Zillow Group, Inc.
Feb 13, 2015
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Zillow, Inc. Reports Record Fourth Quarter and Full Year 2014 Results; Announces Date to Close Trulia Acquisition

SEATTLE, Feb. 13, 2015 (GLOBE NEWSWIRE) -- Zillow, Inc. (Nasdaq:Z), the leading real estate and home-related marketplace, today announced financial results for the quarter and full year ended December 31, 2014. In addition, Zillow announced it expects to close the previously announced acquisition of Trulia, Inc. as early as February 17, 2015, following notification from the Federal Trade Commission that it has closed its investigation.

"Simply stated, 2014 was a remarkable year for Zillow with record revenue, record mobile usage and record Premier Agent advertiser revenue," said Spencer Rascoff, Zillow CEO. "And we expect to close the acquisition of Trulia as early as February 17."

Fourth Quarter 2014 Financial Highlights

Full Year 2014 Financial Highlights

Operating and Business Highlights

1 Source: Mortgage Bankers Association Mortgage Finance Forecast as of January 2015.

Quarterly Conference Call

Zillow, Inc. will not host a fourth quarter and full year 2014 earnings conference call. However, Zillow management will host a conference call to discuss the close of the Trulia, Inc. acquisition on February 18, 2015, the day after the expected close of the acquisition. The call will begin at 6 a.m. Pacific Time (9 a.m. Eastern Time), and it will also be webcast live. The live webcast of the conference call will be available on the investor relations section of Zillow, Inc.'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# 61427387. Callers outside the United States may dial 443-863-7921 with conference ID# 61427387. Following completion of the call, a recorded replay of the webcast will be available on the investor relations section of Zillow, Inc.'s website at http://investors.zillow.com/.

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 expectations related to the closing of the acquisition of Trulia, Inc. and the number of for-sale-by-agent listings we expect to directly receive through the Zillow Data Dashboard in 2015. 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's actual results from those described in these forward-looking statements may result from actions taken by Zillow as well as from risks and uncertainties beyond Zillow's control. Factors that may contribute to such differences include, but are not limited to, Zillow's ability to successfully integrate and realize the benefits of our past or future strategic acquisitions or investments, including our proposed acquisition of Trulia, Inc.; Zillow's ability to maintain and effectively manage an adequate rate of growth; Zillow's ability to maintain or establish relationships with listings and data providers; the impact of the real estate industry on Zillow's business; Zillow's ability to innovate and provide products and services that are attractive to its users and advertisers; Zillow's ability to increase awareness of the Zillow brand; Zillow's ability to attract consumers to Zillow's mobile applications and websites; Zillow's ability to compete successfully against existing or future competitors; the reliable performance of Zillow's network infrastructure and content delivery processes; and Zillow'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's business and financial results, please review the "Risk Factors" described in Zillow's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2014 filed with the Securities and Exchange Commission, or SEC, and in Zillow's other filings with the SEC. Except as may be required by law, Zillow does not intend, and undertakes no duty, to update this information to reflect future events or circumstances.

Additional Information and Where to Find It

In connection with the proposed acquisition of Trulia, Inc. (the "Proposed Transaction"), a new holding company, Zebra Holdco, Inc. ("Holdco"), filed a Registration Statement on Form S-4 with the SEC (the "Registration/Joint Proxy Statement"), which includes a registration statement and final prospectus with respect to Holdco's shares to be issued in the Proposed Transaction and a definitive joint proxy statement of Zillow and Trulia, Inc. with respect to the Proposed Transaction. The Registration/Joint Proxy Statement was declared effective by the SEC on November 17, 2014. INVESTORS AND SECURITYHOLDERS ARE URGED TO READ THE REGISTRATION/JOINT PROXY STATEMENT REGARDING THE PROPOSED TRANSACTION BECAUSE IT CONTAINS IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION AND RELATED MATTERS. Investors and security holders can obtain free copies of the Registration /Joint Proxy Statement at the SEC's website at www.sec.gov. Copies of the Registration/Joint Proxy Statement, and the filings that are incorporated by reference therein, may also be obtained, without charge, by contacting Zillow Investor Relations at (206) 470-7137 or by going to Zillow's website, www.zillow.com, under the heading "Investors". These documents may also be obtained, without charge, by contacting Trulia Investor Relations at (415) 400-7238 or going to Trulia's website, www.trulia.com, under the tab "Investor Relations".

Use of Non-GAAP Financial Measures

To provide investors with additional information regarding our financial results, this press release includes references to Adjusted EBITDA as well as non-GAAP net income per share, both of which are non-GAAP financial measures. We have provided a reconciliation of Adjusted EBITDA to net income (loss), the most directly comparable GAAP financial measure, and a reconciliation of net income, adjusted, to net income (loss), as reported on a GAAP basis, and the calculation 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. 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 income (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 the 2013 income tax benefit. 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 the income tax benefit 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, Inc.

Zillow, Inc. (Nasdaq:Z) operates the leading real estate and home-related marketplaces on mobile and the Web, with a complementary portfolio of brands and products that help people find vital information about homes, and connect with the best local professionals. Zillow's brands serve the full lifecycle of owning and living in a home: buying, selling, renting, financing, remodeling and more. In addition, Zillow offers a suite of tools and services to help local real estate, mortgage, rental and home improvement professionals manage and market their businesses. Welcoming nearly 87 million monthly unique users in January 2015, the Zillow, Inc. portfolio includes Zillow.com®, Zillow Mobile, Zillow Mortgages, Zillow Rentals, Zillow Digs®, Postlets®, Diverse Solutions®, Mortech®, HotPads®, StreetEasy® and Retsly. Zillow is headquartered in Seattle.

Please visit http://investors.zillow.com/, www.zillowblog.com, www.twitter.com/zillow, www.twitter.com/ZillowforPros, and www.facebook.com/zillow, where Zillow discloses information about the company, its financial information, and its business which may be deemed material.

The Zillow logo is available at http://zillow.mediaroom.com/logos.

Zillow.com, Zillow, Postlets, Mortech, Diverse Solutions, StreetEasy, HotPads and Digs are registered trademarks of Zillow, Inc. Retsly is a trademark of Zillow, Inc.

(ZFIN)

 
ZILLOW, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
     
     
  December 31,
2014
December 31,
2013
Assets    
Current assets:    
Cash and cash equivalents  $ 125,765  $ 201,760
Short-term investments  246,829  93,531
Accounts receivable, net  18,684  15,234
Prepaid expenses and other current assets  10,059  4,987
Total current assets  401,337  315,512
Long-term investments  83,326  142,435
Property and equipment, net  41,600  27,408
Goodwill  96,352  93,213
Intangible assets, net  26,757  29,149
Other assets  358  346
Total assets  $ 649,730  $ 608,063
     
Liabilities and shareholders' equity    
Current liabilities:    
Accounts payable  $ 9,358  $ 4,724
Accrued expenses and other current liabilities  16,883  10,601
Accrued compensation and benefits  6,735  4,440
Deferred revenue  15,356  12,298
Deferred rent, current portion  864  546
Total current liabilities  49,196  32,609
Deferred rent, net of current portion  11,755  7,658
Shareholders' equity:    
Class A common stock  3  3
Class B common stock  1  1
Additional paid-in capital  716,506  651,913
Accumulated deficit  (127,731)  (84,121)
Total shareholders' equity  588,779  567,796
Total liabilities and shareholders' equity  $ 649,730  $ 608,063
     
 
ZILLOW, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
         
  Three Months Ended Year Ended
  December 31, December 31,
  2014 2013 2014 2013
         
Revenue  $ 92,329  $ 58,348  $ 325,893  $ 197,545
Costs and expenses:        
Cost of revenue (exclusive of amortization) (1)(2)  8,825  5,270  29,461  18,810
Sales and marketing (2)  37,818  24,978  167,725  108,891
Technology and development (2)  28,256  14,649  86,406  48,498
General and administrative (2)  20,535  10,552  65,503  37,919
Acquisition-related costs  8,109  175  21,493  376
Total costs and expenses  103,543  55,624  370,588  214,494
Income (loss) from operations  (11,214)  2,724  (44,695)  (16,949)
Other income  317  145  1,085  385
Income (loss) before income taxes  (10,897)  2,869  (43,610)  (16,564)
Income tax benefit (expense)  --  (154)  --  4,111
Net income (loss)  $ (10,897)  $ 2,715  $ (43,610)  $ (12,453)
Net income (loss) per share — basic  $ (0.27)  $ 0.07  $ (1.09)  $ (0.35)
Net income (loss) per share — diluted  $ (0.27)  $ 0.06  $ (1.09)  $ (0.35)
Weighted-average shares outstanding — basic  40,600  39,050  40,009  36,029
Weighted-average shares outstanding — diluted  40,600  42,116  40,009  36,029
         
(1) Amortization of website development costs and intangible assets included in technology and development  $ 8,374  $ 5,999  $ 29,487  $ 19,791
         
(2) Includes share-based compensation expense as follows:        
Cost of revenue  $ 564  $ 213  $ 1,844  $ 737
Sales and marketing  2,434  1,094  7,320  10,969
Technology and development  3,852  1,607  11,681  4,660
General and administrative  3,059  2,141  13,240  7,070
Total  $ 9,909  $ 5,055  $ 34,085  $ 23,436
         
Other Financial Data:        
Adjusted EBITDA (3)  $ 19,978  $ 15,397  $ 49,766  $ 30,117
         
(3) See above for more information regarding our presentation of Adjusted EBITDA.
         
 
ZILLOW, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
     
  Year Ended 
December 31,
  2014 2013
Operating activities    
Net loss  $ (43,610)  $ (12,453)
Adjustments to reconcile net loss to net cash provided by operating activities:    
Depreciation and amortization  35,624  23,254
Share-based compensation expense  34,085  23,436
Release of valuation allowance on certain deferred tax assets  --  (4,111)
Loss on disposal of property and equipment  505  910
Bad debt expense  2,529  1,907
Deferred rent  4,415  400
Amortization of bond premium  3,506  624
Impairment of certain acquired intangible assets  3,259  --
Changes in operating assets and liabilities:    
Accounts receivable  (5,979)  (7,571)
Prepaid expenses and other assets  (5,084)  (1,543)
Accounts payable  4,634  1,497
Accrued expenses  8,577  1,038
Deferred revenue  3,058  3,910
Net cash provided by operating activities  45,519  31,298
     
Investing activities    
Proceeds from investment maturities  174,949  53,000
Purchases of investments  (272,644)  (236,147)
Purchases of property and equipment  (32,595)  (22,047)
Purchases of intangible assets  (11,647)  (3,925)
Acquisitions, net of cash acquired  (3,500)  (42,708)
Net cash used in investing activities  (145,437)  (251,827)
     
Financing activities    
Proceeds from exercise of Class A common stock options  23,923  18,350
Proceeds from public offering, net of offering costs  --  253,899
Net cash provided by financing activities  23,923  272,249
Net increase (decrease) in cash and cash equivalents during period  (75,995)  51,720
Cash and cash equivalents at beginning of period  201,760  150,040
Cash and cash equivalents at end of period  $ 125,765  $ 201,760
     
Supplemental disclosures of cash flow information    
Noncash transactions:    
Capitalized share-based compensation  $ 6,585  $ 3,817
Write-off of fully depreciated property and equipment  $ 4,749  $ 3,697
     

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 Year Ended
  December 31, December 31,
  2014 2013 2014 2013
Reconciliation of Adjusted EBITDA to Net Income (Loss):        
Net income (loss)  $ (10,897)  $ 2,715  $ (43,610)  $ (12,453)
Other income  (317)  (145)  (1,085)  (385)
Depreciation and amortization expense  9,915  7,443  35,624  23,254
Impairment of certain acquired intangible assets  3,259  --  3,259  --
Share-based compensation expense  9,909  5,055  34,085  23,436
Acquisition-related costs  8,109  175  21,493  376
Income tax (benefit) expense  --  154  --  (4,111)
Adjusted EBITDA  $ 19,978  $ 15,397  $ 49,766  $ 30,117
         

Non-GAAP Net Income per Share

The following table presents a reconciliation of net income, adjusted, to net income (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 Year Ended
  December 31, December 31,
  2014 2013 2014 2013
         
Net income (loss), as reported  $ (10,897)  $ 2,715  $ (43,610)  $ (12,453)
Share-based compensation expense  9,909  5,055  34,085  23,436
Acquisition-related costs  8,109  175  21,493  376
Impairment of certain acquired intangible assets  3,259  --  3,259  --
Income tax (benefit) expense  --  154  --  (4,111)
Net income, adjusted  $ 10,380  $ 8,099  $ 15,227  $ 7,248
         
Non-GAAP net income (loss) per share - basic  $ 0.26  $ 0.21  $ 0.38  $ 0.20
Non-GAAP net income (loss) per share - diluted  $ 0.24  $ 0.19  $ 0.35  $ 0.18
Weighted-average shares outstanding - basic  40,600  39,050  40,009  36,029
Weighted-average shares outstanding - diluted  43,161  42,116  43,029  39,379
         

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 Year Ended
  December 31, December 31,
  2014 2013 2014 2013
Revenue:        
Marketplace revenue:        
Real estate  $ 70,807  $ 40,901  $ 239,039  $132,901
Mortgages  7,403  5,347  28,203  21,812
Total Marketplace revenue  78,210  46,248  267,242  154,713
Display revenue  14,119  12,100  58,651  42,832
Total revenue  $ 92,329  $ 58,348  $ 325,893  $197,545
         
         
  Three Months Ended Year Ended
  December 31, December 31,
  2014 2013 2014 2013
Percentage of Total Revenue:        
Marketplace revenue:        
Real estate 77% 70% 73% 67%
Mortgages 8% 9% 9% 11%
Total Marketplace revenue 85% 79% 82% 78%
Display revenue 15% 21% 18% 22%
Total revenue 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 December 31,

2013 to 2014
  2014 2013 % Change
  (in thousands)  
Unique Users 76,713* 54,358 41%
       

Unique users source: We measure unique users with Google Analytics. Beginning in September 2013, the reported monthly unique users reflect the effect of Zillow's August 26, 2013 acquisition of StreetEasy, Inc.

* For December 2014, the reported monthly unique user metric was estimated by Zillow based on historical trends by calculating the percentage change in monthly unique users from November 2013 to December 2013 and multiplying that percentage change by the reported November 2014 monthly unique users. Zillow transitioned to an upgraded version of the Google Analytics measurement service, Universal Analytics, in the month of December 2014 on both its mobile application and website platforms. As a result, Zillow is not able to provide an accurate count of the monthly unique users as reported by the service for December 2014.

       
  At December 31, 2013 to 2014
  2014 2013 % Change
Premier Agent Advertisers 62,305 48,314 29%
       
CONTACT: Raymond Jones

         Investor Relations

         206-470-7137

         ir@zillow.com



         Katie Curnutte

         Public Relations

         206-757-2785

         press@zillow.com

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Source: Zillow

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