Zillow Group, Inc.
May 4, 2017

Zillow Group Reports Record First Quarter 2017 Results

SEATTLE, May 04, 2017 (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, 2017.

"Zillow Group's strong first quarter performance across the board was a tremendous start to 2017," said Zillow Group CEO Spencer Rascoff. "We beat our own expectations and surpassed last year's seasonal annual traffic peak by reaching an all-time high of unique users in March. We are thrilled with our first quarter results, which demonstrate that as consumers become more engaged, real estate agents and brokerages become more successful on our platform."   

First Quarter 2017 Financial Highlights

Operating and Business Highlights

Business Outlook - Second Quarter and Full Year 2017

For full year 2017, Zillow Group is increasing its outlook for Revenue to a range of $1.050 billion to $1.065 billion, which represents a 25% year-over-year increase at the midpoint of the range.

Zillow Group is raising its full year 2017 Adjusted EBITDA outlook to a range of $215 million to $230 million, which represents 21% of Revenue at the midpoint of the range. For 2017, the company is choosing to increase its investment in advertising, which supports growth in users and visits, at a rate that is lower than revenue growth. In line with the typical seasonality of the real estate industry, advertising spend is expected to be greatest in the second quarter, accounting for more than one third of Zillow Group's annual advertising budget, with the fourth quarter being the lightest. Accordingly, Zillow Group expects these seasonal changes in advertising investment to impact quarterly Adjusted EBITDA proportionally throughout the year.

The following table presents Zillow Group's business outlook for the periods presented:

  Three Months Ending Year Ending
Zillow Group Outlook as of May 4, 2017 June 30, 2017 December 31, 2017
(in millions)         
Revenue $257to$262 $1,050to$1,065
Premier Agent revenue $185to$187 $757to$765
Other real estate revenue $36to$37 $147to$151
Mortgages revenue $20to$21 $80to$82
Display revenue $16to$17 $66to$67
Operating expenses $284to$289   ***  
Net loss $(34.8)to$(29.8) $(32)to$(17)
Adjusted EBITDA (1) $27to$32 $215to$230
Depreciation and amortization $27to$29 $113to$118
Share-based compensation expense $27to$29 $106to$111
Capital expenditures   ***   $48to$50
Weighted average shares outstanding — basic   183.5to185.5  184.0to186.0
Weighted average shares outstanding — diluted  191.5to193.5  192.0to194.0
*** Outlook not provided        

(1)A reconciliation of forecasted Adjusted EBITDA 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'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 Sli.do, 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 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. Following completion of the call, a recorded replay of the webcast will be available on the investor relations section of Zillow Group'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 2017. 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 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 impact of pending litigation and other legal and regulatory matters; 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, 2016 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 (loss) per share, which are non-GAAP financial measures. We have provided a reconciliation of Adjusted EBITDA (historical and forecasted) to net loss (historical and forecasted), 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, 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 (loss) per share excludes the impact of share-based compensation expense, acquisition-related costs and income tax benefits. 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 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 and financing. 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®, Naked Apartments® and RealEstate.com. 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 Bridge Interactive™. 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 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, LLC. Bridge Interactive is a trademark of Zillow, Inc.

Twitter is a registered trademark of Twitter, Inc.


Reported Consolidated Results

(in thousands)
  March 31,
 December 31,
Current assets:    
  Cash and cash equivalents $  261,524  $  243,592 
  Short-term investments    297,520      262,870 
  Accounts receivable, net     41,868     40,527  
  Prepaid expenses and other current assets    29,559     34,817 
Total current assets    630,471     581,806 
Restricted cash    1,053     1,053 
Property and equipment, net    94,945     98,288 
Goodwill    1,927,450     1,923,480 
Intangible assets, net    525,771     527,464 
Other assets    17,404     17,586 
Total assets $  3,197,094  $  3,149,677 
Liabilities and shareholders' equity    
Current liabilities:    
  Accounts payable $  4,157   $  4,257 
  Accrued expenses and other current liabilities    43,742     38,427 
  Accrued compensation and benefits    26,596     24,057 
  Deferred revenue    30,875     29,154 
  Deferred rent, current portion    1,451     1,347 
Total current liabilities    106,821     97,242 
Deferred rent, net of current portion     15,384     15,298 
Long-term debt    371,757     367,404 
Deferred tax liabilities and other long-term liabilities    134,146     136,146 
Total liabilities    628,108     616,090 
Shareholders' equity:    
  Class A common stock    5     5 
  Class B common stock    1     1 
  Class C capital stock    12     12 
  Additional paid-in capital    3,071,664     3,030,854 
  Accumulated other comprehensive loss    (267)    (242)
  Accumulated deficit    (502,429)    (497,043)
Total shareholders' equity    2,568,986     2,533,587 
Total liabilities and shareholders' equity $  3,197,094  $  3,149,677 

(in thousands, except per share data) 
  Three Months Ended 
  March 31, 
   2017   2016  
Revenue $  245,775  $   185,982  
Costs and expenses:     
  Cost of revenue (exclusive of amortization) (1)(2)    20,232     16,203  
  Sales and marketing (2)    105,940     99,101  
  Technology and development (2)    72,868     60,371  
  General and administrative (2)    45,466     57,791  
  Acquisition-related costs    105     593  
Total costs and expenses    244,611      234,059  
Income (loss) from operations    1,164     (48,077) 
Other income    953     681  
Interest expense    (6,723)    (1,573) 
Loss before income taxes    (4,606)    (48,969) 
Income tax benefit    -     1,364  
Net loss $  (4,606) $  (47,605) 
Net loss per share — basic and diluted $  (0.03) $  (0.27) 
Weighted-average shares outstanding — basic and diluted    183,158     178,686  
(1) Amortization of website development costs and
       intangible assets included in technology and
 $  23,261  $  20,059  
(2)  Includes share-based compensation expense as follows:     
   Cost of revenue $  903  $  786  
   Sales and marketing    5,530     5,203  
   Technology and development    8,491     6,759  
   General and administrative    11,471     12,803  
       Total  $  26,395  $  25,551  
Other Financial Data:     
Adjusted EBITDA (3) $  54,799  $  1,874  
(3)  See above for more information regarding our presentation of Adjusted EBITDA.  

(in thousands)
  Three Months Ended
  March 31,
   2017   2016 
Operating activities    
Net loss $  (4,606) $  (47,605)
Adjustments to reconcile net loss to net cash provided by operating activities,
net of amounts assumed in connection with acquisitions:
  Depreciation and amortization    27,135     23,807 
  Share-based compensation expense    26,395     25,551 
  Amortization of discount and issuance costs on 2021 Notes    4,353     - 
  Release of valuation allowance on certain deferred tax assets    -      1,364 
  Loss on disposal of property and equipment    999     1,436 
  Bad debt expense    718     313 
  Deferred rent    190     (7)
  Amortization of bond premium    223     430 
  Changes in operating assets and liabilities:    
  Accounts receivable    (2,059)    (2,770)
  Prepaid expenses and other assets    4,737     2,708 
  Accounts payable    53     1,594 
  Accrued expenses and other current liabilities    4,683     2,793 
  Accrued compensation and benefits    2,539     8,759 
  Deferred revenue    1,598     3,294 
  Other long-term liabilities    -     (2,749)
Net cash provided by operating activities    66,958     18,918 
Investing activities    
Proceeds from maturities of investments    49,107     44,108 
Purchases of investments    (84,008)    (38,760)
Proceeds from sales of investments    -     4,795 
Decrease in restricted cash    -     1,962 
Purchases of property and equipment    (14,163)    (14,251)
Purchases of intangible assets    (5,308)    (2,675)
Proceeds from divestiture of business    579     - 
Cash paid for acquisitions, net    (6,002)    (12,357 )
Net cash used in investing activities    (59,795)    (17,178)
Financing activities    
Proceeds from exercise of stock options    11,006     1,682 
Value of equity awards withheld for tax liability    (237)    (117)
Net cash provided by financing activities    10,769     1,565 
Net increase in cash and cash equivalents during period    17,932     3,305 
Cash and cash equivalents at beginning of period    243,592      229,138 
Cash and cash equivalents at end of period $  261,524  $  232,443 
Supplemental disclosures of cash flow information    
  Noncash transactions:    
  Capitalized share-based compensation $  2,868  $  2,250 
  Write-off of fully depreciated property and equipment $  3,446  $  6,834 
  Write-off of fully amortized intangible assets $  5,280  $  - 

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,
    2017   2016 
Reconciliation of Adjusted EBITDA to Net Loss:     
Net loss $  (4,606) $ (47,605)
Other income    (953)    (681 )
Depreciation and amortization expense    27,135     23,807 
Share-based compensation expense    26,395     25,551 
Acquisition-related costs     105     593 
Interest expense    6,723     1,573 
Income tax benefit    -     (1,364)
  Adjusted EBITDA $  54,799  $  1,874 

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
  June 30, 2017 December 31, 2017
Reconciliation of Forecasted Adjusted EBITDA to Forecasted Net Loss:     
Forecasted Net loss $  (32,250) $  (24,500)
Forecasted Other income    (950)  (3,800)
Forecasted Depreciation and amortization expense    28,000   115,500 
Forecasted Share-based compensation expense    28,000   108,500 
Forecasted Interest expense    6,700   26,800 
  Forecasted Adjusted EBITDA $  29,500  $  222,500 

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 
  March 31, 
   2017   2016  
Net loss, as reported $  (4,606) $ (47,605) 
Share-based compensation expense    26,395     25,551  
Acquisition-related costs    105     593  
Income tax benefit    -     (1,364) 
  Net income (loss), adjusted $  21,894  $ (22,825) 
Non-GAAP net income (loss) per share - basic $  0.12  $  (0.13) 
Non-GAAP net income (loss) per share - diluted $  0.11  $  (0.13) 
Weighted-average shares outstanding - basic    183,158     178,686  
Weighted-average shares outstanding - diluted    191,290     178,686  

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,
  2017   2016 
Marketplace revenue:   
  Premier Agent$  175,301  $  134,529 
  Other real estate   34,755     17,978 
  Mortgages   20,270     16,454 
Total Marketplace revenue   230,326     168,961 
Display revenue   15,449     17,021 
     Total revenue$  245,775  $  185,982 
 Three Months Ended
 March 31,
  2017   2016 
Percentage of Total Revenue:   
Marketplace revenue:   
  Premier Agent 71%  72%
  Other real estate 14%  10%
  Mortgages  8%  9%
Total Marketplace revenue 94%  91%
Display revenue 6%  9%
     Total revenue 100%  100%

Key Metrics

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

  Three Months Ended
 March 31,
 2016 to 2017
 2017 2016 % Change
 (in millions)  
Average Monthly Unique Users (1)166.6 156.2 7%

 Three Months Ended
March 31,
 2016 to 2017 
 2017 2016 % Change 
 (in millions)   
Visits (2)1,533.0 1,298.3  18% 

(1)We measure Zillow unique users with Google Analytics and Trulia unique users with Adobe Analytics (formerly called Omniture analytical tools).
(2)Visits includes visits to Zillow's and Trulia's mobile apps and websites, and beginning in March 2017, also includes visits to StreetEasy's mobile app and website. We measure Zillow and StreetEasy visits with Google Analytics and Trulia visits with Adobe Analytics.


1 Other Real Estate Revenue primarily includes Zillow Group Rentals, agent services, dotloop, Naked Apartments, and other offerings to endemic advertisers that are not traditional display advertising, including New Construction, which includes advertising services for homebuilders.


Raymond Jones

Investor Relations



Katie Curnutte

Public Relations


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Source: Zillow Group, Inc.

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