Zillow Group Reports Fourth Quarter and Full Year 2017 Results
- Achieved full year 2017 record Revenue of nearly
$1.1 billion , up 27% year-over-year. - Fourth quarter record Revenue of
$282.3 million , up 24% year-over-year. - More than 151 million average monthly unique users visited
Zillow Group brands' mobile apps and websites during the fourth quarter of 2017. - Visits to
Zillow Group brands' mobile apps and websites increased 21% year-over-year to more than 1.4 billion in the fourth quarter of 2017.
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"Zillow Group had another fantastic year of record results in 2017 and exceeded
Fourth Quarter 2017 Financial Highlights
• Revenue increased 24% to a record
- Marketplace Revenue increased 26% to
$265.6 million from$210.6 million in the fourth quarter of 2016.
• Premier Agent Revenue increased 21% to$199.5 million from$164.3 million in the fourth quarter of 2016.
• Other Real Estate Revenue1 increased 60% to$47.6 million from$29.8 million in the fourth quarter of 2016.
• Mortgages Revenue increased 12% to$18.5 million from$16.5 million in the fourth quarter of 2016.
- Display Revenue decreased 1% to
$16.7 million from$17.0 million in the fourth quarter of 2016, consistent with the company's strategy to deemphasize display advertising in the user experience and instead focus on growth in marketplace revenue.
• GAAP net loss was
• Adjusted EBITDA was
1 Other Real Estate Revenue primarily includes revenue generated by
Full Year 2017 Financial Highlights
• Revenue increased 27% to a record
- Marketplace Revenue increased 29% to
$1,007.2 million from$778.1 million in 2016.
• Premier Agent Revenue increased 26% to$761.6 million from$604.3 million in 2016.
• Other Real Estate Revenue increased 61% to$165.0 million from$102.6 million in 2016.
• Mortgages Revenue increased 13% to$80.6 million from$71.1 million in 2016.
- Display Revenue increased 2% to
$69.6 million from$68.5 million in 2016.
• GAAP net loss was
• Adjusted EBITDA was
Fourth Quarter 2017 Operating and Business Highlights
• More than 151 million average monthly unique users visited
• Visits to
• The number of Premier Agent® advertisers, including brokerages and other teams, spending more than
• Total sales to Premier Agent advertisers who have been customers for more than one year increased 41% year-over-year during the fourth quarter of 2017.
• Sales to existing Premier Agent advertisers accounted for 63% of total bookings during the fourth quarter of 2017.
Business Outlook - First Quarter and Full Year 2018
The following table presents Zillow Group's business outlook for the periods presented:
| Three Months Ending | Year Ending | ||||||||||
| Zillow Group Outlook as of | |||||||||||
| (in millions) | |||||||||||
| Revenue | to | to | |||||||||
| Premier Agent revenue | to | to | |||||||||
| Mortgages revenue | to | to | |||||||||
| Rentals revenue (1) | to | to | |||||||||
| Other revenue (1) | to | to | |||||||||
| Operating expenses | to | to | |||||||||
| Net income (loss) | to | to | |||||||||
| Adjusted EBITDA (2) | to | to | |||||||||
| Depreciation and amortization | to | to | |||||||||
| Share-based compensation expense | to | to | |||||||||
| Capital expenditures | *** | to | |||||||||
| Weighted average shares outstanding — basic | 190.0 | to | 192.0 | 193.0 | to | 195.0 | |||||
| Weighted average shares outstanding — diluted | 197.5 | to | 199.5 | 200.5 | to | 202.5 | |||||
| *** Outlook not provided | |||||||||||
(1)
(2) 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'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 and recorded replay 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.
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 2018. 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
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 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:
- Adjusted EBITDA does not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments;
- Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;
- Adjusted EBITDA does not consider the potentially dilutive impact of share-based compensation;
- Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements;
- Adjusted EBITDA does not reflect impairment costs;
- Adjusted EBITDA does not reflect acquisition-related costs;
- Adjusted EBITDA does not reflect the gain on divestiture of business;
- Adjusted EBITDA does not reflect interest expense or other income;
- Adjusted EBITDA does not reflect the loss on debt extinguishment;
- Adjusted EBITDA does not reflect income tax benefit (expense); and
- Other companies, including companies in our own industry, may calculate Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure.
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, impairment costs, acquisition-related costs, loss on debt extinguishment, 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, impairment costs, acquisition-related costs, loss on debt extinguishment, 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
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(ZFIN)
Reported Consolidated Results
| UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS | |||||||
| (in thousands) | |||||||
2017 | 2016 | ||||||
| Assets | |||||||
| Current assets: | |||||||
| Cash and cash equivalents | $ | 352,095 | $ | 243,592 | |||
| Short-term investments | 410,444 | 263,923 | |||||
| Accounts receivable, net | 54,396 | 40,527 | |||||
| Prepaid expenses and other current assets | 24,590 | 34,817 | |||||
| Total current assets | 841,525 | 582,859 | |||||
| Property and equipment, net | 112,271 | 98,288 | |||||
| 1,931,076 | 1,923,480 | ||||||
| Intangible assets, net | 319,711 | 527,464 | |||||
| Other assets | 25,934 | 17,586 | |||||
| Total assets | $ | 3,230,517 | $ | 3,149,677 | |||
| Liabilities and shareholders' equity | |||||||
| Current liabilities: | |||||||
| Accounts payable | $ | 3,587 | $ | 4,257 | |||
| Accrued expenses and other current liabilities | 61,373 | 38,427 | |||||
| Accrued compensation and benefits | 19,109 | 24,057 | |||||
| Deferred revenue | 31,918 | 29,154 | |||||
| Deferred rent, current portion | 2,400 | 1,347 | |||||
| Total current liabilities | 118,387 | 97,242 | |||||
| Deferred rent, net of current portion | 21,330 | 15,298 | |||||
| Long-term debt | 385,416 | 367,404 | |||||
| Deferred tax liabilities and other long-term liabilities | 44,561 | 136,146 | |||||
| Total liabilities | 569,694 | 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 | 3,254,146 | 3,030,854 | |||||
| Accumulated other comprehensive loss | (1,100 | ) | (242 | ) | |||
| Accumulated deficit | (592,243 | ) | (497,043 | ) | |||
| Total shareholders' equity | 2,660,823 | 2,533,587 | |||||
| Total liabilities and shareholders' equity | $ | 3,230,517 | $ | 3,149,677 | |||
| UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||||
| (in thousands, except per share data) | ||||||||||||||||
| Three Months Ended | Year Ended | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| Revenue | $ | 282,330 | $ | 227,612 | $ | 1,076,794 | $ | 846,589 | ||||||||
| Costs and expenses: | ||||||||||||||||
| Cost of revenue (exclusive of amortization) (1)(2) | 22,559 | 18,706 | 85,203 | 69,262 | ||||||||||||
| Sales and marketing (2) | 103,935 | 90,509 | 448,201 | 382,419 | ||||||||||||
| Technology and development (2) | 85,187 | 67,320 | 319,985 | 255,583 | ||||||||||||
| General and administrative (2) | 57,778 | 47,832 | 210,816 | 332,007 | ||||||||||||
| Impairment costs | 174,000 | - | 174,000 | - | ||||||||||||
| Acquisition-related costs | 97 | 533 | 463 | 1,423 | ||||||||||||
| Gain on divestiture of business | - | - | - | (1,251 | ) | |||||||||||
| Total costs and expenses | 443,556 | 224,900 | 1,238,668 | 1,039,443 | ||||||||||||
| Income (loss) from operations | (161,226 | ) | 2,712 | (161,874 | ) | (192,854 | ) | |||||||||
| Loss on debt extinguishment | - | (22,757 | ) | - | (22,757 | ) | ||||||||||
| Other income | 1,415 | 716 | 5,385 | 2,711 | ||||||||||||
| Interest expense | (6,991 | ) | (2,668 | ) | (27,517 | ) | (7,408 | ) | ||||||||
| Loss before income taxes | (166,802 | ) | (21,997 | ) | (184,006 | ) | (220,308 | ) | ||||||||
| Income tax benefit (expense) | 89,627 | (1,494 | ) | 89,586 | (130 | ) | ||||||||||
| Net loss | $ | (77,175 | ) | $ | (23,491 | ) | $ | (94,420 | ) | $ | (220,438 | ) | ||||
| Net loss per share — basic and diluted | $ | (0.41 | ) | $ | (0.13 | ) | $ | (0.51 | ) | $ | (1.22 | ) | ||||
| Weighted-average shares outstanding — basic and diluted | 189,439 | 181,852 | 186,453 | 180,149 | ||||||||||||
| _________ | ||||||||||||||||
| (1) Amortization of website development costs and intangible assets included in technology and development | $ | 24,392 | $ | 22,130 | $ | 94,349 | $ | 87,060 | ||||||||
| (2) Includes share-based compensation expense as follows: | ||||||||||||||||
| Cost of revenue | $ | 942 | $ | 888 | $ | 3,884 | $ | 3,550 | ||||||||
| Sales and marketing | 5,041 | 5,754 | 22,735 | 23,320 | ||||||||||||
| Technology and development | 10,609 | 8,306 | 39,938 | 31,466 | ||||||||||||
| General and administrative | 12,817 | 10,818 | 47,014 | 48,582 | ||||||||||||
| Total | $ | 29,409 | $ | 25,766 | $ | 113,571 | $ | 106,918 | ||||||||
| Other Financial Data: | ||||||||||||||||
| Adjusted EBITDA (3) | $ | 70,859 | $ | 54,749 | $ | 236,315 | $ | 14,826 | ||||||||
| (3) See above for more information regarding our presentation of Adjusted EBITDA. | ||||||||||||||||
| UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
| (in thousands) | ||||||||
| Year Ended | ||||||||
| 2017 | 2016 | |||||||
| Operating activities | ||||||||
| Net loss | $ | (94,420 | ) | $ | (220,438 | ) | ||
| Adjustments to reconcile net loss to net cash provided by operating activities, net of amounts assumed in connection with acquisitions: | ||||||||
| Depreciation and amortization | 110,155 | 100,590 | ||||||
| Share-based compensation expense | 113,571 | 106,918 | ||||||
| Loss on debt extinguishment | - | 22,757 | ||||||
| Amortization of discount and issuance costs on 2021 Notes | 18,012 | 883 | ||||||
| Impairment costs | 174,000 | - | ||||||
| Deferred income taxes | (89,586 | ) | (1,370 | ) | ||||
| Loss on disposal of property and equipment | 5,678 | 3,689 | ||||||
| Gain on divestiture of business | - | (1,360 | ) | |||||
| Bad debt expense | 7,349 | 2,681 | ||||||
| Deferred rent | 7,085 | 1,730 | ||||||
| Amortization of bond premium | 431 | 1,489 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | (21,203 | ) | (13,324 | ) | ||||
| Prepaid expenses and other assets | 10,807 | (13,260 | ) | |||||
| Accounts payable | (373 | ) | 856 | |||||
| Accrued expenses and other current liabilities | 19,000 | (5,065 | ) | |||||
| Accrued compensation and benefits | (4,948 | ) | 12,463 | |||||
| Deferred revenue | 2,633 | 7,794 | ||||||
| Other long-term liabilities | - | 1,612 | ||||||
| Net cash provided by operating activities | 258,191 | 8,645 | ||||||
| Investing activities | ||||||||
| Proceeds from maturities of investments | 259,227 | 199,369 | ||||||
| Purchases of investments | (407,032 | ) | (175,210 | ) | ||||
| Proceeds from sales of investments | - | 4,963 | ||||||
| Purchases of property and equipment | (66,728 | ) | (62,060 | ) | ||||
| Purchases of intangible assets | (11,907 | ) | (9,662 | ) | ||||
| Purchases of cost method investments | (10,000 | ) | (10,000 | ) | ||||
| Proceeds from divestiture of a business | 579 | 3,200 | ||||||
| Cash paid for acquisitions, net | (11,533 | ) | (16,319 | ) | ||||
| Net cash used in investing activities | (247,394 | ) | (65,719 | ) | ||||
| Financing activities | ||||||||
| Proceeds from issuance of 2021 Notes, net of issuance costs | - | 447,784 | ||||||
| Premiums paid for Capped Call Confirmations | - | (36,616 | ) | |||||
| Partial repurchase of 2020 Notes | - | (370,235 | ) | |||||
| Proceeds from exercise of stock options | 98,071 | 31,211 | ||||||
| Value of equity awards withheld for tax liability | (365 | ) | (616 | ) | ||||
| Net cash provided by financing activities | 97,706 | 71,528 | ||||||
| Net increase in cash and cash equivalents during period | 108,503 | 14,454 | ||||||
| Cash and cash equivalents at beginning of period | 243,592 | 229,138 | ||||||
| Cash and cash equivalents at end of period | $ | 352,095 | $ | 243,592 | ||||
| Supplemental disclosures of cash flow information | ||||||||
| Cash paid for interest | $ | 9,198 | $ | 6,325 | ||||
| Noncash transactions: | ||||||||
| Capitalized share-based compensation | $ | 11,236 | $ | 10,061 | ||||
| Write-off of fully depreciated property and equipment | $ | 15,004 | $ | 14,564 | ||||
| Write-off of fully amortized intangible assets | $ | 5,473 | $ | 9,293 | ||||
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 | Year Ended | ||||||||||||||||
| 2017 | 2016 | 2017 | 2016 | ||||||||||||||
| Reconciliation of Adjusted EBITDA to Net Loss: | |||||||||||||||||
| Net loss | $ | (77,175 | ) | $ | (23,491 | ) | $ | (94,420 | ) | $ | (220,438 | ) | |||||
| Other income | (1,415 | ) | (716 | ) | (5,385 | ) | (2,711 | ) | |||||||||
| Depreciation and amortization expense | 28,579 | 25,738 | 110,155 | 100,590 | |||||||||||||
| Share-based compensation expense | 29,409 | 25,766 | 113,571 | 106,918 | |||||||||||||
| Impairment costs | 174,000 | - | 174,000 | - | |||||||||||||
| Acquisition-related costs | 97 | 533 | 463 | 1,423 | |||||||||||||
| Gain on divestiture of business | - | - | - | (1,251 | ) | ||||||||||||
| Interest expense | 6,991 | 2,668 | 27,517 | 7,408 | |||||||||||||
| Loss on debt extinguishment | - | 22,757 | - | 22,757 | |||||||||||||
| Income tax (benefit) expense | (89,627 | ) | 1,494 | (89,586 | ) | 130 | |||||||||||
| Adjusted EBITDA (1) | $ | 70,859 | $ | 54,749 | $ | 236,315 | $ | 14,826 | |||||||||
(1) For the year ended December 31, 2016, Adjusted EBITDA includes the impact of a $130.0 million litigation settlement. Adjusted EBITDA for the year ended
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 | Year Ended | ||||||||||||||||
| 2017 | 2016 | 2017 | 2016 | ||||||||||||||
| Net loss, as reported | $ | (77,175 | ) | $ | (23,491 | ) | $ | (94,420 | ) | $ | (220,438 | ) | |||||
| Share-based compensation expense | 29,409 | 25,766 | 113,571 | 106,918 | |||||||||||||
| Impairment costs | 174,000 | - | 174,000 | - | |||||||||||||
| Acquisition-related costs | 97 | 533 | 463 | 1,423 | |||||||||||||
| Loss on debt extinguishment | - | 22,757 | - | 22,757 | |||||||||||||
| Income tax (benefit) expense | (89,627 | ) | 1,494 | (89,586 | ) | 130 | |||||||||||
| Gain on divestiture of business | - | - | - | (1,251 | ) | ||||||||||||
| Net income (loss), adjusted | $ | 36,704 | $ | 27,059 | $ | 104,028 | $ | (90,461 | ) | ||||||||
| Non-GAAP net income (loss) per share - basic | $ | 0.19 | $ | 0.15 | $ | 0.56 | $ | (0.50 | ) | ||||||||
| Non-GAAP net income (loss) per share - diluted | $ | 0.19 | $ | 0.14 | $ | 0.53 | $ | (0.50 | ) | ||||||||
| Weighted-average shares outstanding - basic | 189,439 | 181,852 | 186,453 | 180,149 | |||||||||||||
| Weighted-average shares outstanding - diluted | 197,442 | 190,331 | 194,837 | 180,149 | |||||||||||||
Revenue by Type
The following tables present our revenue by type (in thousands, unaudited) and as a percentage of total revenue for each of the periods presented (unaudited):
| Three Months Ended | Year Ended | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| Revenue: | ||||||||||||||||
| Marketplace revenue: | ||||||||||||||||
| Premier Agent | $ | 199,514 | $ | 164,335 | $ | 761,594 | $ | 604,292 | ||||||||
| Other real estate | 47,564 | 29,788 | 164,991 | 102,635 | ||||||||||||
| Mortgages | 18,516 | 16,512 | 80,591 | 71,133 | ||||||||||||
| 265,594 | 210,635 | 1,007,176 | 778,060 | |||||||||||||
| Display revenue | 16,736 | 16,977 | 69,618 | 68,529 | ||||||||||||
| Total revenue | $ | 282,330 | $ | 227,612 | $ | 1,076,794 | $ | 846,589 | ||||||||
| Three Months Ended | Year Ended | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| Percentage of Total Revenue: | ||||||||||||||||
| Marketplace revenue: | ||||||||||||||||
| Premier Agent | 71 | % | 72 | % | 71 | % | 71 | % | ||||||||
| Other real estate | 17 | % | 13 | % | 15 | % | 12 | % | ||||||||
| Mortgages | 7 | % | 7 | % | 7 | % | 8 | % | ||||||||
| 94 | % | 93 | % | 94 | % | 92 | % | |||||||||
| Display revenue | 6 | % | 7 | % | 6 | % | 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 | 2016 to 2017 | ||||||
| 2017 | 2016 | % Change | |||||
| (in millions) | |||||||
| Average Monthly Unique Users (1) | 151.6 | 140.1 | 8 | % | |||
| Visits (2) | 1,435.6 | 1,189.7 | 21 | % | |||
(1)
(2) Visits includes visits to the
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 | |||||||
| Reconciliation of Forecasted Adjusted EBITDA to Forecasted Net Income (Loss): | ||||||||
| Forecasted Net income (loss) | $ | (15,800 | ) | $ | 45,500 | |||
| Forecasted Other income | (1,500 | ) | (5,200 | ) | ||||
| Forecasted Depreciation and amortization expense | 28,000 | 120,500 | ||||||
| Forecasted Share-based compensation expense | 27,000 | 124,500 | ||||||
| Forecasted Interest expense | 6,800 | 27,200 | ||||||
| Forecasted Income tax benefit | - | (5,000 | ) | |||||
| Forecasted Adjusted EBITDA | $ | 44,500 | $ | 307,500 | ||||
Contacts:
Investor Relations
ir@zillowgroup.com
Public Relations
press@zillow.com
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