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 June 30,
2018. In a separate news release, Zillow Group announced that it
has entered into a definitive agreement to acquire Mortgage Lenders
of America, L.L.C., a national mortgage lender headquartered in
Overland Park, Kansas.
“Zillow Group’s second quarter 2018 year-over-year revenue
growth of 22% was driven primarily by our Premier Agent, Rentals
and New Construction marketplaces,” said Zillow Group CEO Spencer
Rascoff. “This quarter also marked a major milestone in Zillow
Group’s history, as we launched our Homes business and began buying
houses directly from homeowners in two cities through Zillow
Offers™. At this exciting time in the real estate industry, Zillow
Group is committed to developing innovative technology and
services, like Zillow Offers and, with today’s announcement,
potential for mortgage originations, that help our partners meet
evolving consumer expectations, while generating more revenue
opportunities.”
Complete financial results can be found in the investor
relations section of Zillow Group’s website at
http://investors.zillowgroup.com/results.cfm.
Zillow Group Q2 2018 Earnings Highlights
Second Quarter and Year to Date 2018
Financial Highlights
In the second quarter of 2018, Zillow Group began reporting
financial results for its two reportable segments: the Internet,
Media & Technology (“IMT”) segment and the Homes segment. The
IMT segment includes 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 includes the financial results
from Zillow Group’s buying and selling of homes directly.
The following table sets forth our financial highlights for the
periods presented (in thousands, unaudited):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
2017 to 2018 % Change |
|
|
Six Months Ended |
|
2017 to 2018 % Change |
|
|
|
June 30, |
|
|
|
June 30, |
|
|
|
|
|
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: |
|
|
|
|
|
|
|
|
|
|
|
|
IMT segment |
$ |
64,724 |
|
|
$ |
39,700 |
|
|
|
|
$ |
115,724 |
|
|
$ |
94,499 |
|
|
|
|
Homes
segment |
|
(8,724 |
) |
|
|
- |
|
|
|
|
|
(13,414 |
) |
|
|
- |
|
|
|
|
Total Adjusted EBITDA
(2) |
$ |
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. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second Quarter 2018 Audience
Highlights
- 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.
Business Outlook – Third Quarter and Full Year
2018
The following table presents Zillow Group’s business outlook for
the periods presented (in millions, unaudited):
|
|
|
|
|
|
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 |
|
|
|
|
|
|
|
|
|
|
|
|
In addition, Zillow Group expects to hold 300 to 550 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 loss for total
Adjusted EBITDA or to forecasted GAAP loss before income taxes for
segment Adjusted EBITDA 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 loss and loss before income taxes, 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 measure discussed in this release,
please see “Use of Non-GAAP Financial Measure” below.
Conference Call and Webcast Information
Zillow Group CEO Spencer Rascoff and Interim CFO Jennifer Rock
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 Quarterly
Update letter will be posted to the Quarterly Results section
of Zillow Group’s investor relations website at
http://investors.zillowgroup.com/results.cfm prior to the live
conference call and webcast.
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. 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 the proposed acquisition of Mortgage Lenders of America,
L.L.C., our business outlook, 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, the
satisfaction of conditions precedent to the closing of Zillow
Group’s acquisition of Mortgage Lenders of America, L.L.C., 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 Quarterly Report on Form 10-Q
for the quarterly period ended March 31, 2018 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 Measure
To provide investors with additional information regarding our
financial results, this press release includes references to
Adjusted EBITDA, including forecasted Adjusted EBITDA, which is a
non-GAAP financial measure. We have provided 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, 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 loss before income taxes
and our other GAAP results. You should not consider Adjusted EBITDA
in isolation or as a substitute 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
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.
Zillow Offers™ provides homeowners in certain metropolitan areas
with the opportunity to receive offers to purchase their home from
Zillow. 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®. Zillow Group is headquartered in Seattle,
Washington.
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 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)
Adjusted EBITDA
The following tables set forth 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 (in
thousands, unaudited):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Three Months Ended |
|
|
|
June 30, 2018 |
|
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 |
|
Six Months Ended |
|
|
|
June 30, 2018 |
|
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. |
|
|
|
|
|
Contacts:
Raymond
Jones
Investor
Relationsir@zillowgroup.com
Katie CurnuttePublic
Relations
press@zillow.com
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