Zillow Group, Inc.
May 12, 2015

Zillow Group Reports First Quarter 2015 Consolidated Results; Reaffirms Full-Year 2015 Outlook

SEATTLE, May 12, 2015 (GLOBE NEWSWIRE) -- Zillow Group (Nasdaq:Z), which houses a portfolio of the largest and most vibrant real estate and home-related brands on mobile and Web, today announced its pro forma and consolidated financial results for the quarter ended March 31, 2015. Throughout this release, financial results are presented on both a reported and pro forma basis. Reported results were prepared in accordance with generally accepted accounting principles (GAAP). Pro forma results exclude items described in the reconciliation tables below and also assume the February 2015 acquisition of Trulia occurred on January 1, 2014, the beginning of the comparable prior year reporting period. The pro forma results are presented in order to provide additional insights into the underlying trends in the business.

"The combined team at Zillow Group is executing extremely well across all of our brands and marketplaces," said Zillow Group CEO Spencer Rascoff. "Our already massive audience of home shoppers continues to grow throughout our network of brands, and we are rapidly recognizing the benefits of scale. We have integrated the Zillow mortgage and rentals products into Trulia, giving our advertisers and partners access to an even wider consumer audience. And most importantly, we are on track to combine our agent advertising business by the end of 2015, setting us up to fully realize the potential of Zillow Group's huge and growing audience."

Pro Forma First Quarter 2015 Financial Highlights

Reported First Quarter 2015 Consolidated Financial Highlights

Zillow Group's first quarter 2015 consolidated financial results include the results of Trulia's operations for the partial period from the acquisition date of February 17, 2015 to March 31, 2015.

Operating and Business Highlights

Business Outlook - Full-Year 2015

For full-year 2015, Zillow Group reaffirmed its previous outlook, and expects pro forma revenue to be $690 million, which includes Market Leader's expected revenue of $40 million. The company expects pro forma Adjusted EBITDA to be in the range of $80 million to $85 million.

Quarterly Conference Call

A quarterly conference call to discuss Zillow Group, Inc.'s first quarter 2015 financial results and business outlook will occur today at 2 p.m. Pacific Time (5 p.m. Eastern Time) and will be webcast live. 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. For those without access to the Internet, the call may be accessed toll-free via phone at 877-643-7152 with conference ID# 18765839. Callers outside the United States may dial 443-863-7921 with conference ID# 18765839. Questions submitted via Zillow Group, Inc.'s Twitter account (www.twitter.com/zillowgroup) using the hashtag #ZEarnings will be considered during the Q&A portion of the call, in addition to questions submitted by those dialed in. 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 at http://investors.zillowgroup.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 our execution against our strategic priorities, our positioning for 2016, and our business outlook. 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, including our February 2015 acquisition of Trulia, Inc.; 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, Inc.'s Quarterly Report on Form 10-Q for the quarterly period ended March 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 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, adjusted, to net loss, as reported on a GAAP basis, and the calculation of non-GAAP net income per share - 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 acquisition had been completed on the applicable dates of the financial statements presented herein or 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:

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 restructuring costs. 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 restructuring costs 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) houses a portfolio of the largest real estate and home-related brands on mobile and 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® and HotPads®. 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 Postlets®, Mortech®, Diverse Solutions®, Market Leader® 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, Postlets, Mortech, Diverse Solutions, StreetEasy, and HotPads are registered trademarks of Zillow, Inc. Retsly is a trademark of Zillow, Inc. Trulia is a registered trademark of Trulia, Inc. Market Leader is a registered trademark of Market Leader, Inc.

(ZFIN)

Pro Forma Financial Information

The following pro forma financial information gives effect to the February 2015 acquisition of Trulia as if it were consummated on January 1, 2014, the beginning of the comparable prior reporting period (in thousands, unaudited):

  Three Months Ended
  March 31,
  2015 (1) 2014 (2)
     
Pro forma revenue  $ 162,531  $ 120,732
Pro forma net loss  $ (17,854)  $ (23,806)
Pro forma net loss per share — basic and diluted  $ (0.31)  $ (0.42)
Pro forma weighted-average shares outstanding — basic and diluted  58,143  56,581
_________    
     
Other Financial Data:    
Pro forma Adjusted EBITDA (3)  $ 24,501  $ 12,117
 
(1)   The three months ended March 31, 2015 includes pro forma adjustments for $46.2 million to eliminate direct and incremental acquisition-related costs reflected in the historical financial statements, $33.7 million to eliminate one-time share-based compensation expense attributable to substituted equity awards and to record additional share-based compensation expense attributable to substituted equity awards, $25.3 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. 
 
(2)   The three months ended March 31, 2014 includes pro forma adjustments for $4.7 million to record additional amortization expense for acquired intangible assets, $1.3 million to eliminate share-based compensation expense attributable to substituted equity awards and $0.9 million to eliminate Trulia's historical amortization of capitalized website development costs. 
 
(3)   See below for a reconciliation of pro forma Adjusted EBITDA to pro forma net loss. 

The following table presents a reconciliation of pro forma Adjusted EBITDA to pro forma net loss for each of the periods presented (in thousands, unaudited):

  Three Months Ended
  March 31,
  2015 2014
Reconciliation of Pro Forma Adjusted EBITDA to Pro Forma Net Loss:    
Pro forma net loss  $ (17,854)  $(23,806)
Pro forma other income  (302)  (364)
Pro forma depreciation and amortization expense  19,862  19,013
Pro forma share-based compensation expense  21,236  15,701
Pro forma interest expense  1,559  1,573
Pro forma Adjusted EBITDA  $ 24,501  $ 12,117

The following table presents our pro forma revenue by type for each of the periods presented (in thousands, unaudited):

  Three Months Ended
  March 31,
  2015 2014
Pro Forma Revenue:    
Pro forma Marketplace revenue:    
Real estate  $ 113,396  $ 73,520
Mortgages  9,950  7,497
Market Leader  13,581  15,252
Total pro forma Marketplace revenue  136,927  96,269
Pro forma Display revenue  25,604  24,464
Total pro forma revenue  $ 162,531  $ 120,732

Reported Consolidated Results

ZILLOW GROUP, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS 
(in thousands)
     
   
  March 31, 2015 December 31, 2014
Assets    
Current assets:    
Cash and cash equivalents  $ 307,852  $ 125,765
Short-term investments  320,581  246,829
Accounts receivable, net   31,267  18,684
Prepaid expenses and other current assets  25,035  10,059
Total current assets  684,735  401,337
Restricted cash  6,800  --
Long-term investments  --  83,326
Property and equipment, net  72,936  41,600
Goodwill  1,833,427  96,352
Intangible assets, net  569,125  26,757
Other assets  1,171  358
Total assets  $ 3,168,194  $ 649,730
     
Liabilities and shareholders' equity    
Current liabilities:    
Accounts payable  $ 13,661  $ 9,358
Accrued expenses and other current liabilities  52,468  16,883
Accrued compensation and benefits  16,786  6,735
Accrued restructuring costs  7,369  --
Deferred revenue  23,768  15,356
Deferred rent, current portion  968  864
Total current liabilities  115,020  49,196
Deferred rent, net of current portion  11,774  11,755
Long-term debt  230,000  --
Deferred tax liabilities and other long-term liabilities  143,430  --
Shareholders' equity:    
Class A common stock  5  3
Class B common stock  1  1
Additional paid-in capital  2,853,941  716,506
Accumulated other comprehensive income   138  --
Accumulated deficit  (186,115)  (127,731)
Total shareholders' equity  2,667,970  588,779
Total liabilities and shareholders' equity  $ 3,168,194  $ 649,730
 
 
 
ZILLOW GROUP, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS 
(in thousands, except per share data)
     
  Three Months Ended
  March 31,
  2015 2014
     
Revenue  $ 127,273  $ 66,243
Costs and expenses:    
Cost of revenue (exclusive of amortization) (1)(2)  13,019  6,164
Sales and marketing (2)  59,286  35,133
Technology and development (2)  37,325  16,735
General and administrative (2)  38,024  14,689
Acquisition-related costs  12,477  --
Restructuring costs (2)  25,065  --
Total costs and expenses  185,196  72,721
Loss from operations  (57,923)  (6,478)
Other income  269  219
Interest expense  (730)  --
Net loss  $ (58,384)  $ (6,259)
Net loss per share — basic and diluted  $ (1.19)  $ (0.16)
Weighted-average shares outstanding — basic and diluted  49,130  39,322
_________    
(1) Amortization of website development costs and intangible assets included in technology and development  $ 11,782  $ 6,784
     
(2) Includes share-based compensation expense as follows:    
Cost of revenue  $ 952  $ 373
Sales and marketing  4,209  1,303
Technology and development  5,766  2,025
General and administrative  12,080  3,431
Restructuring costs  10,420  --
Total   $ 33,427  $ 7,132
     
Other Financial Data:    
Adjusted EBITDA (3)  $ 16,654  $ 8,728
     
(3) See above for more information regarding our presentation of Adjusted EBITDA. 
 
 
ZILLOW GROUP, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
     
  Three Months Ended
  March 31,
  2015 2014
Operating activities    
Net loss  $ (58,384)  $ (6,259)
Adjustments to reconcile net loss to net cash provided by operating activities:    
Depreciation and amortization  14,028  8,074
Share-based compensation expense  23,007  7,132
Restructuring costs  21,702  --
Loss on disposal of property and equipment  87  235
Bad debt expense  805  635
Deferred rent  381  697
Amortization of bond premium  849  812
Changes in operating assets and liabilities:    
Accounts receivable  (296)  (260)
Prepaid expenses and other assets  5,477  (1,920)
Accounts payable  (763)  1,679
Accrued expenses and other current liabilities  (7,652)  2,468
Accrued compensation and benefits  1,727  1,070
Deferred revenue  112  (158)
Other long-term liabilities  375  --
Net cash provided by operating activities  1,455  14,205
     
Investing activities    
Proceeds from maturities of investments  63,780  44,539
Purchases of investments  (59,896)  (103,094)
Proceeds from sales of investments  4,979  --
Increase in restricted cash  147  --
Purchases of property and equipment  (10,321)  (7,872)
Purchases of intangible assets  (284)  (1,147)
Cash acquired in acquisition, net  173,406  --
Net cash provided by (used in) investing activities  171,811  (67,574)
     
Financing activities    
Proceeds from exercise of Class A common stock options  9,124  5,263
Value of equity awards withheld for tax liability  (303)  --
Net cash provided by financing activities  8,821  5,263
Net increase (decrease) in cash and cash equivalents during period  182,087  (48,106)
Cash and cash equivalents at beginning of period  125,765  201,760
Cash and cash equivalents at end of period  $ 307,852  $ 153,654
     
Supplemental disclosures of cash flow information    
Noncash transactions:    
Value of Class A common stock issued in connection with an acquisition  $ 1,883,728  $ --
Capitalized share-based compensation  $ 2,424  $ 1,586
Write-off of fully depreciated property and equipment  $ 11,759  $ 1,498

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
  March 31,
  2015 2014
Reconciliation of Adjusted EBITDA to Net Loss:    
Net loss  $ (58,384)  $(6,259)
Other income  (269)  (219)
Depreciation and amortization expense  14,028  8,074
Share-based compensation expense  23,007  7,132
Acquisition-related costs  12,477  --
Restructuring costs  25,065  --
Interest expense  730  --
Adjusted EBITDA  $ 16,654  $ 8,728

Non-GAAP Net Income per Share

The following table presents 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,
  2015 2014
     
Net loss, as reported  $ (58,384)  $(6,259)
Share-based compensation expense  23,007  7,132
Acquisition-related costs  12,477  --
Restructuring costs  25,065  --
Net income, adjusted  $ 2,165  $ 873
     
Weighted-average shares outstanding - basic  49,130  39,322
Weighted-average shares outstanding - diluted  55,102  42,378
Non-GAAP net income per share - basic  $ 0.04  $ 0.02
Non-GAAP net income per share - diluted  $ 0.05  $ 0.02

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
  March 31,
  2015 2014
Revenue:    
Marketplace revenue:    
Real estate  $ 93,312  $ 46,595
Mortgages  9,558  7,129
Market Leader  6,057  -- 
Total Marketplace revenue  108,927  53,724
Display revenue  18,346  12,519
Total revenue  $ 127,273  $ 66,243
     
  Three Months Ended
  March 31,
  2015 2014
Percentage of Total Revenue:    
Marketplace revenue:    
Real estate 73% 70%
Mortgages 8% 11%
Market Leader 5% 0%
Total Marketplace revenue 86% 81%
Display revenue 14% 19%
Total revenue 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 March 31, 2014 to 2015
  2015 2014 % Change
  (in thousands)  
Unique Users 109,912 70,668 56%

Unique users source: Zillow measures unique users with Google Analytics and Trulia measures unique users with Omniture analytical tools. Beginning on February 17, 2015, the reported monthly unique users reflect the effect of Zillow Group's February 17, 2015 acquisition of Trulia.

  At March 31, 2014 to 2015 
  2015 2014 % Change
Agent Advertisers 103,415 52,968 95%

__________

1 For example, flagship brand Zillow operates the most popular suite of mobile real estate apps across all major platforms, according to internal tracking in April 2015.

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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