Zillow Earnings 2021-03-31

Balance Sheet	Income Statement	Cash Flow
Assets, Equity	Rev, G Profit, Net Income	Ops, Inv, Fin

z-20210331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_____________________________________________________

FORM 10-Q

_____________________________________________________


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2021


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 001-36853

_____________________________________________________

ZILLOW GROUP, INC.

(Exact name of registrant as specified in its charter)

_____________________________________________________


Washington						47-1645716
(State or other jurisdiction of						(I.R.S. Employer
incorporation or organization)						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)

_____________________________________________________

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A Common Stock, par value $0.0001 per share	ZG	The Nasdaq Global Select Market
Class C Capital Stock, par value $0.0001 per share	Z	The Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

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. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of April 27, 2021, 61,335,992 shares of Class A common stock, 6,217,447 shares of Class B common stock, and 180,104,154 shares of Class C capital stock were outstanding.

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ZILLOW GROUP, INC.

Quarterly Report on Form 10-Q

For the Three Months Ended March 31, 2021

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As used in this Quarterly Report on Form 10-Q, the terms “Zillow Group,” “the Company,” “we,” “us” and “our” refer to Zillow Group, Inc., unless the context indicates otherwise.

NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, including Part I, Item 2 (Management’s Discussion and Analysis of Financial Condition and Results of Operations), contains forward-looking statements based on our management’s beliefs and assumptions and on information currently available to our management. Forward-looking statements include all statements that are not historical facts and generally may be identified by terms such as “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “could,” “would,” “project,” “plan,” “expect” or the negative or plural of these words or similar expressions.

These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those risks, uncertainties and assumptions described in Part I, Item 1A (Risk Factors) in our Annual Report on Form 10-K for the year ended December 31, 2020, including, but not limited to:

•the impact of the COVID-19 pandemic or other public health crises and any associated economic downturn on our future financial position, operations and financial performance;

•the magnitude, duration and severity of the COVID-19 pandemic and the availability and widespread distribution and use of effective vaccines;

•the impact of actions taken by governments, businesses and individuals in response to the COVID-19 pandemic, including changes in laws or regulations that limit our ability to operate;

•the current and future health and stability of the economy, financial conditions and residential housing market, including any extended slowdown in the real estate markets as a result of the COVID-19 pandemic;

•changes in laws or regulations applicable to our business, employees, products or services, including current and future laws, regulations and orders that limit our ability to operate in light of the COVID-19 pandemic;

•the satisfaction of conditions precedent to the closing of Zillow Group’s proposed acquisition of ShowingTime.com, Inc., including expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Act;

•changes in general economic and financial conditions that reduce demand for our products and services, lower our profitability or reduce our access to credit;

•actual or anticipated fluctuations in our financial condition and results of operations;

•changes in projected operational and financial results;

•addition or loss of significant customers;

•actual or anticipated changes in our growth rate relative to that of our competitors;

•acquisitions, strategic partnerships, joint ventures, capital-raising activities or other corporate transactions or commitments by us or our competitors;

•actual or anticipated changes in technology, products, markets or services by us or our competitors;

•ability to obtain or maintain licenses and permits to support our current and future businesses;

•ability to comply with MLS rules and requirements to access and use listing data, and to maintain or establish relationships with listings and data providers;

•ability to operate our mortgage originations business, including the ability to obtain sufficient financing;

•fluctuations in the valuation of companies perceived by investors to be comparable to us;

•the impact of natural disasters and other catastrophic events;

•the impact of pending or future litigation; and

•issuance of new or updated research or reports by securities analysts.

Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the effect of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this report may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

You should not rely on forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. Moreover, except as required by law, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements, and we undertake no obligation to update publicly any forward-looking statements for any reason after the date of this report to conform these statements to actual results or to changes in our expectations.

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WHERE YOU CAN FIND MORE INFORMATION

Our filings with the Securities and Exchange Commission, or SEC, including our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports, are available on the “Investors” section of our website at www.zillowgroup.com, free of charge, as soon as reasonably practicable after the electronic filing of these reports with the SEC. The information contained on our website is not a part of this Quarterly Report on Form 10-Q or any other document we file with the SEC.

Investors and others should note that Zillow Group announces material financial information to its investors using its press releases, SEC filings and public conference calls and webcasts. Zillow Group intends to also use the following channels as a means of disclosing information about Zillow Group, its services and other matters and for complying with its disclosure obligations under Regulation FD:

•Zillow Group Investor Relations Webpage (http://investors.zillowgroup.com)

•Zillow Group Investor Relations Blog (http://www.zillowgroup.com/ir-blog)

•Zillow Group Twitter Account (https://twitter.com/zillowgroup)

The information Zillow Group posts through these channels may be deemed material. Accordingly, investors should monitor these channels, in addition to following Zillow Group’s press releases, SEC filings and public conference calls and webcasts. This list may be updated from time to time. The information we post through these channels is not a part of this Quarterly Report on Form 10-Q or any other document we file with the SEC, and the inclusion of our website addresses and Twitter account are as inactive textual references only.

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PART I – FINANCIAL INFORMATION

Item 1. Financial Statements (unaudited)

ZILLOW GROUP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share data, unaudited)


	March 31, 2021		December 31, 2020
Assets
Current assets:
Cash and cash equivalents	$	3,401,762	$	1,703,130
Short-term investments	1,294,051		2,218,108
Accounts receivable, net of allowance for doubtful accounts of $3,460 and $3,427 at March 31, 2021 and December 31, 2020, respectively	82,461		69,940
Mortgage loans held for sale	274,319		330,758
Inventory	472,397		491,293
Prepaid expenses and other current assets	107,877		75,846
Restricted cash	120,713		75,805
Total current assets	5,753,580		4,964,880
Contract cost assets	50,182		50,719
Property and equipment, net	190,234		196,152
Right of use assets	180,610		187,960
Goodwill	1,984,907		1,984,907
Intangible assets, net	87,711		94,767
Other assets	8,678		7,175
Total assets	$	8,255,902	$	7,486,560
Liabilities and shareholders’ equity
Current liabilities:
Accounts payable	$	17,044	$	18,974
Accrued expenses and other current liabilities	121,692		94,487
Accrued compensation and benefits	49,844		47,666
Borrowings under credit facilities	662,175		670,209
Deferred revenue	54,192		48,995
Lease liabilities, current portion	28,465		28,310
Total current liabilities	933,412		908,641
Lease liabilities, net of current portion	200,762		207,723
Convertible senior notes	1,597,205		1,613,523
Other long-term liabilities	14,485		14,857
Total liabilities	2,745,864		2,744,744
Commitments and contingencies (Note 16)
Shareholders’ equity:
Preferred stock, $0.0001 par value; 30,000,000 shares authorized; no shares issued and outstanding	—		—
Class A common stock, $0.0001 par value; 1,245,000,000 shares authorized; 61,335,992 and 61,101,303 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively	6		6
Class B common stock, $0.0001 par value; 15,000,000 shares authorized; 6,217,447 shares issued and outstanding	1		1
Class C capital stock, $0.0001 par value; 600,000,000 shares authorized; 179,754,423 and 173,207,170 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively	18		17
Additional paid-in capital	6,596,850		5,880,883
Accumulated other comprehensive income	454		164
Accumulated deficit	(1,087,291)		(1,139,255)
Total shareholders’ equity	5,510,038		4,741,816
Total liabilities and shareholders’ equity	$	8,255,902	$	7,486,560

See accompanying notes to the condensed consolidated financial statements.

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ZILLOW GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data, unaudited)


	Three Months Ended March 31,
	2021		2020
Revenue:
Homes	$	704,152	$	769,873
IMT	446,328		330,666
Mortgages	67,960		25,282
Total revenue	1,218,440		1,125,821
Cost of revenue (exclusive of amortization) (1):
Homes	640,618		732,199
IMT	28,016		24,318
Mortgages	18,396		5,155
Total cost of revenue	687,030		761,672
Sales and marketing	193,593		204,648
Technology and development	148,856		134,918
General and administrative	100,551		92,285
Impairment costs	—		76,800
Acquisition-related costs	817		—
Total costs and expenses	1,130,847		1,270,323
Income (loss) from operations	87,593		(144,502)
Loss on extinguishment of debt	(1,403)		—
Other income	2,439		9,593
Interest expense	(39,555)		(37,592)
Income (loss) before income taxes	49,074		(172,501)
Income tax benefit	2,890		9,228
Net income (loss)	$	51,964	$	(163,273)
Net income (loss) per share:
Basic	$	0.21	$	(0.78)
Diluted	$	0.20	$	(0.78)
Weighted-average shares outstanding:
Basic	243,234		210,674
Diluted	259,346		210,674
____________________ (1) Amortization of website development costs and intangible assets included in technology and development	$	20,838	$	17,184

See accompanying notes to the condensed consolidated financial statements.

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ZILLOW GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands, unaudited)


	Three Months Ended March 31,
	2021		2020
Net income (loss)	$	51,964	$	(163,273)
Other comprehensive income:
Unrealized gains on investments	261		3,602
Reclassification adjustment for net investment gains included in net income (loss)	—		434
Net unrealized gains on investments	261		4,036
Currency translation adjustments	29		(90)
Total other comprehensive income	290		3,946
Comprehensive income (loss)	$	52,254	$	(159,327)

See accompanying notes to the condensed consolidated financial statements.

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ZILLOW GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(in thousands, except share data, unaudited)


	Class A Common Stock, Class B Common Stock and Class C Capital Stock			Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Income		Total Shareholders’ Equity

	Shares	Amount
Balance at January 1, 2021	240,525,920	$	24	$	5,880,883	$	(1,139,255)	$	164	$	4,741,816
Issuance of common and capital stock upon exercise of stock options	1,602,896	—		61,149		—		—		61,149
Vesting of restricted stock units	813,471	—		—		—		—		—
Restricted stock units withheld for tax liability	(622)	—		(124)		—		—		(124)
Share-based compensation expense	—	—		67,386		—		—		67,386
Issuance of Class C capital stock in connection with equity offering, net of issuance costs of $6,054	3,163,502	1		544,557		—		—		544,558
Conversion of convertible senior notes	1,202,720	—		42,999		—		—		42,999
Unwind of capped call transactions	(25)	—		—		—		—		—
Net income	—	—		—		51,964		—		51,964
Other comprehensive income	—	—		—		—		290		290
Balance at March 31, 2021	247,307,862	$	25	$	6,596,850	$	(1,087,291)	$	454	$	5,510,038


	Class A Common Stock, Class B Common Stock and Class C Capital Stock			Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Income		Total Shareholders’ Equity

	Shares	Amount
Balance at January 1, 2020	209,066,855	$	21	$	4,412,200	$	(977,140)	$	340	$	3,435,421
Issuance of common and capital stock upon exercise of stock options	3,207,375	1		92,201		—		—		92,202
Vesting of restricted stock units	638,909	—		—		—		—		—
Share-based compensation expense	—	—		47,465		—		—		47,465
Net loss	—	—		—		(163,273)		—		(163,273)
Other comprehensive income	—	—		—		—		3,946		3,946
Balance at March 31, 2020	212,913,139	$	22	$	4,551,866	$	(1,140,413)	$	4,286	$	3,415,761

See accompanying notes to the condensed consolidated financial statements.

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ZILLOW GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands, unaudited)


	Three Months Ended March 31,
	2021		2020
Operating activities
Net income (loss)	$	51,964	$	(163,273)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	28,899		29,026
Share-based compensation expense	63,673		43,795
Amortization of right of use assets	7,350		6,465
Amortization of contract cost assets	10,130		8,415
Amortization of debt discount and debt issuance costs	25,271		22,547
Loss on extinguishment of debt	1,403		—
Impairment costs	—		76,800
Deferred income taxes	(2,890)		(9,228)
Loss on disposal of property and equipment and other assets	4,418		1,952
Credit loss expense	128		558
Net loss on investment securities	—		434
Amortization (accretion) of bond premium (discount)	4,014		(473)
Changes in operating assets and liabilities:
Accounts receivable	(12,649)		(5,335)
Mortgage loans held for sale	56,439		(341)
Inventory	18,893		302,593
Prepaid expenses and other assets	(28,643)		(2,916)
Contract cost assets	(9,593)		(9,771)
Lease liabilities	(6,806)		(1,625)
Accounts payable	(2,235)		7,673
Accrued expenses and other current liabilities	24,889		4,588
Accrued compensation and benefits	2,178		(4,967)
Deferred revenue	5,197		(4,400)
Other long-term liabilities	(372)		(527)
Net cash provided by operating activities	241,658		301,990
Investing activities
Proceeds from maturities of investments	920,304		296,272
Proceeds from sales of investments	—		53,997
Purchases of investments	—		(58,459)
Purchases of property and equipment	(11,485)		(32,966)
Purchases of intangible assets	(4,485)		(4,503)
Net cash provided by investing activities	904,334		254,341
Financing activities
Proceeds from issuance of Class C capital stock, net of issuance costs	544,557		—
Proceeds from borrowings on credit facilities	126,010		34,460
Repayments of borrowings on credit facilities	(88,340)		(294,150)
Net borrowings (repayments) on warehouse line of credit and repurchase agreements	(45,704)		4,386
Proceeds from exercise of stock options	61,149		92,202
Value of equity awards withheld for tax liability	(124)		—
Net cash provided by (used in) financing activities	597,548		(163,102)
Net increase in cash, cash equivalents and restricted cash during period	1,743,540		393,229
Cash, cash equivalents and restricted cash at beginning of period	1,778,935		1,230,909
Cash, cash equivalents and restricted cash at end of period	$	3,522,475	$	1,624,138
Supplemental disclosures of cash flow information
Cash paid for interest	$	14,191	$	17,038
Noncash transactions:
Capitalized share-based compensation	$	3,713	$	3,670
Write-off of fully depreciated property and equipment	$	11,603	$	4,143
Write-off of fully amortized intangible assets	$	1,300	$	—
Property and equipment purchased on account	$	905	$	9,445

See accompanying notes to the condensed consolidated financial statements.

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ZILLOW GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 1. Organization and Description of Business

Zillow Group, Inc. is reimagining real estate to make it easier to unlock life’s next chapter. As the most visited real estate website in the United States, Zillow and its affiliates offer customers an on-demand experience for selling, buying, renting or financing with transparency and nearly seamless end-to-end service. Zillow Offers buys and sells homes directly in dozens of markets across the country, allowing sellers control over their timeline. Zillow Home Loans, our affiliate lender, provides our customers with an easy option to get pre-approved and secure financing for their next home purchase. In September 2020, Zillow launched Zillow Homes, Inc., a licensed brokerage entity, to streamline Zillow Offers transactions.

Other consumer brands include Trulia, StreetEasy, HotPads and Out East. In addition, Zillow Group provides a comprehensive suite of marketing software and technology solutions which include Mortech, dotloop, Bridge Interactive and New Home Feed. Zillow, Inc. was incorporated as a Washington corporation in December 2004, and we launched the initial version of our website, Zillow.com, in February 2006. Zillow Group, Inc. was incorporated as a Washington corporation in July 2014 in connection with our acquisition of Trulia, Inc. (“Trulia”), and upon the closing of the Trulia acquisition in February 2015, each of Zillow, Inc. and Trulia became wholly owned subsidiaries of Zillow Group, Inc.

Certain Significant Risks and Uncertainties

We operate in a dynamic industry and, accordingly, can be affected by a variety of factors. For example, we believe that changes in any of the following areas could have a significant negative effect on us in terms of our future financial position, results of operations or cash flows: public health crises, like the COVID-19 pandemic and the availability and widespread distribution and use of effective vaccines; rates of revenue growth; our ability to successfully integrate and realize the benefits of our past or future strategic acquisitions or investments; the satisfaction of conditions precedent to the closing of our proposed acquisition of ShowingTime.com, Inc., including expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Act; our ability to manage advertising inventory or pricing; engagement and usage of our products; our investment of resources to pursue strategies that may not prove effective; competition in our market; the stability of the residential real estate market and the impact of interest rate changes; changes in technology, products, markets or services by us or our competitors; addition or loss of significant customers; our ability to maintain or establish relationships with listings and data providers; our ability to obtain or maintain licenses and permits to support our current and future businesses; actual or anticipated changes to our products and services; changes in government regulation affecting our business; outcomes of legal proceedings; natural disasters and catastrophic events; scaling and adaptation of existing technology and network infrastructure; management of our growth; our ability to attract and retain qualified employees and key personnel; protection of customers’ information and other privacy concerns; protection of our brand and intellectual property; and intellectual property infringement and other claims, among other things.

Note 2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying condensed consolidated financial statements include Zillow Group, Inc. and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. These condensed consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Accordingly, these interim condensed consolidated financial statements should be read in conjunction with the audited financial statements and accompanying notes included in Zillow Group, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2020, which was filed with the SEC on February 12, 2021. The condensed consolidated balance sheet as of December 31, 2020, included herein, was derived from the audited financial statements of Zillow Group, Inc. as of that date.

The unaudited condensed consolidated interim financial statements, in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments, necessary to present fairly our financial position as of March 31, 2021 and our results of operations, comprehensive income (loss), shareholders’ equity and cash flows for the three months ended March 31, 2021 and 2020. The results for the three months ended March 31, 2021 are not necessarily indicative of the results to be expected for the year ending December 31, 2021 or for any interim period or for any other future year.

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Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and the related disclosures at the date of the financial statements, as well as the reported amounts of revenue and expenses during the periods presented. On an ongoing basis, we evaluate our estimates, including those related to the accounting for certain revenue offerings, the net realizable value of inventory, amortization period and recoverability of contract cost assets, website and software development costs, recoverability of long-lived assets and intangible assets, share-based compensation, income taxes, business combinations and the recoverability of goodwill, among others. To the extent there are material differences between these estimates, judgments or assumptions and actual results, our financial statements will be affected. The COVID-19 pandemic has introduced significant additional uncertainty with respect to estimates, judgments and assumptions, which may materially impact the estimates previously listed, among others.

Recently Adopted Accounting Standards

In December 2019, the Financial Accounting Standards Board (“FASB”) issued guidance which is intended to simplify the accounting for income taxes. It removes certain exceptions to the general principles and clarifies and amends existing guidance to improve consistent application. This guidance is effective for interim and annual periods beginning after December 15, 2020, and early adoption is permitted. We adopted this guidance on January 1, 2021. The method of adoption for this guidance varies based on the amendment, however the relevant amendments have been applied on a prospective basis. The adoption of this guidance did not have a material impact on our financial position, results of operations or cash flows.

Recently Issued Accounting Standards Not Yet Adopted

In August 2020, the FASB issued guidance which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts in an entity’s own equity. Among other changes, the guidance removes the liability and equity separation models for convertible instruments. Instead, entities will account for convertible debt instruments wholly as debt unless convertible instruments contain features that require bifurcation as a derivative or that result in substantial premiums accounted for as paid-in capital. The guidance also requires the application of the if-converted method to calculate the impact of convertible instruments on diluted earnings per share. The guidance is effective for fiscal years beginning after December 15, 2021, with early adoption permitted for fiscal years beginning after December 15, 2020, and can be adopted on either a retrospective or modified retrospective basis. We expect to adopt this guidance on January 1, 2022. Although we continue to evaluate the method of adoption and impact of this guidance on our financial position, results of operations and cash flows, upon adoption we expect this guidance to result in a reclassification of conversion feature balances from additional paid-in capital to debt and to decrease reported interest expense for our convertible senior notes.

In March 2020, the FASB issued guidance which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions that reference the London Inter-Bank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued because of reference rate reform. This guidance is optional for a limited period of time to ease the potential burden in accounting for, or recognizing the effects of, reference rate reform on financial reporting. This guidance is effective from March 12, 2020 through December 31, 2022. Entities may elect to adopt the amendments for contract modifications as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020, up to the date that the financial statements are available to be issued. We expect to apply some of the expedients and exceptions provided in this guidance to our credit facilities, warehouse line of credit and master repurchase agreements, all of which reference the one-month LIBOR in the applicable interest rate, as publication of the one-month LIBOR is expected to cease after June 30, 2023. We expect to amend our facility agreements prior to that date. As the goal of the reference rate reform transition is for it to be economically neutral to entities, we do not believe the adoption of this guidance will have a material impact on our financial position, results of operations or cash flows.

Note 3. Fair Value Measurements

We applied the following methods and assumptions in estimating our fair value measurements:

Cash equivalents — The fair value measurement of money market funds is based on quoted market prices in active markets (Level 1). The fair value measurement of other cash equivalents is based on observable market-based inputs principally derived from or corroborated by observable market data (Level 2).

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Short-term investments — The fair value measurement of our short-term investments is based on observable market-based inputs or inputs that are derived principally from or corroborated by observable market data by correlation or other means (Level 2).

Restricted cash — The carrying value of restricted cash approximates fair value due to the short period of time amounts borrowed on the credit facilities are outstanding and amounts are held in escrow (Level 1).

Mortgage loans held for sale — The fair value of mortgage loans held for sale is generally calculated by reference to quoted prices in secondary markets for commitments to sell mortgage loans with similar characteristics (Level 2).

Interest rate lock commitments — The fair value of interest rate lock commitments (“IRLCs”) is calculated by reference to quoted prices in secondary markets for commitments to sell mortgage loans with similar characteristics. Expired commitments are excluded from the fair value measurement. Since not all IRLCs will become closed loans, we adjust our fair value measurements for the estimated amount of IRLCs that will not close. This adjustment is effected through the pull-through rate, which represents the probability that an interest rate lock commitment will ultimately result in a closed loan (Level 3).

The following table presents the range and weighted-average pull-through rates used in determining the fair value of IRLCs as of the dates presented:


	March 31, 2021	December 31, 2020
Range	50% - 100%	47% - 100%
Weighted-average	81%	75%

Forward contracts — The fair value of mandatory loan sales commitments and derivative instruments such as forward sales of mortgage-backed securities that are utilized as economic hedging instruments are calculated by reference to quoted prices for similar assets (Level 2).

The following tables present the balances of assets and liabilities measured at fair value on a recurring basis, by level within the fair value hierarchy, as of the dates presented (in thousands):


	March 31, 2021
	Total		Level 1		Level 2		Level 3
Cash equivalents:
Money market funds	$	3,074,175	$	3,074,175	$	—	$	—
Short-term investments:
U. S. government agency securities	988,774		—		988,774		—
Treasury bills	298,984		—		298,984		—
Municipal securities	6,044		—		6,044		—
Certificates of deposit	249		—		249		—
Restricted cash	120,713		120,713		—		—
Mortgage origination-related:
Mortgage loans held for sale	274,319		—		274,319		—
IRLCs	5,002		—		—		5,002
Forward contracts - other current assets	4,946		—		4,946		—
Forward contracts - other current liabilities	(16)		—		(16)		—
Total	$	4,773,190	$	3,194,888	$	1,573,300	$	5,002

Table of Contents


	December 31, 2020
	Total		Level 1		Level 2		Level 3
Cash equivalents:
Money market funds	$	1,486,384	$	1,486,384	$	—	$	—
Municipal securities	3,228		—		3,228		—
Short-term investments:
Treasury bills	1,163,813		—		1,163,813		—
U. S. government agency securities	1,037,577		—		1,037,577		—
Municipal securities	16,220		—		16,220		—
Certificates of deposit	498		—		498		—
Restricted cash	75,805		75,805		—		—
Mortgage origination-related:
Mortgage loans held for sale	330,758		—		330,758		—
IRLCs	12,342		—		—		12,342
Forward contracts - other current liabilities	(2,608)		—		(2,608)		—
Total	$	4,124,017	$	1,562,189	$	2,549,486	$	12,342

The following table presents the changes in our IRLCs during the three months ended March 31, 2021 (in thousands):


	Three Months Ended March 31, 2021		Three Months Ended March 31, 2020
Balance, beginning of the period	$	12,342	$	937
Issuances	18,301		5,208
Transfers	(24,398)		(5,349)
Fair value changes recognized in earnings	(1,243)		1,429
Balance, end of period	$	5,002	$	2,225

At March 31, 2021, the notional amounts of the hedging instruments related to our mortgage loans held for sale were $336.2 million and $560.0 million for our IRLCs and forward contracts, respectively. At December 31, 2020, the notional amounts of the hedging instruments related to our mortgage loans held for sale were $378.1 million and $652.1 million for our IRLCs and forward contracts, respectively. We do not have the right to offset our derivative positions.

See Note 11 for the carrying amount and estimated fair value of our convertible senior notes.

Table of Contents

Note 4. Cash and Cash Equivalents, Short-term Investments and Restricted Cash

The following tables present the amortized cost, gross unrealized gains and losses and estimated fair market value of our cash and cash equivalents, short-term investments and restricted cash as of the dates presented (in thousands):


	March 31, 2021
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Market Value
Cash	$	327,587	$	—	$	—	$	327,587
Cash equivalents:
Money market funds	3,074,175		—		—		3,074,175
Short-term investments:
U. S. government agency securities	988,478		303		(7)		988,774
Treasury bills	298,953		31		—		298,984
Municipal securities	6,046		—		(2)		6,044
Certificates of deposit	249		—		—		249
Restricted cash	120,713		—		—		120,713
Total	$	4,816,201	$	334	$	(9)	$	4,816,526


	December 31, 2020
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Market Value
Cash	$	213,518	$	—	$	—	$	213,518
Cash equivalents:
Money market funds	1,486,384		—		—		1,486,384
Municipal securities	3,229		—		(1)		3,228
Short-term investments:
Treasury bills	1,163,748		65		—		1,163,813
U.S. government agency securities	1,037,572		57		(52)		1,037,577
Municipal securities	16,226		—		(6)		16,220
Certificates of deposit	498		—		—		498
Restricted cash	75,805		—		—		75,805
Total	$	3,996,980	$	122	$	(59)	$	3,997,043

All short-term investments as of March 31, 2021 have a contractual maturity date of one year or less.

Note 5. Inventory

The following table presents the components of inventory, net of applicable lower of cost or net realizable value adjustments, as of the dates presented (in thousands):


	March 31, 2021		December 31, 2020
Finished goods	$	341,887	$	339,372
Work-in-process	130,510		151,921
Inventory	$	472,397	$	491,293

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Note 6. Contract Balances

Contract assets were $34.3 million and $20.8 million as of March 31, 2021 and December 31, 2020, respectively. Contract assets are recorded within prepaids and other current assets in our condensed consolidated balance sheets.

For the three months ended March 31, 2021 and 2020, we recognized revenue of $46.5 million and $36.0 million, respectively, that was included in the deferred revenue balance at the beginning of the related period.

Note 7. Contract Cost Assets

As of March 31, 2021 and December 31, 2020, we had $50.2 million and $50.7 million, respectively, of contract cost assets. During the three months ended March 31, 2021 and 2020, we did not incur any impairment losses to our contract cost assets. We recorded amortization expense related to contract cost assets of $10.1 million and $8.4 million during the three months ended March 31, 2021 and 2020, respectively.

Note 8. Property and Equipment, net

The following table presents the detail of property and equipment as of the dates presented (in thousands):


	March 31, 2021		December 31, 2020
Website development costs	$	110,971	$	95,466
Leasehold improvements	102,632		110,280
Office equipment, furniture and fixtures	34,561		39,607
Construction-in-progress	32,553		44,151
Computer equipment	20,209		20,433
Property and equipment	300,926		309,937
Less: accumulated amortization and depreciation	(110,692)		(113,785)
Property and equipment, net	$	190,234	$	196,152

Price	29.53	EPS	-1
Shares	207	P/E	-30
MCap	6,113	P/FCF	-9
Net Debt	-920	EBIT	-208
TEV	5,193	TEV/EBIT	-25
TTM 2019-09-30, in MM, except price, ratios

10-Q	2021-03-31	Filed 2021-05-04
10-K	2020-12-31	Filed 2021-02-12
10-Q	2020-09-30	Filed 2020-11-05
10-Q	2020-06-30	Filed 2020-08-06
10-Q	2020-03-31	Filed 2020-05-07
10-K	2019-12-31	Filed 2020-02-19
10-Q	2019-09-30	Filed 2019-11-07
10-Q	2019-06-30	Filed 2019-08-07
10-Q	2019-03-31	Filed 2019-05-09
10-K	2018-12-31	Filed 2019-02-21
10-Q	2018-09-30	Filed 2018-11-06
10-Q	2018-06-30	Filed 2018-08-06
10-Q	2018-03-31	Filed 2018-05-08
10-K	2017-12-31	Filed 2018-02-15
10-Q	2017-09-30	Filed 2017-11-07
10-Q	2017-06-30	Filed 2017-08-08
10-Q	2017-03-31	Filed 2017-05-04
10-K	2016-12-31	Filed 2017-02-07
10-Q	2016-09-30	Filed 2016-11-02
10-Q	2016-06-30	Filed 2016-08-05
10-Q	2016-03-31	Filed 2016-05-04
10-K	2015-12-31	Filed 2016-02-12
10-Q	2015-09-30	Filed 2015-11-05
10-Q	2015-06-30	Filed 2015-08-05
10-Q	2015-03-31	Filed 2015-05-12

EX-31.1	q12021form10-qex311.htm
EX-31.2	q12021form10-qex312.htm
EX-32.1	q12021form10-qex321.htm
EX-32.2	q12021form10-qex322.htm


		Page
	PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements (unaudited)	3
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Operations	4
	Condensed Consolidated Statements of Comprehensive Income (Loss)	5
	Condensed Consolidated Statements of Shareholders’ Equity	6
	Condensed Consolidated Statements of Cash Flows	7
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	46
Item 4.	Controls and Procedures	48

	PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	49
Item 1A.	Risk Factors	50
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	51
Item 6.	Exhibits	52

	Signatures	53

8-K	2020-11-05
8-K	2020-10-11
8-K	2020-09-17
8-K	2020-08-06
8-K	2020-06-09
8-K	2020-06-02
8-K	2020-05-15
8-K	2020-05-12
8-K	2020-05-07
8-K	2020-04-06
8-K	2020-03-23
8-K	2020-03-23
8-K	2020-03-17
8-K	2020-02-19
8-K	2019-11-18
8-K	2019-11-07
8-K	2019-10-04
8-K	2019-09-04
8-K	2019-09-04
8-K	2019-09-03
8-K	2019-08-07
8-K	2019-06-04
8-K	2019-05-09
8-K	2019-05-03
8-K	2019-04-23
8-K	2019-02-21
8-K	2018-11-13
8-K	2018-11-06
8-K	2018-10-31
8-K	2018-10-16
8-K	2018-08-03
8-K	2018-08-02
8-K	2018-06-28
8-K	2018-06-28
8-K	2018-06-25
8-K	2018-05-31
8-K	2018-05-03
8-K	2018-04-12
8-K	2018-02-08

Z 10Q Quarterly Report

Zillow Earnings 2021-03-31