Zillow Group, Inc.
Nov 2, 2011

Zillow Reports Third Quarter 2011 Results, Raises Full Year Outlook

SEATTLE, Nov. 2, 2011 (GLOBE NEWSWIRE) -- Zillow, Inc. (Nasdaq:Z), the leading real estate information marketplace, today announced financial results for the quarter ended September 30, 2011.

"We continue to see substantial growth in site traffic, mobile usage and revenues. As a result, our outstanding results in the third quarter exceeded our prior outlook," said Spencer Rascoff, Zillow CEO. "In addition, the acquisition of Diverse Solutions, announced today, will allow us to become an even more meaningful marketing partner for real estate agents."

Third Quarter 2011 Financial Highlights

  • Marketplace Revenues increased 226% to $11.8 million from $3.6 million in the third quarter of 2010.
  • Display Revenues increased 57% to $7.2 million from $4.6 million in the third quarter of 2010.

The following table presents Zillow's GAAP and non-GAAP net income (loss), and GAAP and non-GAAP basic earnings (loss) per share, for the periods presented:

  Three Months Ended September 30,
  2011 2010
  (in thousands, except per share amounts)
    Basic Earnings    Basic Earnings 
   Dollars  (loss) per Share  Dollars  (loss) per Share
Net loss, as reported  $ (570)  $ (0.02)  $ (1,510)  $ (0.12)
Facility exit charge  1,737  0.07  --  --
Non-GAAP income (loss), as adjusted  $ 1,167  $ 0.05  $ (1,510)  $ (0.12)

The charge of $1.7 million is related to Zillow's previously announced facilities move in August to accommodate for the substantial growth in Zillow's business. Excluding this charge, Non-GAAP income for the third quarter of 2011 was $1.1 million, or $0.05 per share.

Operating and Business Highlights

Business Outlook — Fourth Quarter and Full Year 2011

Zillow is raising its Revenues and Adjusted EBITDA outlook for the full year 2011 as follows:

  • Revenues for full year 2011 are expected to be in the range of approximately $63.0 to $64.0 million. This represents a 108% year-over-year growth rate over 2010 full year revenues of $30.5 million at the midpoint of the outlook range.
     
  • Adjusted EBITDA for full year 2011 is expected to be in the range of approximately $9.0 million to $10.0 million, compared to full year 2010 Adjusted EBITDA of $0.1 million.

Quarterly Conference Call

A conference call to discuss Zillow's third quarter 2011 financial results and business outlook will be webcast live today at 2 p.m. PDT (5 p.m. EDT). The live webcast of the conference call will be available on the investor relations section of Zillow's website at http://investors.zillow.com/. For those without access to the Internet, the call may be accessed toll-free via phone at 877-643-7152, with conference ID# 21057461. Callers outside the United States may dial 443-863-7921, with conference ID# 21057461. Following completion of the call, a recorded replay of the webcast will be available on the investor section of the Zillow website until November 16, 2011. To listen to the telephone replay, call toll-free 855-859-2056, conference ID# 21057461. Callers outside the United States may dial 404-537-3406, conference ID# 21057461.

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 the statement regarding the benefits of our acquisitions and strategic relationships and our business outlook. Statements containing words such as "may," "believe," "anticipate," "expect," "intend," "plan," "project," "projections," "business outlook," "estimate," or similar expressions constitute forward-looking statements. Differences in the Company's actual results from those anticipated in these forward-looking statements may result from actions taken by the Company as well as from risks and uncertainties beyond the Company's control. Factors that may contribute to such differences include, but are not limited to, the Company's ability to maintain and effectively manage an adequate rate of growth; the impact of the real estate industry on the Company's business; the Company's ability to innovate and provide products and services that are attractive to its users advertisers; the Company's ability to increase awareness of the Zillow brand; the Company's ability to maintain or establish relationships with listings and data providers; the Company's ability to attract consumers to the Company's website and mobile applications; the Company's ability to compete successfully against existing or future competitors; the reliable performance of the Company's network infrastructure and content delivery processes; and the Company'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 the Company's business and financial results, please review "Risk Factors" described in the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2011 filed with the Securities and Exchange Commission, or SEC, and in the Company's other filings with the SEC. Except as may be required by law, the Company 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 presents references to Adjusted EBITDA, as well as Non-GAAP income (loss) and Non-GAAP basic earnings (loss) per share (both of which exclude the impact of a facilities exit charge incurred in the third quarter of 2011). All of these measures are non-GAAP financial measures. We have provided GAAP to Non-GAAP reconciliations within this earnings release, including Adjusted EBITDA to net income (loss), the most directly comparable GAAP financial measure, and Non-GAAP income (loss) to net income (loss). 

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:

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 use of Non-GAAP net income (loss) and Non-GAAP basic earnings (loss) per share excludes the impact of a facility exit charge. We believe the exclusion of the facilities charge facilitates operating performance comparisons on a period-to-period basis. However, you should not consider these metrics in isolation or as substitutes for analysis of our results as reported under GAAP.

About Zillow, Inc.

Zillow is the leading real estate information marketplace, providing vital information about homes, real estate listings and mortgages through its websites and mobile applications, enabling homeowners, buyers, sellers and renters to connect with real estate and mortgage professionals best suited to meet their needs. More than 24.6 million unique users visited Zillow's websites and mobile applications in October 2011. Zillow, Inc. operates Zillow.com®, Zillow Mortgage Marketplace, Zillow Mobile, Postlets® and Diverse Solutions™. The company is headquartered in Seattle.

The Zillow logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=10012

Zillow.com, Zillow, Zestimate and Postlets are registered trademarks of Zillow, Inc. Diverse Solutions is a trademark of Zillow, Inc.

iPhone and iPad are registered trademarks of Apple Inc. Android is a trademark of Google Inc. BlackBerry is a registered trademark of Research in Motion Limited. Windows is a registered trademark of Microsoft Corporation.

(ZFIN)

ZILLOW, INC.
UNAUDITED CONDENSED BALANCE SHEETS 
(in thousands)
       
  September 30, 2011 December 31, 2010  
Assets      
Current assets:      
 Cash and cash equivalents  $ 95,813  $ 12,278  
 Short-term investments  --  1,499  
 Accounts receivable, net   6,115  3,984  
 Prepaid expenses and other current assets  848  410  
Total current assets  102,776  18,171  
Property and equipment, net  8,252  4,929  
Goodwill  1,140  --  
Intangible assets, net  1,714  888  
Other assets  40  25  
Total assets  $ 113,922  $ 24,013  
       
Liabilities and shareholders' equity      
Current liabilities:      
 Accounts payable  $ 3,734  $ 750  
 Accrued expenses and other current liabilities  4,063  576  
 Accrued compensation and benefits  1,597  1,349  
 Deferred revenue  5,734  3,284  
 Deferred rent, current portion  27  271  
Total current liabilities  15,155  6,230  
Deferred rent, net of current portion  629  335  
Other non-current liabilities  471  --  
Shareholders' equity:      
 Convertible preferred stock  --  4  
 Preferred stock  --  --  
 Class A common stock  2  --  
 Class B common stock  1  1  
 Class C nonvoting common stock  --  --  
 Additional paid-in capital  176,195  96,152  
 Accumulated other comprehensive loss  (78,531)  (78,709)  
Total shareholders' equity  97,667  17,448  
Total liabilities and shareholders' equity  $ 113,922  $ 24,013  
 
ZILLOW, INC.
UNAUDITED CONDENSED STATEMENTS OF OPERATIONS 
(in thousands, except per share data)
         
  Three Months Ended Nine Months Ended
  September 30,  September 30, 
  2011 2010 2011 2010
Revenues  $ 19,057  $ 8,229  $ 46,162  $ 20,894
Costs and expenses:        
 Cost of revenues (exclusive of amortization) (1) (2)  3,084  1,263  7,614  3,647
 Sales and marketing (2)  7,035  4,060  18,150  10,925
 Technology and development (2)  3,849  2,528  10,148  7,940
 General and administrative (2) (3)  5,695  1,902  10,151  4,726
Total costs and expenses  19,663  9,753  46,063  27,238
Income (loss) from operations  (606)  (1,524)  99  (6,344)
Other income  36  14  79  56
Net income (loss)  $ (570)  $ (1,510)  $ 178  $ (6,288)
Net income (loss) attributable to common shareholders  $ (570)  $ (1,510)  $ 178  $ (6,288)
Net income (loss) per share attributable to common shareholders — basic   $ (0.02)  $ (0.12)  $ 0.01  $ (0.50)
   $ (0.02)  $ (0.12)  $ 0.01  $ (0.50)
Weighted-average shares outstanding — basic   24,020  12,803  17,141  12,702
Weighted-average shares outstanding — diluted  24,020  12,803  20,220  12,702
         
(1) Amortization of website development costs and intangible assets
 included in technology and development is as follows:
 $ 1,461  $ 1,030  $ 3,918  $ 3,107
         
(2) Includes share-based compensation as follows:        
 Cost of revenues  $ 48  $ 61  $ 134  $ 168
 Sales and marketing  85  117  259  332
 Technology and development  135  102  311  303
 General and administrative  220  188  587  506
 Total  $ 488  $ 468  $ 1,291  $ 1,309
         
(3) General and administrative includes a facility exit charge as follows:  $ 1,737  $ --   $ 1,737  $ -- 
         
Other Financial Data:        
Adjusted EBITDA (4)  $ 3,654  $ 246  $ 8,556  $ (1,139)
 
(4) See above for more information regarding our presentation of Adjusted EBITDA. 

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

  Three Months Ended Nine Months Ended
  September 30,  September 30, 
  2011 2010 2011 2010
Reconciliation of Adjusted EBITDA to Net Income (Loss):        
Net income (loss)  $ (570)  $ (1,510)  $ 178  $ (6,288)
Income tax expense (benefit)  --  --  --  --
Other income  (36)  (14)  (79)  (56)
Depreciation and amortization expense  2,035  1,302  5,429  3,896
Share-based compensation expense  488  468  1,291  1,309
Facility exit charge  1,737  --  1,737  --
 Adjusted EBITDA  $ 3,654  $ 246  $ 8,556  $ (1,139)

Revenues by Type

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

  Three Months Ended Nine Months Ended
  September 30,  September 30, 
  2011 2010 2011 2010
Revenues:        
Marketplace revenues  $ 11,840  $ 3,628  $ 28,443  $ 8,114
Display revenues  7,217  4,601  17,719  12,780
 Total  $ 19,057  $ 8,229  $ 46,162  $ 20,894
         
  Three Months Ended Nine Months Ended
  September 30,  September 30, 
  2011 2010 2011 2010
Percentage of Revenues:        
Marketplace revenues 62% 44% 62% 39%
Display revenues 38% 56% 38% 61%
 Total 100% 100% 100% 100%

Key Growth Drivers

The following tables set forth our key growth drivers for each of the periods presented:

  Average Monthly Unique Users for the  
  Three Months Ended September 30, 2010 to 2011
  2011 2010 % Change
  (in thousands)  
Unique Users 24,238 12,061 101%

Unique users source: Internal tracking of Zillow's websites and mobile applications using Omniture analytical tools.
 

  At September 30, 2010 to 2011 
  2011 2010 % Change
Premier Agent Subscribers 14,876 6,448 131%
CONTACT: Kevin McCarty

         Investor Relations

         206-470-7137

         ir@zillow.com



         Cynthia Nowak

         Public Relations

         206-757-2701

         press@zillow.com

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Source: Zillow

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