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Zillow Group Reports Record First Quarter 2017 Results

  • Revenue increased 32% year-over-year to a record $245.8 million.
  • Full-year Revenue outlook raised to a range of $1.050 billion to $1.065 billion.
  • Zillow Group brands’ mobile apps and websites reached more than 166 million average monthly unique users in the first quarter of 2017 and an all-time high of nearly 180 million unique users in March 2017.
  • Visits to Zillow Group brands’ mobile apps and websites, including Zillow, Trulia and StreetEasy, increased 18% year-over-year to more than 1.5 billion in the first quarter of 2017.

SEATTLE, May 04, 2017 (GLOBE NEWSWIRE) -- Zillow Group, Inc. (NASDAQ:Z) (NASDAQ: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, 2017.

“Zillow Group’s strong first quarter performance across the board was a tremendous start to 2017,” said Zillow Group CEO Spencer Rascoff. “We beat our own expectations and surpassed last year’s seasonal annual traffic peak by reaching an all-time high of unique users in March. We are thrilled with our first quarter results, which demonstrate that as consumers become more engaged, real estate agents and brokerages become more successful on our platform.”

First Quarter 2017 Financial Highlights

  • Revenue increased 32% to $245.8 million from $186.0 million in the first quarter of 2016.

    Marketplace Revenue increased 36% to $230.3 million from $169.0 million in the first quarter of 2016.

    • Premier Agent Revenue increased 30% to $175.3 million from $134.5 million in the first quarter of 2016.

    Other Real Estate Revenue1 increased 93% to $34.8 million from $18.0 million in the first quarter of 2016.

    Mortgages Revenue increased 23% to $20.3 million from $16.5 million in the first quarter of 2016.

    Display Revenue decreased 9% to $15.4 million from $17.0 million in the first quarter of 2016. The decrease is primarily a result of the company’s strategy to deemphasize display advertising and improve the user experience.

  • GAAP net loss was $4.6 million, or 2% of Revenue, in the first quarter of 2017, compared to GAAP net loss of $47.6 million, or 26% of Revenue, in the first quarter of 2016.

  • Adjusted EBITDA was $54.8 million, or 22% of Revenue, in the first quarter of 2017, which was an increase from $1.9 million, or 1% of Revenue, in the first quarter of 2016.

Operating and Business Highlights

  • More than 166 million average monthly unique users visited Zillow Group brands’ mobile apps and websites during the first quarter of 2017, an increase of 7% year-over-year. Zillow Group brands’ mobile apps and websites reached an all-time high of nearly 180 million unique users in March 2017.

  • Visits to Zillow Group brands’ mobile apps and websites, Zillow, Trulia and (beginning in March 2017) StreetEasy, increased 18% year-over-year to more than 1.5 billion in the first quarter of 2017. Premier Agent revenue per visit increased 10% to $0.114 from $0.104 in the same period last year.
  • The number of Premier Agent accounts spending more than $5,000 per month grew by 98% year-over-year and increased 86% on a total dollar basis.
  • Total sales to Premier Agents who have been customers for more than one year increased 54% year-over-year for the first quarter of 2017.
  • Sales to existing Premier Agents accounted for 63% of total bookings for the first quarter of 2017.

Business Outlook - Second Quarter and Full Year 2017

For full year 2017, Zillow Group is increasing its outlook for Revenue to a range of $1.050 billion to $1.065 billion, which represents a 25% year-over-year increase at the midpoint of the range.

Zillow Group is raising its full year 2017 Adjusted EBITDA outlook to a range of $215 million to $230 million, which represents 21% of Revenue at the midpoint of the range. For 2017, the company is choosing to increase its investment in advertising, which supports growth in users and visits, at a rate that is lower than revenue growth. In line with the typical seasonality of the real estate industry, advertising spend is expected to be greatest in the second quarter, accounting for more than one third of Zillow Group’s annual advertising budget, with the fourth quarter being the lightest. Accordingly, Zillow Group expects these seasonal changes in advertising investment to impact quarterly Adjusted EBITDA proportionally throughout the year.

The following table presents Zillow Group’s business outlook for the periods presented:

Three Months Ending Year Ending
Zillow Group Outlook as of May 4, 2017 June 30, 2017 December 31, 2017
(in millions)
Revenue $257to$262 $1,050to$1,065
Premier Agent revenue $185to$187 $757to$765
Other real estate revenue $36to$37 $147to$151
Mortgages revenue $20to$21 $80to$82
Display revenue $16to$17 $66to$67
Operating expenses $284to$289 ***
Net loss $(34.8)to$(29.8) $(32)to$(17)
Adjusted EBITDA (1) $27to$32 $215to$230
Depreciation and amortization $27to$29 $113to$118
Share-based compensation expense $27to$29 $106to$111
Capital expenditures *** $48to$50
Weighted average shares outstanding — basic 183.5to185.5 184.0to186.0
Weighted average shares outstanding — diluted 191.5to193.5 192.0to194.0
*** Outlook not provided


(1)A reconciliation of forecasted Adjusted EBITDA to forecasted net loss is provided below in this press release.

Conference Call and Webcast Information

Zillow Group’s 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 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 first read the prepared remarks and then answer questions submitted via Sli.do, 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 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. Following completion of the call, a recorded replay of the webcast will be available on the investor relations section of Zillow Group’s website.

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 2017. 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 maintain or establish relationships with listings and data providers; the impact of the real estate industry on Zillow Group’s business; Zillow Group’s ability to innovate and provide products and services that are attractive to its users and advertisers; Zillow Group’s ability to increase awareness of the Zillow Group brands; Zillow Group’s ability to attract consumers to Zillow Group’s mobile applications and websites; Zillow Group’s ability to compete successfully against existing or future competitors; the impact of pending litigation and other legal and regulatory matters; 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, 2016 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 (loss) per share, which are non-GAAP financial measures. We have provided a reconciliation of Adjusted EBITDA (historical and forecasted) to net loss (historical and forecasted), the most directly comparable GAAP financial measure, and a reconciliation of net income (loss), adjusted, to net loss, as reported on a GAAP basis, and the calculations of non-GAAP net income (loss) 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 tax benefits; 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 (loss) per share excludes the impact of share-based compensation expense, acquisition-related costs and income tax benefits. 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 (loss) 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) (NASDAQ:ZG) houses a portfolio of the largest real estate and home-related brands on mobile and the web. The company’s brands 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 the right local professionals to help. The Zillow Group portfolio of consumer brands includes real estate and rental marketplaces Zillow®, Trulia®, StreetEasy®, HotPads®, Naked Apartments® and RealEstate.com. In addition, Zillow Group works with tens of thousands of real estate agents, lenders and rental professionals, helping maximize business opportunities and connect to millions of consumers. The company operates a number of business brands for real estate, rental and mortgage professionals, including Mortech®, dotloop® and Bridge Interactive™. 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, StreetEasy and HotPads are registered trademarks 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. Bridge Interactive is a trademark of Zillow, Inc.

Twitter is a registered trademark of Twitter, Inc.

(ZFIN)


Reported Consolidated Results

ZILLOW GROUP, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
March 31,
2017
December 31,
2016
Assets
Current assets:
Cash and cash equivalents $ 261,524 $ 243,592
Short-term investments 297,520 262,870
Accounts receivable, net 41,868 40,527
Prepaid expenses and other current assets 29,559 34,817
Total current assets 630,471 581,806
Restricted cash 1,053 1,053
Property and equipment, net 94,945 98,288
Goodwill 1,927,450 1,923,480
Intangible assets, net 525,771 527,464
Other assets 17,404 17,586
Total assets $ 3,197,094 $ 3,149,677
Liabilities and shareholders’ equity
Current liabilities:
Accounts payable $ 4,157 $ 4,257
Accrued expenses and other current liabilities 43,742 38,427
Accrued compensation and benefits 26,596 24,057
Deferred revenue 30,875 29,154
Deferred rent, current portion 1,451 1,347
Total current liabilities 106,821 97,242
Deferred rent, net of current portion 15,384 15,298
Long-term debt 371,757 367,404
Deferred tax liabilities and other long-term liabilities 134,146 136,146
Total liabilities 628,108 616,090
Shareholders’ equity:
Class A common stock 5 5
Class B common stock 1 1
Class C capital stock 12 12
Additional paid-in capital 3,071,664 3,030,854
Accumulated other comprehensive loss (267) (242)
Accumulated deficit (502,429) (497,043)
Total shareholders’ equity 2,568,986 2,533,587
Total liabilities and shareholders’ equity $ 3,197,094 $ 3,149,677


ZILLOW GROUP, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
Three Months Ended
March 31,
2017 2016
Revenue $ 245,775 $ 185,982
Costs and expenses:
Cost of revenue (exclusive of amortization) (1)(2) 20,232 16,203
Sales and marketing (2) 105,940 99,101
Technology and development (2) 72,868 60,371
General and administrative (2) 45,466 57,791
Acquisition-related costs 105 593
Total costs and expenses 244,611 234,059
Income (loss) from operations 1,164 (48,077)
Other income 953 681
Interest expense (6,723) (1,573)
Loss before income taxes (4,606) (48,969)
Income tax benefit - 1,364
Net loss $ (4,606) $ (47,605)
Net loss per share — basic and diluted $ (0.03) $ (0.27)
Weighted-average shares outstanding — basic and diluted 183,158 178,686
_________
(1) Amortization of website development costs and
intangible assets included in technology and
development
$ 23,261 $ 20,059
(2) Includes share-based compensation expense as follows:
Cost of revenue $ 903 $ 786
Sales and marketing 5,530 5,203
Technology and development 8,491 6,759
General and administrative 11,471 12,803
Total $ 26,395 $ 25,551
Other Financial Data:
Adjusted EBITDA (3) $ 54,799 $ 1,874
(3) See above for more information regarding our presentation of Adjusted EBITDA.


ZILLOW GROUP, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Three Months Ended
March 31,
2017 2016
Operating activities
Net loss $ (4,606) $ (47,605)
Adjustments to reconcile net loss to net cash provided by operating activities,
net of amounts assumed in connection with acquisitions:
Depreciation and amortization 27,135 23,807
Share-based compensation expense 26,395 25,551
Amortization of discount and issuance costs on 2021 Notes 4,353 -
Release of valuation allowance on certain deferred tax assets - 1,364
Loss on disposal of property and equipment 999 1,436
Bad debt expense 718 313
Deferred rent 190 (7)
Amortization of bond premium 223 430
Changes in operating assets and liabilities:
Accounts receivable (2,059) (2,770)
Prepaid expenses and other assets 4,737 2,708
Accounts payable 53 1,594
Accrued expenses and other current liabilities 4,683 2,793
Accrued compensation and benefits 2,539 8,759
Deferred revenue 1,598 3,294
Other long-term liabilities - (2,749)
Net cash provided by operating activities 66,958 18,918
Investing activities
Proceeds from maturities of investments 49,107 44,108
Purchases of investments (84,008) (38,760)
Proceeds from sales of investments - 4,795
Decrease in restricted cash - 1,962
Purchases of property and equipment (14,163) (14,251)
Purchases of intangible assets (5,308) (2,675)
Proceeds from divestiture of business 579 -
Cash paid for acquisitions, net (6,002) (12,357)
Net cash used in investing activities (59,795) (17,178)
Financing activities
Proceeds from exercise of stock options 11,006 1,682
Value of equity awards withheld for tax liability (237) (117)
Net cash provided by financing activities 10,769 1,565
Net increase in cash and cash equivalents during period 17,932 3,305
Cash and cash equivalents at beginning of period 243,592 229,138
Cash and cash equivalents at end of period $ 261,524 $ 232,443
Supplemental disclosures of cash flow information
Noncash transactions:
Capitalized share-based compensation $ 2,868 $ 2,250
Write-off of fully depreciated property and equipment $ 3,446 $ 6,834
Write-off of fully amortized intangible assets $ 5,280 $ -

Adjusted EBITDA

The following table presents 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,
2017 2016
Reconciliation of Adjusted EBITDA to Net Loss:
Net loss $ (4,606) $ (47,605)
Other income (953) (681)
Depreciation and amortization expense 27,135 23,807
Share-based compensation expense 26,395 25,551
Acquisition-related costs 105 593
Interest expense 6,723 1,573
Income tax benefit - (1,364)
Adjusted EBITDA $ 54,799 $ 1,874


The following table presents a reconciliation of forecasted Adjusted EBITDA to forecasted net loss for each of the periods presented (in thousands, unaudited):

Three Months Ending Year Ending
June 30, 2017 December 31, 2017
Reconciliation of Forecasted Adjusted EBITDA to Forecasted Net Loss:
Forecasted Net loss $ (32,250) $ (24,500)
Forecasted Other income (950) (3,800)
Forecasted Depreciation and amortization expense 28,000 115,500
Forecasted Share-based compensation expense 28,000 108,500
Forecasted Interest expense 6,700 26,800
Forecasted Adjusted EBITDA $ 29,500 $ 222,500

Non-GAAP Net Income (Loss) per Share

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

Three Months Ended
March 31,
2017 2016
Net loss, as reported $ (4,606) $ (47,605)
Share-based compensation expense 26,395 25,551
Acquisition-related costs 105 593
Income tax benefit - (1,364)
Net income (loss), adjusted $ 21,894 $ (22,825)
Non-GAAP net income (loss) per share - basic $ 0.12 $ (0.13)
Non-GAAP net income (loss) per share - diluted $ 0.11 $ (0.13)
Weighted-average shares outstanding - basic 183,158 178,686
Weighted-average shares outstanding - diluted 191,290 178,686

Revenue by Type

The following tables present our revenue by type and as a percentage of total revenue for each of the periods presented (in thousands, unaudited):

Three Months Ended
March 31,
2017 2016
Revenue:
Marketplace revenue:
Premier Agent$ 175,301 $ 134,529
Other real estate 34,755 17,978
Mortgages 20,270 16,454
Total Marketplace revenue 230,326 168,961
Display revenue 15,449 17,021
Total revenue$ 245,775 $ 185,982
Three Months Ended
March 31,
2017 2016
Percentage of Total Revenue:
Marketplace revenue:
Premier Agent 71% 72%
Other real estate 14% 10%
Mortgages 8% 9%
Total Marketplace revenue 94% 91%
Display revenue 6% 9%
Total revenue 100% 100%

Key Metrics

The following tables set forth our key metrics for each of the periods presented:

Three Months Ended
March 31,
2016 to 2017
2017 2016 % Change
(in millions)
Average Monthly Unique Users (1)166.6 156.2 7%


Three Months Ended
March 31,
2016 to 2017
2017 2016 % Change
(in millions)
Visits (2)1,533.0 1,298.3 18%


(1)We measure Zillow unique users with Google Analytics and Trulia unique users with Adobe Analytics (formerly called Omniture analytical tools).
(2)Visits includes visits to Zillow’s and Trulia’s mobile apps and websites, and beginning in March 2017, also includes visits to StreetEasy’s mobile app and website. We measure Zillow and StreetEasy visits with Google Analytics and Trulia visits with Adobe Analytics.

______________________

1 Other Real Estate Revenue primarily includes Zillow Group Rentals, agent services, dotloop, Naked Apartments, and other offerings to endemic advertisers that are not traditional display advertising, including New Construction, which includes advertising services for homebuilders.


Contacts: Raymond Jones Investor Relations 206-470-7137 ir@zillowgroup.com Katie Curnutte Public Relations press@zillow.com

Source: Zillow Group, Inc.