Non-GAAP Net Income (Loss) per Share
The following table presents a reconciliation of net income (loss), adjusted, to net loss, as reported on a GAAP basis, and the calculation of non-GAAP net income (loss) per share - basic and diluted, for each of the periods presented (in thousands, except per share data, unaudited):
| Three Months Ended | Six Months Ended | ||||||||||||||||
| June 30, | June 30, | ||||||||||||||||
| 2016 | 2015 | 2016 | 2015 | ||||||||||||||
| Net loss, as reported | $ | (156,149 | ) | $ | (38,721 | ) | $ | (203,754 | ) | $ | (97,105 | ) | |||||
| Share-based compensation expense | 28,316 | 29,880 | 53,867 | 52,887 | |||||||||||||
| Acquisition-related costs | 204 | 1,679 | 797 | 14,156 | |||||||||||||
| Restructuring costs | - | 6,652 | - | 31,717 | |||||||||||||
| Income tax benefit | - | - | (1,364 | ) | - | ||||||||||||
| Net income (loss), adjusted | $ | (127,629 | ) | $ | (510 | ) | $ | (150,454 | ) | $ | 1,655 | ||||||
| Non-GAAP net income (loss) per share - basic | $ | (0.71 | ) | $ | (0.00 | ) | $ | (0.84 | ) | $ | 0.01 | ||||||
| Non-GAAP net income (loss) per share - diluted | $ | (0.71 | ) | $ | (0.00 | ) | $ | (0.84 | ) | $ | 0.02 | ||||||
| Weighted-average shares outstanding - basic | 179,451 | 176,142 | 179,067 | 161,847 | |||||||||||||
| Weighted-average shares outstanding - diluted | 179,451 | 176,142 | 179,067 | 179,876 | |||||||||||||
Revenue by Type
The following tables present our revenue by type and as a percentage of total revenue for each of the periods presented (in thousands, unaudited):
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||
| Revenue: | ||||||||||||||||
| Marketplace revenue: | ||||||||||||||||
| Real estate: | ||||||||||||||||
| Premier Agent | $ | 147,106 | $ | 115,185 | $ | 281,635 | $ | 203,077 | ||||||||
| Other real estate | 26,070 | 7,373 | 44,048 | 12,793 | ||||||||||||
| Total Real estate revenue | 173,176 | 122,558 | 325,683 | 215,870 | ||||||||||||
| Mortgages | 18,392 | 10,393 | 34,846 | 19,951 | ||||||||||||
| Market Leader | - | 12,530 | - | 18,587 | ||||||||||||
| Total Marketplace revenue | 191,568 | 145,481 | 360,529 | 254,408 | ||||||||||||
| Display revenue | 16,835 | 25,788 | 33,856 | 44,134 | ||||||||||||
| Total revenue | $ | 208,403 | $ | 171,269 | $ | 394,385 | $ | 298,542 | ||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||
| Percentage of Total Revenue: | ||||||||||||||||
| Marketplace revenue: | ||||||||||||||||
| Real estate: | ||||||||||||||||
| Premier Agent | 71 | % | 67 | % | 71 | % | 68 | % | ||||||||
| Other real estate | 13 | % | 4 | % | 11 | % | 4 | % | ||||||||
| Total Real estate revenue | 83 | % | 72 | % | 83 | % | 72 | % | ||||||||
| Mortgages | 9 | % | 6 | % | 9 | % | 7 | % | ||||||||
| Market Leader | 0 | % | 7 | % | 0 | % | 6 | % | ||||||||
| Total Marketplace revenue | 92 | % | 85 | % | 91 | % | 85 | % | ||||||||
| Display revenue | 8 | % | 15 | % | 9 | % | 15 | % | ||||||||
| Total revenue | 100 | % | 100 | % | 100 | % | 100 | % | ||||||||
Unique Users
The following table sets forth our average monthly unique users for each of the periods presented:
| Average Monthly Unique Users for the Three Months Ended June 30, | 2015 to 2016 | |||||||
| 2016 | 2015 | % Change | ||||||
| (in thousands) | ||||||||
| Unique Users | 168,700 | 140,959 | 20 | % | ||||
Unique users source: We measure Zillow unique users with Google Analytics and Trulia unique users with Omniture analytical tools.