Zillow Group, Inc.
ZILLOW GROUP, INC. (Form: 8-K, Received: 02/08/2018 16:11:48)

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of Earliest Event Reported): February 8, 2018

 

 

ZILLOW GROUP, INC.

(Exact name of registrant as specified in its charter)

 

 

 

Washington   001-36853   47-1645716

(State or other jurisdiction

of incorporation)

 

(Commission

File Number)

 

(I.R.S. Employer

Identification No.)

 

1301 Second Avenue, Floor 31, Seattle, Washington

  98101
(Address of principal executive offices)   (Zip Code)

(206) 470-7000

(Registrant’s telephone number, including area code)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company     ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    ☐

 

 

 


Item 2.02 Results of Operations and Financial Condition.

Zillow Group, Inc. (“Zillow Group”) today issued a press release announcing its financial results for the fiscal quarter and full year ended December 31, 2017. The full text of the press release issued in connection with the announcement is furnished as Exhibit 99.1 to this Current Report on Form 8-K.

The information in this Item 2.02 and Exhibit 99.1 of this Current Report on Form 8-K shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, except as expressly set forth by specific reference in such a filing.

 

Item 7.01 Regulation FD Disclosure.

During the year ended December 31, 2017, we recognized a non-cash impairment charge of $174.0 million related to our indefinite-lived Trulia trade names and trademarks intangible asset. In connection with our qualitative assessment of the recoverability of this asset during our annual impairment test as of October 1, 2017, we identified factors that led us to conclude it was more likely than not that the $351.0 million carrying value of the asset exceeded its fair value. The most significant of such factors was a shortfall in projected revenue related to the Trulia brand compared to projections at the time the intangible asset was initially recorded in February 2015. Accordingly, with the assistance of a third-party valuation specialist, we performed a quantitative analysis to determine the fair value of the intangible asset and concluded that our best estimate of its fair value was $177.0 million. In connection with this impairment analysis, we evaluated our planned future use of the Trulia trade names and trademarks intangible asset and concluded that it remains appropriate to consider this asset to have an indefinite life.

The information in this Item 7.01 of this Current Report on Form 8-K shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act, except as expressly set forth by specific reference in such a filing. This report will not be deemed an admission as to the materiality of any information required to be disclosed solely to satisfy the requirements of Regulation FD.

 

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.

 

Exhibit
Number
  

Description

99.1    Press release dated February 8, 2018 entitled “Zillow Group Reports Fourth Quarter and Full Year 2017 Results” issued by Zillow Group, Inc. on February 8, 2018.


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

Dated: February 8, 2018   ZILLOW GROUP, INC.
  By:  

/s/ S PENCER M. R ASCOFF

  Name:   Spencer M. Rascoff
  Title:   Chief Executive Officer

Exhibit 99.1

 

LOGO

 

Contacts:         
Raymond Jones       Katie Curnutte   
Investor Relations       Public Relations   
ir@zillowgroup.com       press@zillow.com   

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.

SEATTLE – February 8, 2018 – 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 quarter and full year ended December 31, 2017.

“Zillow Group had another fantastic year of record results in 2017 and exceeded $1 billion in revenue for the first time,” said Zillow Group CEO Spencer Rascoff. “We successfully transitioned advertisers to an auction-based pricing model, launched RealEstate.com, and continued to grow our emerging marketplaces, including two strategic acquisitions. We believe the next phase of our company’s evolution will make Zillow Group an even more meaningful part of the home-shopping experience. In 2018, we plan to deliver better experiences for consumers buying, selling or renting a home, and strengthen our partnerships with real estate professionals by aligning our growth with their success.”

Fourth Quarter 2017 Financial Highlights

 

    Revenue increased 24% to a record $282.3 million from $227.6 million in the fourth quarter of 2016.

 

    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 Revenue 1 increased 60% to $47.6 million from $29.8 million in the fourth quarter of 2016.

 

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


    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 $77.2 million in the fourth quarter of 2017, or (27)% of Revenue, which includes the impact of a $174.0 million non-cash impairment charge recorded in connection with Trulia’s trade names and trademarks indefinite-lived intangible asset, compared to GAAP net loss of $23.5 million in the fourth quarter of 2016, or (10)% of Revenue.

 

    Adjusted EBITDA was $70.9 million in the fourth quarter of 2017, or 25% of Revenue, which was an increase from $54.7 million in the fourth quarter of 2016, or 24% of Revenue.

Full Year 2017 Financial Highlights

 

    Revenue increased 27% to a record $1,076.8 million from $846.6 million in 2016.

 

    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 $94.4 million, or (9)% of Revenue, which includes the impact of the $174.0 million non-cash impairment charge, compared to GAAP net loss of $220.4 million in 2016, or (26)% of Revenue, which includes the impact of a $130.0 million litigation settlement.

 

    Adjusted EBITDA was $236.3 million, or 22% of Revenue, which was an increase from $14.8 million in 2016, or 2% of Revenue.

Fourth Quarter 2017 Operating and Business Highlights

 

    More than 151 million average monthly unique users visited Zillow Group brands’ mobile apps and websites during the fourth quarter of 2017, an increase of 8% year-over-year.

 

    Visits to Zillow Group brands’ mobile apps and websites Zillow ® , Trulia ® , StreetEasy ® (included as of March 2017) and RealEstate.com (included as of June 2017) increased 21% year-over-year to more than 1.4 billion during the fourth quarter of 2017. Premier Agent revenue per visit increased 1% to $0.139 from $0.138 in the same period last year.

 

2


    The number of Premier Agent ® advertisers, including brokerages and other teams, spending more than $5,000 per month grew by 70% year-over-year and increased 64% on a total dollar basis during the fourth quarter of 2017.

 

    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 February 8, 2018

   March 31, 2018      December 31, 2018  

(in millions)

     

Revenue

   $ 291 to $296      $  1,302 to $1,317  

Premier Agent revenue

   $ 206 to $208      $ 900 to $910  

Mortgages revenue

   $ 21 to $22      $ 95 to $96  

Rentals revenue (1)

   $ 30 to $31      $ 144 to $146  

Other revenue (1)

   $ 34 to $35      $ 163 to $165  

Operating expenses

   $ 302 to $307      $  1,240 to $1,255  

Net income (loss)

   $  (18.3)  to  $(13.3)      $ 38  to $53  

Adjusted EBITDA (2)

   $ 42 to $47      $ 300 to $315  

Depreciation and amortization

   $ 27 to $29      $ 118 to $123  

Share-based compensation expense

   $ 26 to $28      $ 122 to $127  

Capital expenditures

     ***      $ 93 to $98  

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) Zillow Group will begin reporting Rentals Revenue as a separate revenue category beginning with quarterly reporting for the three months ending March 31, 2018. In addition, Display Revenue will be included in the Other Revenue category and not reported separately. Beginning in 2018, Other Real Estate Revenue will be redefined as Other Revenue and will include revenue from New Construction, dotloop, Display, as well as from the sale of various other advertising and business software solutions.
(2) A reconciliation of forecasted Adjusted EBITDA to forecasted net income (loss) is provided below in this press release.

 

3


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 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 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 innovate and provide products and services that are attractive to its users and advertisers; 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; the impact of the real estate industry on Zillow Group’s business; the impact of pending litigation and other legal and regulatory matters; Zillow Group’s ability to increase awareness of the Zillow Group brands in a cost-effective manner; Zillow Group’s ability to attract consumers to Zillow Group’s mobile applications and websites; 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.

 

4


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.

 

5


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.

Twitter is a registered trademark of Twitter, Inc.

(ZFIN)

 

6


Reported Consolidated Results

ZILLOW GROUP, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

 

     December 31,
2017
    December 31,
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  

Goodwill

     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  
  

 

 

   

 

 

 

 

7


ZILLOW GROUP, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

 

     Three Months Ended
December 31,
    Year Ended
December 31,
 
     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.

 

8


ZILLOW GROUP, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

 

     Year Ended December 31,  
     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  

 

9


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
December 31,
     Year Ended
December 31,
 
     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 December 31, 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 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
December 31,
     Year Ended
December 31,
 
     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  

 

10


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
December 31,
    Year Ended
December 31,
 
     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  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total Marketplace revenue

     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
December 31,
    Year Ended December 31,  
     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
  

 

 

   

 

 

   

 

 

   

 

 

 

Total Marketplace revenue

     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
December 31,
     2016 to 2017
% Change
 
     2017      2016     
     (in millions)         

Average Monthly Unique Users (1)

     151.6        140.1        8

Visits (2)

     1,435.6        1,189.7        21

 

(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.

 

11


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
March 31, 2018
     Year Ending
December 31, 2018
 

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  
  

 

 

    

 

 

 

 

12