UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 8-K
 
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): February 20, 2019
 
ZILLOW GROUP, INC.
(Exact name of registrant as specified in its charter)

 

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)
(206) 470-7000
(Registrant’s telephone number, including area 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))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company     ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    ☐
 






Item 2.02
Results of Operations and Financial Condition.
Zillow Group, Inc. (“Zillow Group”) today issued a press release announcing its financial results for the fiscal quarter and full year ended December 31, 2018 . The full text of the press release issued in connection with the announcement is furnished as Exhibit 99.2 and accompanying supporting tables as Exhibit 99.3 to this Current Report on Form 8-K.
The information in this Item 2.02 and Exhibits 99.2 and 99.3 of this Current Report on Form 8-K shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, except as expressly set forth by specific reference in such a filing.
Item 5.02
Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
On February 21, 2019, Zillow Group announced the appointment of Richard N. Barton as Zillow Group’s Chief Executive Officer, effective February 21, 2019. Mr. Barton will succeed Spencer Rascoff, who has served as Zillow Group’s Chief Executive Officer since 2010 and who will remain a member of Zillow Group’s board of directors. Mr. Barton also will remain a member of Zillow Group’s board of directors. In connection with Mr. Barton’s appointment, Lloyd D. Frink will succeed Mr. Barton as Executive Chairman. Mr. Frink will remain President of Zillow Group.
Mr. Barton (age 51) co-founded Zillow, Inc. in December 2004 and served as its Chief Executive Officer from inception until September 2010. Mr. Barton served as Executive Chairman since September 2010 until the present and has been a member of the board of directors since inception. He served as a venture partner at Benchmark Capital, a venture capital firm, from February 2005 through 2018. Prior to co-founding Zillow, Inc., Mr. Barton founded Expedia as a group within Microsoft Corporation in 1994, which Microsoft spun out as Expedia, Inc. in 1999, and Mr. Barton served as Expedia’s President, Chief Executive Officer and as a member of its board of directors from 1999 to 2003. Mr. Barton also co-founded and served as Non-Executive Chairman of Glassdoor, a job search and cultural reviews website for companies, from January 2008 through the company’s acquisition in June 2018. Mr. Barton has served on the board of directors of Netflix, Inc., an online media subscription service provider, since 2002, and Qurate Retail, Inc. (formerly Liberty Interactive Corporation), a holding company of businesses in the electronic retailing, media, communications and entertainment industries, since 2016. Mr. Barton holds a B.S. in General Engineering: Industrial Economics from Stanford University.
In connection with Mr. Barton’s appointment, the compensation committee of Zillow Group’s board of directors approved an increase in his annual base salary to $540,000.00, effective as of February 21, 2019.
The full text of the press release issued in connection with the announcement is furnished as Exhibit 99.1 to this Current Report on Form 8-K.
In connection with Mr. Rascoff’s resignation as Chief Executive Officer, effective February 21, 2019, Zillow Group entered into an Executive Departure Agreement and Release (the “Agreement”) with Mr. Rascoff. Pursuant to the Agreement, Mr. Rascoff will remain a full-time employee of Zillow Group at his current level of compensation and benefits until March 22, 2019 (the “Departure Date”) in order to provide transition services until such date. Mr. Rascoff will remain a member of Zillow Group’s board of directors.
Pursuant to the Agreement, Mr. Rascoff will be eligible to receive the following payments and benefits on or after the Departure Date: (i) a lump sum payment of $405,000.00, which represents six months of Mr. Rascoff’s current base salary; (ii) COBRA continuation coverage on a monthly basis through September 30, 2019; and (iii) accelerated vesting of outstanding stock options held by Mr. Rascoff as of the Departure Date by an additional eighteen months from the Departure Date. Options not vested as of the Departure Date, taking into account the foregoing vesting acceleration, will terminate. During Mr. Rascoff’s continued service on Zillow Group’s board of directors, he will be eligible to receive the compensation payable to non-employee directors under the Zillow Group Amended and Restated Stock Option Program for Nonemployee Directors; provided, however, that in lieu of any compensation payable thereunder to him during 2019, Mr. Rascoff will receive, effective as of March 21, 2019, a stock option under the Company’s Amended and Restated 2011 Incentive Plan to purchase that number of shares of Zillow Group’s Class C capital stock with a Black-Scholes-Merton value equal to $400,000.00. The option will be fully vested as of the grant date and will have a ten-year term. Each of Mr. Rascoff’s vested stock options that are outstanding





as of the Departure Date (including the foregoing option for 2019 director service) will remain exercisable until, except for any later date contemplated by the following proviso, the later of (x) the third anniversary of the Departure Date and (y) the latest day upon which the option would have expired by its original terms under any circumstances (the “Option Expiration Outside Date”); provided, however, that the options will remain exercisable for so long as Mr. Rascoff serves on Zillow Group’s board of directors (but not later than any applicable Option Expiration Outside Date), and if Mr. Rascoff ceases to serve on Zillow Group’s board of directors on or after the third anniversary of the Departure Date, each option will remain exercisable until the earlier of (i) ninety days from the final date of Mr. Rascoff’s service on Zillow Group’s board of directors and (ii) the applicable Option Expiration Outside Date.
Upon effectiveness of the Agreement, Mr. Rascoff’s current employment agreement with Zillow Group will end (other than Section 3.4.2 thereof).
The Agreement provides for customary general releases and waivers of claims by Mr. Rascoff against Zillow Group. Mr. Rascoff remains subject to his obligations under his confidentiality, nonsolicitation and noncompetition agreement with Zillow Group.
The foregoing description of the Agreement is qualified in its entirety by reference to the full text of the Agreement, a copy of which is attached as Exhibit 10.1 to this Current Report on Form 8-K and is incorporated herein by reference.

Item 9.01
Financial Statements and Exhibits.
(d) Exhibits.
 





SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
Dated: February 21, 2019
 
ZILLOW GROUP, INC.
 
 
 
 
 
By:
/s/ S PENCER  M. R ASCOFF
 
 
Name:
Spencer M. Rascoff
 
 
Title:
Chief Executive Officer




Exhibit 10.1

EXECUTIVE DEPARTURE AGREEMENT AND RELEASE
This Executive Departure Agreement and Release (“Agreement”) is made and entered into by and between Spencer M. Rascoff (“Executive”) and Zillow Group, Inc. (the “Company”), hereinafter collectively referred to as the “Parties.”
RECITALS
A.      WHEREAS, on or about September 2010, the Company appointed Executive to the position of Chief Executive Officer (“CEO”) of the Company, and on or about May 20, 2011, the Company and Executive entered into an Executive Employment Agreement, restating Executive’s appointment to the position of Chief Executive Officer (the “Employment Agreement”);
B.      WHEREAS, Executive has also served as a member of the Board of Directors of the Company (the “Board”) since July 2011;
C.      WHEREAS, Executive has provided the Company with notice of his resignation from the position of CEO of the Company;
D.      WHEREAS, the Company desires to recognize Executive’s leadership and performance during his tenure as CEO as well as his role as a co-founder of the Company; and     
E.      WHEREAS, in light of Executive’s contributions to the Company, the Parties wish to end the employment relationship amicably and to enter into certain covenants below, to provide assurances and peace of mind to each Party;
NOW, THEREFORE, in consideration of the Recitals and the mutual promises, covenants, and agreements set forth herein, the receipt and sufficiency of which are hereby acknowledged, the Parties covenant and agree as follows:
1. SEPARATION FROM EMPLOYMENT
1.1      Separation from Employment . Executive’s resignation from the position of CEO of the Company will take effect on February 21, 2019, immediately after the filing with the Securities and Exchange Commission of the Company’s Form 10-K for the fiscal year ending December 31, 2018 and the Company’s Registration Statement on Form S-8 to be filed immediately thereafter (“CEO Departure Date”). The Parties agree that subject to Executive’s compliance with the terms of this Agreement, Executive will remain on the Company’s payroll at his current level of compensation and benefits as a full-time employee of the Company with secretarial and administrative support in order to provide transition services until March 22, 2019 (“Departure Date”).
1.2      Continued Service on Board of Directors . Executive shall continue to serve as a member of the Board following the CEO Departure Date; provided, however, that consistent with the Company’s articles of incorporation and bylaws as they apply to any other member of the Board, Executive’s continued service as a director will be subject to approval by the Board in its sole discretion of Executive’s nomination for election by the shareholders of the Company at each annual meeting of shareholders (or special meeting in lieu thereof) at which Executive is required to stand for election and to Executive’s election by the shareholders of the Company by the requisite vote of shareholders under applicable law, listing standards and the Company’s articles of incorporation and bylaws (each as may be amended and





restated from time to time). Executive may be removed as a director in accordance with applicable law and the provisions of the Company’s articles of incorporation and bylaws as they apply to any other member of the Board (each as may be amended and restated from time to time). At all times while serving as a member of the Board, Executive acknowledges that he will be subject to all policies, procedures, processes, codes, rules, standards and guidelines applicable to members of the Board. At the Company’s request Executive shall execute one or more documents in customary form provided by the Company resigning from all officer and director positions he holds with any direct or indirect subsidiaries of the Company.
1.3      Effect of this Agreement . The Parties acknowledge and agree that upon the Effective Date (as defined in paragraph 8.9 herein) of this Agreement, the Employment Agreement will terminate (other than Section 3.4.2 of the Employment Agreement, which will continue to survive). Executive, however, understands and agrees that he has continuing obligations under the confidentiality and proprietary rights provisions of his Confidential Information, Inventions, Nonsolicitation and Noncompetition Agreement with the Company (attached as Exhibit A) (the “CIINNA”), incorporated herein by reference, consistent with and to the extent enforceable under all applicable law, and he reaffirms those commitments in this Agreement, and agrees that, as part of this Agreement he will continue to abide by his obligations under the terms of Exhibit A, consistent with and to the extent enforceable under all applicable law.

2. SEVERANCE COMPENSATION
2.1      Departure Payment . Notwithstanding anything to the contrary in the Employment Agreement or any stock option agreement, subject to Executive’s compliance with all the terms and conditions of this Agreement, Executive will receive the following payments:
(a)      no later than fifteen (15) days following the Departure Date, the Company shall pay Executive a lump sum payment of $405,000, which represents six months of Executive’s salary, at the rate in effect immediately prior to the date of this Agreement, less standard deductions and withholding required by law; and
(b)      the Company shall pay in full for COBRA continuation coverage, subject to Executive’s proper election of such coverage, on a monthly basis through September 30, 2019 when each such payment is due, provided that the Company’s obligation under this paragraph 2.1(b) shall not apply in any month during which Executive has become actually covered by the medical plan of a subsequent employer or in which Executive is not otherwise entitled to COBRA continuation coverage and provided further that Executive shall thereafter be responsible for paying the full cost for any additional COBRA continuation coverage to which Executive is then entitled. The Company shall provide Executive with a separate COBRA election form and with written notice of his rights and obligations under COBRA, in accordance with law.
2.2      Treatment of Outstanding Stock Options .
Notwithstanding anything to the contrary in the Employment Agreement or any stock option agreement, subject to Executive’s compliance with all the terms and conditions of this Agreement:
(a)      each outstanding stock option held by Executive as of the Departure Date (each, an “Option” and collectively, the “Options”) shall automatically become vested and exercisable by an additional eighteen (18) months from the Departure Date (or, if less than eighteen (18) months of vesting then remains under an Option, by the remaining vesting period for such Option) (the “Vesting





Acceleration”). As of the Departure Date, Executive understands and agrees that vesting of all Options shall cease (taking into account the Vesting Acceleration), and the unvested portions of the Options shall automatically terminate and not become exercisable. Exhibit B lists each Option held by Executive as of the date of this Agreement and the extent to which such Option shall be vested as of the Departure Date, taking into account the Vesting Acceleration, and the extent to which such Option shall terminate as of the Departure Date; and
     (b)      except for any later expiration date provided by paragraph 3.2 herein, each Option (or portion thereof) vested as of the Departure Date (including as a result of the Vesting Acceleration) (each, a “Vested Option”) shall remain exercisable until the earlier of (i) three (3) years from the Departure Date and (ii) the latest day upon which the Option would have expired by its original terms under any circumstances. In all other respects, the original terms of the Options continue to apply.
2.3      Legal Consideration . Executive agrees that the amounts and benefits referenced in paragraph 2.1 and paragraph 2.2 (the “Departure Payment”) constitute sufficient legal consideration for Executive’s promises and covenants set forth in the Agreement. Executive further acknowledges and agrees that the Departure Payment is not required by the policies and procedures of the Company, by the Employment Agreement or by any other contractual obligation, but rather is offered solely as consideration for Executive’s promises and covenants made pursuant to this Agreement. Executive further agrees that he is not entitled to any other compensation for employment by the Company not expressly provided for or referenced herein.
2.4      Accrued Obligations; Expenses . The Company shall pay Executive the Accrued Obligations (as defined in Employment Agreement) through the Departure Date on the first regularly scheduled payroll date following the Departure Date or on such earlier date as may be required by applicable law. Executive shall provide the Company with final expense reports within thirty (30) days following the Departure Date with respect to any expenses incurred prior to the Departure Date. The Company shall reimburse Executive for such expenses in accordance with, and to the extent such expenses are reimbursable pursuant to, the Company’s expense reimbursement policies in effect at the time such expenses were incurred by Executive.
3. BOARD OF DIRECTORS COMPENSATION     
3.1      Non-Employee Director Compensation . During Executive’s term(s) of service on the Board following the Departure Date, Executive shall be eligible to receive, and shall receive, the compensation payable to non-employee directors under the terms and conditions of the Company’s Amended and Restated Stock Option Program for Nonemployee Directors (as amended from time to time, the “Director Program”); provided, however, that in lieu of receiving any compensation that is payable to non-employee directors under the Director Program during 2019, Executive shall on or about March 21, 2019 be granted a stock option under the Company’s Amended and Restated 2011 Incentive Plan to purchase that number of shares of Class C capital stock with a Black-Scholes-Merton value equal to $400,000, with any fractional share rounded to the nearest whole share (0.5 to be rounded up) (the “Director Option”). The Director Option shall be fully vested and exercisable as of its grant date and shall have a ten (10)-year term, subject to earlier termination as set forth in paragraph 3.2. For the avoidance of doubt, the Parties agree that, during Executive’s term(s) of service on the Board following the Departure Date, Executive shall be deemed to have been an “Eligible Director” (as defined in the Director Program) during the twelve months preceding the applicable grant date (or such other applicable standard) for purposes of receiving compensation payable to non-employee directors in years 2020 and later.





3.2      Exercisability of Stock Options . The Director Option and the Vested Options shall remain exercisable during Executive’s term(s) of service on the Board; provided, however, that neither the Director Option nor the Vested Options may be exercised after the latest day upon which such options would have expired by their original terms under any circumstances (such latest date, as applicable, the “Option Expiration Outside Date”). If Executive ceases to serve as a member of the Board prior to the three (3)-year anniversary of the Departure Date, the Director Option and each Vested Option shall remain exercisable until the earlier of (i) three (3) years from the Departure Date and (ii) the applicable Option Expiration Outside Date, and if Executive ceases to serve as a member of the Board on or after the three (3)-year anniversary of the Departure Date, the Director Option and each Vested Option shall remain exercisable until the earlier of (A) ninety (90) days from the final date of Executive’s service as a member of the Board and (B) the applicable Option Expiration Outside Date.
4. GENERAL RELEASE AND WAIVER OF CLAIMS BY EXECUTIVE

4.1      In consideration of the Departure Payment set forth in Section 2 above, and other mutual agreements and covenants set forth in the Agreement, Executive, on behalf of himself, his heirs, executors, administrators, successors and assigns, agrees to the following:
(a)      Executive expressly waives any claims against the Company and releases the Company and its predecessors, successors, parents, subsidiaries, and related or affiliated entities (including, without limitation, their present, former, and future officers, directors, shareholders, managers, agents, employees, attorneys, and representatives, in their respective capacities as such) (the “Released Parties”) from any claims that Executive may have in any way connected with Executive’s employment with the Company and the termination thereof, whether or not such claims are presently known or unknown to Executive. It is understood that the release includes, but is not limited to, any claims for damages of any kind whatsoever, including any claims for employment benefits, arising out of any contracts, express or implied, any covenant of good faith and fair dealing, express or implied, any theory of unlawful discharge or other tort theory, any legal restriction on the Company’s right to terminate Executive, or any federal, state or other governmental statute or ordinance, including, without limitation, Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act (“ADEA”), the Older Workers Benefit Protection Act, the Americans with Disabilities Act, the Employee Retirement Income Security Act of 1974, the Washington Law Against Discrimination (“WLAD”), the California Fair Employment and Housing Act (“FEHA”), the California Family Rights Act, the California Labor Code, any California Industrial Welfare Commission Wage Order, and any other state laws concerning discrimination or harassment, or any other legal limitation on the employment relationship to the maximum extent such claims are allowed by law to be released. The waiver and release shall not waive or release claims where the events in dispute first arise after execution of this Agreement, nor shall it preclude Executive or the Company from filing a lawsuit for the exclusive purpose of enforcing this Agreement.
(b)      Executive represents and warrants that, as of the Effective Date, he has not filed any lawsuits, complaints, or charges against the Released Parties with any governmental agency or any court.
(c)      Executive understands that nothing in this Agreement is intended to interfere with or deter Executive’s right to challenge the waiver of an ADEA claim or state law age discrimination claim or the filing of an ADEA charge or ADEA complaint or state law age discrimination complaint or charge with the Equal Employment Opportunity Commission (“EEOC”) or any state discrimination agency or commission or to participate in any investigation or proceeding conducted by those agencies. Further, Executive understands that nothing in this Agreement would require Executive to tender back the money or benefits received under this Agreement if Executive seeks to challenge the validity of the ADEA or state law age discrimination waiver, nor does the Executive agree to ratify any ADEA or state law age





discrimination waiver that fails to comply with the Older Workers’ Benefit Protection Act by retaining the money or benefits received under this Agreement. Further, nothing in this Agreement is intended to require the payment of damages, attorneys’ fees or costs to the Company should Executive challenge the waiver of an ADEA or state law age discrimination claim or file an ADEA or state law age discrimination suit except as authorized by federal or state law.
(d)      This release excludes (i) Executive’s rights under this Agreement and any claims arising from breach of this Agreement, (ii) any claim which cannot be released by private agreement, such as workers’ compensation claims, (iii) claims arising after the date of this Agreement, (iv) the right to file administrative charges with certain government agencies, (v) claims to continued participation in certain of the Company’s group benefit plans pursuant to the terms and conditions of COBRA or the comparable California law knowns as Cal-COBRA, (vi) any rights vested as of the Departure Date to benefits under any Company-sponsored retirement or welfare benefit plans, (vii) Executive’s right to indemnity and/or advancement of expenses and/or to the protections of any directors’ and officers’ liability insurance policies of the Company or any of its affiliates, and (viii) any right Executive may have to obtain contribution as permitted by law in the event of entry of judgment against Executive as a result of any act or failure to act for which the Company, or any of its affiliates, and Executive are held jointly liable. Nothing in this Agreement shall be construed to prohibit Executive from filing a charge with or participating (including providing truthful testimony) in any investigation or proceeding conducted by the EEOC, National Labor Relations Board, or any other federal, state or local governmental body or agency. Notwithstanding this or the immediately preceding paragraph, Executive agrees to waive any right to recover monetary damages in any charge, complaint, or lawsuit against the Company filed by Executive or by anyone else on Executive’s behalf with respect to any Released Claim.
(e)      To the extent permitted by law, Employee also promises never directly or indirectly to bring or participate in an action against any Released Party under California Business & Professions Code Section 17200 or any unfair competition law of any jurisdiction regarding any events up through the Effective Date.
This release does not cover any claim or right Employee cannot waive as a matter of law, such as rights to workers’ compensation benefits, unemployment benefits, vested benefits under the Company’s fringe benefit plans, claims against the Company for breach of its obligations under this Agreement, and any claims that might arise after the date Executive signs this Agreement.
(f)      It is the intention of Executive in executing this Agreement that the same shall be effective as a waiver and bar to each and every claim, including any potential unknown or unsuspected claims. Executive, therefore, expressly waives any and all rights and benefits conferred by the provisions of SECTION 1542 OF THE CALIFORNIA CIVIL CODE, which provides:
“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS THAT THE CREDITOR OR RELEASING PARTY DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE AND THAT, IF KNOWN BY HIM OR HER WOULD HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR OR RELEASED PARTY.”
Executive expressly waives any right, claim or cause of action that might arise as a result of information later learned by Executive.
4.2      This release covers both claims that Executive knows about and those that Executive may not know about, except that it does not waive any rights or claims, including claims under the ADEA, that





may arise after the date on which Executive executes this Agreement. Executive further represents and warrants that: (a) Executive has been fully and properly paid for all hours worked through the most recent payroll date of the Company; (b) Executive has received all leave to which Executive is entitled in accordance with applicable law; and (c) Executive has not suffered any on the job injury for which Executive has not already filed a claim. Executive further acknowledges, agrees and hereby stipulates that: (i) during Executive’s employment with the Company, Executive was allowed to take all leave and afforded all other rights to which Executive was entitled under the Family and Medical Leave Act (“FMLA”); and (ii) the Company has not in any way interfered with, restrained or denied the exercise of (or attempt to exercise) any FMLA rights, nor terminated or otherwise discriminated against Executive for exercising (or attempting to exercise) any such rights.
5.      RETURN OF COMPANY PROPERTY
On or before the Departure Date, except as may be otherwise mutually agreed by Executive and the Company’s General Counsel, Executive shall turn over to the Company all property of the Company, including without limitation all files, memoranda, keys, manuals, equipment, data, records, and other documents, including electronically recorded documents and data that Executive received from the Company or its directors or employees or that Executive generated in the course of his employment with the Company. No later than the Departure Date, Executive shall also provide the Company with access to all Company-related computer files and any and all passwords needed to access those files.
6.      RESTRICTIVE COVENANTS
6.1      Confidentiality and Proprietary Rights
(a)      Executive acknowledges and agrees that during his employment with the Company he acquired considerable Confidential Information about the Company. Executive acknowledges and agrees that the term “Confidential Information” shall mean information belonging to the Company which is of value to the Company or with respect to which Company has right in the course of conducting its business and the disclosure of which could result in a competitive or other disadvantage to the Company. Confidential Information includes information, whether or not patentable or copyrightable, in written, oral, electronic or other tangible or intangible forms, stored in any medium, including, by way of example and without limitation, trade secrets, ideas, concepts, designs, configurations, specifications, drawings, blueprints, diagrams, models, prototypes, samples, flow charts processes, techniques, formulas, software, improvements, inventions, data, know-how, discoveries, copyrightable materials, marketing plans and strategies, sales and financial reports and forecasts, customer lists, studies, reports, records, books, contracts, instruments, surveys, computer disks, diskettes, tapes, computer programs and business plans, prospects and opportunities (such as possible acquisitions or dispositions of businesses or facilities) which have, to Executive’s knowledge, been discussed or considered by the management of the Company. Confidential Information includes information developed by Executive within the course and scope of Executive's employment by the Company, as well as other information to which Executive may have access in connection with Executive’s performance of his duties to the Company. Confidential Information also includes the confidential information of others with which the Company has a business relationship that became known to Executive in connection with his performance of his duties to the Company. Notwithstanding the foregoing, Confidential Information does not include information in the public domain, unless due to breach of Executive’s duties under Section 6 of this Agreement.
(b)      Executive hereby reaffirms his continuing confidentiality obligations under the terms of the CIINNA, consistent with and to the extent enforceable under all applicable law, specifically including, but





not limited to, the provisions regarding nondisclosure of the Company’s trade secrets and confidential and proprietary information, non-solicitation, and noncompetition, as set forth in Exhibit A to this Agreement.
(c)      Notwithstanding anything to the contrary, this Section 6 does not prohibit the disclosure of trade secret information within the limitations permitted by the Defend Trade Secrets Act, and Executive is hereby notified that no individual will be held criminally or civilly liable for the disclosure of a trade secret (as defined in the Act) that is: (i) made in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney, and made solely for the purpose of reporting or investigating a suspected violation of law; (ii) made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal so that it is not made public; or (iii) disclosed to the individual’s attorney or used in a court proceeding (as permitted by court order) in connection with a lawsuit for retaliation by an employer for reporting a suspected violation of the law.
(d)      Nothing in this Section 6 or this Agreement shall be construed to prohibit Executive from filing a charge with or participating in any investigation or proceeding conducted by the EEOC, National Labor Relations Board, or any other federal, state or local governmental body or agency. Furthermore, this Section 6 does not apply to Executive filing a charge with or participating in any investigation or proceeding conducted by the EEOC, National Labor Relations Board, or any other federal, state or local governmental body or agency.
6.2      Non-Disparagement . The Company and the Company’s directors and executive officers and other individuals authorized to make official communications on the Company’s behalf agree to refrain from disparaging Executive or Executive’s performance or otherwise taking any action that could reasonably be expected to adversely affect Executive’s personal or professional reputation. Similarly, Executive agrees to refrain from disparaging the Company, its prospects, products or services, its employees and directors, or otherwise taking any action that could reasonably be expected to adversely affect the Company’s business reputation, or tortious interference with the contracts and relationships of the Company.
6.3      Internal and External Communications . Prior to February 21, 2019, the Parties will develop and mutually agree upon all external and internal statements regarding Executive’s departure and the subject matter of this Agreement (including without limitation press releases, public disclosures, and employee communications). All external and internal statements regarding Executive’s shall be limited to and consistent with such agreed upon statements, unless otherwise mutually agreed by the Parties.
6.4      The Podcast and Social Media Accounts .

(a)      Notwithstanding anything in this Agreement to the contrary, as between Executive and the Company, Executive shall have the exclusive right to continue controlling, managing, producing and distributing the podcast named “Office Hours with Spencer Rascoff” (the “Podcast”). The Company hereby assigns and transfers to Executive any and all right, title and interest of the Company in and to the Podcast. The Company further assigns and transfers to Executive any and all intellectual property rights (including without limitation all inventions, methods, processes, software, copyrightable works, data and results) of the Company associated with the Podcast, including without limitation the “Office Hours with Spencer Rascoff” brand and mark, all associated goodwill and the library, including the content of all the Podcast episodes produced prior to the Departure Date; provided, however, that such assignment and transfer does not include any of the Company’s service marks, trademarks, tradenames and logos, including without limitation the marks ZILLOW, ZILLOW Logo and Z Logo, including all goodwill and other intellectual property rights in and to such marks, names and logos (collectively the “Zillow Marks”). The Company reserves and retains all right, title and interest in and to the Zillow Marks.






(b) As soon as reasonably practicable, but no later than ninety (90) days after the Departure Date, the Company shall transfer the Podcast from the Company’s website to Executive to enable Executive to host the Podcast at a new domain selected by Executive (the “New Podcast Domain”). Commencing on the date of such transfer, the Company shall have no obligations with regard to the Podcast, including any assistance in the production or hosting of any future episodes of the Podcast.

(c) Notwithstanding anything in this Agreement to the contrary, Executive shall have the exclusive right to continue controlling, managing, producing and distributing content on his personal social media accounts, including without limitation Executive’s personal account on Twitter (@spencerrascoff), Instagram ((@spencerrascoff), Facebook (@SpencerRascoff), and LinkedIn (www.linkedin.com/in/spencerrascoff/) (collectively the “Social Media Accounts”). Notwithstanding the preceding sentence, the Company reserves and retains all right, title, and interest in and to any content created for or by the Company on or prior to the Departure Date that is posted, displayed on, linked to, or otherwise referenced or made available on or from the Social Media Accounts, such as articles, blog entries, comments, photos, videos, audio recordings, web links, and other Company content (the “Company Content”) and the Zillow Marks. The definition of Company Content does not include the Podcast. For Company Content that was produced and then posted on the Social Media Accounts before the Departure Date (including to the extent that Zillow Marks are displayed in such content), the Company hereby grants to Executive a perpetual, royalty-free, and non-exclusive license to continue to display such Company Content on the Social Media Accounts in the same posts. (For clarity, Executive will not use such pre-Departure Date Company Content in new posts on the Social Media Accounts without written permission from Company.) The Company also hereby grants Executive a perpetual, royalty-free, and non-exclusive license to use the Zillow Marks for the sole purpose of continuing to host and distribute all audio, video or photographic files that were posted, published or distributed with the Podcast before the Departure Date. Notwithstanding the licenses granted to Executive in this paragraph, the Company may request that Executive remove, at the Company’s expense and with the Company’s cooperation, any licensed Company Content or Zillow Marks from the Podcast or Social Media Accounts, and Executive shall so remove such Company Content or Zillow Marks within 30 days after such request.

(d)      The Company’s assignment and transfer to Executive of any and all of the Company’s right, title and interest in and to the Podcast, the license grant to the Company Content, and the license grant to Executive to use the Zillow Marks each as set forth in this Section 6.4 are made “ AS IS ” and without any warranty, express or implied.

6.5      Co-Founder . The Company and the Executive agree that the Executive is a co-founder of the Company. Accordingly, neither the Company nor any of its directors or executive officers shall object to or contest Executive referring to himself as a co-founder of the Company; and in the event the Company or any of its directors or executive officers publishes or otherwise makes publicly available, whether verbally or in writing, the names of the founders of the Company, Executive shall be included in any list of Company co-founders.
6.6      Remedies . It is specifically understood and agreed that any breach of the provisions of Section 6 of this Agreement is likely to result in irreparable injury to the aggrieved Party and that the remedy at law alone will be an inadequate remedy for such breach, and that in addition to any other remedy it may have, the aggrieved Party shall be entitled to enforce the specific performance of this Agreement by the other Party and to seek both temporary and permanent injunctive relief (to the extent permitted by law) without bond and without liability should such relief be denied, modified or violated. And in addition to any other remedy the Company may have in the event of a breach of the provisions of Section 6, the Company shall be entitled to cease making any payments or providing any benefit otherwise required by this Agreement, including, without limitation, any Departure Payment required under Section 2 of this Agreement, in each





case in addition to any other remedy to which the Company may be entitled at law or in equity; provided, however, notwithstanding anything in this Agreement to the contrary, in no event shall Executive fail to receive any payment or benefit described in this Agreement (including, without limitation, any Departure Payment), for any reason whatsoever, to the extent that Executive would have been eligible to receive such payment or benefit under Section 3.3 of the Employment Agreement had his resignation been deemed for Good Reason (as defined in the Employment Agreement) and effective as of the Departure Date.
7.      NOTICES
All notices hereunder, to be effective, shall be in writing and shall be deemed effective when delivered by hand or mailed by (a) certified mail, postage and fees prepaid, or (b) nationally recognized overnight express mail service, as follows:
 
If to the Company:
 
 
 
 
 
 
 
 
Zillow Group, Inc.
 
 
 
 
1301 2 nd 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
                    
or to such other address as a party may notify the other pursuant to a notice given in accordance with this Section 7.
8.      GENERAL PROVISIONS
8.1      No Admissions . This Agreement should not be construed as an admission or a statement of any party hereto that such party has acted wrongfully or unlawfully. Each party expressly denies any wrongful or unlawful action.
8.2      Opportunity to Review and Revocation Period . Executive hereby warrants and represents that (a) he has carefully read this Agreement including the release in Section 4, and finds that it is written in a manner that he understands; (b) Executive knows the contents hereof; (c) Executive has been advised to consult and has discussed this Agreement and its effects with his personal attorney or has knowingly and voluntarily waived the right to do so; (d) Executive understands that he is giving up all claims, damages, and disputes that have arisen before the date of this Agreement to the extent released herein; (e) Executive has had the opportunity to review and analyze this Agreement for twenty-one (21) days (the “Review Period”), but agrees that if he signs this Agreement before expiration of the Review Period, he knowingly and voluntarily agrees to waive the remainder of the Review Period; (f) Executive has seven (7) days to revoke this Agreement by notifying the Company’s General Counsel via written communication at the address above before midnight on the seventh day after Executive signs this Agreement (the “Revocation Period”); (g) Executive did not rely upon any representation or statement concerning the subject matter of





this Agreement, except as expressly stated in the Agreement; (h) Executive understands this Agreement’s final and binding effect; and (i) Executive has signed this Agreement as his free and voluntary act.
8.3      Entire Agreement; Amendment . This Agreement constitutes the entire Agreement between the parties hereto with regard to the subject matter hereof, superseding all prior understandings and agreements, whether written or oral, including the Employment Agreement (except that Section 3.4.2 of the Employment Agreement shall continue to survive), with the exception of the confidentiality and proprietary rights provisions of the Confidential Information, Inventions, Nonsolicitation and Noncompetition Agreement with the Company (attached as Exhibit A), which remain in effect consistent with and to the extent enforceable under all applicable law, and the terms of the Indemnification Agreement between Executive and the Company, dated as of May 20, 2011 (the “Indemnification Agreement”). This Agreement may not be amended or revised except by a writing signed by the Parties.
8.4      Section 409A . The Parties intend that this Agreement and the payments and benefits provided hereunder be exempt from the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) to the maximum extent possible, whether pursuant to the short-term deferral exception described in Treas. Reg. Section 1.409A-1(b)(4), the involuntary separation pay plan exception described in Treas. Reg. Section 1.409A-1(b)(9)(iii), or otherwise. For the avoidance of doubt, the Parties intend for the payments and benefits set forth in paragraphs 2.1(a) and 2.1(b) to be treated as exempt from the requirements of Section 409A of the Code. To the extent Section 409A of the Code is applicable to this Agreement, the Parties intend that this Agreement and any payments and benefits thereunder comply with the deferral, payout and other limitations and restrictions imposed under Section 409A of the Code. Notwithstanding anything herein to the contrary, this Agreement shall be interpreted, operated and administered in a manner consistent with such intentions; provided, however that in no event shall the Company (or any of its affiliates or successors) be liable for any additional tax, interest or penalty that may be imposed on Executive pursuant to Section 409A of the Code or for any damages incurred by Executive as a result of this Agreement (or the payments or benefits hereunder) failing to comply with, or be exempt from, Section 409A of the Code. Without limiting the generality of the foregoing and notwithstanding any other provision of this Agreement to the contrary:
(a) If any payment, compensation or other benefit provided to Executive in connection with his employment termination is determined, in whole or in part, to constitute “nonqualified deferred compensation” within the meaning of Section 409A of the Code and Executive is a specified employee as defined in Section 409A(a)(2)(B)(i) of the Code, then no portion of such “nonqualified deferred compensation” shall be paid before the day that is six (6) months plus one (1) day after the date of termination (the “New Payment Date”). The aggregate of any payments that otherwise would have been paid to Executive during the period between the date of termination and the New Payment Date shall be paid to Executive in a lump sum on such New Payment Date. Thereafter, any payments that remain outstanding as of the day immediately following the New Payment Date shall be paid without delay over the time period originally scheduled, in accordance with the terms of this Agreement. Notwithstanding the foregoing, to the extent that the foregoing applies to the provision of any ongoing welfare benefits to Executive that would not be required to be delayed if the premiums therefor were paid by Executive, Executive shall pay the full cost of premiums for such welfare benefits during the six (6)-month period and the Company shall pay Executive an amount equal to the amount of such premiums paid by Executive during such six (6)-month period promptly after its conclusion. The parties hereto acknowledge and agree that the interpretation of Section 409A of the Code and its application to the terms of this Agreement is uncertain and may be subject to change as additional guidance and interpretations become available. Anything to the contrary herein notwithstanding, all benefits or payments provided by the Company to Executive that would be deemed to constitute “nonqualified deferred compensation” within the meaning





of Section 409A of the Code are intended to comply with Section 409A of the Code. If, however, any such benefit or payment is deemed to not comply with Section 409A of the Code, the Company and Executive agree to renegotiate in good faith any such benefit or payment (including, without limitation, as to the timing of any severance payments payable hereof) so that either (i) Section 409A of the Code will not apply or (ii) compliance with Section 409A of the Code will be achieved; provided, that, neither the Company nor its employees or representatives shall have liability to Executive with respect hereto.

(b) Notwithstanding anything to the contrary contained in this Agreement, all reimbursements for costs and expenses under this Agreement shall be paid in no event later than the end of the taxable year following the taxable year in which Executive incurs such expense. With regard to any provision herein that provides for reimbursement of costs and expenses or in-kind benefits, except as permitted by Section 409A of the Code, (i) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit, and (ii) the amount of expenses eligible for reimbursements or in-kind benefits provided during any taxable year shall not affect the expenses eligible for reimbursement or in-kind benefits to be provided in any other taxable year.

(c) If under this Agreement, an amount is paid in two or more installments, for purposes of Section 409A of the Code, each installment shall be treated as a separate payment.

(d) A termination of employment shall not be deemed to have occurred for purposes of any provision of this Agreement providing for the payment of any amounts or benefits subject to Section 409A of the Code upon or following a termination of employment unless such termination is also a “separation from service” as defined in Section 1.409A-1(h) of the Department of Treasury final regulations, including the default presumptions, and for purposes of any such provision of this Agreement, references to a “resignation,” “termination,” “terminate,” “termination of employment” or like terms shall mean separation from.

8.5      Enforcement . This Agreement shall be construed under and enforced in accordance with the laws of the State of Washington, without regard to the conflicts of law provisions thereof. Any disputes arising under this Agreement shall be brought in a court of competent jurisdiction within King County, Washington. Executive acknowledges that he may be subject to a permanent injunction and/or temporary restraining order for any violations of this Agreement, including any violations of the CIINNA.
8.6      Cooperation .
(a)      In return for the amounts paid hereunder, from and after the Departure Date, Executive agrees to cooperate in defense of the Company in any legal action or claim in which Executive is named as a witness or defendant (other than any legal action or claim arising out of this Agreement). Cooperation shall include, upon request by the Company, participating in and testifying at depositions, trials, mediations, arbitrations, or other hearings, with reasonable advance notice; providing information in written format such as declaration or affidavit; making himself reasonably available to the Company and its attorneys for interview or other consultation at times and locations reasonably acceptable to Executive and the Company; and providing general assistance to the Company and its attorneys as may be reasonably requested. Executive acknowledges that this is a material term of this Agreement, and that breach of this term would cause damage to the Company. No lack of compliance may be shown without failure, after notice by the Company in writing, of the Executive to abide by the Company’s request. In requesting such services, the Company shall consider other commitments that Executive may have at the time of request, and the Company agrees to make reasonable efforts to minimize disruption of the Executive’s other activities.





(b)      In exchange for Executive’s agreement to cooperate and assist in the defense of the Company in any legal action in accordance with paragraph 8.6(a), the Company agrees to be responsible and reimburse Executive for reasonable expenses or costs associated with his participation and cooperation in such possible legal actions, including any and all travel, airfare and transportation, lodging, and meals within thirty (30) days after submission of receipts by Executive. If Executive’s cooperation in such possible legal actions requires a substantial time commitment on the part of Executive, exceeding that which would be expected under normal circumstances, the Company agrees to compensate Executive for his time away from other activities at a reasonable hourly rate to be determined by the Board.
8.7      Indemnification . Executive’s rights under the Indemnification Agreement, including rights to indemnification and advancement of expenses, shall continue in accordance with the terms of the Indemnification Agreement. The Company shall not amend or otherwise modify Executive’s right to indemnification and/or advancement of expenses (whether under the Indemnification Agreement, the Company’s articles of incorporation, bylaws, or otherwise) or Executive’s rights with respect to the protection of any directors’ and officers’ liability insurance policies of the Company or any of its affiliates.
8.8      Counterparts . This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and shall have the same effect as if the signatures hereto and thereto were on the same instrument.
8.9      Effective Date . The “Effective Date” of this Agreement is the later of the date of execution of this Agreement by all parties or the next calendar day following expiration of the revocation period set forth in Paragraph 8.2 of this Agreement, so long as Executive has not revoked acceptance of this Agreement before such date in accordance with the revocation procedures described in paragraph 8.2. Upon any such revocation, this Agreement shall automatically become null and void and have no force or effect.
8.10      Representations . By executing this Agreement, Executive also acknowledges that Executive (a) is not relying upon any statements, understandings, representations, expectations, or agreements other than those expressly set forth in this Agreement; and (b) has made Executive’s own investigation of the facts and is relying solely upon Executive’s own knowledge and the advice of Executive’s own legal counsel. The Parties stipulate that each Party is relying upon these representations and warranties in entering into this Agreement. These representations and warranties shall survive the execution of this Agreement.
8.11      Negotiation by Parties . All terms and provisions of this Agreement, and the drafting of this Agreement, have been negotiated by the Parties at arm’s length and to mutual agreement, with consideration by and participation of each, and no Party shall be deemed the scrivener of this Agreement.
8.12      Construction . Section 4 of the Agreement is integral to its purpose and may not be severed from it. Should any other provision of this Agreement be deemed invalid or unenforceable, that provision shall be narrowed to the extent required to make it lawful and enforceable, and the remaining provisions shall not be affected but instead remain valid and enforceable to the maximum extent consistent with current law.
8.13      Knowing and Voluntary Agreement . Executive understands this Agreement is a release of claims against the Released Parties to the extent provided herein. Executive understands that Executive is not waiving claims that the law does not permit Executive to waive, nor is Executive waiving any claims arising after the date of this Agreement, including, but not limited to, claims for enforcement of this Agreement.
[The remainder of this page is left intentionally blank.]







IN WITNESS WHEREOF, the parties have executed this Executive Departure Agreement and Release as of the dates indicated below.
Company
ZILLOW GROUP, INC.

 
 
 
/s/ Bradley D. Owens
 
 
 
Title: General Counsel
 
 
 
Dated: February 20, 2019
 
 
 
 
 
Executive

 
 
 
 
/s/ Spencer M. Rascoff
 
 
 
 
 
Dated: February 20, 2019








































EXHIBIT A

Confidential Information, Inventions, Nonsolicitation, and Noncompetition Agreement




























































EXHIBIT B

Options






Exhibit 99.1

Media Contact:
press@zillow.com

Founder Rich Barton Returns as CEO of Zillow Group
Co-Founder and President of Zillow Group Lloyd Frink Named Executive Chairman;
Spencer Rascoff Remains on Board of Directors

SEATTLE Feb. 21, 2019 - 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 web, today announced Rich Barton, who co-founded Zillow in 2005 and served as the company’s CEO until 2010, has been named chief executive officer.
Barton has been executive chairman since stepping down as CEO. Co-founder of Zillow Group Lloyd Frink will now become executive chairman.
Co-founder Spencer Rascoff will remain on Zillow Group’s board of directors. Rascoff has led Zillow Group as CEO from 2010 through its IPO, overseeing 15 acquisitions and growing the company from 200 employees to more than 4,000. Under his leadership, Zillow Group has consistently been recognized as among the best companies to work for, and its annual revenue has grown from $30 million to $1.3 billion.
Barton, who also founded Expedia in 1994 and co-founded Glassdoor in 2007, and Frink have remained active executives of Zillow Group since the company was founded. These changes come at a time when Zillow Group is dramatically expanding the scope of its business, entering into buying and selling homes, mortgage lending and other services intended to make real estate transactions easier and more seamless for consumers.
“We created Zillow Group in 2005 to make the real estate shopping and purchase process easier,” Barton said. “Much of our original dream is just now becoming possible. We are at an inflection point in this quest, and the time is right to shuffle leadership seats. I am excited to be back as CEO. I am incredibly grateful to Spencer for the indefatigable leadership that got us to this point, and I am happy we will benefit from his continued support and counsel as a board director.”
“Leading Zillow Group through its tremendous growth has been one of the most rewarding experiences of my life,” Rascoff said. “I couldn’t be prouder of the team and what we have accomplished together, and I will continue my deep involvement with Zillow Group as a board director and major shareholder. The company is well-positioned for Rich to now take the wheel as CEO through its next phase of growth.”
These leadership changes coincide with the release of the company’s fourth quarter and full year 2018 earnings report, announced separately today. Barton and Zillow Group’s new Chief Financial Officer Allen Parker will host the quarterly conference call with participation from Rascoff and other executives at 2 p.m. PT today.
Rich Barton
Rich Barton has a long history of founding and advising successful companies, with a focus on those that bring “power to the people” by innovating on behalf of the consumer. Rich co-founded Zillow in 2005 and was its CEO until 2010, when he became the company’s executive chairman. Before Zillow, Rich founded Expedia within Microsoft in 1994 and successfully spun the company out as a public company in 1999. Rich served as president, CEO and board director of Expedia from 1999 until 2003. He also co-founded and served as non-executive chairman of Glassdoor from its 2007 creation through its acquisition in 2018.
Rich was a venture partner at Benchmark, a venture capital firm that has been an early-stage investor in companies like Netflix, Instagram, WeWork and Zillow, from 2005 until 2018. He has served on many public company boards,





and continues to be a board director for Netflix, where he has served since 2002; Qurate, a holding company that runs several digital commerce businesses and was formerly called Liberty Interactive Corp., since 2016; Artsy, an online collection and resource for art collectors, since 2017; and Zillow Group. He holds a B.S. in General Engineering: Industrial Economics from Stanford University.
Lloyd Frink
Lloyd Frink co-founded Zillow in 2005, and today serves as executive chairman and president of Zillow Group where he remains instrumental in leading and developing the company’s business and product strategies. Prior to Zillow, Lloyd was senior vice president at Expedia, where he managed the air, hotel, car, destination services, content, merchandising, and partner marketing groups.
Before joining Expedia in 1999, Lloyd worked at Microsoft, where he started the groups that created software for pen-based and handheld devices. He initially joined Microsoft in 1979 as a summer intern at 14 years old and then joined full-time in 1988.
In addition to chairing the Zillow Group board, Lloyd serves on the board of GrubHub. He graduated from Stanford University with a bachelor’s degree in economics.
Spencer Rascoff
Spencer is an entrepreneur and company leader who has founded two businesses that became household names. Spencer co-founded Zillow in 2005, and served in various roles including chief operating officer, chief financial officer and chief marketing officer, until his appointment to CEO in 2010. As CEO, Spencer led Zillow through its 2011 IPO and 15 acquisitions. In 2015, Spencer co-wrote the New York Times’ Best Seller “Zillow Talk: Rewriting the Rules of Real Estate.” Under his leadership, Zillow Group won numerous “best places to work” awards, and Spencer frequently writes and speaks about management and culture.
In 1999, at the age of 24, Spencer co-founded Hotwire.com, a leading Internet travel company, which was sold to IAC/Expedia in 2003 for $685 million.
Before his consumer web career, Spencer worked in investment banking at Goldman Sachs and in private equity at TPG Capital.
Spencer is on the boards of directors of TripAdvisor, Zillow Group and Hutch. He is also a member of the Young Presidents’ Organization. Spencer graduated cum laude from Harvard University.
About Zillow Group

Zillow Group, Inc. (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 Zillow®, Trulia®, Mortgage Lenders of America, L.L.C. (MLOA), 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 some 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. Zillow Group operates a number of business brands for real estate, rental and mortgage professionals, including Mortech®, dotloop®, Bridge Interactive® and New Home Feed®. The company is headquartered in Seattle, Washington.
Zillow, 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. Mortgage Lenders of America, L.L.C. is an Equal Housing Lender; NMLS #10287.
(ZFIN)







Exhibit 99.2
 
  ZGLOGOFINAL.JPG
Contacts:
 
 
Raymond Jones
 
Katie Curnutte
Investor Relations
 
Public Relations
ir@zillowgroup.com
 
press@zillow.com
ZILLOW GROUP REPORTS FOURTH QUARTER AND FULL YEAR 2018 RESULTS

Founder Rich Barton Returns as CEO of Zillow Group
Increased Borrowing Capacity to $1 Billion to Support Zillow Offers’ Rapid Growth in 2019 and Beyond
Company Introduces Long-term 3- to 5-Year Targets

SEATTLE - February 21, 2019 - 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 quarter and full year ended December 31, 2018. In a separate news release, Zillow Group announced that co-founder Rich Barton is returning as CEO, co-founder Lloyd Frink has been named Executive Chairman, and co-founder Spencer Rascoff, who has served as CEO since 2010, will continue to serve as a member of the company’s board of directors.
“In the past year, Zillow Group has become a very different company,” said Rich Barton, co-founder and CEO of Zillow Group, Inc. “We’re making strategic investments to broaden the Zillow Group portfolio to move further down the home-shopping funnel, giving today’s ‘uberized,’ on-demand consumers a full spectrum of options to buy, sell, borrow and rent on their terms. The launch of Zillow Offers and the acquisition of Mortgage Lenders of America in 2018 opened our doors to home buying and selling and home loan originations. Adding real estate transactions and eventually seamless mortgages to the Zillow Group portfolio positions us well for the next generation of online real estate and dramatically increases our addressable market.
“We’re also in the process of transitioning our Premier Agent business from a web 1.0 lead-generation model to one that creates live on-demand connections with consumers to improve their experience and ultimately helps our Premier Agents close more deals. While our Premier Agent business is still recovering from some mid-year challenges, we’re now seeing better agent response rates and higher conversion rates, as our churn rates are approaching normal historical levels.
“2019 will continue to be a year of transformation and investment. We’re building on our market leadership, the power of the Zillow Group brand portfolio and our culture of innovation to nurture our new businesses, while also partnering with Premier Agents and the industry to delight consumers, and set the stage for our next wave of growth. We are sharing our three- to five-year targets that reveal what we believe will be a much larger, integrated online real estate company in which our Homes segment alone can add $20 billion in annual revenue.
“We created Zillow Group in 2005 to make the real estate shopping and purchase process easier and more seamless. Much of our original dream is just now becoming possible. We are at an inflection point in this quest, and the time is right to shuffle leadership seats. I’m excited to be back as CEO. I am incredibly grateful to Spencer for the indefatigable leadership that got us to this point, and I’m happy we will benefit from his continued support and counsel as a board director,” concluded Barton.
Details about Zillow Group’s fourth quarter and full year financial results are included in this news release. Financial tables can be found in the investor relations section of Zillow Group’s website at http://investors.zillowgroup.com/results.cfm. There will not be a shareholder letter this quarter, but the company will post prepared remarks from the conference call to the investor relations website after the call.
Long-Term Targets +  
If Zillow Group is successful in executing its growth strategy, in three to five years, Zillow Group management believes the company could achieve the following:

1



Homes Segment
Purchasing 5,000 homes per month at annualized segment revenue of approximately $20.0 billion.
Mortgage Segment
Achieve 33% attach rate to the Homes segment.
Originating more than 3,000 loans per month.
Internet, Media & Technology Segment
Achieve $2.0 billion in annual segment revenue, almost doubling its current size.
Generate approximately $600.0 million in Adjusted EBITDA 1 , or 30% of segment revenue.*

+ Please see “Forward-Looking Statements” below for additional information about these long-term targets.
Fourth Quarter and Full Year 2018 Financial Highlights
Fourth quarter total revenue of $365.3 million was up 29% year-over-year, driven primarily by growth in Premier Agent revenue and the addition of Homes revenue. On a consolidated basis, GAAP net loss for the fourth quarter of 2018, including a non-cash impairment charge, was approximately $97.7 million, or 27% of revenue, and Adjusted EBITDA 2 was $32.4 million, or 9% of revenue.
For the full year 2018, Zillow Group reported total revenue of more than $1.3 billion, up 24% year-over-year. On a consolidated basis, GAAP net loss for the year, including a non-cash impairment charge, was approximately $119.9 million, or 9% of revenue, and Adjusted EBITDA was $200.8 million, or 15% of revenue.


























 
1 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. 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.
2 Please 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.

2



The following table sets forth our financial highlights for the periods presented (in thousands, unaudited):
 
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.
Audience Highlights
More than 157 million average monthly unique users accessed Zillow Group brands’ mobile apps and websites during the fourth quarter of 2018, an increase of 4% year-over-year. Zillow Group brands’ mobile apps and websites reached an all-time traffic high of more than 195 million unique users in July 2018.
Visits to Zillow Group brands’ mobile apps and websites Zillow®, Trulia®, StreetEasy® and RealEstate.com increased 12% year-over-year to approximately 1.6 billion during the fourth quarter of 2018. For the full year 2018, more than 7 billion visits occurred on Zillow Group brands’ mobile apps and websites, an increase of 14% year-over-year.

3



Homes Segment Results
Homes segment revenue was $41.3 million for the fourth quarter of 2018. Homes segment GAAP loss before income taxes for the quarter was approximately $27.2 million, or 66% of segment revenue, and Homes segment Adjusted EBITDA was a loss of $20 million, or 48% of segment revenue.
During the fourth quarter of 2018, Zillow purchased 499 homes and sold 141 homes. As of December 31, 2018, Zillow held 509 homes in inventory, or approximately $162.8 million in value.
In total, Zillow purchased 686 homes and sold 177 homes since Zillow Offers launched in April 2018. Zillow Offers is currently available in 7 markets with plans announced to be in at least 14 by the end of 2019. After less than a year, Zillow currently receives a request for a Zillow Offer every 5 minutes, which translates to an estimated $100 million in demand value per day.
As of December 31, 2018, Zillow Group had $116.7 million drawn on its credit facility for the Homes business. Zillow Group announced the expansion of its initial credit facility from $250 million to $500 million in 2018. In addition, in early 2019, Zillow Group entered into a second $500 million credit facility with a different bank for the purchase of homes through certain of its wholly owned subsidiaries. In total, Zillow Group now has $1 billion of maximum borrowing capacity to support Zillow Offers’ rapid growth in 2019 and beyond.
To help ensure profitability and to compensate for risk exposure, Zillow charges the seller a service fee in exchange for avoiding the hassle, time commitment and uncertainty of a traditional home sale. During the fourth quarter of 2018, that fee was an average of 7%. Additional unit economics disclosures are included in the supplemental financial tables available on the Investor Relations section of the Zillow Group website and with a Current Report on Form 8-K as furnished to the SEC on February 21, 2019.
Internet, Media & Technology Results
Internet, Media & Technology (IMT) segment revenue of $324.0 million for the fourth quarter of 2018 grew 15% year-over-year. IMT segment GAAP loss before income taxes for the fourth quarter of 2018 was $78.9 million, or 24% of segment revenue, and IMT segment Adjusted EBITDA of $52.4 million, or 16% of segment revenue.
Premier Agent
Premier Agent revenue grew 11% year-over-year to $221.0 million in the fourth quarter of 2018. Due to changes made to the Premier Agent program in 2018, the company experienced increased advertiser account cancellations, or churn, that began in the third quarter. Based on feedback from advertisers about the lead validation and distribution process, Zillow Group implemented changes to attempt to remedy the situation. These changes have been well-received and the churn rate has started to return to historical norms as conversion and transaction rates are growing. However, the mid-year challenges led to a projected cumulative annual recurring revenue shortfall in Premier Agent revenue entering 2019, or an estimated 6 month sell-through gap to close.
Zillow Group anticipates recovery from advertiser and total dollar churn to occur in the first and second quarters of 2019. These are the most challenging quarters for prior-year comparisons in Premier Agent, when auction-based pricing drove substantial price increases for agents ahead of the mid-year product changes.
Rentals
Rentals revenue grew 21% year-over-year to $34.9 million in the fourth quarter of 2018. The year-over-year increase in Rentals revenue was primarily attributable to an increase in the number of average monthly monetized, deduplicated rental listings on Zillow Group’s mobile apps and websites, which increased 16% year-over-year to 40,889 for the fourth quarter of 2018.
Mortgages
Mortgages revenue was $23.3 million in the fourth quarter of 2018, a 26% increase year-over-year. Average revenue per loan information request in Zillow Group’s mortgage advertising marketplace decreased 10% year-over-year and the number of mortgage loan information requests submitted by consumers increased 4% year-over-year to 5.6 million.
Other Revenue
Other revenue, which includes revenue generated by New Construction, dotloop and Display, as well as revenue from the sale of various other marketing and business products and services to real estate professionals, grew 26% year-over-year to $44.8 million in the fourth quarter of 2018. The increase in Other revenue was primarily driven by approximately a 55% year-over-year increase in revenue from our New Construction marketplace.

4



Business Outlook - First Quarter and Full Year 2019
Beginning with the quarterly report for the first quarter of 2019, Zillow Group will report financial results and expects to provide outlook for three segments. Mortgages will become the third reportable segment and will include financial results for advertising sold to mortgage lenders and other mortgage professionals, mortgage originations through MLOA and Mortech mortgage software solutions. Zillow Group will now provide Revenue and Adjusted EBITDA guidance for the next reportable three-month period and current full year for its IMT and Mortgages segments, as well as for Premier Agent revenue within the IMT segment. For Zillow Group’s Homes segment, the company will provide Revenue and Adjusted EBITDA guidance only for the next reportable three-month period. Due to the nature of the Homes segment business model and newness of the business, longer term forecasts are highly sensitive to small changes in performance in the near term.

The following table presents Zillow Group’s business outlook for the periods presented (in millions, unaudited):
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
* Zillow Group has not provided a quantitative reconciliation of forecasted Adjusted EBITDA to forecasted GAAP net income (loss) for total Adjusted EBITDA or to forecasted GAAP income (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 income (loss) and income (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 measures discussed in this release, please see “Use of Non-GAAP Financial Measures” below.
Conference Call and Webcast Information
Zillow Group will host a live conference call and webcast to discuss the results today at 2 p.m. Pacific Time (5 p.m. Eastern Time). The call will be hosted by Co-founder and CEO Rich Barton and CFO Allen Parker. They will be joined by Co-Founder Spencer Rascoff, Zillow Brand President and Co-head of Zillow Offers, Jeremy Wacksman, and President of Media & Marketplaces, Greg Schwartz. 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: long-

5



term business and financial targets for the next three to five years and other future years; the performance of Premier Agent advertising, including churn rates and revenue, in 2019 and beyond; as well as statements regarding our business outlook for 2019, strategic priorities, and operational plans for 2019. Statements containing words such as “target,” “may,” “believe,” “anticipate,” “expect,” “intend,” “plan,” “project,” “will,” “projections,” “continue,” “business outlook,” “forecast,” “estimate,” “outlook,” “guidance,” or similar expressions constitute forward-looking statements. Forward-looking statements are made based on assumptions as of February 21, 2019, and although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee these results. 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 general economic conditions; Zillow Group’s ability to execute on strategy; 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 investment of resources to pursue strategies that may not prove effective; Zillow Group’s ability to compete successfully against existing or future competitors; changes in interest rates and other similar factors; the impact of the real estate industry on Zillow Group’s business; the impact of pending legal proceedings described in Zillow Group’s filings with the Securities and Exchange Commission, or SEC; Zillow Group’s ability to successfully integrate and realize the benefits of its past or future strategic acquisitions or investments; Zillow Group’s ability to maintain or establish relationships with listings and data providers; the reliable performance of Zillow Group’s information security systems, 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 September 30, 2018 and in Zillow Group’s Annual Report on Form 10-K for the year ended December 31, 2018 filed with the 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 on both a consolidated basis and for each segment and including forecasted Adjusted EBITDA, which are non-GAAP financial measures. 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 except for forecasted Adjusted EBITDA, as discussed above.
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 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.
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.

6



About Zillow Group
Zillow Group, Inc. (NASDAQ: Z) (NASDAQ: ZG) operates the largest portfolio of 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 Zillow®, Trulia®, Mortgage Lenders of America, L.L.C. (MLOA), 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 some 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. Zillow Group operates a number of business brands for real estate, rental and mortgage professionals, including Mortech®, dotloop®, Bridge Interactive® and New Home Feed®. The company is headquartered in Seattle, 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. Mortgage Lenders of America, L.L.C. is an Equal Housing Lender; NMLS #10287.
(ZFIN)

7



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
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.

8


Exhibit 99.3


Reported Consolidated Results
ZILLOW GROUP, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
 
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



1



ZILLOW GROUP, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
 
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.



2



ZILLOW GROUP, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
 
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


3





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

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


Non-GAAP net income per share - diluted for the periods presented is calculated using weighted-average shares outstanding - diluted, which includes potential shares of Class A common stock and Class C capital stock because their effect would have been dilutive. The potential shares of Class A common stock and Class C capital stock were excluded from the calculation of GAAP loss per share for the periods presented because their effect would have been antidilutive as a result of the GAAP net loss incurred in such periods. The following table reconciles the denominators used in the basic and diluted non-GAAP net income per share calculations (in thousands):
 
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



4



Segment Results of Operations
The following tables present our segment results for the periods presented (in thousands, unaudited):
 
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
)

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

Non-GAAP Return on Homes Sold After Interest
To provide investors with additional information regarding our Homes segment financial results, this Exhibit includes a calculation of Return on Homes Sold After Interest, which is a non-GAAP financial measure. We have provided a reconciliation of Return on Homes Sold After Interest to the most directly comparable GAAP financial measure, which is net loss before income taxes for the Homes segment.
We believe that Return on Homes Sold After Interest is a useful financial measure to investors in evaluating the performance of a subset of our assets, as it measures the return generated by Zillow specifically on homes sold during a given period. We also present this measure on a per home basis so investors are able to evaluate unit profitability across periods notwithstanding

5



variability in the number of homes sold during each period. This measure also assists Homes segment management in making strategic decisions regarding home offer pricing and other operational decisions.
We calculate Return on Homes Sold After Interest in total and on a per home basis as revenue associated with homes sold during the period less direct costs attributable to those homes. Specifically, direct costs include, with respect to each home sold during the period (1) home acquisition and renovation costs, which in turn include certain labor costs directly associated with these activities; (2) holding and selling costs; and (3) interest costs incurred.
Included in direct holding and interest expense amounts for the three months ended December 31, 2018 are holding and interest costs recorded as period expenses in prior periods associated with homes sold in the current period, which are not calculated in accordance with, or an alternative for, GAAP and should not be considered in isolation or as a substitute for results reported under GAAP. Excluded from certain of these direct cost amounts are costs recorded in the current period related to homes that remain in inventory at the end of the period, as shown in the tables below. We make these period adjustments because we believe presenting Return on Homes Sold After Interest in this manner provides a focused view on a subset of our assets - homes sold during the period - and reflecting costs associated with those homes sold from the time we acquire to the time we sell the home, which may be useful to investors.
Return on Homes Sold After Interest is intended to illustrate the performance of homes sold during the period and is not intended to be a segment or company performance metric. Return on Homes Sold After Interest is a supplemental measure of operating performance for a subset of assets and 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:
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.

Because of these limitations, you should consider Return on Homes Sold After Interest alongside other financial performance measures, including various cash flow metrics, net loss before income taxes and our other GAAP results.
On a GAAP basis, per home loss before income taxes was $192,586 for the three months ended December 31, 2018 and $352,317 for the year ended December 31, 2018.
The following table presents the Return on Homes Sold After Interest for the period presented (in thousands, except per home amounts, unaudited):
 
 
 
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.


6




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.

The following table presents the Return on Homes Sold After Interest for the period presented (in thousands, except per home amounts, unaudited):
 
 
 
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.





7



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.