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 5.02 | Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers. |
Item 9.01 | Financial Statements and Exhibits. |
Exhibit Number | Description | |
10.1* | ||
99.1 | ||
99.2 | ||
99.3 | ||
* | Indicates a management contract or compensatory plan or arrangement. |
Dated: February 21, 2019 | ZILLOW GROUP, INC. | ||
By: | /s/ SPENCER M. RASCOFF | ||
Name: | Spencer M. Rascoff | ||
Title: | Chief Executive Officer |
If to the Company: | ||||
Zillow Group, Inc. | ||||
1301 2nd Ave, Floor 31 | ||||
Seattle, WA | ||||
legal@zillowgroup.com | ||||
Attn: General Counsel | ||||
If to Executive: | ||||
Spencer M. Rascoff | ||||
Address and email on file at the Company |
“Company” | ZILLOW GROUP, INC. |
/s/ Bradley D. Owens | |
Title: General Counsel | |
Dated: February 20, 2019 | |
“Executive” | |
/s/ Spencer M. Rascoff | |
Dated: February 20, 2019 |
Contacts: | ||
Raymond Jones | Katie Curnutte | |
Investor Relations | Public Relations | |
ir@zillowgroup.com | press@zillow.com |
• | Purchasing 5,000 homes per month at annualized segment revenue of approximately $20.0 billion. |
• | Achieve 33% attach rate to the Homes segment. |
• | Originating more than 3,000 loans per month. |
• | Achieve $2.0 billion in annual segment revenue, almost doubling its current size. |
• | Generate approximately $600.0 million in Adjusted EBITDA1, or 30% of segment revenue.* |
1Adjusted EBITDA is a non-GAAP financial measure; it is not calculated or presented in accordance with U.S. generally accepted accounting principles, or GAAP. Please see the below section “Use of Non-GAAP Financial Measures” for more information about our presentation of Adjusted EBITDA. Zillow Group has not provided a quantitative reconciliation of forecasted segment Adjusted EBITDA to forecasted segment GAAP income (loss) before income taxes within this earnings release because the company is unable, without making unreasonable efforts, to calculate certain reconciling items with confidence, as described further below. | ||||
2Please see below for more information about 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, for each of the periods presented. |
Three Months Ended December 31, | 2017 to 2018 % Change | Year Ended December 31, | 2017 to 2018 % Change | ||||||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||||||||
Revenue: | |||||||||||||||||||||
IMT segment: | |||||||||||||||||||||
Premier Agent | $ | 221,012 | $ | 199,514 | 11 | % | $ | 898,332 | $ | 761,594 | 18 | % | |||||||||
Rentals | 34,917 | 28,851 | 21 | % | 134,587 | 102,544 | 31 | % | |||||||||||||
Mortgages | 23,280 | 18,516 | 26 | % | 80,046 | 80,591 | (1 | )% | |||||||||||||
Other (1) | 44,779 | 35,449 | 26 | % | 168,224 | 132,065 | 27 | % | |||||||||||||
Total IMT segment revenue | 323,988 | 282,330 | 15 | % | 1,281,189 | 1,076,794 | 19 | % | |||||||||||||
Homes segment | 41,347 | — | N/A | 52,365 | — | N/A | |||||||||||||||
Total revenue | $ | 365,335 | $ | 282,330 | 29 | % | $ | 1,333,554 | $ | 1,076,794 | 24 | % | |||||||||
Other Financial Data: | |||||||||||||||||||||
Loss before income taxes: | |||||||||||||||||||||
IMT segment | $ | (78,930 | ) | $ | (166,802 | ) | $ | (88,600 | ) | $ | (184,006 | ) | |||||||||
Homes segment | (27,154 | ) | — | (62,360 | ) | — | |||||||||||||||
Total loss before income taxes | $ | (106,084 | ) | $ | (166,802 | ) | $ | (150,960 | ) | $ | (184,006 | ) | |||||||||
Net loss | $ | (97,682 | ) | $ | (77,175 | ) | $ | (119,858 | ) | $ | (94,420 | ) | |||||||||
Adjusted EBITDA (2): | |||||||||||||||||||||
IMT segment | $ | 52,357 | $ | 70,859 | $ | 245,937 | $ | 236,315 | |||||||||||||
Homes segment | (20,000 | ) | — | (45,105 | ) | — | |||||||||||||||
Total Adjusted EBITDA | $ | 32,357 | $ | 70,859 | $ | 200,832 | $ | 236,315 | |||||||||||||
Percentage of Revenue: | |||||||||||||||||||||
Loss before income taxes: | |||||||||||||||||||||
IMT segment | (24 | )% | (59 | )% | (7 | )% | (17 | )% | |||||||||||||
Homes segment | (66 | )% | N/A | (119 | )% | N/A | |||||||||||||||
Total loss before income taxes | (29 | )% | (59 | )% | (11 | )% | (17 | )% | |||||||||||||
Net loss | (27 | )% | (27 | )% | (9 | )% | (9 | )% | |||||||||||||
Adjusted EBITDA: | |||||||||||||||||||||
IMT segment | 16 | % | 25 | % | 19 | % | 22 | % | |||||||||||||
Homes segment | (48 | )% | N/A | (86 | )% | N/A | |||||||||||||||
Total Adjusted EBITDA | 9 | % | 25 | % | 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) Adjusted EBITDA is a non-GAAP financial measure; it is not calculated or presented in accordance with U.S. generally accepted accounting principles, or GAAP. 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. |
Zillow Group Outlook as of February 21, 2019 | Three Months Ended March 31, 2019 | Year Ending December 31, 2019 | ||
Revenue: | ||||
IMT segment: | ||||
Premier Agent | $215.0 to $220.0 | $905.0 to $930.0 | ||
Total IMT segment revenue | $293.0 to $301.0 | $1,246.0 to $1,281.0 | ||
Homes segment | $100.0 to $115.0 | *** | ||
Mortgages segment | $24.0 to $27.0 | $100.0 to $115.0 | ||
Total revenue | $417.0 to $443.0 | *** | ||
Adjusted EBITDA*: | ||||
IMT segment | $32.0 to $38.0 | $241.0 to $266.0 | ||
Homes segment | ($38.0) to ($33.0) | *** | ||
Mortgages segment | ($8.0) to ($6.0) | ($32.0) to ($22.0) | ||
Total Adjusted EBITDA | ($14.0) to ($1.0) | *** | ||
Weighted average shares outstanding — basic | 204.0 to 206.0 | 207.0 to 209.0 | ||
Weighted average shares outstanding — diluted | 207.5 to 209.5 | 210.5 to 212.5 |
*** Outlook not provided |
▪ | 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 impairment costs; |
▪ | 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 December 31, 2018 | Three Months Ended December 31, 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 | $ | (97,682 | ) | N/A | N/A | $ | (77,175 | ) | |||||||||||||
Income tax benefit | N/A | N/A | (8,402 | ) | N/A | N/A | (89,627 | ) | |||||||||||||||
Loss before income taxes | $ | (78,930 | ) | $ | (27,154 | ) | $ | (106,084 | ) | $ | (166,802 | ) | $ | — | $ | (166,802 | ) | ||||||
Other income | (5,962 | ) | — | (5,962 | ) | (1,415 | ) | — | (1,415 | ) | |||||||||||||
Depreciation and amortization expense | 22,465 | 625 | 23,090 | 28,579 | — | 28,579 | |||||||||||||||||
Share-based compensation expense | 32,934 | 4,784 | 37,718 | 29,409 | — | 29,409 | |||||||||||||||||
Impairment costs | 69,000 | — | 69,000 | 174,000 | — | 174,000 | |||||||||||||||||
Acquisition-related costs | 268 | — | 268 | 97 | — | 97 | |||||||||||||||||
Interest expense | 12,582 | 1,745 | 14,327 | 6,991 | — | 6,991 | |||||||||||||||||
Adjusted EBITDA | $ | 52,357 | $ | (20,000 | ) | $ | 32,357 | $ | 70,859 | $ | — | $ | 70,859 |
Year Ended December 31, 2018 | Year Ended December 31, 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 | $ | (119,858 | ) | N/A | N/A | $ | (94,420 | ) | |||||||||||||
Income tax benefit | N/A | N/A | (31,102 | ) | N/A | N/A | (89,586 | ) | |||||||||||||||
Loss before income taxes | $ | (88,600 | ) | $ | (62,360 | ) | $ | (150,960 | ) | $ | (184,006 | ) | $ | — | $ | (184,006 | ) | ||||||
Other income | (19,270 | ) | — | (19,270 | ) | (5,385 | ) | — | (5,385 | ) | |||||||||||||
Depreciation and amortization expense | 98,041 | 1,350 | 99,391 | 110,155 | — | 110,155 | |||||||||||||||||
Share-based compensation expense | 135,356 | 13,728 | 149,084 | 113,571 | — | 113,571 | |||||||||||||||||
Impairment costs | 79,000 | — | 79,000 | 174,000 | — | 174,000 | |||||||||||||||||
Acquisition-related costs | 2,332 | — | 2,332 | 463 | — | 463 | |||||||||||||||||
Interest expense | 39,078 | 2,177 | 41,255 | 27,517 | — | 27,517 | |||||||||||||||||
Adjusted EBITDA | $ | 245,937 | $ | (45,105 | ) | $ | 200,832 | $ | 236,315 | $ | — | $ | 236,315 | ||||||||||
(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. |
December 31, 2018 | December 31, 2017 | ||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 651,058 | $ | 352,095 | |||
Short-term investments | 903,867 | 410,444 | |||||
Accounts receivable, net | 66,083 | 54,396 | |||||
Inventory | 162,829 | — | |||||
Mortgage loans held for sale | 35,409 | ||||||
Prepaid expenses and other current assets | 61,067 | 24,590 | |||||
Restricted cash | 12,385 | — | |||||
Total current assets | 1,892,698 | 841,525 | |||||
Contract cost assets | 45,819 | — | |||||
Property and equipment, net | 135,172 | 112,271 | |||||
Goodwill | 1,984,907 | 1,931,076 | |||||
Intangible assets, net | 215,904 | 319,711 | |||||
Other assets | 16,616 | 25,934 | |||||
Total assets | $ | 4,291,116 | $ | 3,230,517 | |||
Liabilities and shareholders’ equity | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 7,471 | $ | 3,587 | |||
Accrued expenses and other current liabilities | 63,101 | 61,373 | |||||
Accrued compensation and benefits | 31,388 | 19,109 | |||||
Revolving credit facility | 116,700 | — | |||||
Warehouse lines of credit | 33,018 | — | |||||
Deferred revenue | 34,080 | 31,918 | |||||
Deferred rent, current portion | 1,740 | 2,400 | |||||
Total current liabilities | 287,498 | 118,387 | |||||
Deferred rent, net of current portion | 19,945 | 21,330 | |||||
Long-term debt | 699,020 | 385,416 | |||||
Deferred tax liabilities and other long-term liabilities | 17,474 | 44,561 | |||||
Total liabilities | 1,023,937 | 569,694 | |||||
Shareholders’ equity: | |||||||
Preferred stock | — | — | |||||
Class A common stock | 6 | 6 | |||||
Class B common stock | 1 | 1 | |||||
Class C capital stock | 14 | 13 | |||||
Additional paid-in capital | 3,939,842 | 3,254,146 | |||||
Accumulated other comprehensive loss | (905 | ) | (1,100 | ) | |||
Accumulated deficit | (671,779 | ) | (592,243 | ) | |||
Total shareholders’ equity | 3,267,179 | 2,660,823 | |||||
Total liabilities and shareholders’ equity | $ | 4,291,116 | $ | 3,230,517 |
Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Revenue: | |||||||||||||||
IMT | $ | 323,988 | $ | 282,330 | $ | 1,281,189 | $ | 1,076,794 | |||||||
Homes | 41,347 | — | 52,365 | — | |||||||||||
Total revenue | 365,335 | 282,330 | 1,333,554 | 1,076,794 | |||||||||||
Cost of revenue (exclusive of amortization) (1)(2): | |||||||||||||||
IMT | 28,498 | 22,559 | 104,330 | 85,203 | |||||||||||
Homes | 38,974 | — | 49,260 | — | |||||||||||
Total cost of revenue | 67,472 | 22,559 | 153,590 | 85,203 | |||||||||||
Sales and marketing (2) | 138,869 | 103,935 | 552,621 | 448,201 | |||||||||||
Technology and development (2) | 111,195 | 85,187 | 410,818 | 319,985 | |||||||||||
General and administrative (2) | 74,758 | 57,778 | 262,153 | 210,816 | |||||||||||
Impairment costs | 69,000 | 174,000 | 79,000 | 174,000 | |||||||||||
Acquisition-related costs | 268 | 97 | 2,332 | 463 | |||||||||||
Integration costs | 1,492 | — | 2,015 | — | |||||||||||
Total costs and expenses | 463,054 | 443,556 | 1,462,529 | 1,238,668 | |||||||||||
Loss from operations | (97,719 | ) | (161,226 | ) | (128,975 | ) | (161,874 | ) | |||||||
Other income | 5,962 | 1,415 | 19,270 | 5,385 | |||||||||||
Interest expense | (14,327 | ) | (6,991 | ) | (41,255 | ) | (27,517 | ) | |||||||
Loss before income taxes | (106,084 | ) | (166,802 | ) | (150,960 | ) | (184,006 | ) | |||||||
Income tax benefit (expense) | 8,402 | 89,627 | 31,102 | 89,586 | |||||||||||
Net loss | $ | (97,682 | ) | $ | (77,175 | ) | $ | (119,858 | ) | $ | (94,420 | ) | |||
Net loss per share — basic and diluted | $ | (0.48 | ) | $ | (0.41 | ) | $ | (0.61 | ) | $ | (0.51 | ) | |||
Weighted-average shares outstanding — basic and diluted | 203,561 | 189,439 | 197,944 | 186,453 | |||||||||||
____________________ (1) Amortization of website development costs and intangible assets included in technology and development | $ | 17,575 | $ | 24,392 | $ | 79,309 | $ | 94,349 | |||||||
(2) Includes share-based compensation expense as follows: | |||||||||||||||
Cost of revenue | $ | 947 | $ | 942 | $ | 4,127 | $ | 3,884 | |||||||
Sales and marketing | 5,529 | 5,041 | 22,942 | 22,735 | |||||||||||
Technology and development | 15,753 | 10,609 | 56,673 | 39,938 | |||||||||||
General and administrative | 15,489 | 12,817 | 65,342 | 47,014 | |||||||||||
Total | $ | 37,718 | $ | 29,409 | $ | 149,084 | $ | 113,571 | |||||||
Other Financial Data: | |||||||||||||||
Adjusted EBITDA (3) | $ | 32,357 | $ | 70,859 | $ | 200,832 | $ | 236,315 | |||||||
(3) Adjusted EBITDA is a non-GAAP financial measure; it is not calculated or presented in accordance with U.S. generally accepted accounting principles, or GAAP. 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. |
Year Ended December 31, | |||||||
2018 | 2017 | ||||||
Operating activities | |||||||
Net loss | $ | (119,858 | ) | $ | (94,420 | ) | |
Adjustments to reconcile net loss to net cash provided by operating activities: | |||||||
Depreciation and amortization | 99,391 | 110,155 | |||||
Share-based compensation expense | 149,084 | 113,571 | |||||
Amortization of contract cost assets | 36,013 | — | |||||
Amortization of discount and issuance costs on 2023 and 2021 Notes | 26,672 | 18,012 | |||||
Impairment costs | 79,000 | 174,000 | |||||
Deferred income taxes | (31,102 | ) | (89,586 | ) | |||
Loss on disposal of property and equipment | 3,617 | 5,678 | |||||
Bad debt expense | 869 | 7,349 | |||||
Deferred rent | (2,045 | ) | 7,085 | ||||
Amortization (accretion) of bond premium (discount) | (4,313 | ) | 431 | ||||
Changes in operating assets and liabilities: | |||||||
Accounts receivable | (12,556 | ) | (21,203 | ) | |||
Inventory | (162,829 | ) | — | ||||
Mortgage loans held for sale | (1,161 | ) | — | ||||
Prepaid expenses and other assets | (34,068 | ) | 10,807 | ||||
Contract cost assets | (41,510 | ) | — | ||||
Accounts payable | 1,311 | (373 | ) | ||||
Accrued expenses and other current liabilities | 1,920 | 19,000 | |||||
Accrued compensation and benefits | 11,291 | (4,948 | ) | ||||
Deferred revenue | 2,162 | 2,633 | |||||
Other long-term liabilities | 1,962 | — | |||||
Net cash provided by operating activities | 3,850 | 258,191 | |||||
Investing activities | |||||||
Proceeds from maturities of investments | 399,228 | 259,227 | |||||
Purchases of investments | (901,761 | ) | (407,032 | ) | |||
Proceeds from sales of investments | 13,567 | — | |||||
Purchases of property and equipment | (66,054 | ) | (66,728 | ) | |||
Purchases of intangible assets | (12,481 | ) | (11,907 | ) | |||
Purchase of equity investment | — | (10,000 | ) | ||||
Proceeds from divestiture of a business | — | 579 | |||||
Cash paid for acquisition, net | (55,138 | ) | (11,533 | ) | |||
Net cash used in investing activities | (622,639 | ) | (247,394 | ) | |||
Financing activities | |||||||
Proceeds from issuance of 2023 and 2021 Notes, net of issuance costs | 364,020 | — | |||||
Premiums paid for Capped Call Confirmations | (29,414 | ) | — | ||||
Proceeds from issuance of Class C Capital Stock, net of issuance costs | 360,345 | — | |||||
Proceeds from borrowing on revolving credit facility | 116,700 | — | |||||
Proceeds from borrowing on warehouse lines of credit | 482 | — | |||||
Proceeds from exercise of stock options | 120,074 | 98,071 | |||||
Value of equity awards withheld for tax liability | (70 | ) | (365 | ) | |||
Cash paid for contingent merger consideration | (2,000 | ) | — | ||||
Net cash provided by financing activities | 930,137 | 97,706 | |||||
Net increase in cash, cash equivalents and restricted cash during period | 311,348 | 108,503 | |||||
Cash, cash equivalents and restricted cash at beginning of period | 352,095 | 243,592 | |||||
Cash, cash equivalents and restricted cash at end of period | $ | 663,443 | $ | 352,095 | |||
Supplemental disclosures of cash flow information | |||||||
Cash paid for interest | $ | 15,473 | $ | 9,198 | |||
Noncash transactions: | |||||||
Capitalized share-based compensation | $ | 8,590 | $ | 11,236 | |||
Write-off of fully depreciated property and equipment | $ | 22,364 | $ | 15,004 | |||
Write-off of fully amortized intangible assets | $ | 12,999 | $ | 5,473 |
Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Net loss, as reported | $ | (97,682 | ) | $ | (77,175 | ) | $ | (119,858 | ) | $ | (94,420 | ) | |||
Share-based compensation expense | 37,718 | 29,409 | 149,084 | 113,571 | |||||||||||
Impairment costs | 69,000 | 174,000 | 79,000 | 174,000 | |||||||||||
Acquisition-related costs | 268 | 97 | 2,332 | 463 | |||||||||||
Income tax benefit | (8,204 | ) | (89,627 | ) | (31,102 | ) | (89,586 | ) | |||||||
Net income, adjusted | $ | 1,100 | $ | 36,704 | $ | 79,456 | $ | 104,028 | |||||||
Non-GAAP net income per share — basic | $ | 0.01 | $ | 0.19 | $ | 0.40 | $ | 0.56 | |||||||
Non-GAAP net income per share — diluted | $ | 0.01 | $ | 0.19 | $ | 0.39 | $ | 0.53 | |||||||
Weighted-average shares outstanding — basic | 203,561 | 189,439 | 197,944 | 186,453 | |||||||||||
Weighted-average shares outstanding — diluted | 207,271 | 197,442 | 206,067 | 194,837 |
Three Months Ended December 31, | Year Ended December 31, | ||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||
Denominator for basic calculation | 203,561 | 189,439 | 197,944 | 186,453 | |||||||
Effect of dilutive securities: | |||||||||||
Option awards | 3,370 | 6,468 | 6,967 | 7,332 | |||||||
Unvested restricted stock units | 340 | 1,100 | 1,156 | 1,052 | |||||||
Class A common stock issuable upon conversion of the 2020 Notes | — | 435 | — | — | |||||||
Denominator for dilutive calculation | 207,271 | 197,442 | 206,067 | 194,837 |
Three Months Ended December 31, 2018 | Three Months Ended December 31, 2017 | ||||||||||||||||||||||
IMT | Homes | Consolidated | IMT | Homes | Consolidated | ||||||||||||||||||
Revenue | $ | 323,988 | $ | 41,347 | $ | 365,335 | $ | 282,330 | $ | — | $ | 282,330 | |||||||||||
Costs and expenses: | |||||||||||||||||||||||
Cost of revenue | 28,498 | 38,974 | 67,472 | 22,559 | — | 22,559 | |||||||||||||||||
Sales and marketing | 128,513 | 10,356 | 138,869 | 103,935 | — | 103,935 | |||||||||||||||||
Technology and development | 102,556 | 8,639 | 111,195 | 85,187 | — | 85,187 | |||||||||||||||||
General and administrative | 65,970 | 8,788 | 74,758 | 57,778 | — | 57,778 | |||||||||||||||||
Impairment costs | 69,000 | — | 69,000 | 174,000 | — | 174,000 | |||||||||||||||||
Acquisition-related costs | 268 | — | 268 | 97 | — | 97 | |||||||||||||||||
Integration costs | 1,492 | — | 1,492 | — | — | — | |||||||||||||||||
Total costs and expenses | 396,297 | 66,757 | 463,054 | 443,556 | — | 443,556 | |||||||||||||||||
Loss from operations | (72,309 | ) | (25,410 | ) | (97,719 | ) | (161,226 | ) | — | (161,226 | ) | ||||||||||||
Other income | 5,962 | — | 5,962 | 1,415 | — | 1,415 | |||||||||||||||||
Interest expense | (12,582 | ) | (1,745 | ) | (14,327 | ) | (6,991 | ) | — | (6,991 | ) | ||||||||||||
Loss before income taxes | $ | (78,929 | ) | $ | (27,155 | ) | $ | (106,084 | ) | $ | (166,802 | ) | $ | — | $ | (166,802 | ) |
Year Ended December 31, 2018 | Year Ended December 31, 2017 | ||||||||||||||||||||||
IMT | Homes | Consolidated | IMT | Homes | Consolidated | ||||||||||||||||||
Revenue | $ | 1,281,189 | $ | 52,365 | $ | 1,333,554 | $ | 1,076,794 | $ | — | $ | 1,076,794 | |||||||||||
Costs and expenses: | |||||||||||||||||||||||
Cost of revenue | 104,330 | 49,260 | 153,590 | 85,203 | — | 85,203 | |||||||||||||||||
Sales and marketing | 534,038 | 18,583 | 552,621 | 448,201 | — | 448,201 | |||||||||||||||||
Technology and development | 389,539 | 21,279 | 410,818 | 319,985 | — | 319,985 | |||||||||||||||||
General and administrative | 238,727 | 23,426 | 262,153 | 210,816 | — | 210,816 | |||||||||||||||||
Impairment costs | 79,000 | — | 79,000 | 174,000 | — | 174,000 | |||||||||||||||||
Acquisition-related costs | 2,332 | — | 2,332 | 463 | — | 463 | |||||||||||||||||
Integration costs | 2,015 | — | 2,015 | — | — | — | |||||||||||||||||
Total costs and expenses | 1,349,981 | 112,548 | 1,462,529 | 1,238,668 | — | 1,238,668 | |||||||||||||||||
Loss from operations | (68,792 | ) | (60,183 | ) | (128,975 | ) | (161,874 | ) | — | (161,874 | ) | ||||||||||||
Other income | 19,270 | — | 19,270 | 5,385 | — | 5,385 | |||||||||||||||||
Interest expense | (39,078 | ) | (2,177 | ) | (41,255 | ) | (27,517 | ) | — | (27,517 | ) | ||||||||||||
Loss before income taxes | $ | (88,600 | ) | $ | (62,360 | ) | $ | (150,960 | ) | $ | (184,006 | ) | $ | — | $ | (184,006 | ) |
Three Months Ended December 31, | 2017 to 2018 % Change | |||||||
2018 | 2017 | |||||||
(in millions) | ||||||||
Average Monthly Unique Users (1) | 157.2 | 151.6 | 4 | % | ||||
Visits (2) | 1,607.8 | 1,435.6 | 12 | % |
(1) | Zillow, StreetEasy, HotPads, Naked Apartments and RealEstate.com 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 mobile apps and websites. We measure Zillow, StreetEasy and RealEstate.com visits with Google Analytics and Trulia visits with Adobe Analytics. |
• | Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Return on Homes Sold After Interest does not reflect capital expenditure requirements for such replacements or for new capital expenditure requirements; |
• | Return on Homes Sold After Interest does not consider the potentially dilutive impact of share-based compensation; |
• | Return on Homes Sold After Interest does not include period costs that were not eligible for inventory capitalization associated with homes held in inventory at the end of the period; |
• | Return on Homes Sold After Interest does not reflect indirect expenses included in cost of revenue, sales and marketing, technology and development, or general and administrative expenses, some of which are recurring cash expenditures necessary to operate the business; and |
• | Return on Homes Sold After Interest does not reflect income taxes. |
Three Months Ended December 31, 2018 | |||||||||
Total | Per Home | ||||||||
Homes sold | 141 | ||||||||
Homes revenue | $ | 41,347 | $ | 293,241 | |||||
Operating costs: | |||||||||
Home acquisition costs (1) | 37,243 | 264,134 | |||||||
Renovation costs (1) | 1,286 | 9,121 | |||||||
Holding costs (1)(2) | 365 | 2,589 | |||||||
Selling costs | 1,839 | 13,043 | |||||||
Total operating costs | 40,733 | 288,887 | |||||||
Interest expense (1)(2) | 371 | 2,631 | |||||||
Return on Homes Sold After Interest | $ | 243 | $ | 1,723 | |||||
(1) Amount excludes expenses incurred during the period that are not related to homes sold during the period. (2) Holding costs and interest expense include $0.1 million and $0.3 million, respectively, of costs incurred in prior quarters associated with homes sold in the fourth quarter of 2018. |
Reconciliation of Non-GAAP Measure to Nearest GAAP Measure: | Three Months Ended December 31, 2018 | ||
Loss before income taxes | $ | (27,155 | ) |
Homes sold | 141 | ||
Per home loss before income taxes | $ | (192,586 | ) |
Loss before income taxes | $ | (27,155 | ) |
Depreciation and amortization | 625 | ||
Share-based compensation expense | 4,784 | ||
Costs incurred in prior periods associated with homes sold in the current period (1) | (437 | ) | |
Costs incurred in current period related to homes not sold in current period (2) | 2,765 | ||
Indirect expenses included in cost of revenue (3) | 56 | ||
Indirect marketing and advertising costs included in sales and marketing (4) | 6,970 | ||
Indirect costs included in technology and development expense (5) | 6,691 | ||
Indirect costs included in general and administrative expense (6) | 5,944 | ||
Return on Homes Sold After Interest | $ | 243 | |
Homes sold | 141 | ||
Per home Return on Homes Sold After Interest | $ | 1,723 | |
(1) Amount represents costs incurred in prior periods associated with homes sold in the current period that were not eligible for inventory capitalization and were therefore expensed as period costs. (2) Amount represents costs ineligible for inventory capitalization that were expensed as period costs in the three months ended December 31, 2018 associated with homes that remain in inventory as of December 31, 2018. (3) Includes allocated segment costs that were recorded to cost of revenue within the Homes segment during the three months ended December 31, 2018. (4) Includes marketing and advertising expenses incurred in the three months ended December 31, 2018 not directly related to purchasing, renovating and selling homes. (5) Includes technology and development expenses incurred in the three months ended December 31, 2018 not directly related to purchasing, renovating and selling homes. (6) Includes general and administration expenses incurred in the three months ended December 31, 2018 not directly related to purchasing, renovating and selling homes. |
Year Ended December 31, 2018 | |||||||||
Total | Per Home | ||||||||
Homes sold | 177 | ||||||||
Homes revenue | $ | 52,365 | $ | 295,847 | |||||
Operating costs: | |||||||||
Home acquisition costs (1) | 47,143 | 266,345 | |||||||
Renovation costs (1) | 1,566 | 8,847 | |||||||
Holding costs (1) | 446 | 2,520 | |||||||
Selling costs | 2,347 | 13,260 | |||||||
Total operating costs | 51,502 | 290,972 | |||||||
Interest expense (1) | 423 | 2,389 | |||||||
Return on Homes Sold After Interest | $ | 440 | $ | 2,486 | |||||
(1) Amount excludes expenses incurred during the period that are not related to homes sold during the period. |
Reconciliation of Non-GAAP Measure to Nearest GAAP Measure: | Year Ended December 31, 2018 | ||
Loss before income taxes | $ | (62,360 | ) |
Homes sold | 177 | ||
Per home loss before income taxes | $ | (352,317 | ) |
Loss before income taxes | $ | (62,360 | ) |
Depreciation and amortization | 1,350 | ||
Share-based compensation expense | 13,728 | ||
Costs incurred in current period related to homes not sold in current period (1) | 3,518 | ||
Indirect expenses included in cost of revenue (2) | 229 | ||
Indirect marketing and advertising costs included in sales and marketing (3) | 12,992 | ||
Indirect costs included in technology and development expense (4) | 16,287 | ||
Indirect costs included in general and administrative expense (5) | 14,696 | ||
Return on Homes Sold After Interest | $ | 440 | |
Homes sold | 177 | ||
Per home Return on Homes Sold After Interest | $ | 2,486 | |
(1) Amount represents costs ineligible for inventory capitalization and expensed as period costs during the year ended December 31, 2018 associated with homes that remain in inventory as of December 31, 2018. (2) Includes allocated segment costs which were recorded to cost of revenue within the Homes segment during the year ended December 31, 2018. (3) Includes marketing and advertising expenses incurred during the year ended December 31, 2018 not directly related to purchasing, renovating and selling homes. (4) Includes technology and development expenses incurred during the year ended December 31, 2018 not directly related to purchasing, renovating and selling homes. (5) Includes general and administration expenses incurred during the year ended December 31, 2018 not directly related to purchasing, renovating and selling homes. |
Three Months Ended March 31, 2018 | Year Ended December 31, 2018 | ||||||
Revenue: | |||||||
IMT Segment: | |||||||
Premier Agent | $ | 213,732 | $ | 898,332 | |||
Rentals | 29,063 | 134,587 | |||||
Other | 38,061 | 168,224 | |||||
Total IMT segment revenue | 280,856 | 1,201,143 | |||||
Homes segment | — | 52,365 | |||||
Mortgages segment | 19,023 | 80,046 | |||||
Total revenue | $ | 299,879 | $ | 1,333,554 | |||
Adjusted EBITDA (1): | |||||||
IMT segment | $ | 46,683 | $ | 240,026 | |||
Homes segment | (3,513 | ) | (48,461 | ) | |||
Mortgages segment | 3,140 | 9,267 | |||||
Total Adjusted EBITDA | $ | 46,310 | $ | 200,832 | |||
(1) See Exhibit 99.1 for more information regarding our presentation of Adjusted EBITDA. See below for 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. |
Three Months Ended March 31, 2018 | Year Ended December 31, 2018 | ||||||||||||||||||||||||||||||
IMT | Homes | Mortgages | Consolidated | IMT | Homes | Mortgages | Consolidated | ||||||||||||||||||||||||
Reconciliation of Adjusted EBITDA to Net Loss and Loss Before Income Taxes: | |||||||||||||||||||||||||||||||
Net loss (1) | N/A | N/A | N/A | $ | (18,591 | ) | N/A | N/A | N/A | $ | (119,858 | ) | |||||||||||||||||||
Income tax (benefit) expense | N/A | N/A | N/A | 2,600 | N/A | N/A | N/A | (31,102 | ) | ||||||||||||||||||||||
Loss before income taxes | $ | (11,243 | ) | $ | (4,390 | ) | $ | (358 | ) | $ | (15,991 | ) | $ | (77,558 | ) | $ | (59,691 | ) | $ | (13,711 | ) | $ | (150,960 | ) | |||||||
Other income | (2,446 | ) | — | — | (2,446 | ) | (19,026 | ) | — | (244 | ) | (19,270 | ) | ||||||||||||||||||
Depreciation and amortization expense | 25,465 | 59 | 1,382 | 26,906 | 91,232 | 1,323 | 6,836 | 99,391 | |||||||||||||||||||||||
Share-based compensation expense | 27,807 | 818 | 2,116 | 30,741 | 131,404 | 7,731 | 9,949 | 149,084 | |||||||||||||||||||||||
Impairment costs | — | — | — | — | 75,000 | — | 4,000 | 79,000 | |||||||||||||||||||||||
Acquisition-related costs | 27 | — | — | 27 | 27 | — | 2,305 | 2,332 | |||||||||||||||||||||||
Interest expense | 7,073 | — | — | 7,073 | 38,946 | 2,177 | 132 | 41,255 | |||||||||||||||||||||||
Adjusted EBITDA | $ | 46,683 | $ | (3,513 | ) | $ | 3,140 | $ | 46,310 | $ | 240,025 | $ | (48,460 | ) | $ | 9,267 | $ | 200,832 | |||||||||||||
(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. |