Zillow Group Earnings 2020-06-30

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

z-20200630

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 June 30, 2020


☐			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

@ZillowGroup

(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 July 30, 2020, 60,002,842 shares of Class A common stock, 6,217,447 shares of Class B common stock, and 160,765,729 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 June 30, 2020

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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, 2019 and in Part II, Item 1A (Risk Factors) in this Quarterly Report on Form 10-Q, including, but not limited to:

•the impact of the novel coronavirus (“COVID-19”) pandemic and any associated economic downturn on our future financial position, operations and financial performance;

•the magnitude, duration and severity of the COVID-19 pandemic;

•the impact of actions taken by governments, businesses, and individuals in response to the COVID-19 pandemic;

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

•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 COVID-19;

•changes in general economic and financial conditions that reduce demand for our products and services, lower our profit margins 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;

•actual or anticipated changes to our products and services;

•ability to maintain or establish relationships with listings and data providers;

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

•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 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)


	June 30, 2020		December 31, 2019
Assets
Current assets:
Cash and cash equivalents	$	2,045,474	$	1,141,263
Short-term investments	1,491,167		1,280,989
Accounts receivable, net of allowance for doubtful accounts of $2,282 and $4,522 at June 30, 2020 and December 31, 2019, respectively	66,878		67,005
Mortgage loans held for sale	75,021		36,507
Inventory	135,401		836,627
Prepaid expenses and other current assets	56,373		58,117
Restricted cash	33,620		89,646
Total current assets	3,903,934		3,510,154
Contract cost assets	47,747		45,209
Property and equipment, net	195,747		170,489
Right of use assets	199,422		212,153
Goodwill	1,984,907		1,984,907
Intangible assets, net	106,990		190,567
Other assets	11,041		18,494
Total assets	$	6,449,788	$	6,131,973
Liabilities and shareholders’ equity
Current liabilities:
Accounts payable	$	14,307	$	8,343
Accrued expenses and other current liabilities	74,646		85,442
Accrued compensation and benefits	34,520		37,805
Borrowings under credit facilities	187,032		721,951
Deferred revenue	44,514		39,747
Lease liabilities, current portion	22,789		17,592
Convertible senior notes, current portion	9,637		9,637
Total current liabilities	387,445		920,517
Lease liabilities, net of current portion	214,752		220,445
Convertible senior notes, net of current portion	1,810,341		1,543,402
Deferred tax liabilities and other long-term liabilities	14,192		12,188
Total liabilities	2,426,730		2,696,552
Commitments and contingencies (Note 17)
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; 59,850,004 and 58,739,989 shares issued and outstanding as of June 30, 2020 and December 31, 2019, 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; 159,974,485 and 144,109,419 shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively	16		14
Additional paid-in capital	5,246,371		4,412,200
Accumulated other comprehensive income	1,525		340
Accumulated deficit	(1,224,861)		(977,140)
Total shareholders’ equity	4,023,058		3,435,421
Total liabilities and shareholders’ equity	$	6,449,788	$	6,131,973

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 June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
Revenue:
Homes	$	454,252	$	248,924	$	1,224,125	$	377,396
IMT	280,339		323,669		611,005		621,941
Mortgages	33,761		26,985		59,043		54,345
Total revenue	768,352		599,578		1,894,173		1,053,682
Cost of revenue (exclusive of amortization) (1):
Homes	431,788		240,732		1,163,987		363,151
IMT	23,387		26,059		47,705		50,310
Mortgages	5,896		4,430		11,051		9,108
Total cost of revenue	461,071		271,221		1,222,743		422,569
Sales and marketing	155,598		187,433		360,246		349,020
Technology and development	128,857		120,330		263,775		228,100
General and administrative	85,511		82,839		177,796		178,613
Impairment costs	—		—		76,800		—
Integration costs	—		293		—		645
Total costs and expenses	831,037		662,116		2,101,360		1,178,947
Loss from operations	(62,685)		(62,538)		(207,187)		(125,265)
Gain on partial extinguishment of 2021 Notes	6,391		—		6,391		—
Other income	10,115		9,458		19,708		18,626
Interest expense	(37,590)		(18,897)		(75,182)		(35,363)
Loss before income taxes	(83,769)		(71,977)		(256,270)		(142,002)
Income tax benefit (expense)	(679)		—		8,549		2,500
Net loss	$	(84,448)	$	(71,977)	$	(247,721)	$	(139,502)
Net loss per share — basic and diluted	$	(0.38)	$	(0.35)	$	(1.15)	$	(0.68)
Weighted-average shares outstanding — basic and diluted	219,467		205,754		215,070		205,137
____________________ (1) Amortization of website development costs and intangible assets included in technology and development	$	18,857	$	14,656	$	36,041	$	29,056

See accompanying notes to the condensed consolidated financial statements.

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ZILLOW GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(in thousands, unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
Net loss	$	(84,448)	$	(71,977)	$	(247,721)	$	(139,502)
Other comprehensive income (loss):
Unrealized gains (losses) on investments	(2,806)		751		796		1,895
Reclassification adjustment for net investment (gains) losses included in net loss	(62)		—		372		—
Net unrealized gains (losses) on investments	(2,868)		751		1,168		1,895
Currency translation adjustments	107		(52)		17		(94)
Total other comprehensive income (loss)	(2,761)		699		1,185		1,801
Comprehensive loss	$	(87,209)	$	(71,278)	$	(246,536)	$	(137,701)

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 April 1, 2020	212,913,139		$	22		$	4,551,866	$	(1,140,413)	$	4,286	$	3,415,761
Issuance of common and capital stock upon exercise of stock options	3,117,483		—			92,783		—		—		92,783
Vesting of restricted stock units	775,249		—			—		—		—		—
Shares and value of restricted stock units withheld for tax liability	(6)		—			—		—		—		—
Share-based compensation expense	—		—			57,171		—		—		57,171
Issuance of Class C capital stock in connection with equity offering, net of issuance costs of $10,877	8,800,000		1			411,522		—		—		411,523
Equity component of issuance of 2025 Notes, net of issuance costs of $3,279	—		—			154,813		—		—		154,813
Partial repurchase of 2021 Notes	753,936		—			(21,784)		—		—		(21,784)
Partial unwind of capped call transactions for 2021 Notes	(317,865)		—			—		—		—		—
Net loss	—		—			—		(84,448)		—		(84,448)
Other comprehensive loss	—		—			—		—		(2,761)		(2,761)
Balance at June 30, 2020	226,041,936		$	23		$	5,246,371	$	(1,224,861)	$	1,525	$	4,023,058


	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 April 1, 2019	205,130,332		$	21		$	4,022,218	$	(739,304)	$	197	$	3,283,132
Issuance of common and capital stock upon exercise of stock options	814,062		—			19,433		—		—		19,433
Vesting of restricted stock units	569,260		—			—		—		—		—
Shares and value of restricted stock units withheld for tax liability	(18)		—			(1)		—		—		(1)
Share-based compensation expense	—		—			46,820		—		—		46,820
Net loss	—		—			—		(71,977)		—		(71,977)
Other comprehensive income	—		—			—		—		699		699
Balance at June 30, 2019	206,513,636		$	21		$	4,088,470	$	(811,281)	$	896	$	3,278,106

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	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	6,324,858		1			184,984		—		—		184,985
Vesting of restricted stock units	1,414,158		—			—		—		—		—
Shares and value of restricted stock units withheld for tax liability	(6)		—			—		—		—		—
Share-based compensation expense	—		—			104,636		—		—		104,636
Issuance of Class C capital stock in connection with equity offering, net of issuance costs of $10,877	8,800,000		1			411,522		—		—		411,523
Equity component of issuance of 2025 Notes, net of issuance costs of $3,279	—		—			154,813		—		—		154,813

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	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

8-K	2020-08-06	Earnings, Exhibits
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

EX-10.2	q22020form10-qex102.htm
EX-10.3	q22020form10-qex103.htm
EX-31.1	q22020form10-qex311.htm
EX-31.2	q22020form10-qex312.htm
EX-32.1	q22020form10-qex321.htm
EX-32.2	q22020form10-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 Loss	5
	Condensed Consolidated Statements of Shareholders’ Equity	6
	Condensed Consolidated Statements of Cash Flows	8
	Notes to Condensed Consolidated Financial Statements	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	32
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	59
Item 4.	Controls and Procedures	61

	PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	62
Item 1A.	Risk Factors	63
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	64
Item 6.	Exhibits	65

	Signatures	66

Z 10Q Quarterly Report

Zillow Group Earnings 2020-06-30