Washington | 001-36853 | 47-1645716 | ||
(State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) | ||
1301 Second Avenue, Floor 31, Seattle, Washington | 98101 | |||
(Address of principal executive offices) | (Zip Code) |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: |
☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02 | Results of Operations and Financial Condition. |
Item 8.01 | Other Events |
Item 9.01 | Financial Statements and Exhibits. |
Dated: August 6, 2018 | ZILLOW GROUP, INC. | ||
By: | /s/ SPENCER M. RASCOFF | ||
Name: | Spencer M. Rascoff | ||
Title: | Chief Executive Officer |
Contacts: | ||
Raymond Jones | Katie Curnutte | |
Investor Relations | Public Relations | |
ir@zillowgroup.com | press@zillow.com |
• | Premier Agent Revenue increased 22% year-over-year to $230.9 million. |
• | Purchased 19 homes in Phoenix through Zillow Offers. |
• | Traffic to Zillow Group brands’ mobile apps and websites reached an all-time high of more than 188 million unique users in April 2018. |
• | Visits to Zillow Group brands’ mobile apps and websites, including Zillow, Trulia, StreetEasy and RealEstate.com, increased 14% year-over-year to approximately 1.9 billion. |
Three Months Ended June 30, | 2017 to 2018 % Change | Six Months Ended June 30, | 2017 to 2018 % Change | ||||||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||||||||
Revenue: | |||||||||||||||||||||
IMT segment: | |||||||||||||||||||||
Premier Agent | $ | 230,885 | $ | 189,725 | 22 | % | $ | 444,617 | $ | 365,026 | 22 | % | |||||||||
Rentals | 33,288 | 23,710 | 40 | % | 62,351 | 45,255 | 38 | % | |||||||||||||
Mortgages | 19,305 | 20,936 | (8 | )% | 38,328 | 41,206 | (7 | )% | |||||||||||||
Other (1) | 41,768 | 32,479 | 29 | % | 79,829 | 61,138 | 31 | % | |||||||||||||
Total IMT segment revenue | 325,246 | 266,850 | 22 | % | $ | 625,125 | $ | 512,625 | 22 | % | |||||||||||
Homes segment | — | — | N/A | — | — | N/A | |||||||||||||||
Total revenue | $ | 325,246 | $ | 266,850 | 22 | % | $ | 625,125 | $ | 512,625 | 22 | % | |||||||||
Other Financial Data: | |||||||||||||||||||||
Loss before income taxes: | |||||||||||||||||||||
IMT segment | $ | (1,539 | ) | $ | (21,845 | ) | $ | (10,488 | ) | $ | (26,451 | ) | |||||||||
Homes segment | (12,154 | ) | — | (19,196 | ) | — | |||||||||||||||
Total loss before income taxes | $ | (13,693 | ) | $ | (21,845 | ) | $ | (29,684 | ) | $ | (26,451 | ) | |||||||||
Net loss | $ | (3,093 | ) | $ | (21,845 | ) | $ | (21,684 | ) | $ | (26,451 | ) | |||||||||
Adjusted EBITDA (2): | |||||||||||||||||||||
IMT segment | $ | 64,724 | $ | 39,700 | $ | 115,724 | $ | 94,499 | |||||||||||||
Homes segment | (8,724 | ) | — | (13,414 | ) | — | |||||||||||||||
Total Adjusted EBITDA | $ | 56,000 | $ | 39,700 | $ | 102,310 | $ | 94,499 | |||||||||||||
Percentage of Revenue: | |||||||||||||||||||||
Loss before income taxes: | |||||||||||||||||||||
IMT segment | — | % | (8 | )% | (2 | )% | (5 | )% | |||||||||||||
Homes segment | N/A | N/A | N/A | N/A | |||||||||||||||||
Total loss before income taxes: | (4 | )% | (8 | )% | (5 | )% | (5 | )% | |||||||||||||
Net loss | (1 | )% | (8 | )% | (3 | )% | (5 | )% | |||||||||||||
Adjusted EBITDA: | |||||||||||||||||||||
IMT segment | 20 | % | 15 | % | 19 | % | 18 | % | |||||||||||||
Homes segment | N/A | N/A | N/A | N/A | |||||||||||||||||
Total Adjusted EBITDA | 17 | % | 15 | % | 16 | % | 18 | % | |||||||||||||
(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 the most directly comparable GAAP financial measure, which is net loss on a consolidated basis and loss before income taxes for each segment, for each of the periods presented. |
• | More than 186 million average monthly unique users accessed Zillow Group brands’ mobile apps and websites, an increase of 4% year-over-year. Zillow Group brands’ mobile apps and websites reached an all-time high of more than 188 million unique users in April 2018, an increase of nearly 14 million unique users from the same period last year. |
• | Visits to Zillow Group brands’ mobile apps and websites Zillow®, Trulia®, StreetEasy® and RealEstate.com increased 14% year-over-year to approximately 1.9 billion. |
Zillow Group Outlook as of August 6, 2018 | Three Months Ending September 30, 2018 | Year Ending December 31, 2018 | ||
Revenue: | ||||
IMT segment: | ||||
Premier Agent | $237 to $239 | $921 to $927 | ||
Rentals | $37 to $38 | $136 to $138 | ||
Mortgages | $18 to $19 | $76 to $77 | ||
Other | $43 to $44 | $167 to $168 | ||
Total IMT segment revenue | $335 to $340 | $1,300 to $1,310 | ||
Homes segment | $2 to $7 | $20 to $40 | ||
Total revenue | $337 to $347 | $1,320 to $1,350 | ||
Adjusted EBITDA*: | ||||
IMT segment | $77 to $82 | $276 to $286 | ||
Homes segment | $(12) to $(9) | $(39) to $(33) | ||
Total Adjusted EBITDA | $65 to $73 | $237 to $253 | ||
Weighted average shares outstanding — basic | 202.0 to 204.0 | 197.5 to 199.5 | ||
Weighted average shares outstanding — diluted | 212.5 to 214.5 | 208.0 to 210.0 |
▪ | 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. |
Three Months Ended June 30, 2018 | Three Months Ended June 30, 2017 | ||||||||||||||||||||||
IMT | Homes | Consolidated | IMT | Homes | Consolidated | ||||||||||||||||||
Reconciliation of Adjusted EBITDA to Net Loss and Loss Before Income Taxes: | |||||||||||||||||||||||
Net loss (1) | N/A | N/A | $ | (3,093 | ) | N/A | N/A | $ | (21,845 | ) | |||||||||||||
Income tax benefit | N/A | N/A | (10,600 | ) | N/A | N/A | — | ||||||||||||||||
Loss before income taxes | $ | (1,539 | ) | $ | (12,154 | ) | $ | (13,693 | ) | $ | (21,845 | ) | $ | — | $ | (21,845 | ) | ||||||
Other income | (3,089 | ) | — | (3,089 | ) | (1,610 | ) | — | (1,610 | ) | |||||||||||||
Depreciation and amortization expense | 25,763 | 257 | 26,020 | 27,022 | — | 27,022 | |||||||||||||||||
Share-based compensation expense | 35,770 | 3,173 | 38,943 | 29,193 | — | 29,193 | |||||||||||||||||
Acquisition-related costs | 632 | — | 632 | 43 | — | 43 | |||||||||||||||||
Interest expense | 7,187 | — | 7,187 | 6,897 | — | 6,897 | |||||||||||||||||
Adjusted EBITDA | $ | 64,724 | $ | (8,724 | ) | $ | 56,000 | $ | 39,700 | $ | — | $ | 39,700 |
Six Months Ended June 30, 2018 | Six Months Ended June 30, 2017 | ||||||||||||||||||||||
IMT | Homes | Consolidated | IMT | Homes | Consolidated | ||||||||||||||||||
Reconciliation of Adjusted EBITDA to Net Loss and Loss Before Income Taxes: | |||||||||||||||||||||||
Net loss (1) | N/A | N/A | $ | (21,684 | ) | N/A | N/A | $ | (26,451 | ) | |||||||||||||
Income tax benefit | N/A | N/A | (8,000 | ) | N/A | N/A | — | ||||||||||||||||
Loss before income taxes | $ | (10,488 | ) | $ | (19,196 | ) | $ | (29,684 | ) | $ | (26,451 | ) | $ | — | $ | (26,451 | ) | ||||||
Other income | (5,535 | ) | — | (5,535 | ) | (2,563 | ) | — | (2,563 | ) | |||||||||||||
Depreciation and amortization expense | 52,561 | 365 | 52,926 | 54,157 | — | 54,157 | |||||||||||||||||
Share-based compensation expense | 64,267 | 5,417 | 69,684 | 55,588 | — | 55,588 | |||||||||||||||||
Acquisition-related costs | 659 | — | 659 | 148 | — | 148 | |||||||||||||||||
Interest expense | 14,260 | — | 14,260 | 13,620 | — | 13,620 | |||||||||||||||||
Adjusted EBITDA | $ | 115,724 | $ | (13,414 | ) | $ | 102,310 | $ | 94,499 | $ | — | $ | 94,499 | ||||||||||
(1) We use loss before income taxes as our profitability measure in making operating decisions and assessing the performance of our segments, therefore, net loss is calculated and presented only on a consolidated basis within our financial statements. |
June 30, 2018 | December 31, 2017 | ||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 431,045 | $ | 352,095 | |||
Short-term investments | 468,541 | 410,444 | |||||
Accounts receivable, net | 64,083 | 54,396 | |||||
Inventory | 5,666 | — | |||||
Prepaid expenses and other current assets | 38,169 | 24,590 | |||||
Total current assets | 1,007,504 | 841,525 | |||||
Contract cost assets | 43,384 | — | |||||
Property and equipment, net | 118,242 | 112,271 | |||||
Goodwill | 1,931,076 | 1,931,076 | |||||
Intangible assets, net | 299,228 | 319,711 | |||||
Other assets | 26,739 | 25,934 | |||||
Total assets | $ | 3,426,173 | $ | 3,230,517 | |||
Liabilities and shareholders’ equity | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 5,928 | $ | 3,587 | |||
Accrued expenses and other current liabilities | 55,360 | 61,373 | |||||
Accrued compensation and benefits | 23,418 | 19,109 | |||||
Deferred revenue | 35,920 | 31,918 | |||||
Deferred rent, current portion | 2,622 | 2,400 | |||||
Total current liabilities | 123,248 | 118,387 | |||||
Deferred rent, net of current portion | 18,263 | 21,330 | |||||
Long-term debt | 394,420 | 385,416 | |||||
Deferred tax liabilities and other long-term liabilities | 36,561 | 44,561 | |||||
Total liabilities | 572,492 | 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 | 3,428,541 | 3,254,146 | |||||
Accumulated other comprehensive loss | (1,275 | ) | (1,100 | ) | |||
Accumulated deficit | (573,605 | ) | (592,243 | ) | |||
Total shareholders’ equity | 2,853,681 | 2,660,823 | |||||
Total liabilities and shareholders’ equity | $ | 3,426,173 | $ | 3,230,517 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Revenue: | |||||||||||||||
IMT | $ | 325,246 | $ | 266,850 | $ | 625,125 | $ | 512,625 | |||||||
Homes | — | — | — | — | |||||||||||
Total revenue | 325,246 | 266,850 | 625,125 | 512,625 | |||||||||||
Cost of revenue (exclusive of amortization) (1)(2): | |||||||||||||||
IMT | 25,527 | 20,260 | 49,446 | 40,492 | |||||||||||
Homes | — | — | — | — | |||||||||||
Total cost of revenue | 25,527 | 20,260 | 49,446 | 40,492 | |||||||||||
Sales and marketing (2) | 147,727 | 131,218 | 285,018 | 237,158 | |||||||||||
Technology and development (2) | 100,376 | 78,541 | 194,309 | 151,409 | |||||||||||
General and administrative (2) | 60,579 | 53,346 | 116,652 | 98,812 | |||||||||||
Acquisition-related costs | 632 | 43 | 659 | 148 | |||||||||||
Total costs and expenses | 334,841 | 283,408 | 646,084 | 528,019 | |||||||||||
Loss from operations | (9,595 | ) | (16,558 | ) | (20,959 | ) | (15,394 | ) | |||||||
Other income | 3,089 | 1,610 | 5,535 | 2,563 | |||||||||||
Interest expense | (7,187 | ) | (6,897 | ) | (14,260 | ) | (13,620 | ) | |||||||
Loss before income taxes | (13,693 | ) | (21,845 | ) | (29,684 | ) | (26,451 | ) | |||||||
Income tax benefit | 10,600 | — | 8,000 | — | |||||||||||
Net loss | $ | (3,093 | ) | $ | (21,845 | ) | $ | (21,684 | ) | $ | (26,451 | ) | |||
Net loss per share — basic and diluted | $ | (0.02 | ) | $ | (0.12 | ) | $ | (0.11 | ) | $ | (0.14 | ) | |||
Weighted-average shares outstanding — basic and diluted | 194,155 | 185,439 | 192,807 | 184,305 | |||||||||||
____________________ (1) Amortization of website development costs and intangible assets included in technology and development | $ | 21,020 | $ | 23,159 | $ | 43,569 | $ | 46,420 | |||||||
(2) Includes share-based compensation expense as follows: | |||||||||||||||
Cost of revenue | $ | 1,256 | $ | 1,025 | $ | 2,211 | $ | 1,928 | |||||||
Sales and marketing | 6,340 | 6,250 | 11,502 | 11,780 | |||||||||||
Technology and development | 14,347 | 10,400 | 25,889 | 18,891 | |||||||||||
General and administrative | 17,000 | 11,518 | 30,082 | 22,989 | |||||||||||
Total | $ | 38,943 | $ | 29,193 | $ | 69,684 | $ | 55,588 | |||||||
Other Financial Data: | |||||||||||||||
Adjusted EBITDA (3) | $ | 56,000 | $ | 39,700 | $ | 102,310 | $ | 94,499 | |||||||
(3) See Exhibit 99.1 for more information regarding our presentation of Adjusted EBITDA and for a reconciliation of Adjusted EBITDA to net loss, the most directly comparable GAAP financial measure, for each of the periods presented. |
Six Months Ended June 30, | |||||||
2018 | 2017 | ||||||
Operating activities | |||||||
Net loss | $ | (21,684 | ) | $ | (26,451 | ) | |
Adjustments to reconcile net loss to net cash provided by operating activities: | |||||||
Depreciation and amortization | 52,926 | 54,157 | |||||
Share-based compensation expense | 69,684 | 55,588 | |||||
Amortization of contract cost assets | 18,309 | — | |||||
Amortization of discount and issuance costs on 2021 Notes | 9,504 | 8,855 | |||||
Deferred income taxes | (8,000 | ) | — | ||||
Loss on disposal of property and equipment | 2,106 | 2,024 | |||||
Bad debt expense | (352 | ) | 3,960 | ||||
Deferred rent | (2,845 | ) | 1,750 | ||||
Amortization (accretion) of bond premium (discount) | (504 | ) | 376 | ||||
Changes in operating assets and liabilities: | |||||||
Accounts receivable | (9,335 | ) | (11,149 | ) | |||
Inventory | (5,666 | ) | — | ||||
Prepaid expenses and other assets | (14,697 | ) | (5,845 | ) | |||
Contract cost assets | (21,371 | ) | — | ||||
Accounts payable | 1,855 | (1,714 | ) | ||||
Accrued expenses and other current liabilities | (5,189 | ) | 1,203 | ||||
Accrued compensation and benefits | 4,309 | 503 | |||||
Deferred revenue | 4,002 | 1,635 | |||||
Net cash provided by operating activities | 73,052 | 84,892 | |||||
Investing activities | |||||||
Proceeds from maturities of investments | 172,573 | 133,432 | |||||
Purchases of investments | (230,276 | ) | (193,604 | ) | |||
Purchases of property and equipment | (31,212 | ) | (31,608 | ) | |||
Purchases of intangible assets | (4,777 | ) | (6,784 | ) | |||
Purchase of equity method investment | — | (10,000 | ) | ||||
Proceeds from divestiture of a business | — | 579 | |||||
Cash paid for acquisition, net | — | (6,002 | ) | ||||
Net cash used in investing activities | (93,692 | ) | (113,987 | ) | |||
Financing activities | |||||||
Proceeds from exercise of stock options | 99,656 | 62,263 | |||||
Value of equity awards withheld for tax liability | (66 | ) | (295 | ) | |||
Net cash provided by financing activities | 99,590 | 61,968 | |||||
Net increase in cash and cash equivalents during period | 78,950 | 32,873 | |||||
Cash and cash equivalents at beginning of period | 352,095 | 243,592 | |||||
Cash and cash equivalents at end of period | $ | 431,045 | $ | 276,465 | |||
Supplemental disclosures of cash flow information | |||||||
Cash paid for interest | $ | 4,733 | $ | 4,458 | |||
Noncash transactions: | |||||||
Capitalized share-based compensation | $ | 4,623 | $ | 5,289 | |||
Write-off of fully depreciated property and equipment | $ | 13,293 | $ | 7,552 | |||
Write-off of fully amortized intangible assets | $ | 10,797 | $ | 5,302 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Net loss, as reported | $ | (3,093 | ) | $ | (21,845 | ) | $ | (21,684 | ) | $ | (26,451 | ) | |||
Share-based compensation expense | 38,943 | 29,193 | 69,684 | 55,588 | |||||||||||
Acquisition-related costs | 632 | 43 | 659 | 148 | |||||||||||
Income tax benefit | (10,600 | ) | — | (8,000 | ) | — | |||||||||
Net income, adjusted | $ | 25,882 | $ | 7,391 | $ | 40,659 | $ | 29,285 | |||||||
Non-GAAP net income per share — basic | $ | 0.13 | $ | 0.04 | $ | 0.21 | $ | 0.16 | |||||||
Non-GAAP net income per share — diluted | $ | 0.13 | $ | 0.04 | $ | 0.20 | $ | 0.15 | |||||||
Weighted-average shares outstanding — basic | 194,155 | 185,439 | 192,807 | 184,305 | |||||||||||
Weighted-average shares outstanding — diluted | 205,830 | 195,021 | 203,923 | 193,119 |
Three Months Ended June 30, 2018 | Three Months Ended June 30, 2017 | ||||||||||||||||||||||
IMT | Homes | Consolidated | IMT | Homes | Consolidated | ||||||||||||||||||
Revenue | $ | 325,246 | $ | — | $ | 325,246 | $ | 266,850 | $ | — | $ | 266,850 | |||||||||||
Costs and expenses: | |||||||||||||||||||||||
Cost of revenue | 25,527 | — | 25,527 | 20,260 | — | 20,260 | |||||||||||||||||
Sales and marketing | 145,177 | 2,550 | 147,727 | 131,218 | — | 131,218 | |||||||||||||||||
Technology and development | 95,967 | 4,409 | 100,376 | 78,541 | — | 78,541 | |||||||||||||||||
General and administrative | 55,384 | 5,195 | 60,579 | 53,346 | — | 53,346 | |||||||||||||||||
Acquisition-related costs | 632 | — | 632 | 43 | — | 43 | |||||||||||||||||
Total costs and expenses | 322,687 | 12,154 | 334,841 | 283,408 | — | 283,408 | |||||||||||||||||
Income (loss) from operations | 2,559 | (12,154 | ) | (9,595 | ) | (16,558 | ) | — | (16,558 | ) | |||||||||||||
Other income | 3,089 | — | 3,089 | 1,610 | — | 1,610 | |||||||||||||||||
Interest expense | (7,187 | ) | — | (7,187 | ) | (6,897 | ) | — | (6,897 | ) | |||||||||||||
Loss before income taxes | $ | (1,539 | ) | $ | (12,154 | ) | $ | (13,693 | ) | $ | (21,845 | ) | $ | — | $ | (21,845 | ) |
Six Months Ended June 30, 2018 | Six Months Ended June 30, 2017 | ||||||||||||||||||||||
IMT | Homes | Consolidated | IMT | Homes | Consolidated | ||||||||||||||||||
Revenue | $ | 625,125 | $ | — | $ | 625,125 | $ | 512,625 | $ | — | $ | 512,625 | |||||||||||
Costs and expenses: | |||||||||||||||||||||||
Cost of revenue | 49,446 | — | 49,446 | 40,492 | — | 40,492 | |||||||||||||||||
Sales and marketing | 281,770 | 3,248 | 285,018 | 237,158 | — | 237,158 | |||||||||||||||||
Technology and development | 187,412 | 6,897 | 194,309 | 151,409 | — | 151,409 | |||||||||||||||||
General and administrative | 107,601 | 9,051 | 116,652 | 98,812 | — | 98,812 | |||||||||||||||||
Acquisition-related costs | 659 | — | 659 | 148 | — | 148 | |||||||||||||||||
Total costs and expenses | 626,888 | 19,196 | 646,084 | 528,019 | — | 528,019 | |||||||||||||||||
Loss from operations | (1,763 | ) | (19,196 | ) | (20,959 | ) | (15,394 | ) | — | (15,394 | ) | ||||||||||||
Other income | 5,535 | — | 5,535 | 2,563 | — | 2,563 | |||||||||||||||||
Interest expense | (14,260 | ) | — | (14,260 | ) | (13,620 | ) | — | (13,620 | ) | |||||||||||||
Loss before income taxes | $ | (10,488 | ) | $ | (19,196 | ) | $ | (29,684 | ) | $ | (26,451 | ) | $ | — | $ | (26,451 | ) |
Three Months Ended June 30, | 2017 to 2018 % Change | |||||||
2018 | 2017 | |||||||
(in millions) | ||||||||
Average Monthly Unique Users (1) | 186.1 | 178.1 | 4 | % | ||||
Visits (2) | 1,920.6 | 1,678.7 | 14 | % |
(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 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. |