Zillow Earnings 2019-09-30

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

Document

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 September 30, 2019



☐	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 October 31, 2019, 58,524,004 shares of Class A common stock, 6,217,447 shares of Class B common stock, and 142,711,993 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 September 30, 2019

TABLE OF CONTENTS

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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, 2018, including, but not limited to:

•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;

•changes in laws or regulations applicable to our business, employees, products or services;

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

•the current and future health and stability of the residential housing market;

•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; 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.

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements (unaudited)

ZILLOW GROUP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share data, unaudited)



	September 30, 2019			December 31, 2018
Assets
Current assets:
Cash and cash equivalents	$	1,791,918		$	651,058
Short-term investments	531,679			903,867
Accounts receivable, net of allowance for doubtful accounts of $4,464 and $4,838 at September 30, 2019 and December 31, 2018, respectively	77,674			66,083
Mortgage loans held for sale	36,762			35,409
Inventory	879,353			162,829
Prepaid expenses and other current assets	66,413			61,067
Restricted cash	75,004			12,385
Total current assets	3,458,803			1,892,698
Contract cost assets	46,047			45,819
Property and equipment, net	154,251			135,172
Right of use assets	218,564			—
Goodwill	1,984,907			1,984,907
Intangible assets, net	197,527			215,904
Other assets	15,889			16,616
Total assets	$	6,075,988		$	4,291,116
Liabilities and shareholders’ equity
Current liabilities:
Accounts payable	$	9,717		$	7,471
Accrued expenses and other current liabilities	76,061			63,101
Accrued compensation and benefits	33,540			31,388
Revolving credit facilities	698,280			116,700
Warehouse lines of credit	30,116			33,018
Deferred revenue	41,955			34,080
Deferred rent, current portion	—			1,740
Lease liabilities, current portion	17,937			—
Total current liabilities	907,606			287,498
Deferred rent, net of current portion	—			19,945
Lease liabilities, net of current portion	223,989			—
Long-term debt	1,478,719			699,020
Deferred tax liabilities and other long-term liabilities	13,796			17,474
Total liabilities	2,624,110			1,023,937
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; 58,522,404 and 58,051,448 shares issued and outstanding as of September 30, 2019 and December 31, 2018, respectively	6			6
Class B common stock, $0.0001 par value; 15,000,000 shares authorized; 6,217,447 shares issued and outstanding as of September 30, 2019 and December 31, 2018	1			1
Class C capital stock, $0.0001 par value; 600,000,000 shares authorized; 142,689,395 and 139,635,370 shares issued and outstanding as of September 30, 2019 and December 31, 2018, respectively	14			14
Additional paid-in capital	4,327,003			3,939,842
Accumulated other comprehensive income (loss)	784			(905		)
Accumulated deficit	(875,930		)	(671,779		)
Total shareholders’ equity	3,451,878			3,267,179
Total liabilities and shareholders’ equity	$	6,075,988		$	4,291,116

See accompanying notes to 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 September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Revenue:
Homes	$	384,626		$	11,018		$	762,022		$	11,018
IMT	335,290			313,638			957,231			900,435
Mortgages	25,292			18,438			79,637			56,766
Total revenue	745,208			343,094			1,798,890			968,219
Cost of revenue (exclusive of amortization) (1):
Homes	370,796			10,226			733,947			10,312
IMT	24,318			25,186			74,628			72,070
Mortgages	4,721			1,260			13,829			3,736
Total cost of revenue	399,835			36,672			822,404			86,118
Sales and marketing	181,347			128,734			530,367			413,752
Technology and development	123,974			105,314			352,074			299,623
General and administrative	88,493			70,743			267,106			187,395
Impairment costs	—			10,000			—			10,000
Acquisition-related costs	—			1,405			—			2,064
Integration costs	5			523			650			523
Total costs and expenses	793,654			353,391			1,972,601			999,475
Loss from operations	(48,446		)	(10,297		)	(173,711		)	(31,256		)
Other income	8,999			7,773			27,625			13,308
Interest expense	(26,502		)	(12,668		)	(61,865		)	(26,928		)
Loss before income taxes	(65,949		)	(15,192		)	(207,951		)	(44,876		)
Income tax benefit	1,300			14,700			3,800			22,700
Net loss	$	(64,649	)	$	(492	)	$	(204,151	)	$	(22,176	)
Net loss per share — basic and diluted	$	(0.31	)	$	—		$	(0.99	)	$	(0.11	)
Weighted-average shares outstanding — basic and diluted	207,002			202,416			205,766			195,208
____________________ (1) Amortization of website development costs and intangible assets included in technology and development	$	15,835		$	18,165		$	44,891		$	61,735

See accompanying notes to condensed consolidated financial statements.

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ZILLOW GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(in thousands, unaudited)



	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Net loss	$	(64,649	)	$	(492	)	$	(204,151	)	$	(22,176	)
Other comprehensive income (loss):
Unrealized gains (losses) on investments	(143		)	(428		)	1,752			(537		)
Currency translation adjustments	31			42			(63		)	(24		)
Total other comprehensive income (loss)	(112		)	(386		)	1,689			(561		)
Comprehensive loss	$	(64,761	)	$	(878	)	$	(202,462	)	$	(22,737	)

See accompanying notes to 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 July 1, 2019	206,513,636		$	21	$	4,088,470		$	(811,281	)	$	896		$	3,278,106
Issuance of common and capital stock upon exercise of stock options	347,261		—		8,017			—			—			8,017
Vesting of restricted stock units	568,355		—		—			—			—			—
Shares and value of restricted stock units withheld for tax liability	(6	)	—		—			—			—			—
Share-based compensation expense	—		—		45,192			—			—			45,192
Premiums paid for Capped Call Confirmations	—		—		(150,530		)	—			—			(150,530		)
Equity component of issuance of 2024 Notes and 2026 Notes, net of issuance costs of $4,430	—		—		335,854			—			—			335,854
Net loss	—		—		—			(64,649		)	—			(64,649		)
Other comprehensive loss	—		—		—			—			(112		)	(112		)
Balance at September 30, 2019	207,429,246		$	21	$	4,327,003		$	(875,930	)	$	784		$	3,451,878



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

	Shares		Amount
Balance at July 1, 2018	195,449,104		$	20	$	3,428,541		$	(573,605	)	$	(1,275	)	$	2,853,681
Issuance of common and capital stock upon exercise of stock options	697,301		—		14,970			—			—			14,970
Vesting of restricted stock units	453,958		—		—			—			—			—
Shares and value of restricted stock units withheld for tax liability	(27	)	—		(2		)	—			—			(2		)
Share-based compensation expense	—		—		43,730			—			—			43,730
Issuance of Class C capital stock in connection with equity offering, net of issuance costs of $13,425	6,557,017		—		360,345			—			—			360,345
Premiums paid for capped call confirmations	—		—		(29,414		)	—			—			(29,414		)
Equity component of issuance of convertible notes maturing in 2023, net of issuance costs of $2,047	—		—		76,587			—			—			76,587
Net loss	—		—		—			(492		)	—			(492		)
Other comprehensive loss	—		—		—			—			(386		)	(386		)
Balance at September 30, 2018	203,157,353		$	20	$	3,894,757		$	(574,097	)	$	(1,661	)	$	3,319,019

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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 (Loss)			Total Shareholders’ Equity

	Shares		Amount
Balance at January 1, 2019	203,904,265		$	21	$	3,939,842		$	(671,779	)	$	(905	)	$	3,267,179
Issuance of common and capital stock upon exercise of stock options	1,891,111		—		41,014			—			—			41,014
Vesting of restricted stock units	1,633,962		—		—			—			—			—
Shares and value of restricted stock units withheld for tax liability	(92	)	—		(3		)	—			—			(3		)
Share-based compensation expense	—		—		160,826			—			—			160,826
Premiums paid for Capped Call Confirmations	—		—		(150,530		)	—			—			(150,530		)
Equity component of issuance of 2024 Notes and 2026 Notes, net of issuance costs of $4,430	—		—		335,854			—			—			335,854
Net loss	—		—		—			(204,151		)	—			(204,151		)
Other comprehensive income	—		—		—			—			1,689			1,689
Balance at September 30, 2019	207,429,246		$	21	$	4,327,003		$	(875,930	)	$	784		$	3,451,878



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

	Shares		Amount
Balance at January 1, 2018	190,115,148		$	20	$	3,254,146		$	(592,243	)	$	(1,100	)	$	2,660,823
Cumulative-effect adjustment from adoption of guidance on revenue from contracts with customers	—		—		—			40,322			—			40,322
Issuance of common and capital stock upon exercise of stock options	5,177,060		—		114,623			—			—			114,623
Vesting of restricted stock units	1,288,746		—		—			—			—			—
Shares and value of restricted stock units withheld for tax liability	(1,345	)	—		(67		)	—			—			(67		)
Share-based compensation expense	—		—		118,037			—			—			118,037
Portion of conversion recorded in additional paid-in-capital in connection with partial conversion of convertible notes maturing in 2020	20,727		—		500			—			—			500
Issuance of Class C capital stock in connection with equity offering, net of issuance costs of $13,425	6,557,017		—		360,345						—			360,345
Premiums paid for capped call confirmations	—		—		(29,414		)	—			—			(29,414		)
Equity component of issuance of convertible notes maturing in 2023, net of issuance costs of $2,047	—		—		76,587			—			—			76,587
Net loss	—		—		—			(22,176		)	—			(22,176		)
Other comprehensive loss	—		—		—			—			(561		)	(561		)
Balance at September 30, 2018	203,157,353		$	20	$	3,894,757		$	(574,097	)	$	(1,661	)	$	3,319,019

See accompanying notes to condensed consolidated financial statements.

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ZILLOW GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands, unaudited)



	Nine Months Ended September 30,
	2019			2018
Operating activities
Net loss	$	(204,151	)	$	(22,176	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	63,888			76,301
Share-based compensation expense	151,884			111,366
Amortization of right of use assets	16,710			—
Amortization of contract cost assets	26,722			27,227
Amortization of discount and issuance costs on convertible senior notes maturing in 2021, 2023, 2024 and 2026	29,868			17,990
Impairment costs	—			10,000
Deferred income taxes	(3,800		)	(22,700		)
Loss on disposal of property and equipment	5,744			3,129
Bad debt expense	1,894			1,053
Deferred rent	—			(3,116		)
Accretion of bond discount	(5,241		)	(2,172		)
Changes in operating assets and liabilities:
Accounts receivable	(13,485		)	(12,994		)
Mortgage loans held for sale	(1,353		)	—
Inventory	(716,524		)	(43,257		)
Prepaid expenses and other assets	(5,848		)	(15,012		)
Lease liabilities	(15,029		)	—
Contract cost assets	(26,950		)	(32,143		)
Accounts payable	2,999			2,254
Accrued expenses and other current liabilities	12,241			(3,751		)
Accrued compensation and benefits	2,152			6,503
Deferred revenue	7,875			4,041
Other long-term liabilities	122			—
Net cash provided by (used in) operating activities	(670,282		)	102,543
Investing activities
Proceeds from maturities of investments	859,142			261,675
Purchases of investments	(479,963		)	(848,838		)
Purchases of property and equipment	(45,140		)	(44,482		)
Purchases of intangible assets	(15,123		)	(8,179		)
Cash paid for acquisition, net	—			(2,000		)
Net cash provided by (used in) investing activities	318,916			(641,824		)
Financing activities
Proceeds from issuance of convertible notes, net of issuance costs	1,085,686			364,020
Premiums paid for capped call confirmations	(150,530		)	(29,414		)
Proceeds from issuance of Class C capital stock, net of issuance costs	—			360,345
Proceeds from borrowing on revolving credit facilities	581,580			24,674
Net repayments on warehouse lines of credit	(2,902		)	—
Proceeds from exercise of stock options	41,014			114,623
Value of equity awards withheld for tax liability	(3		)	(67		)
Net cash provided by financing activities	1,554,845			834,181
Net increase in cash, cash equivalents and restricted cash during period	1,203,479			294,900
Cash, cash equivalents and restricted cash at beginning of period	663,443			352,095
Cash, cash equivalents and restricted cash at end of period	$	1,866,922		$	646,995
Supplemental disclosures of cash flow information
Cash paid for interest	$	25,837		$	4,800
Noncash transactions:

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-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-10.2	q32019form10-qex102.htm
EX-10.3	q32019form10-qex103.htm
EX-31.1	q32019form10-qex311.htm
EX-31.2	q32019form10-qex312.htm
EX-32.1	q32019form10-qex321.htm
EX-32.2	q32019form10-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	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	54
Item 4.	Controls and Procedures	55

	PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	56
Item 1A.	Risk Factors	57
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	58
Item 6.	Exhibits	59

	Signatures	61

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 2019-09-30