Zillow Group, Inc.
May 7, 2018
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Zillow Group First Quarter 2018 Revenue Increased 22% Year-Over-Year

SEATTLE, May 07, 2018 (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 the web, today announced its consolidated financial results for the three months ended March 31, 2018.

Zillow Group Q1 2018 Earnings Highlights
Zillow Group Q1 2018 Earnings Highlights


"Zillow Group had a great start to 2018 and we are already executing well on our strategic priorities for the year," said Zillow Group CEO Spencer Rascoff. "First quarter 2018 revenue growth was driven by strength in the Premier Agent, Rentals and New Construction marketplaces. This year, we are taking our business beyond lead generation by creating better experiences for consumers and further strengthening our partnerships with real estate professionals. Our opportunity is expanding with the introduction of innovative products and services, like Zillow Instant Offers, that provide end-to-end solutions for consumers and will generate more home-related transactions across our platforms. It will be an exciting year as we begin the next phase of Zillow Group's growth."   

First Quarter 2018 Financial Highlights

The following table sets forth our financial highlights for the periods presented (in thousands, unaudited): 

      
 Three Months Ended 2017 to 2018 %
Change
 March 31, 
  2018   2017  
Revenue:     
  Premier Agent$  213,732  $  175,301  22%
  Rentals    29,063     21,545  35%
  Mortgages   19,023     20,270  (6)%
  Other (1)   38,061     28,659  33%
  Total revenue$  299,879  $  245,775  22%
Other Financial Data:     
Net loss$  (18,591) $  (4,606)  
Adjusted EBITDA (2)$  46,310  $  54,799   
Percentage of Revenue:     
Net loss (6)%  (2)%  
Adjusted EBITDA 15%  22%  
          
(1) 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.

(2) See below for more information regarding our presentation of Adjusted EBITDA, including a reconciliation of Adjusted EBITDA to net loss, the most directly comparable GAAP financial measure, for each of the periods presented.

 First Quarter 2018 Operating and Business Highlights


Business Outlook - Second Quarter and Full Year 2018

In the second quarter of 2018, Zillow Group expects to begin reporting financial results for its 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, dotloop, and display, as well as revenue from the sale of various other marketing and business products and services to real estate professionals. The Homes segment will include the financial results from Zillow Group's buying and selling of homes directly, which Zillow Group announced in April 2018.

The following tables present Zillow Group's business outlook for the periods presented (in millions, unaudited): 

        
Zillow Group Outlook as of May 7, 2018 Three Months Ending June 30, 2018 
  IMT Segment Homes Segment Consolidated 
Total revenue $322to$327  $0  $322to$327 
Premier Agent revenue $228to$230     $228to$230  
Rentals revenue  $34to$35      $34to$35 
Mortgages revenue $18to$19     $18to$19 
Other revenue  $42to$43     $42to$43 
Adjusted EBITDA* $57to$62 $(8)to$(5) $49to$57 
Weighted average shares outstanding — basic           193.0to 195.0 
Weighted average shares outstanding — diluted         202.5to 204.5 
              
  Year Ending December 31, 2018 
  IMT Segment Homes Segment Consolidated 
Total revenue $1,308to$1,323 $125  to$255  $1,433to$1,578 
Premier Agent revenue $917to$927     $917to$927 
Rentals revenue  $144to$146     $144to$146 
Mortgages revenue $76to$77     $76to$77 
Other revenue  $171to$173     $171to$173 
Adjusted EBITDA* $295to$310 $(35)to$(25) $260to$285 
Weighted average shares outstanding — basic           194.0to 196.0 
Weighted average shares outstanding — diluted         203.5to 205.5 
              

In addition, Zillow Group expects to hold 300 to 1,000 homes in inventory as related to the Homes segment as of December 31, 2018

* Zillow Group has not provided a quantitative reconciliation of forecasted Adjusted EBITDA to forecasted GAAP net income (loss) within this earnings release because the company is unable, without making unreasonable efforts, to calculate certain reconciling items with confidence. These items include, but are not limited to: income taxes which are directly impacted by unpredictable fluctuations in the market price of the company's capital stock; depreciation and amortization expense from new acquisitions; impairments of assets; and acquisition-related costs. These items, which could materially affect the computation of forward-looking GAAP net income (loss), are inherently uncertain and depend on various factors, many of which are outside of Zillow Group's control. For more information regarding the non-GAAP financial measures discussed in this release, please see "Use of Non-GAAP Financial Measures" below.

Conference Call and Webcast Information

Zillow Group 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, which will not be read during the live call, will be made available on the investor relations section of Zillow Group'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 answer questions submitted via Slido, in addition to answering questions from dialed-in participants, during the live conference call. Questions may be submitted at www.slido.com using the event code #ZEarnings. 

A link to the live webcast and recorded replay of the conference call will be available on the investor relations section of Zillow Group'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.

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 2018. Statements containing words such as "may," "believe," "anticipate," "expect," "intend," "plan," "project," "will," "projections," "continue," "business outlook," "forecast," "estimate," "outlook," "guidance," 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 maintain and effectively manage an adequate rate of growth; Zillow Group's ability to innovate and provide products and services that are attractive to its users and advertisers; Zillow Group's ability to compete successfully against existing or future competitors; Zillow Group's investment of resources to pursue strategies that may not prove effective; the impact of the real estate industry on Zillow Group's business; the impact of pending litigation and other legal and regulatory matters; Zillow Group's ability to increase awareness of the Zillow Group brands in a cost-effective manner; Zillow Group's ability to attract consumers to Zillow Group's mobile applications and websites; Zillow Group's ability to successfully integrate and realize the benefits of our past or future strategic acquisitions or investments; 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, 2017 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 Adjusted EBITDA (including forecasted Adjusted EBITDA) and non-GAAP net income per share, which are non-GAAP financial measures. We have provided a reconciliation of Adjusted EBITDA to net loss, the most directly comparable GAAP financial measure, and a reconciliation of net income, adjusted, to net loss, as reported on a GAAP basis, and the calculations of non-GAAP net income per share - basic and diluted, within this earnings release.

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. 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:

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 per share excludes the impact of share-based compensation expense, acquisition-related 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 per share as supplemental information to investors, as we believe the exclusion of share-based compensation expense, acquisition-related 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 which focus on all stages of the home lifecycle: renting, buying, selling and financing. Zillow Group is committed to empowering consumers with unparalleled data, inspiration and knowledge around homes, and connecting them with great real estate professionals. The Zillow Group portfolio of consumer brands includes real estate and rental marketplaces Zillow®, Trulia®, StreetEasy®, HotPads®, Naked Apartments®, RealEstate.com and Out East®. In addition, Zillow Group provides a comprehensive suite of marketing software and technology solutions to help real estate 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 in some metropolitan areas. When Zillow buys a home, it will make necessary updates and list the home for resale on the open market. The company operates a number of business brands for real estate, rental and mortgage professionals, including Mortech®, dotloop®, Bridge Interactive® and New Home Feed®. 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, Bridge Interactive, StreetEasy, HotPads, Out East and New Home Feed are registered trademarks of Zillow, Inc. Zillow Instant Offers is a trademark 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, LLC.

(ZFIN)

Reported Consolidated Results 

ZILLOW GROUP, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS 
(in thousands)
     
  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     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 
Shareholders' equity:    
  Class A common stock    6     6 
  Class B common stock    1     1 
  Class C capital stock    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 
     

  

ZILLOW GROUP, INC. 
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS  
(in thousands, except per share data) 
     
 Three Months Ended 
 March 31, 
  2018   2017  
     
Revenue$  299,879  $  245,775  
Costs and expenses:    
  Cost of revenue (exclusive of amortization) (1)(2)   23,919     20,232  
  Sales and marketing (2)   137,291     105,940  
  Technology and development (2)   93,933     72,868  
  General and administrative (2)   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  
     
(2) Includes share-based compensation expense 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  
     
Other Financial Data:    
Adjusted EBITDA (3)$  46,310  $  54,799  
     
(3) See above for more information regarding our presentation of Adjusted EBITDA. See below  for a reconciliation of Adjusted EBITDA to net loss, the most directly comparable GAAP financial measure, for each of the periods presented. 
     

 

ZILLOW GROUP, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
      
  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 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  

 
Adjusted EBITDA

The following table sets forth 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 
  March 31, 
   2018   2017  
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  
 

Non-GAAP Net Income per Share

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

      
  Three Months Ended 
  March 31, 
   2018   2017  
      
Net loss, as reported $  (18,591) $  (4,606) 
Share-based compensation expense    30,741     26,395  
Acquisition-related costs    27     105  
Income tax expense    2,600     -  
  Net income, adjusted $  14,777  $  21,894  
      
Non-GAAP net income per share - basic $  0.08  $  0.12  
Non-GAAP net income per share - diluted $  0.07  $  0.11  
Weighted-average shares outstanding - basic    191,464     183,158  
Weighted-average shares outstanding - diluted    201,096     191,290  
       

Select Historical Rentals Revenue

Zillow Group began presenting Rentals Revenue as a separate revenue category with quarterly reporting for the three months ended March 31, 2018. The following table sets forth select historical Rentals Revenue for each of the periods presented (in thousands, unaudited):  

          
  Three Months Ended 
  March 31, June 30, September 30, December 31, 
    2017 2017  2017  2017 
          
Rentals revenue $  21,545 $  23,710  $  28,438 $  28,851 
          

 Key Metrics

The following table sets forth our key metrics for each of the periods presented: 

       
 Three Months Ended
 March 31,
 2017 to 2018 
 2018 2017 % Change 
 (in millions)   
Average Monthly Unique Users (1)175.5 166.6 5% 
Visits (2)1,764.8 1,533.0 15%  
       

(1) Zillow, StreetEasy, HotPads, Naked Apartments and RealEstate.com (as of June 2017) measure unique users with Google Analytics, and Trulia measures unique users with Adobe Analytics.

(2) Visits includes visits to the Zillow, Trulia, StreetEasy (as of March 2017) and RealEstate.com (as of June 2017) mobile apps and websites. We measure Zillow, StreetEasy and RealEstate.com visits with Google Analytics and Trulia visits with Adobe Analytics. 

Contacts:
Raymond Jones
Investor Relations
ir@zillowgroup.com            

Katie Curnutte
Public Relations                                 
press@zillow.com

A photo accompanying this announcement is available at http://resource.globenewswire.com/Resource/Download/4574d94b-005a-4d28-bf65-b900d1bd6d6d

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Source: Zillow Group, Inc.

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