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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, 2022

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)
_____________________________________________________
Washington47-1645716
(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 classTrading Symbol(s)Name of each exchange on which registered
Class A Common Stock, par value $0.0001 per shareZGThe Nasdaq Global Select Market
Class C Capital Stock, par value $0.0001 per shareZThe 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 filerAccelerated filer
Non-accelerated filerSmaller 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 28, 2022, 60,119,308 shares of Class A common stock, 6,217,447 shares of Class B common stock, and 179,972,714 shares of Class C capital stock were outstanding.



ZILLOW GROUP, INC.
Quarterly Report on Form 10-Q
For the Three Months Ended March 31, 2022
TABLE OF CONTENTS
 
i

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 fiscal year ended December 31, 2021, including, but not limited to risks related to:
the current and future health and stability of the economy, financial conditions and residential housing market, including any extended downturn or slowdown;
changes in general economic and financial conditions (including federal monetary policy, interest rate changes, inflation, home price appreciation, and housing inventory) that may reduce demand for our products and services, lower our profitability or reduce our access to financing;
actual or anticipated changes in our rates of growth and innovation relative to that of our competitors;
investment of resources to pursue strategies and develop new products and services that may not prove effective or that are not attractive to customers and real estate partners;
the impact of the COVID-19 pandemic (including variants) or other public health crises on our ability to operate, demand for our products or services, or general economic conditions;
disruptions in operations and relationships with customers, suppliers, vendors, broker partners, contractors, employees and lenders given our decision to wind down Zillow Offers, our iBuying operations;
unanticipated developments that may prevent, delay or increase the costs associated with our wind down activities;
actual or anticipated fluctuations in our financial condition and results of operations;
changes in projected operational and financial results;
addition or loss of a significant number of customers;
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 protect the information and privacy of our customers and other third parties;
ability to protect our brand and intellectual property;
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 and grow our mortgage origination business, including the ability to obtain sufficient financing;
the impact of natural disasters and other catastrophic events;
changes in laws or government regulation affecting our business and
the impact of pending or future litigation or regulatory actions.
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.
1

In addition, statements such as “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based on information available to us as of the date of this Quarterly Report on Form 10-Q. While we believe that such information provides a reasonable basis for these statements, that information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely on these statements.

2

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 Blog (https://www.zillowgroup.com/news/)
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 and reflects current updated channels as of the date of this Quarterly Report on Form 10-Q. 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.
3

PART I – FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
ZILLOW GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions, except share data, unaudited)
March 31, 2022December 31, 2021
Assets
Current assets:
Cash and cash equivalents$2,594 $2,611 
Short-term investments
1,032 514 
Accounts receivable, net of allowance for doubtful accounts of $4 at March 31, 2022 and December 31, 2021
99 155 
Mortgage loans held for sale93 107 
Inventory494 3,913 
Prepaid expenses and other current assets386 153 
Restricted cash92 227 
Total current assets4,790 7,680 
Contract cost assets31 35 
Property and equipment, net234 215 
Right of use assets140 130 
Goodwill2,374 2,374 
Intangible assets, net165 180 
Other assets86 81 
Total assets$7,820 $10,695 
Liabilities and shareholders’ equity
Current liabilities:
Accounts payable$24 $17 
Accrued expenses and other current liabilities119 161 
Accrued compensation and benefits102 108 
Borrowings under credit facilities88 2,312 
Deferred revenue56 51 
Lease liabilities, current portion23 24 
Securitization term loans790 1,209 
Total current liabilities1,202 3,882 
Lease liabilities, net of current portion156 148 
Convertible senior notes1,656 1,319 
Other long-term liabilities4 5 
Total liabilities3,018 5,354 
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; 60,119,308 and 61,513,634 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively
  
Class B common stock, $0.0001 par value; 15,000,000 shares authorized; 6,217,447 shares issued and outstanding
  
Class C capital stock, $0.0001 par value; 600,000,000 shares authorized; 179,931,577 and 182,898,987 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively
  
Additional paid-in capital6,298 7,001 
Accumulated other comprehensive income (loss)(1)7 
Accumulated deficit(1,495)(1,667)
Total shareholders’ equity4,802 5,341 
Total liabilities and shareholders’ equity$7,820 $10,695 
See accompanying notes to the condensed consolidated financial statements.
4

ZILLOW GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except share data which are presented in thousands, and per share data, unaudited)

 Three Months Ended
March 31,
 20222021
Revenue:
Homes$3,721 $704 
IMT490 446 
Mortgages46 68 
Total revenue4,257 1,218 
Cost of revenue:
Homes3,537 645 
IMT65 47 
Mortgages20 19 
Total cost of revenue3,622 711 
Gross profit635 507 
Operating expenses:
Sales and marketing307 197 
Technology and development114 120 
General and administrative119 101 
Restructuring costs38  
Acquisition-related costs 1 
Total operating expenses578 419 
Income from operations
57 88 
Loss on extinguishment of debt
(14)(1)
Other income8 2 
Interest expense(44)(40)
Income before income taxes7 49 
Income tax benefit9 3 
Net income$16 $52 
Net income per share:
Basic$0.06 $0.21 
Diluted$0.06 $0.20 
Weighted-average shares outstanding:
Basic248,542 243,234 
Diluted251,963 259,346 
See accompanying notes to the condensed consolidated financial statements.

5

ZILLOW GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in millions, unaudited)

 Three Months Ended
March 31,
 20222021
Net income$16 $52 
Other comprehensive loss:
Unrealized losses on investments(8) 
Total other comprehensive loss(8) 
Comprehensive income
$8 $52 
See accompanying notes to the condensed consolidated financial statements.
6

ZILLOW GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(in millions, except share data which are presented in thousands, unaudited)

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
SharesAmount
Balance at January 1, 2022250,630 $ $7,001 $(1,667)$7 $5,341 
Cumulative-effect adjustment from adoption of guidance on accounting for convertible instruments and contracts in an entity’s own equity— — (492)156 — (336)
Issuance of common and capital stock upon exercise of stock options807 — 36 — — 36 
Vesting of restricted stock units689 — — — — — 
Share-based compensation expense— — 101 — — 101 
Repurchases of Class A common stock and Class C capital stock(5,858)— (348)— — (348)
Net income— — — 16 — 16 
Other comprehensive loss— — — — (8)(8)
Balance at March 31, 2022246,268 $ $6,298 $(1,495)$(1)$4,802 

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
SharesAmount
Balance at January 1, 2021240,526 $ $5,881 $(1,139)$ $4,742 
Issuance of common and capital stock upon exercise of stock options1,603 — 61 — — 61 
Vesting of restricted stock units813 — — — — — 
Restricted stock units withheld for tax liability(1)—  — —  
Share-based compensation expense— — 67 — — 67 
Issuance of Class C capital stock in connection with equity offering, net of issuance costs3,164 — 545 — — 545 
Settlement of convertible senior notes1,203 — 43 — — 43 
Net income— — — 52 — 52 
Other comprehensive income— — — — —  
Balance at March 31, 2021247,308 $ $6,597 $(1,087)$ $5,510 
See accompanying notes to the condensed consolidated financial statements.
7

ZILLOW GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions, unaudited)
 Three Months Ended
March 31,
 20222021
Operating activities
Net income
$16 $52 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization43 29 
Share-based compensation91 64 
Amortization of right of use assets6 7 
Amortization of contract cost assets8 10 
Amortization of debt discount and debt issuance costs23 25 
Loss on extinguishment of debt14 1 
Inventory valuation adjustment5  
Deferred income taxes (3)
Other adjustments to reconcile net income to cash provided by operating activities (3)9 
Changes in operating assets and liabilities:
Accounts receivable56 (13)
Mortgage loans held for sale14 57 
Inventory3,414 19 
Prepaid expenses and other assets(247)(29)
Contract cost assets(4)(10)
Lease liabilities(9)(7)
Accounts payable6 (2)
Accrued expenses and other current liabilities(43)25 
Accrued compensation and benefits(6)2 
Deferred revenue5 5 
Other long-term liabilities3  
Net cash provided by operating activities3,392 241 
Investing activities
Proceeds from maturities of investments 920 
Purchases of investments(525) 
Purchases of property and equipment(33)(12)
Purchases of intangible assets(5)(4)
Net cash provided by (used in) investing activities(563)904 
Financing activities
Proceeds from issuance of Class C capital stock, net of issuance costs 545 
Proceeds from borrowings on credit facilities 126 
Repayments of borrowings on credit facilities(2,205)(88)
Net repayments on warehouse line of credit and repurchase agreements(25)(46)
Repurchases of Class A common stock and Class C capital stock(348) 
Settlement of long term debt(439) 
Proceeds from exercise of stock options36 61 
Net cash provided by (used in) financing activities(2,981)598 
Net increase (decrease) in cash, cash equivalents and restricted cash during period(152)1,743 
Cash, cash equivalents and restricted cash at beginning of period2,838 1,779 
Cash, cash equivalents and restricted cash at end of period$2,686 $3,522 
Supplemental disclosures of cash flow information
Cash paid for interest$25 $14 
Noncash transactions:
Write-off of fully amortized intangible assets$168 $1 
Write-off of fully depreciated property and equipment18 12 
Recognition of operating right of use assets and lease liabilities16  
Capitalized share-based compensation10 4 
Property and equipment purchased on account1 1 
See accompanying notes to the condensed consolidated financial statements.
8

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 help high-intent movers find and win their home through digital solutions, first class partners and easier buying, selling, financing and renting experiences. We help customers find and win their home with referrals to trusted Zillow Premier Agent and Premier Broker partners and our portfolio of Zillow-branded and affiliated transaction-oriented services. Zillow Offers, our iBuying business, has purchased and sold homes directly in markets across the country. In the fourth quarter of 2021, we began to wind down Zillow Offers operations with expected completion in the second half of 2022. 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.
Other consumer brands include Zillow Rentals, Trulia, StreetEasy, Zillow Closing Services, HotPads and Out East. In addition, Zillow Group provides a comprehensive suite of marketing software and technology solutions for the real estate industry which include Mortech, dotloop, Bridge Interactive, New Home Feed and ShowingTime.com, Inc. (“ShowingTime”).
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: current and future health and stability of the economy, financial conditions and residential housing market and changes in general economic and financial conditions (including federal monetary policy, interest rate changes, inflation, home price appreciation and housing inventory); our investment in resources to pursue strategies and develop products and services that may not prove effective or that are not attractive for customers and real estate partners; the impact of public health crises, like the COVID-19 pandemic (including variants) on our ability to operate, demand for our products or services or general economic conditions; disruptions in operations and relationships with customers, suppliers, vendors, broker partners, contractors, employees, lenders and consumers given our decision to wind down iBuying operations; unanticipated developments that may prevent, delay or increase the costs associated with our wind down activities; addition or loss of significant customers; our ability to successfully integrate and realize the benefits of our past or future strategic acquisitions or investments; our ability to manage advertising inventory or pricing; engagement and usage of our products; competition and innovation in our markets; actual or anticipated changes in technology, products, markets or services by us or our competitors; 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; changes in laws or government regulation affecting our business; outcomes of legal proceedings; natural disasters and catastrophic events; 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 fiscal year ended December 31, 2021, which was filed with the SEC on February 10, 2022. The condensed consolidated balance sheet as of December 31, 2021, included herein, was derived from the audited financial statements of Zillow Group, Inc. as of that date.
9

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, 2022 and our results of operations, comprehensive income, shareholders’ equity and cash flows for the three months ended March 31, 2022 and 2021. The results for the three months ended March 31, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022, or for any interim period, or for any other future year.
Reclassifications
Certain reclassifications have been made in the condensed consolidated statements of operations to conform data for prior periods to the current format. Beginning with the three and six month periods ended June 30, 2021, we presented a gross profit subtotal in our condensed consolidated statements of operations, which requires certain depreciation expense and amortization expense to be included within cost of revenue. We believe the presentation of gross profit is preferable as it facilitates investors’ ability to model across our segments and enhances comparability with our public company peers. To effect the presentation of gross profit, we present the amortization expense for certain intangible assets and data acquisition costs within cost of revenue and have reclassified certain amounts in prior periods in the condensed consolidated statements of operations from technology and development expenses to cost of revenue. Additionally, we reclassified the amortization expense for trade names and trademarks and customer relationship intangible assets from technology and development expenses to sales and marketing expenses. This change has no impact on income from operations or net income.
Amounts previously reported in the condensed consolidated statements of operations for the periods presented were revised herein as shown below (in millions):
Three Months Ended
March 31, 2021
 As ReportedAs RevisedEffect of Change
Cost of revenue:
Homes $641 $645 $4 
IMT28 47 19 
Mortgages18 19 1 
Total cost of revenue687 711 24 
Operating expenses:
Sales and marketing193 197 4 
Technology and development149 120 (29)
General and administrative100 101 1 
10

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, restructuring costs, 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 and our wind down of Zillow Offers operations have 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 August 2020, the Financial Accounting Standards Board (“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 adopted this guidance on January 1, 2022 using the modified retrospective approach whereby amounts previously reported have not been revised. Upon adoption we recognized a decrease to additional paid-in capital of $492 million, an increase to long-term debt of $336 million and a cumulative-effect adjustment to accumulated deficit of $156 million.
Recently Issued Accounting Standards Not Yet Adopted
In October 2021, the FASB issued guidance which requires contract assets and contract liabilities acquired in a business combination to be recognized and measured in accordance with guidance governing revenue from contracts with customers. We currently recognize contract assets and contract liabilities at the acquisition date based on fair value estimates, which historically has resulted in a reduction to unearned revenue on the balance sheet, and therefore, a reduction to revenue that would have otherwise been recorded as an independent entity. The guidance is effective for interim and annual periods beginning after December 15, 2022 on a prospective basis, with early adoption permitted. We expect to adopt this guidance on January 1, 2023. We are currently evaluating the potential impact of the guidance on our financial position, results of operations and cash flows.
Note 3. Fair Value Measurements
We apply 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).
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 are borrowed on our credit facilities, home sales proceeds are held in restricted accounts associated with our credit facilities and securitizations, 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).
11

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 is calculated by reference to quoted prices for similar assets (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. For IRLCs that are cancelled or expire, any recorded gain or loss is reversed at the end of the commitment period (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, 2022December 31, 2021
Range
40% - 100%
42% - 100%
Weighted-average83%85%
Beneficial interests in securitizations — The fair value of beneficial interests in securitizations is calculated using a discounted cash flow methodology. We rely on significant unobservable valuation inputs as the investments do not trade in active markets with readily observable prices and there is limited observable market data for reference. The primary unobservable inputs include the assumptions related to the expected timing and amount of prepayments and the discount rate of approximately 8% applied to the projected cash flows (Level 3). An increase in the amount of prepayments, in isolation, would result in an increase in the fair value measurement. An increase in the discount rate, in isolation, would result in a decrease in the fair value measurement. The beneficial interests in securitizations are recorded within other assets in our condensed consolidated balance sheets. As of March 31, 2022, we have included the impact of the expected full prepayment of both beneficial interests during the second quarter of 2022 due to the wind down of Zillow Offers operations.
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 millions):
 March 31, 2022
TotalLevel 1Level 2Level 3
Cash equivalents:
Money market funds$2,315 $2,315 $ $ 
Treasury bills 13  13  
Short-term investments:
U.S. government agency securities797  797  
Treasury bills189  189  
Corporate bonds36  36 
Commercial paper10  10 
Beneficial interests in securitizations78   78 
Mortgage origination-related:
Mortgage loans held for sale93  93  
Forward contracts - other current assets3  3  
        Total$3,534 $2,315 $1,141 $78 
12

 December 31, 2021
 TotalLevel 1Level 2Level 3
Cash equivalents:
Money market funds$2,132 $2,132 $ $ 
Short-term investments:
U.S. government agency securities471  471  
Corporate bonds33  33  
Commercial paper10  10  
Beneficial interests in securitizations75   75 
Mortgage origination-related:
Mortgage loans held for sale107  107  
IRLCs5   5 
Forward contracts - other current assets    
Forward contracts - other current liabilities    
Total$2,833 $2,132 $621 $80 
The changes in our beneficial interests in securitizations were not material for the three months ended March 31, 2022. The following table presents the changes in our IRLCs for the periods presented (in millions):
Three Months Ended
March 31,
20222021
Balance, beginning of the period$5 $12 
Issuances6 18 
Transfers(9)(24)
Fair value changes recognized in earnings(2)(1)
Balance, end of period$ $5 
At March 31, 2022, the notional amounts of the hedging instruments related to our mortgage loans held for sale were $143 million and $219 million for our IRLCs and forward contracts, respectively. At December 31, 2021, the notional amounts of the hedging instruments related to our mortgage loans held for sale were $305 million and $388 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 and securitization term loans.
13

Note 4. Cash and Cash Equivalents, 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, investments, including beneficial interests in securitizations, and restricted cash as of the dates presented (in millions):
 March 31, 2022
 Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Estimated
Fair Market
Value
Cash$266 $— $— $266 
Cash equivalents:
Money market funds2,315 — — 2,315 
Treasury bills 13 — — 13 
Short-term investments:
U. S. government agency securities804  (7)797 
Treasury bills 189   189 
Corporate bonds36   36 
Commercial paper10   10 
Restricted cash92 — — 92 
Beneficial interests in securitizations71 9 (2)78 
        Total$3,796 $9 $(9)$3,796 
 December 31, 2021
 Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Estimated
Fair Market
Value
Cash$479 $— $— $479 
Cash equivalents:
Money market funds2,132 — — 2,132 
Short-term investments:
U.S. government agency securities473  (2)471 
Corporate bonds33   33 
Commercial paper10   10 
Restricted cash227 — — 227 
Beneficial interests in securitizations66 9  75 
Total$3,420 $9 $(2)$3,427 
The following table presents available-for-sale investments by contractual maturity date as of March 31, 2022 (in millions):
Amortized CostEstimated Fair
Market Value
Due in one year or less$920 $923 
Due after one year 191 187 
Total $1,111 $1,110 
14

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 millions):
March 31, 2022December 31, 2021
Finished goods$484 $2,728 
Work-in-process10 1,185 
Inventory$494 $3,913 
We have recorded a write-down for homes in inventory of $31 million and $211 million as of March 31, 2022 and December 31, 2021, respectively.
Note 6. Contract Balances
Contract assets were $101 million and $78 million as of March 31, 2022 and December 31, 2021, respectively. Contract assets represent amounts for which we have recognized revenue for contracts that have not yet been invoiced to our customers. Contract assets are primarily related to our Premier Agent Flex, rentals pay per lease and StreetEasy Experts offerings, whereby we estimate variable consideration based on the expected number of real estate transactions to be closed for Premier Agent Flex and StreetEasy Experts, and qualified leases to be secured for rentals pay per lease. We recognize revenue when we satisfy our performance obligations under the corresponding contracts. StreetEasy Experts is our pay for performance pricing model available in the New York City market for which agents and brokers are provided with leads at no initial cost and pay a performance advertising fee only when a real estate purchase transaction is closed with one of the leads. Under the StreetEasy Experts pricing model, the transaction price represents variable consideration, as the amount to which we expect to be entitled varies based on the number of leads that convert into real estate transactions and the value of those transactions. We record a corresponding contract asset for the estimate of variable consideration for StreetEasy Experts when the right to the consideration is conditional. When the right to consideration becomes unconditional, we reclassify amounts to accounts receivable. Contract assets are recorded within prepaid expenses and other current assets in our condensed consolidated balance sheets.
For the three months ended March 31, 2022 and 2021, we recognized revenue of $45 million and $47 million, respectively, that was included in the deferred revenue balance at the beginning of the respective period.
Note 7. Contract Cost Assets
As of March 31, 2022 and December 31, 2021, we had $31 million and $35 million, respectively, of contract cost assets. For the three months ended March 31, 2022 and 2021, we did not incur any material impairment losses to our contract cost assets.
We recorded amortization expense related to contract cost assets of $8 million and $10 million for the three months ended March 31, 2022 and 2021, respectively.
15

Note 8. Property and Equipment, net
The following table presents the detail of property and equipment as of the dates presented (in millions):
March 31, 2022December 31, 2021
Website development costs$212 $175 
Leasehold improvements95 107 
Office equipment, furniture and fixtures29 26 
Computer equipment19 19 
Construction-in-progress2 7 
Property and equipment357 334 
Less: accumulated amortization and depreciation(123)(119)
Property and equipment, net$234 $215 
We recorded depreciation expense related to property and equipment (other than website development costs) of $8 million for the three months ended March 31, 2022 and 2021.
We capitalized $34 million and $12 million in website development costs for the three months ended March 31, 2022 and 2021, respectively. Amortization expense for website development costs included in cost of revenue was $13 million and $8 million for the three months ended March 31, 2022 and 2021, respectively.
Note 9. Acquisition
Acquisition of ShowingTime.com, Inc.
On September 30, 2021, Zillow Group acquired ShowingTime in exchange for approximately $512 million in cash, subject to certain adjustments. Our acquisition of ShowingTime has been accounted for as a business combination, and assets acquired and liabilities assumed were recorded at their preliminary estimated fair values as of September 30, 2021. Goodwill, which represents the expected synergies from combining the acquired assets and the operations of the acquirer, as well as intangible assets that do not qualify for separate recognition, is measured as of the acquisition date as the excess of consideration transferred, which is also measured at fair value, and the net of the fair values of the assets acquired and the liabilities assumed as of the acquisition date.
The total preliminary purchase price has been allocated to the assets acquired and liabilities assumed, including identifiable intangible assets, based on their respective fair values at the acquisition date. The total preliminary purchase price was allocated as follows (in millions):
Cash and cash equivalents$15 
Identifiable intangible assets111 
Goodwill389 
Other acquired assets6 
Deferred tax liability(4)
Other assumed liabilities(5)
Total preliminary estimated purchase price$512 
16

The estimated fair value of identifiable intangible assets acquired and associated useful lives consisted of the following (in millions):
Estimated Fair ValueEstimated Weighted-Average Useful Life (in years)
Customer relationships$55 8
Developed technology47 4
Trade names and trademarks