Zillow Group, Inc.
Nov 7, 2017
PDF

Zillow Group Third Quarter 2017 Revenue Increased 25% Year-Over-Year

SEATTLE, Nov. 07, 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 September 30, 2017.

Zillow Group Q3 2017 Earnings Highlights
Zillow Group Q3 2017 Earnings Highlights


"Zillow Group delivered record revenue and profitability for the third quarter of 2017, driven by strong contributions from all of our marketplaces," said Zillow Group CEO Spencer Rascoff. "It has been an exciting year for the company. We created several innovative products and further cemented our leadership position in the real estate category. Consumers are demanding more than ever from their real estate experiences. We are delivering new products that will delight consumers and our industry partners, such as 3D home tours that can be captured on an iPhone®, and our test of Zillow® Instant Offers™ that allows home sellers to compare an agent's estimate of their home's potential sale price alongside investor offers. We look forward to continuing to innovate in 2018 with new products and services that we believe real estate professionals, home buyers, sellers, owners and renters will love."

Third Quarter 2017 Financial Highlights

Third Quarter 2017 Operating and Business Highlights

___________________________________
1
Other Real Estate Revenue primarily includes revenue generated by Zillow Group Rentals, New Construction, as well as revenue from the sale of various other advertising and business software solutions and services for real estate professionals.

Business Outlook - Fourth Quarter and Full Year 2017

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

         
  Three Months Ending Year Ending
Zillow Group Outlook as of November 7, 2017 December 31, 2017 December 31, 2017
(in millions)        
Revenue $274to$279 $1,068to$1,073
Premier Agent revenue$199to$201 $761to$763
Other real estate revenue$42to$43 $159to$160
Mortgages revenue$18to$19 $80to$81
Display revenue$15to$16 $68to$69
Operating expenses$261to$266  *** 
Net income (loss)$6.5to$11.5 $(10)to$(5)
Adjusted EBITDA (1)$68to$73 $233to$238
Depreciation and amortization$27to$29 $108to$110
Share-based compensation expense$27to$29  $111to$113
Capital expenditures ***  $50to$52
Weighted average shares outstanding — basic189.0to191.0 185.0to187.0
Weighted average shares outstanding — diluted197.5to199.5 194.0to196.0
        
*** Outlook not provided       
        
        
(1) A reconciliation of forecasted Adjusted EBITDA to forecasted net income (loss) is provided below in this press release.
 

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 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; the impact of pending litigation and other legal and regulatory matters, including those described in Note 14 under the subsection titled "Legal Proceedings" in our Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of Zillow Group's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2017; 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; Zillow Group's investment of resources to pursue strategies that may not prove effective; 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 income (loss) (historical and forecasted), the most directly comparable GAAP financial measure, and a reconciliation of net income (loss), adjusted, to net income (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 income (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, income tax benefit (expense) and the gain on divestiture of business. 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, income tax benefit (expense) and the gain on divestiture of business 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 provides a comprehensive suite of marketing software and technology solutions to help real estate, rental and mortgage professionals maximize business opportunities and connect with millions of consumers. 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 and New Home Feed 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. Instant Offers is a trademark of Zillow, Inc.

Twitter is a registered trademark of Twitter, Inc.

iPhone is a registered trademark of Apple Inc.

(ZFIN)


Reported Consolidated Results

 
ZILLOW GROUP, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS 
(in thousands)
     
   
  September 30,
2017
 December 31,
2016
Assets    
Current assets:    
Cash and cash equivalents $319,942  $243,592 
Short-term investments  361,038   262,870 
Accounts receivable, net  53,951   40,527 
Prepaid expenses and other current assets 30,014   34,817 
Total current assets  764,945   581,806 
Restricted cash  1,053   1,053 
Property and equipment, net  110,741   98,288  
Goodwill  1,931,260   1,923,480 
Intangible assets, net  505,696   527,464 
Other assets  27,006   17,586 
Total assets $3,340,701  $3,149,677 
     
Liabilities and shareholders' equity    
Current liabilities:    
Accounts payable $4,915  $4,257 
Accrued expenses and other current liabilities 55,598   38,427 
Accrued compensation and benefits  25,252   24,057 
Deferred revenue  31,060    29,154 
Deferred rent, current portion  1,930   1,347 
Total current liabilities  118,755   97,242 
Deferred rent, net of current portion  17,787   15,298 
Long-term debt  380,795   367,404 
Deferred tax liabilities and other long-term liabilities 134,372   136,146 
Total liabilities   651,709   616,090 
Shareholders' equity:    
Class A common stock  6   5 
Class B common stock  1   1 
Class C capital stock  13   12 
Additional paid-in capital  3,204,383   3,030,854 
Accumulated other comprehensive loss (345)  (242)
Accumulated deficit  (515,066)  (497,043)
Total shareholders' equity  2,688,992   2,533,587 
Total liabilities and shareholders' equity $3,340,701  $3,149,677 
 

 

 
ZILLOW GROUP, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS 
(in thousands, except per share data)
        
 Three Months Ended Nine Months Ended
 September 30, September 30 ,
 2017 2016 2017 2016
        
Revenue$281,839  $224,592  $794,464   $618,977 
Costs and expenses:       
Cost of revenue (exclusive of amortization) (1)(2) 22,152   17,608   62,644   50,556 
Sales and marketing (2) 107,108   93,180   344,266   291,910 
Technology and development (2) 83,389   64,496   234,798   188,263 
General and administrative (2) 54,226   42,625   153,038   284,175 
Acquisition-related costs 218   93   366   890 
Gain on divestiture of business -   (1,251)  -   (1,251)
Total costs and expenses 267,093   216,751   795,112   814,543 
Income (loss) from operations 14,746   7,841   (648)  (195,566)
Other income 1,407    561   3,970   1,995 
Interest expense (6,906)  (1,595)  (20,526)  (4,740)
Income (loss) before income taxes 9,247   6,807   (17,204)  (198,311)
Income tax benefit (expense) (41)  -   (41)  1,364 
Net income (loss)$9,206  $6,807  $(17,245) $(196,947)
Net income (loss) per share — basic and diluted$0.05  $0.04  $(0.09) $(1.10)
Weighted-average shares outstanding — basic  187,692   180,583   185,447   179,577 
Weighted-average shares outstanding — diluted 196,425   189,661    185,447   179,577 
        
(1) Amortization of website development costs and
               
intangible assets included in technology and               
development$13,442  $22,006  $59,862  $64,931 
        
(2)  Includes share-based compensation expense as follows:       
Cost of revenue$1,014  $894  $2,942  $2,662 
Sales and marketing  5,914   5,968   17,694   17,566 
Technology and development 10,438   8,035   29,329   23,160 
General and administrative 11,208   12,388   34,197   37,764 
Total$28,574  $27,285  $84,162  $81,152 
        
Other Financial Data:       
Adjusted EBITDA (3)$70,957  $59,463  $165,456  $(39,923)
        
(3)  See above for more information regarding our presentation of Adjusted EBITDA.    
     


 
ZILLOW GROUP, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
     
  Nine Months Ended
  September 30,
  2017 2016
Operating activities    
Net loss $(17,245) $(196,947)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities, net of amounts assumed in connection with acquisitions:    
Depreciation and amortization  81,576   74,852 
Share-based compensation expense  84,162   81,152 
Amortization of discount and issuance costs on 2021 Notes  13,391   - 
Release of valuation allowance on certain deferred tax assets  -   (1,364)
Loss on disposal of property and equipment  4,085   3,416 
Gain on divestiture of business  -   (1,360)
Bad debt expense  5,861   1,715 
Deferred rent  3,072   312 
Amortization of bond premium  451   1,171 
Changes in operating assets and liabilities:    
Accounts receivable  (19,272)   (11,770)
Prepaid expenses and other assets  4,434   5,197 
Accounts payable  224   3,296 
Accrued expenses and other current liabilities  13,174   (8,746)
Accrued compensation and benefits  1,194   13,016 
Deferred revenue  1,775   5,645 
Other long-term liabilities  41   (21)
Net cash provided by (used in) operating activities  176,923   (30,436)
     
Investing activities    
Proceeds from maturities of investments  204,520   158,828 
Purchases of investments  (303,241)  (126,986)
Proceeds from sales of investments   -   4,963 
Decrease in restricted cash  -   1,962 
Purchases of property and equipment  (51,580)  (45,732)
Purchases of intangible assets  (9,377)  (7,827)
Purchase of cost method investment  (10,000)  - 
Proceeds from divestiture of a business  579   3,200 
Cash paid for acquisitions, net  (11,147)  (16,319)
Net cash used in investing activities  (180,246)  (27,911)
     
Financing activities    
Proceeds from exercise of stock options  80,010   20,461 
Value of equity awards withheld for tax liability  (337)  (492)
Net cash provided by financing activities  79,673   19,969 
Net increase (decrease) in cash and cash equivalents during period  76,350   (38,378)
Cash and cash equivalents at beginning of period  243,592   229,138 
Cash and cash equivalents at end of period $319,942  $190,760 
     
Supplemental disclosures of cash flow information    
Cash paid for interest $4,458  $3,163 
Noncash transactions:    
Capitalized share-based compensation $8,915  $7,809 
Write-off of fully depreciated property and equipment $12,685  $11,585 
Write-off of fully amortized intangible assets $5,454  $- 
         

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,
  2017 2016 2017 2016
Reconciliation of Adjusted EBITDA to Net Income (Loss):        
Net income (loss) $9,206  $6,807  $(17,245) $(196,947)
Other income  (1,407)  (561)  (3,970)  (1,995)
Depreciation and amortization expense  27,419   25,495   81,576   74,852 
Share-based compensation expense  28,574   27,285   84,162   81,152 
Acquisition-related costs  218   93   366   890 
Gain on divestiture of business  -   (1,251)  -   (1,251)
Interest expense  6,906   1,595   20,526   4,740 
Income tax expense (benefit)  41   -   41   (1,364)
Adjusted EBITDA (1) $70,957  $59,463  $165,456  $(39,923)
 
 
(1) For the nine month period ended September 30, 2016, Adjusted EBITDA includes the impact of a $130.0 million litigation settlement. Adjusted EBITDA for the nine month period ended September 30, 2016 also includes $28.8 million in related legal costs.

Non-GAAP Net Income (Loss) per Share

The following table presents a reconciliation of net income (loss), adjusted, to net income (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 Nine Months Ended
  September 30, September 30,
  2017 2016  2017 2016
          
Net income (loss), as reported $9,206 $6,807  $ (17,245) $(196,947)
Share-based compensation expense  28,574  27,285   84,162   81,152 
Acquisition-related costs  218  93   366   890 
Income tax expense (benefit)  41  -   41   (1,364)
Gain on divestiture of business  -  (1,251)  -   (1,251)
Net income (loss), adjusted $38,039 $32,934  $67,324  $(117,520)
         
Non-GAAP net income (loss) per share - basic $0.20 $0.18  $0.36  $(0.65)
Non-GAAP net income (loss) per share - diluted $0.19 $0.17  $0.35   $(0.65)
Weighted-average shares outstanding - basic  187,692  180,583   185,447   179,577 
Weighted-average shares outstanding - diluted  196,863  199,687   194,605   179,577 
                

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 Nine Months Ended
 September 30, September 30,
 2017 2016 2017 2016
Revenue:       
Marketplace revenue:       
Premier Agent$197,054  $158,322  $562,081  $439,957 
Other real estate 44,778    28,799   117,427   72,847 
Mortgages 20,869   19,775   62,075   54,621 
Total Marketplace revenue 262,701   206,896   741,583   567,425 
Display revenue 19,138    17,696   52,881   51,552 
Total revenue$281,839  $224,592  $794,464  $618,977 
        
        
 Three Months Ended Nine Months Ended
 September 30, September 30,
 2017 2016 2017 2016
Percentage of Total Revenue:       
Marketplace revenue:       
Premier Agent 70%  70%  71%  71%
Other real estate 16%  13%  15%  12%
Mortgages 7%   9%  8%  9%
Total Marketplace revenue 93%  92%  93%  92%
Display revenue 7%  8%  7%  8%
Total revenue 100%  100%  100%  100%
        

Key Metrics

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

      
  Three Months Ended
 September 30,
 2016 to 2017
 2017 2016 % Change
 (in millions)
  
Average Monthly Unique Users (1)175.2 164.5 6%
Visits (2)1,667.1 1,403.8 19%
       
(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 (formerly called Omniture analytical tools).
 
(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.
 

Reconciliation of Forecasted Adjusted EBITDA to Forecasted Net Income (Loss)

The following table presents a reconciliation of forecasted Adjusted EBITDA to forecasted net income (loss) at the midpoint of the range for each of the periods presented (in thousands, unaudited):

     
  Three Months Ending Year Ending
  December 31, 2017 December 31, 2017
Reconciliation of Forecasted Adjusted EBITDA to Forecasted Net Income (Loss):     
Forecasted Net income (loss) $9,000  $(7,500)
Forecasted Other income  (1,300)  (5,300)
Forecasted Depreciation and amortization expense  28,000   109,000 
Forecasted Share-based compensation expense  28,000   112,000 
Forecasted Interest expense  6,800   27,300 
Forecasted Adjusted EBITDA $70,500  $235,500 
 
 

Contacts:

Raymond Jones
Investor Relations
ir@zillowgroup.com

Katie Curnutte
Public Relations
press@zillow.com

A photo accompanying this announcement is available at http://www.globenewswire.com/NewsRoom/AttachmentNg/649a2c14-78ba-40b7-8c09-99ae662cdb30.

Source: Zillow Group, Inc.

News Provided by Acquire Media