On March 2nd this year Zillow explained in its 10K Filing the settlement it reached with Core Logic over the patent lawsuit filed by Core Logic. The link to this is attached as it is an area investigated by the SEC in the news released today by the SEC into several aspects of Zillows accounting treatment. As I mentioned in the previous post, it will be interesting if the SEC investigation result in any changes to the Core Logic settlement accounting treatment and if any prior period accounting adjustments that are enforced.
Just in case the link doesn't work here is part of the text in the March 2nd post; "Looks like Zillow may have agreed a $6.1m settlement with First American Core Logic. Interesting that they don't 'connect the dots' between the previous 10-Q and the current 10-Q from which the attached details were extracted. I am more interested in the 'payment phasing' as it seems Zillow is giving themselves a P&L benefit with a $458k charge in 2012, increasing to over $1m in the next 4 years. Let's hope the Analysts ask questions about this topic to clarify exactly what the payment is for and the basis for the payment profile so that any suspicion of accounting irregularity is eliminated. It will be interesting how First American Core Logic account for this transaction as well. I am sure if there is NO connection that Zillow will clarify this matter seeing as they left the 10-Q statement so vague. "In April 2012, we entered into an agreement for a non-cancelable purchase commitment for content related to our website. The amount due for this content is as follows (in thousands): 2012 $458 2013 $1,100 2014 $1,142 2015 $1,242 2016 $1,342 All future years $816 Total future purchase commitments $6,100"
Mark May, an analyst at Barclays Capital, said that “The additional datapoints requested by the SEC were similar to those provided by Trulia in its recent IPO documents and we expect Zillow will likely expand its disclosures in response to the SEC’s requests.” A Zillow spokeswoman said that the SEC letter “was in response to an early 2012 10-K filing submitted by Zillow and we have since responded to the SEC’s satisfaction.”
Yes, thats with regard to the revenue analysis to determine 'churn'. My comment relates to the other aspects of the SEC questions related to the accounting of the Core Logic patent lawsuit settlement and whether any prior period expense adjustments will be necessary, and whether that causes an Earnings miss this fiscal year. No doubt Z stock price will fall like the zestimate on my home if that's the case.