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Zillow Group First Quarter 2018 Revenue Increased 22% Year-Over-Year

  • Premier Agent Revenue increased 22% year-over-year to $213.7 million.
  • More than 175 million average monthly unique users accessed Zillow Group brands’ mobile apps and websites.
  • Visits to Zillow Group brands’ mobile apps and websites, including Zillow, Trulia, StreetEasy and RealEstate.com, increased 15% year-over-year to nearly 1.8 billion.             

SEATTLE, May 07, 2018 (GLOBE NEWSWIRE) -- Zillow Group, Inc. (NASDAQ:Z) (ZG), which houses a portfolio of the largest and most vibrant real estate and home-related brands on mobile and the web, today announced its consolidated financial results for the three months ended March 31, 2018.

“Zillow Group had a great start to 2018 and we are already executing well on our strategic priorities for the year,” said Zillow Group CEO Spencer Rascoff. “First quarter 2018 revenue growth was driven by strength in the Premier Agent, Rentals and New Construction marketplaces. This year, we are taking our business beyond lead generation by creating better experiences for consumers and further strengthening our partnerships with real estate professionals. Our opportunity is expanding with the introduction of innovative products and services, like Zillow Instant Offers, that provide end-to-end solutions for consumers and will generate more home-related transactions across our platforms. It will be an exciting year as we begin the next phase of Zillow Group’s growth.”   

First Quarter 2018 Financial Highlights

The following table sets forth our financial highlights for the periods presented (in thousands, unaudited): 

           
  Three Months Ended   2017 to 2018 %
Change
  March 31,  
    2018       2017    
Revenue:          
  Premier Agent $   213,732     $   175,301     22 %
  Rentals     29,063         21,545     35 %
  Mortgages     19,023         20,270     (6 )%
  Other (1)     38,061         28,659     33 %
  Total revenue $   299,879     $   245,775     22 %
Other Financial Data:          
Net loss $   (18,591 )   $   (4,606 )    
Adjusted EBITDA (2) $   46,310     $   54,799      
Percentage of Revenue:          
Net loss   (6 )%     (2 )%    
Adjusted EBITDA   15 %     22 %    
                   
(1) Other Revenue primarily includes revenue generated by new construction and display, as well as revenue from the sale of various other marketing and business products and services to real estate professionals.

(2) See below for more information regarding our presentation of Adjusted EBITDA, including a reconciliation of Adjusted EBITDA to net loss, the most directly comparable GAAP financial measure, for each of the periods presented.

 First Quarter 2018 Operating and Business Highlights

  • More than 175 million average monthly unique users accessed Zillow Group brands’ mobile apps and websites during the first quarter of 2018, an increase of 5% year-over-year.

  • Visits to Zillow Group brands’ mobile apps and websites Zillow®, Trulia®, StreetEasy® (included as of March 2017) and RealEstate.com (included as of June 2017) increased 15% year-over-year to nearly 1.8 billion. Premier Agent revenue per visit increased 6% to $0.121 from $0.114 in the same period last year.  
     
  • The number of Premier Agent® accounts, including accounts of brokerages and other teams, spending more than $5,000 per month grew by 58% year-over-year and increased 58% on a total dollar basis.
     
  • Total sales to Premier Agents, including brokerages and other teams, who have been customers for more than one year increased 38% year-over-year.
     
  • Sales to existing Premier Agents, including brokerages and other teams, accounted for 70% of total bookings.


Business Outlook – Second Quarter and Full Year 2018

In the second quarter of 2018, Zillow Group expects to begin reporting financial results for its two reportable segments: the Internet, Media & Technology (“IMT”) segment and the Homes segment. The IMT segment will include the financial results for the Premier Agent, Rentals, Mortgages and new construction marketplaces, dotloop, and display, as well as revenue from the sale of various other marketing and business products and services to real estate professionals. The Homes segment will include the financial results from Zillow Group’s buying and selling of homes directly, which Zillow Group announced in April 2018.

The following tables present Zillow Group’s business outlook for the periods presented (in millions, unaudited): 

               
Zillow Group Outlook as of May 7, 2018   Three Months Ending June 30, 2018  
    IMT Segment   Homes Segment   Consolidated  
Total revenue   $322 to $327     $0     $322 to $327  
Premier Agent revenue   $228 to $230           $228 to $230  
Rentals revenue    $34 to $35           $34 to $35  
Mortgages revenue   $18 to $19           $18 to $19  
Other revenue    $42 to $43           $42 to $43  
Adjusted EBITDA*   $57 to $62   $(8 ) to $(5 )   $49 to $57  
Weighted average shares outstanding — basic                      193.0 to   195.0  
Weighted average shares outstanding — diluted                   202.5 to   204.5  
                           
    Year Ending December 31, 2018  
    IMT Segment   Homes Segment   Consolidated  
Total revenue   $1,308 to $1,323   $125   to $255     $1,433 to $1,578  
Premier Agent revenue   $917 to $927           $917 to $927  
Rentals revenue    $144 to $146           $144 to $146  
Mortgages revenue   $76 to $77           $76 to $77  
Other revenue    $171 to $173           $171 to $173  
Adjusted EBITDA*   $295 to $310   $(35 ) to $(25 )   $260 to $285  
Weighted average shares outstanding — basic                      194.0 to   196.0  
Weighted average shares outstanding — diluted                   203.5 to   205.5  
                           

In addition, Zillow Group expects to hold 300 to 1,000 homes in inventory as related to the Homes segment as of December 31, 2018. 

* Zillow Group has not provided a quantitative reconciliation of forecasted Adjusted EBITDA to forecasted GAAP net income (loss) within this earnings release because the company is unable, without making unreasonable efforts, to calculate certain reconciling items with confidence. These items include, but are not limited to: income taxes which are directly impacted by unpredictable fluctuations in the market price of the company’s capital stock; depreciation and amortization expense from new acquisitions; impairments of assets; and acquisition-related costs. These items, which could materially affect the computation of forward-looking GAAP net income (loss), are inherently uncertain and depend on various factors, many of which are outside of Zillow Group’s control. For more information regarding the non-GAAP financial measures discussed in this release, please see “Use of Non-GAAP Financial Measures” below.

Conference Call and Webcast Information

Zillow Group CEO Spencer Rascoff and CFO Kathleen Philips will host a live conference call and webcast to discuss the results today at 2 p.m. Pacific Time (5 p.m. Eastern Time). A copy of management’s prepared remarks, which will not be read during the live call, will be made available on the investor relations section of Zillow Group’s website at http://investors.zillowgroup.com/results.cfm prior to the live conference call and webcast to allow analysts and investors additional time to review the details of the results.

Zillow Group’s management will answer questions submitted via Slido, in addition to answering questions from dialed-in participants, during the live conference call. Questions may be submitted at www.slido.com using the event code #ZEarnings. 

A link to the live webcast and recorded replay of the conference call will be available on the investor relations section of Zillow Group’s website at http://investors.zillowgroup.com/results.cfm. The live call may also be accessed via phone at (877) 643-7152 toll-free domestically and at (443) 863-7921 internationally.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 that involve risks and uncertainties, including, without limitation, statements regarding our business outlook, strategic priorities, and operational plans for 2018. Statements containing words such as “may,” “believe,” “anticipate,” “expect,” “intend,” “plan,” “project,” “will,” “projections,” “continue,” “business outlook,” “forecast,” “estimate,” “outlook,” “guidance,” or similar expressions constitute forward-looking statements. Differences in Zillow Group’s actual results from those described in these forward-looking statements may result from actions taken by Zillow Group as well as from risks and uncertainties beyond Zillow Group’s control. Factors that may contribute to such differences include, but are not limited to, Zillow Group’s ability to maintain and effectively manage an adequate rate of growth; Zillow Group’s ability to innovate and provide products and services that are attractive to its users and advertisers; Zillow Group’s ability to compete successfully against existing or future competitors; Zillow Group’s investment of resources to pursue strategies that may not prove effective; the impact of the real estate industry on Zillow Group’s business; the impact of pending litigation and other legal and regulatory matters; Zillow Group’s ability to increase awareness of the Zillow Group brands in a cost-effective manner; Zillow Group’s ability to attract consumers to Zillow Group’s mobile applications and websites; Zillow Group’s ability to successfully integrate and realize the benefits of our past or future strategic acquisitions or investments; the reliable performance of Zillow Group’s network infrastructure and content delivery processes; and Zillow Group’s ability to protect its intellectual property. The foregoing list of risks and uncertainties is illustrative, but is not exhaustive. For more information about potential factors that could affect Zillow Group’s business and financial results, please review the “Risk Factors” described in Zillow Group’s Annual Report on Form 10-K for the year ended December 31, 2017 filed with the Securities and Exchange Commission, or SEC, and in Zillow Group’s other filings with the SEC. Except as may be required by law, Zillow Group does not intend, and undertakes no duty, to update this information to reflect future events or circumstances.

Use of Non-GAAP Financial Measures

To provide investors with additional information regarding our financial results, this press release includes references to Adjusted EBITDA (including forecasted Adjusted EBITDA) and non-GAAP net income per share, which are non-GAAP financial measures. We have provided a reconciliation of Adjusted EBITDA to net loss, the most directly comparable GAAP financial measure, and a reconciliation of net income, adjusted, to net loss, as reported on a GAAP basis, and the calculations of non-GAAP net income per share - basic and diluted, within this earnings release.

Adjusted EBITDA is a key metric used by our management and board of directors to measure operating performance and trends, and to prepare and approve our annual budget. The exclusion of certain expenses in calculating Adjusted EBITDA facilitates operating performance comparisons on a period-to-period basis.

Our use of Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:

  • Adjusted EBITDA does not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments;
  • Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;
  • Adjusted EBITDA does not consider the potentially dilutive impact of share-based compensation;
  • Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements;
  • Adjusted EBITDA does not reflect acquisition-related costs;
  • Adjusted EBITDA does not reflect interest expense or other income;
  • Adjusted EBITDA does not reflect income taxes; and
  • Other companies, including companies in our own industry, may calculate Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure.

Because of these limitations, you should consider Adjusted EBITDA alongside other financial performance measures, including various cash flow metrics, net loss and our other GAAP results.

Our presentation of non-GAAP net income per share excludes the impact of share-based compensation expense, acquisition-related costs and income taxes. This measure is not a key metric used by our management and board of directors to measure operating performance or otherwise manage the business. However, we provide non-GAAP net income per share as supplemental information to investors, as we believe the exclusion of share-based compensation expense, acquisition-related costs and income taxes facilitates investors’ operating performance comparisons on a period-to-period basis. You should not consider these metrics in isolation or as substitutes for analysis of our results as reported under GAAP.

About Zillow Group

Zillow Group (NASDAQ:Z) (ZG) houses a portfolio of the largest real estate and home-related brands on mobile and the web which focus on all stages of the home lifecycle: renting, buying, selling and financing. Zillow Group is committed to empowering consumers with unparalleled data, inspiration and knowledge around homes, and connecting them with great real estate professionals. The Zillow Group portfolio of consumer brands includes real estate and rental marketplaces Zillow®, Trulia®, StreetEasy®, HotPads®, Naked Apartments®, RealEstate.com and Out East®. In addition, Zillow Group provides a comprehensive suite of marketing software and technology solutions to help real estate professionals maximize business opportunities and connect with millions of consumers. The Zillow Instant Offers™ marketplace provides homeowners with the opportunity to receive offers from buyers, including Zillow in some metropolitan areas. When Zillow buys a home, it will make necessary updates and list the home for resale on the open market. The company operates a number of business brands for real estate, rental and mortgage professionals, including Mortech®, dotloop®, Bridge Interactive® and New Home Feed®. The company is headquartered in Seattle.

Please visit http://investors.zillowgroup.com, www.zillowgroup.com/ir-blog, and www.twitter.com/zillowgroup, where Zillow Group discloses information about the company, its financial information, and its business which may be deemed material.

The Zillow Group logo is available at http://zillowgroup.mediaroom.com/logos-photos.

Zillow, Premier Agent, Mortech, Bridge Interactive, StreetEasy, HotPads, Out East and New Home Feed are registered trademarks of Zillow, Inc. Zillow Instant Offers is a trademark of Zillow, Inc. Trulia is a registered trademark of Trulia, LLC. dotloop is a registered trademark of DotLoop, LLC. Naked Apartments is a registered trademark of Naked Apartments, LLC.

(ZFIN)

Reported Consolidated Results 

ZILLOW GROUP, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS 
(in thousands)
         
    March 31,
2018
  December 31,
2017
Assets        
Current assets:        
  Cash and cash equivalents   $   397,393     $   352,095  
  Short-term investments       425,593         410,444  
  Accounts receivable, net        54,558         54,396  
  Prepaid expenses and other current assets       44,703         24,590  
Total current assets       922,247         841,525  
Contract cost assets       42,465         -  
Property and equipment, net       114,828         112,271  
Goodwill       1,931,076         1,931,076  
Intangible assets, net       307,919         319,711  
Other assets       25,602         25,934  
Total assets   $   3,344,137     $   3,230,517  
         
Liabilities and shareholders’ equity        
Current liabilities:        
  Accounts payable   $   5,194     $   3,587  
  Accrued expenses and other current liabilities       55,034         61,373  
  Accrued compensation and benefits       22,746         19,109  
  Deferred revenue       35,297         31,918  
  Deferred rent, current portion       2,426         2,400  
Total current liabilities       120,697         118,387  
Deferred rent, net of current portion       18,214         21,330  
Long-term debt       389,624         385,416  
Deferred tax liabilities and other long-term liabilities       47,161         44,561  
Total liabilities       575,696         569,694  
Shareholders’ equity:        
  Class A common stock       6         6  
  Class B common stock       1         1  
  Class C capital stock       13         13  
  Additional paid-in capital       3,340,387         3,254,146  
  Accumulated other comprehensive loss       (1,454 )       (1,100 )
  Accumulated deficit       (570,512 )       (592,243 )
Total shareholders’ equity       2,768,441         2,660,823  
Total liabilities and shareholders’ equity   $   3,344,137     $   3,230,517  
         

  

ZILLOW GROUP, INC.  
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS   
(in thousands, except per share data)  
         
  Three Months Ended  
  March 31,  
    2018       2017    
         
Revenue $   299,879     $   245,775    
Costs and expenses:        
  Cost of revenue (exclusive of amortization) (1)(2)     23,919         20,232    
  Sales and marketing (2)     137,291         105,940    
  Technology and development (2)     93,933         72,868    
  General and administrative (2)     56,073         45,466    
  Acquisition-related costs     27         105    
Total costs and expenses     311,243         244,611    
Income (loss) from operations     (11,364 )       1,164    
Other income     2,446         953    
Interest expense     (7,073 )       (6,723 )  
Loss before income taxes     (15,991 )       (4,606 )  
Income tax expense     (2,600 )       -    
Net loss $   (18,591 )   $   (4,606 )  
Net loss per share — basic and diluted $   (0.10 )   $   (0.03 )  
Weighted-average shares outstanding — basic and diluted     191,464         183,158    
_________        
(1) Amortization of website development costs and intangible assets included in technology and development $   22,549     $   23,261    
         
(2) Includes share-based compensation expense as follows:        
  Cost of revenue $   955     $   903    
  Sales and marketing     5,162         5,530    
  Technology and development     11,542         8,491    
  General and administrative     13,082         11,471    
  Total  $   30,741     $   26,395    
         
Other Financial Data:        
Adjusted EBITDA (3) $   46,310     $   54,799    
         
(3) See above for more information regarding our presentation of Adjusted EBITDA. See below  for a reconciliation of Adjusted EBITDA to net loss, the most directly comparable GAAP financial measure, for each of the periods presented.  
         

 

ZILLOW GROUP, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
           
    Three Months Ended  
    March 31,  
      2018       2017    
Operating activities          
Net loss   $   (18,591 )   $   (4,606 )  
Adjustments to reconcile net loss to net cash provided by operating activities:          
  Depreciation and amortization       26,906         27,135    
  Share-based compensation expense       30,741         26,395    
  Amortization of contract cost assets       9,296         -    
  Amortization of discount and issuance costs on 2021 Notes       4,708         4,353    
  Deferred income taxes       2,600         -    
  Loss on disposal of property and equipment       1,803         999    
  Bad debt expense       (267 )       718    
  Deferred rent       (3,090 )       190    
  Amortization of bond premium       (137 )       223    
  Changes in operating assets and liabilities:          
  Accounts receivable       105         (2,059 )  
  Prepaid expenses and other assets       (19,923 )       4,737    
  Contract cost assets       (11,440 )       -    
  Accounts payable       1,672         53    
  Accrued expenses and other current liabilities       (6,747 )       4,683    
  Accrued compensation and benefits       3,637         2,539    
  Deferred revenue       3,379         1,598    
Net cash provided by operating activities       24,652         66,958    
           
Investing activities          
Proceeds from maturities of investments       61,386         49,107    
Purchases of investments       (76,729 )       (84,008 )  
Purchases of property and equipment       (15,791 )       (14,163 )  
Purchases of intangible assets       (1,098 )       (5,308 )  
Proceeds from divestiture of business       -         579    
Cash paid for acquisition, net       -         (6,002 )  
Net cash used in investing activities       (32,232 )       (59,795 )  
           
Financing activities          
Proceeds from exercise of stock options       52,906         11,006    
Value of equity awards withheld for tax liability       (28 )       (237 )  
Net cash provided by financing activities       52,878         10,769    
Net increase in cash and cash equivalents during period       45,298         17,932    
Cash and cash equivalents at beginning of period       352,095         243,592    
Cash and cash equivalents at end of period   $   397,393     $  261,524    
           
Supplemental disclosures of cash flow information          
  Noncash transactions:          
  Capitalized share-based compensation   $   2,120     $   2,868    
  Write-off of fully depreciated property and equipment   $   7,379     $   3,446    
  Write-off of fully amortized intangible assets   $   10,687     $   5,280    

 
Adjusted EBITDA

The following table sets forth a reconciliation of Adjusted EBITDA to net loss, the most directly comparable GAAP financial measure, for each of the periods presented (in thousands, unaudited): 

           
    Three Months Ended  
    March 31,  
      2018       2017    
Reconciliation of Adjusted EBITDA to Net Loss:          
Net loss   $   (18,591 )   $   (4,606 )  
Other income       (2,446 )       (953 )  
Depreciation and amortization expense       26,906         27,135    
Share-based compensation expense       30,741         26,395    
Acquisition-related costs       27         105    
Interest expense       7,073         6,723    
Income tax expense       2,600         -    
  Adjusted EBITDA   $   46,310     $   54,799    
 

Non-GAAP Net Income per Share

The following table sets forth a reconciliation of net income, adjusted, to net loss, as reported on a GAAP basis, and the calculation of non-GAAP net income per share - basic and diluted, for each of the periods presented (in thousands, except per share data, unaudited): 

           
    Three Months Ended  
    March 31,  
      2018       2017    
           
Net loss, as reported   $   (18,591 )   $   (4,606 )  
Share-based compensation expense       30,741         26,395    
Acquisition-related costs       27         105    
Income tax expense       2,600         -    
  Net income, adjusted   $   14,777     $   21,894    
           
Non-GAAP net income per share - basic   $   0.08     $   0.12    
Non-GAAP net income per share - diluted   $   0.07     $   0.11    
Weighted-average shares outstanding - basic       191,464         183,158    
Weighted-average shares outstanding - diluted       201,096         191,290    
           

Select Historical Rentals Revenue

Zillow Group began presenting Rentals Revenue as a separate revenue category with quarterly reporting for the three months ended March 31, 2018. The following table sets forth select historical Rentals Revenue for each of the periods presented (in thousands, unaudited):  

                   
    Three Months Ended  
    March 31,   June 30,   September 30,   December 31,  
     2017   2017    2017    2017  
                   
Rentals revenue   $   21,545   $   23,710    $   28,438   $   28,851  
                   

 Key Metrics

The following table sets forth our key metrics for each of the periods presented: 

             
  Three Months Ended
 March 31,
  2017 to 2018  
  2018   2017   % Change  
  (in millions)      
Average Monthly Unique Users (1) 175.5   166.6   5 %  
Visits (2) 1,764.8   1,533.0   15 %  
             

(1) Zillow, StreetEasy, HotPads, Naked Apartments and RealEstate.com (as of June 2017) measure unique users with Google Analytics, and Trulia measures unique users with Adobe Analytics.

(2) Visits includes visits to the Zillow, Trulia, StreetEasy (as of March 2017) and RealEstate.com (as of June 2017) mobile apps and websites. We measure Zillow, StreetEasy and RealEstate.com visits with Google Analytics and Trulia visits with Adobe Analytics. 

Contacts:
Raymond Jones
Investor Relations
ir@zillowgroup.com            

Katie Curnutte
Public Relations                                 
press@zillow.com

A photo accompanying this announcement is available at http://resource.globenewswire.com/Resource/Download/4574d94b-005a-4d28-bf65-b900d1bd6d6d