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x
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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☐
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Washington
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47-1645716
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(State or other jurisdiction of
incorporation or organization)
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(IRS Employer
Identification No.)
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1301 Second Avenue, Floor 31,
Seattle, Washington
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98101
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(Address of principal executive offices)
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(Zip code)
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Class A Common Stock, par value $0.0001 per share
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The Nasdaq Global Select Market
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Class C Capital Stock, par value $0.0001 per share
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The Nasdaq Global Select Market
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(Title of each class)
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(Name of each exchange on which registered)
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Large accelerated filer
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x
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Accelerated filer
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☐
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Non-accelerated filer
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☐
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Smaller reporting company
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☐
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Emerging growth company
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☐
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Page
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PART I
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Item 1.
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Item 1A.
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Item 1B.
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Item 2.
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Item 3.
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Item 4.
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PART II
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Item 5.
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Item 6.
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Item 7.
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Item 7A.
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Item 8.
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Item 9.
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Item 9A.
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Item 9B.
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PART III
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Item 10.
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Item 11.
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Item 12.
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Item 13.
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Item 14.
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PART IV
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Item 15.
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Item 16.
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•
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26.8% of rental units (12.5 million) are located in buildings with 50 or more units;
|
•
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8.6% of rental units (4.0 million) are located in buildings with 25 to 49 units;
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•
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10.4% of rental units (4.9 million) are located in buildings with 5 to 24 units;
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•
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13.7% of rental units (6.4 million) are located in small multi-family structures of 2-4 units;
|
•
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40.6% of rental units (19.0 million) are 1-unit structures.
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•
|
Powerful Brand and Scale. We have established a powerful brand identity that includes a portfolio of the largest and most vibrant brands, and we have built a large user community. The majority of our traffic comes direct, not dependent on search engines, with demonstrated consumer intent to visit Zillow Group’s brands. Traffic to Zillow Group brands’ mobile applications and websites reached a seasonal peak of more than 195 million monthly unique users in July 2018, an increase of 4% year over year. Visits to Zillow Group brands’ mobile applications and websites, including Zillow, Trulia, StreetEasy and RealEstate.com, increased 14% to 7,182.1 million for the year ended December 31, 2018 compared to the year ended December 31, 2017. For additional information regarding unique users and visits, see “Unique Users” and “Visits” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
|
•
|
Inimitable Database of Homes. Our living database of homes is the result of years of substantial investment, sophisticated economic and statistical analysis, complex data aggregation and millions of user contributions. Our dynamic and comprehensive living database includes detailed information on more than 110 million U.S. homes, and includes homes for sale by third party sellers, homes for sale owned by Zillow, homes for rent and recently sold, as well as properties not currently on the market. This database is central to the value we provide to consumers and real estate, rental and mortgage professionals. It contains extensive information that users can search, through an easy-to-use interface, to identify, analyze and compare homes. Our database is relevant to a broad range of users, including buyers, sellers, renters, homeowners, real estate agents and other real estate professionals. It includes information such as:
|
•
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Property facts: Zestimate and its corresponding value range, number of bedrooms, number of bathrooms, square footage, lot size, assessed tax value and property type such as single-family, condominium, apartment, multifamily, manufactured home or land.
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•
|
Listing information: price, price history and reductions, dollars per square foot, days on the market, listing type (such as for sale by agent, for sale by owner, pre-market inventory, which includes foreclosure, pre-foreclosure, Coming Soon and Make Me Move listings, new construction and rental homes), open houses, property photos and estimated monthly mortgage payment.
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•
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Purchase and sale data: prior sales information and recent sales nearby.
|
•
|
Zestimates and Rent Zestimates. We have developed industry-leading automated home valuation models that use advanced statistical methods and complex, proprietary algorithms. We use these models to provide current home value estimates, or Zestimates, and current rental price estimates, or Rent Zestimates, on approximately 100 million U.S. homes. Based on our Zestimates, we produce Zillow Home Value Indexes at the neighborhood, zip code, city, metropolitan statistical area, county and national levels. Our Zillow Home Value Indexes have been cited by
|
•
|
Mobile Leadership and Monetization. We have developed and operate the most popular suite of mobile real estate applications across all major platforms. For example, on our flagship Zillow brand, during December 2018, nearly 880 million homes, or 328 homes per second, were viewed on a mobile device. More than two-thirds of our flagship brand Zillow’s usage occurs on a mobile device. We operate one of the most popular suites of mobile real estate applications with more than fifty applications across all major mobile platforms. We monetize our marketplace business on our mobile platform in the same way we do on our web platform.
|
•
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Independent Market Positions and Consumer Focus. Zillow Group has been built independent of any real estate industry group. We maintain an unwavering commitment to giving consumers free access to as much useful information as possible. We provide information, products and services, designed to empower consumers to make informed decisions about homes and the residential real estate market. We believe our independence enables us to create compelling products and services with broad consumer appeal.
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•
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Multiple Robust Home-Related Marketplaces. We have created trusted and transparent marketplaces in real estate, rentals and mortgages where consumers can identify and connect with local professionals that are best suited to meet their needs. Our living database of homes provides a foundation on which we can build new consumer and professional marketplaces in other home-related categories.
|
•
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Technology Solutions for Professionals. We offer a suite of marketing and technology solutions to help real estate, rental and mortgage professionals grow their businesses and personal brands including our Premier Agent app that allows real estate professionals to manage their business from wherever they are, dotloop that has digitized the real estate transaction, and Bridge Interactive which has streamlined listing data management.
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•
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Consumer-Oriented Mortgage Marketplace. Unlike other sources of mortgage rate quotes, consumers can anonymously submit mortgage loan information requests and receive an unlimited number of personalized mortgage quotes directly from hundreds of consumer-rated lenders, including MLOA, through which we originate mortgages. Because we operate this marketplace as part of our real estate home shopping experience, we can efficiently attract motivated users to the marketplace and prioritize the consumer’s experience. For the year ended December 31, 2018, there were approximately 25.4 million mortgage loan information requests submitted on Zillow Group platforms by consumers.
|
•
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Personalized Experience. We present homebuyers and sellers and real estate, rental and mortgage professionals with many opportunities to personalize their Zillow Group experience, leading to more informed home shopping and financing decisions. As immediacy is paramount in the home search experience, all Zillow Group mobile applications and websites empower users by allowing them to set the criteria that matters most to them, while we take on the action of alerting them when a home or rental that matches their criteria hits the market.
|
•
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Proven Management Team. We believe the broad experience and depth of our management team are distinct competitive advantages in the complex and evolving industry in which we compete. The Zillow Group management team has a mix of extensive experience building successful consumer internet companies and real estate and mortgages businesses. We believe the collective skills and experiences of our executives provide our management team with immense strategic insight and ability.
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•
|
Improve the Home-Related Transaction Experience for the Consumer. Maintain our unwavering focus on empowering consumers with information and products and services that they love to use to make home-related decisions. Develop seamless end-to-end technology offerings that meet the ever-changing expectations of today’s consumers in an on-demand economy, with a goal of earning consumers’ preference for Zillow Group products and services across all stages of the home lifecycle.
|
•
|
Grow our Audience and Increase Engagement Across all Brands. Expand our targeted marketing and advertising programs, public relations, social media initiatives and content distribution to efficiently increase consumer awareness across all brands in our portfolio. Increase footprint via international expansion, as well as into local markets with new products and services. Launch new brands, products and services that target specific demographics or geographies.
|
•
|
Continuously Provide Growth Opportunities for Residential Real Estate Agents and Brokers, Home Builders, Rental Property Managers, and Mortgage Lenders. Provide real estate, rental and mortgage professionals participating in our marketplaces continuous opportunities to grow their respective businesses and increase transactions by creating opportunities for high-quality consumer-initiated connections. Support participating professionals by developing a broad variety of marketing software, technology solutions, productivity tools and other support services to help those professionals manage and grow their businesses and personal brands.
|
•
|
Deepen and Expand Our Marketplaces Across the Lifecycle of Homes. Deepen and expand our platform beyond advertising services for real estate, rental and mortgage professionals through direct market participation, by purchasing homes from, selling homes to, and originating mortgages for consumers. In the future, develop other ancillary products and services to address friction in residential real estate transactions for consumers and industry professionals. Also, pursue commercial relationships and acquisitions to strengthen our market position, enhance our technology offerings and accelerate our growth.
|
•
|
Leverage our Data Advantage. Enhance the information in our database of more than 110 million homes, and use it as the foundation for new analyses, insights and tools that inform strategic decisions. Our living database of homes provides a foundation on which we can build new consumer and professional marketplaces in other home-related categories. Our unmatched audience size and traffic pattern data also provides us with a competitive advantage.
|
•
|
Physical attributes: location, lot size, square footage, number of bedrooms and bathrooms and many other details.
|
•
|
Tax assessments: property tax information, actual property taxes paid, exceptions to tax assessments and other information provided in the tax assessors’ records.
|
•
|
Prior and current transactions: actual sale prices over time of the home itself and comparable recent sales of nearby homes.
|
•
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User data: data provided directly by millions of users of our mobile applications and websites.
|
Value Information
|
|
Zestimate
|
|
Regional foreclosure statistics
|
|
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Zestimate Forecasts
|
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Prior sale prices
|
|
|
Rent Zestimate
|
|
Historical Zestimate values
|
|
|
For sale price
|
|
Historical Rent Zestimate values
|
|
|
Estimated mortgage payment
|
|
Zillow Home Value Index
|
|
|
Estimated down payment
|
|
Zillow Home Value Index Forecasts
|
|
|
Rental price
|
|
Tax-assessed value
|
|
|
Make Me Move price
|
|
Property taxes paid
|
|
|
Easy links to county assessor records
|
|
Price per square foot
|
|
|
Regional 12-month home value forecast
|
|
|
|
|
|
|
|
Home Details
|
|
Bedrooms
|
|
Number of stories
|
|
|
Bathrooms
|
|
Number of units in building
|
|
|
Square footage
|
|
Finished basement
|
|
|
Lot size
|
|
Cooling system
|
|
|
Year built
|
|
Heating system
|
|
|
Property type
|
|
Heat source
|
|
|
County
|
|
Fireplace
|
|
|
Parcel number
|
|
Exterior material
|
|
|
Legal description
|
|
Parking type
|
|
|
Construction quality
|
|
Garage size
|
|
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Location
|
|
|
|
|
|
|
|
Neighborhood Information
|
|
School district
|
|
School ratings
|
|
|
Elementary school
|
|
Crime data
|
|
|
Middle school
|
|
Transit access
|
|
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High school
|
|
Boundaries
|
|
|
Neighborhood and school reviews
|
|
Photos
|
|
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Amenities
|
|
|
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|
|
|
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For Sale Listing Details
|
|
Price
|
|
Days on Zillow or Trulia
|
|
|
Listing agent information
|
|
MLS number
|
|
|
Listing brokerage information
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|
Foreclosure stage and type
|
|
|
Link to listing source
|
|
Home overview description
|
|
|
Property type and property features
|
|
Neighborhood name and description
|
|
|
Open house dates and times
|
|
Coming Soon on market date
|
|
|
Virtual tour
|
|
Community information for newly
|
|
|
Video walkthroughs
|
|
constructed homes in developments
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|
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Home photos
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|
Building name and information
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|
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Price reductions
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|
3D tours
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|
|
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Rental Listing Details
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|
Building name and number of stories
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|
Property manager
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|
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Rent amount and lease terms
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|
Parking availability
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|
|
Application and deposit fees
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|
Utilities and amenities
|
|
|
Historical rental listings
|
|
3D tours
|
•
|
Zillow Group Investor Relations Webpage (http://investors.zillowgroup.com)
|
•
|
Zillow Group Investor Relations Blog (http://www.zillowgroup.com/ir-blog)
|
•
|
Zillow Group Twitter Account (https://twitter.com/zillowgroup)
|
•
|
increase the number of consumers who use our products and services, provide them with tools to promote engagement between real estate market participants, and enhance their user experience so we can retain them;
|
•
|
offer an attractive return on investment to our advertisers for their advertising spending with us;
|
•
|
continue to develop our advertising products and services to increase adoption by and engagement with advertising customers;
|
•
|
keep pace with and anticipate changes in technology to provide industry-leading products and services to advertisers and consumers; and
|
•
|
compete effectively for advertising dollars with other online media companies.
|
•
|
diversion of management time and focus from operating our business to acquisition integration challenges;
|
•
|
consumer and industry acceptance of products and services offered by the acquired company;
|
•
|
implementation or remediation of controls, procedures and policies at the acquired company;
|
•
|
coordination of product, engineering and sales and marketing functions;
|
•
|
retention of employees from the acquired company;
|
•
|
liability for activities of the acquired company before the acquisition;
|
•
|
litigation or other claims arising in connection with the acquired company; and
|
•
|
impairment charges associated with goodwill and other acquired intangible assets.
|
•
|
expansion of Zillow Offers
|
•
|
expansion of our mortgage origination business
|
•
|
product development;
|
•
|
sales and marketing;
|
•
|
technology infrastructure;
|
•
|
strategic opportunities, including commercial relationships and acquisitions; and
|
•
|
general and administrative expenses, including legal and accounting expenses related to being a public company.
|
•
|
actual or anticipated fluctuations in our financial condition and results of operations;
|
•
|
changes in projected operational and financial results;
|
•
|
addition or loss of significant customers;
|
•
|
actual or anticipated changes in our growth rate relative to that of our competitors;
|
•
|
announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital-raising activities or commitments;
|
•
|
announcements of technological innovations or new offerings by us or our competitors;
|
•
|
additions or departures of key personnel;
|
•
|
changes in laws or regulations applicable to our services;
|
•
|
fluctuations in the valuation of companies perceived by investors to be comparable to us;
|
•
|
the inclusion, exclusion, or deletion of our Class A common stock and Class C capital stock from any trading indices, such as the S&P 500 Index;
|
•
|
issuance of new or updated research or reports by securities analysts;
|
•
|
sales of our Class A common stock and Class C capital stock by us or our shareholders;
|
•
|
issuances of our Class A common stock upon conversion of the 2020 Notes and issuances of our Class C capital stock upon conversion of our 2021 Notes;
|
•
|
stock price and volume fluctuations attributable to inconsistent trading volume levels of our shares; and
|
•
|
general economic and market conditions.
|
•
|
set forth the structure of our capital stock, which concentrates voting control of matters submitted to a vote of our shareholders with the holders of our Class B common stock, which is held or controlled by our founders;
|
•
|
authorize our board of directors to issue, without further action by our shareholders, up to 30,000,000 shares of undesignated preferred stock, subject, prior to the threshold date, to the approval rights of the holders of our Class B common stock;
|
•
|
establish that our board of directors will be divided into three classes, Class I, Class II and Class III, with each class serving three-year staggered terms;
|
•
|
prohibit cumulative voting in the election of directors;
|
•
|
provide that, after the threshold date, our directors may be removed only for cause;
|
•
|
provide that, after the threshold date, vacancies on our board of directors may be filled only by the affirmative vote of a majority of directors then in office or by the sole remaining director;
|
•
|
provide that only our board of directors may change the board’s size;
|
•
|
specify that special meetings of our shareholders can be called only by the chair of our board of directors, our board of directors, our chief executive officer, our president or, prior to the threshold date, holders of at least 25% of all the votes entitled to be cast on any issue proposed to be considered at any such special meeting;
|
•
|
establish an advance notice procedure for shareholder proposals to be brought before a meeting of shareholders, including proposed nominations of persons for election to our board of directors;
|
•
|
require the approval of our board of directors or the holders of at least two-thirds of all the votes entitled to be cast by shareholders generally in the election of directors, voting together as a single group, to amend or repeal our bylaws; and
|
•
|
require the approval of not less than two-thirds of all the votes entitled to be cast on a proposed amendment, voting together as a single group, to amend certain provisions of our articles of incorporation.
|
Location
|
|
Purpose
|
|
Approximate Square
Feet
|
|
Principal Lease
Expiration Dates
|
|
Seattle, Washington
|
|
Corporate headquarters for Zillow Group
|
|
307,237
|
|
|
2024
|
San Francisco, California
|
|
General office space
|
|
105,897
|
|
|
2023
|
Denver, Colorado
|
|
General office space
|
|
73,781
|
|
|
2021
|
Overland Park, Kansas
|
|
General office space
|
|
70,373
|
|
|
2024
|
Irvine, California
|
|
General office space
|
|
60,074
|
|
|
2022
|
New York, New York
|
|
General office space
|
|
53,200
|
|
|
2024
|
|
Year Ended December 31,
|
||||||||||||||||||
|
2018
|
|
2017
|
|
2016
|
|
2015
|
|
2014
|
||||||||||
|
(in thousands, except per share data)
|
||||||||||||||||||
Statement of Operations Data:
|
|
|
|
|
|
|
|
|
|
||||||||||
Revenue:
|
|
|
|
|
|
|
|
|
|
||||||||||
IMT
|
$
|
1,281,189
|
|
|
$
|
1,076,794
|
|
|
$
|
846,589
|
|
|
$
|
644,677
|
|
|
$
|
325,893
|
|
Homes
|
52,365
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Total revenue
|
1,333,554
|
|
|
1,076,794
|
|
|
846,589
|
|
|
644,677
|
|
|
325,893
|
|
|||||
Cost of revenue (exclusive of amortization) (1)(2):
|
|
|
|
|
|
|
|
|
|
||||||||||
IMT
|
104,330
|
|
|
85,203
|
|
|
69,262
|
|
|
60,127
|
|
|
29,461
|
|
|||||
Homes
|
49,260
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Total cost of revenue
|
153,590
|
|
|
85,203
|
|
|
69,262
|
|
|
60,127
|
|
|
29,461
|
|
|||||
Sales and marketing (1)
|
552,621
|
|
|
448,201
|
|
|
382,419
|
|
|
308,125
|
|
|
169,462
|
|
|||||
Technology and development (1)
|
410,818
|
|
|
319,985
|
|
|
255,583
|
|
|
184,477
|
|
|
84,669
|
|
|||||
General and administrative (1)
|
262,153
|
|
|
210,816
|
|
|
332,007
|
|
|
184,984
|
|
|
65,503
|
|
|||||
Impairment and restructuring costs (1)
|
79,000
|
|
|
174,000
|
|
|
—
|
|
|
35,551
|
|
|
—
|
|
|||||
Acquisition-related costs
|
2,332
|
|
|
463
|
|
|
1,423
|
|
|
16,576
|
|
|
21,493
|
|
|||||
Integration costs
|
2,015
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Loss (gain) on divestiture of businesses
|
—
|
|
|
—
|
|
|
(1,251
|
)
|
|
4,368
|
|
|
—
|
|
|||||
Total costs and expenses
|
1,462,529
|
|
|
1,238,668
|
|
|
1,039,443
|
|
|
794,208
|
|
|
370,588
|
|
|||||
Loss from operations
|
(128,975
|
)
|
|
(161,874
|
)
|
|
(192,854
|
)
|
|
(149,531
|
)
|
|
(44,695
|
)
|
|||||
Loss on debt extinguishment
|
—
|
|
|
—
|
|
|
(22,757
|
)
|
|
—
|
|
|
—
|
|
|||||
Other income
|
19,270
|
|
|
5,385
|
|
|
2,711
|
|
|
1,501
|
|
|
1,085
|
|
|||||
Interest expense
|
(41,255
|
)
|
|
(27,517
|
)
|
|
(7,408
|
)
|
|
(5,489
|
)
|
|
—
|
|
|||||
Loss before income taxes
|
(150,960
|
)
|
|
(184,006
|
)
|
|
(220,308
|
)
|
|
(153,519
|
)
|
|
(43,610
|
)
|
|||||
Income tax benefit (expense)
|
31,102
|
|
|
89,586
|
|
|
(130
|
)
|
|
4,645
|
|
|
—
|
|
|||||
Net loss
|
$
|
(119,858
|
)
|
|
$
|
(94,420
|
)
|
|
$
|
(220,438
|
)
|
|
$
|
(148,874
|
)
|
|
$
|
(43,610
|
)
|
Net loss per share—basic and diluted
|
$
|
(0.61
|
)
|
|
$
|
(0.51
|
)
|
|
$
|
(1.22
|
)
|
|
$
|
(0.88
|
)
|
|
$
|
(0.36
|
)
|
Weighted average shares outstanding—basic and diluted
|
197,944
|
|
|
186,453
|
|
|
180,149
|
|
|
169,767
|
|
|
120,027
|
|
|||||
(1) Includes share-based compensation as follows:
|
|
|
|
|
|
|
|
|
|
||||||||||
Cost of revenue
|
$
|
4,127
|
|
|
$
|
3,884
|
|
|
$
|
3,550
|
|
|
$
|
2,384
|
|
|
$
|
1,844
|
|
Sales and marketing
|
22,942
|
|
|
22,735
|
|
|
23,320
|
|
|
25,391
|
|
|
7,320
|
|
|||||
Technology and development
|
56,673
|
|
|
39,938
|
|
|
31,466
|
|
|
26,849
|
|
|
11,681
|
|
|||||
General and administrative
|
65,342
|
|
|
47,014
|
|
|
48,582
|
|
|
50,590
|
|
|
13,240
|
|
|||||
Impairment and restructuring costs
|
—
|
|
|
—
|
|
|
—
|
|
|
14,859
|
|
|
—
|
|
|||||
Total
|
$
|
149,084
|
|
|
$
|
113,571
|
|
|
$
|
106,918
|
|
|
$
|
120,073
|
|
|
$
|
34,085
|
|
(2) Amortization of website development costs and intangible assets included in technology and development
|
$
|
79,309
|
|
|
$
|
94,349
|
|
|
$
|
87,060
|
|
|
$
|
63,189
|
|
|
$
|
29,487
|
|
|
At December 31,
|
||||||||||||||||||
|
2018
|
|
2017
|
|
2016
|
|
2015
|
|
2014
|
||||||||||
|
(in thousands)
|
||||||||||||||||||
Balance Sheet Data:
|
|
|
|
|
|
|
|||||||||||||
Cash, cash equivalents and investments
|
$
|
1,554,925
|
|
|
$
|
762,539
|
|
|
$
|
507,515
|
|
|
$
|
520,289
|
|
|
$
|
455,920
|
|
Working capital
|
1,605,200
|
|
|
723,138
|
|
|
485,617
|
|
|
493,672
|
|
|
352,141
|
|
|||||
Property and equipment, net
|
135,172
|
|
|
112,271
|
|
|
98,288
|
|
|
85,523
|
|
|
41,600
|
|
|||||
Total assets
|
4,291,116
|
|
|
3,230,517
|
|
|
3,149,677
|
|
|
3,135,700
|
|
|
649,730
|
|
|||||
Long-term debt
|
699,020
|
|
|
385,416
|
|
|
367,404
|
|
|
230,000
|
|
|
—
|
|
|||||
Deferred tax liabilities and other long-term liabilities
|
17,474
|
|
|
44,561
|
|
|
136,146
|
|
|
132,482
|
|
|
—
|
|
|||||
Total shareholders’ equity
|
3,267,179
|
|
|
2,660,823
|
|
|
2,533,587
|
|
|
2,679,053
|
|
|
588,779
|
|
•
|
In January, we launched Out East™, a new Hamptons-focused real estate brand. Out East replaces Hamptons Real Estate Online (HREO.com), which Zillow Group acquired in January 2017.
|
•
|
In February, we launched a new national advertising campaign, “Many Ways Home”, with three national TV spots illustrating the diversity of the housing market today and the many different paths people take to find a new home.
|
•
|
In March, we announced the top three teams from round one of our Zillow Prize competition, a machine learning competition to improve Zestimate accuracy, with a grand prize of up to $1 million to the person or team who submits the most improved Zestimate algorithm model. In January 2019, we awarded the $1 million prize to the winning team, which beat the Zillow benchmark model by approximately 13%.
|
•
|
In March, we launched the “My Agent” feature, which creates an exclusive relationship between a Premier Agent and a home shopper on Zillow Group’s mobile applications and websites.
|
•
|
In April, we announced the launch of our Homes business, Zillow Offers. We believe the Zillow Offers service offers transparency, convenience and more choice for home sellers, and gives them certainty over their property sale price and timing of their move. As of December 31, 2018, the Zillow Offers service is available in Phoenix, Las Vegas, Atlanta, Denver, and Charlotte.
|
•
|
In the second half of 2018, we made important changes to the Premier Agent and Premier Broker programs. For example, and as discussed in greater detail below, we implemented a new form of consumer lead validation and distribution to our Premier Agent and Premier Broker advertisers in an effort to deliver higher quality leads, which resulted in a decrease in the total number of leads received by some advertisers. The initial changes resulted in advertiser churn at a rate higher than we expected. Based on feedback from our Premier Agents and Premier Brokers, we subsequently made further adjustments to these processes, for example, by decreasing the number of screening questions posed to consumers as part of consumer lead validation, in an effort to return to prior lead volumes. We also implemented pricing caps in certain high-demand zip codes to help ease pressure on cost-per-lead increases resulting from growing demand in our auction-based pricing model. Beginning in the fourth quarter of 2018, we introduced Premier Agent and Premier Broker Flex Pricing products in a limited number of markets. With the Flex Pricing products, Premier Agents and Premier Brokers are provided validated consumer leads at no upfront cost and pay a performance advertising fee only when a real estate transaction is closed with one of their leads. We plan to expand this pricing model further in 2019.
|
•
|
In June, we announced that we entered into an agreement to receive a direct listing feed from CENTURY 21 Canada to enable Zillow Group to feature Canadian listings on Zillow.com. We entered into additional listing agreements and marketing partnerships with other Canadian real estate enterprises throughout the year.
|
•
|
In July, we introduced new tools for renters and landlords. Renters can apply for multiple rental units with one application, including background and credit reports and pay their rent through new features on Zillow.
|
•
|
In July, we issued $373.8 million aggregate principal amount of 1.50% Convertible Senior Notes due 2023 (the “2023 Notes”), which includes $48.8 million principal amount of 2023 Notes sold pursuant to the underwriters’ option to purchase additional notes. We received net proceeds of $364.0 million after deducting underwriting
|
•
|
In July, we issued and sold 6,557,017 shares (of which 855,263 shares were related to the exercise of the underwriters’ option to purchase additional shares) of our Class C capital stock at a public offering price of $57.00 per share. We received net proceeds of $360.3 million after deducting underwriting discounts and commissions and offering expenses payable by us. For additional information regarding the issuance, see Note 16 to our consolidated financial statements.
|
•
|
In August, the company announced its entrance into a revolving credit agreement with Credit Suisse AG, Cayman Islands Branch, as the directing lender, and certain other parties thereto (the “Revolving Credit Facility”). The agreement provided for a maximum borrowing capacity of $250.0 million with an initial borrowing capacity of $20.0 million. On December 31, 2018 we increased the maximum borrowing capacity related to the Revolving Credit Facility to $500.0 million. As of December 31, 2018, the Revolving Credit Facility had a current borrowing capacity of $126.7 million.
|
•
|
In October, we acquired MLOA, a licensed mortgage lender headquartered in Overland Park, Kansas.
|
•
|
In October, we announced the “Best of Zillow” program, a data-driven program based on consumer feedback that will highlight real estate agent advertisers who provide exceptional customer service and reward them with additional marketing benefits such as designations as “Best of Zillow” or “Best of Trulia”.
|
|
Three Months Ended
December 31, |
|
2017 to 2018
% Change
|
|
2016 to 2017
% Change
|
|||||||||
|
2018
|
|
2017
|
|
2016
|
|
||||||||
|
(in millions)
|
|
|
|
|
|||||||||
Average Monthly Unique Users
|
157.2
|
|
|
151.6
|
|
|
140.1
|
|
|
4
|
%
|
|
8
|
%
|
|
Year Ended December 31,
|
|
2017 to 2018
% Change
|
|
2016 to 2017
% Change
|
|||||||||
|
2018
|
|
2017
|
|
2016
|
|
||||||||
|
(in millions)
|
|
|
|
|
|||||||||
Visits
|
7,182.1
|
|
|
6,314.4
|
|
|
5,323.2
|
|
|
14
|
%
|
|
19
|
%
|
•
|
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 the gain on divestiture of business;
|
•
|
Adjusted EBITDA does not reflect interest expense or other income;
|
•
|
Adjusted EBITDA does not reflect the loss on debt extinguishment;
|
•
|
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.
|
|
Year Ended December 31,
|
|
2017 to 2018
% Change
|
|||||||
|
2018
|
|
2017
|
|
||||||
|
(in thousands)
|
|
|
|||||||
Premier Agent
|
$
|
898,332
|
|
|
$
|
761,594
|
|
|
18
|
%
|
Rentals
|
134,587
|
|
|
102,544
|
|
|
31
|
%
|
||
Mortgages
|
80,046
|
|
|
80,591
|
|
|
(1
|
)%
|
||
Other
|
168,224
|
|
|
132,065
|
|
|
27
|
%
|
||
Homes
|
52,365
|
|
|
—
|
|
|
N/A
|
|
||
Total revenue
|
$
|
1,333,554
|
|
|
$
|
1,076,794
|
|
|
24
|
%
|
|
Year Ended December 31,
|
||||
|
2018
|
|
2017
|
||
Percentage of Total Revenue:
|
|
|
|
||
Premier Agent
|
67
|
%
|
|
71
|
%
|
Rentals
|
10
|
|
|
10
|
|
Mortgages
|
6
|
|
|
7
|
|
Other
|
13
|
|
|
12
|
|
Homes
|
4
|
|
|
—
|
|
Total revenue
|
100
|
%
|
|
100
|
%
|
|
Year Ended December 31,
|
|
2016 to 2017
% Change
|
|||||||
|
2017
|
|
2016
|
|
||||||
|
(in thousands)
|
|
|
|||||||
Revenue:
|
|
|
|
|
|
|||||
Premier Agent
|
$
|
761,594
|
|
|
$
|
604,292
|
|
|
26
|
%
|
Rentals
|
102,544
|
|
|
60,976
|
|
|
68
|
%
|
||
Mortgages
|
80,591
|
|
|
71,133
|
|
|
13
|
%
|
||
Other
|
132,065
|
|
|
110,188
|
|
|
20
|
%
|
||
Total revenue
|
$
|
1,076,794
|
|
|
$
|
846,589
|
|
|
27
|
%
|
|
Year Ended December 31,
|
||||
|
2017
|
|
2016
|
||
Percentage of Total Revenue:
|
|
|
|
||
Premier Agent
|
71
|
%
|
|
71
|
%
|
Rentals
|
10
|
|
|
7
|
|
Mortgages
|
7
|
|
|
8
|
|
Other
|
12
|
|
|
13
|
|
Total revenue
|
100
|
%
|
|
100
|
%
|
|
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
|
|
||||||
Income (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
|
)
|
|
Year Ended
December 31, 2017 |
|
Year Ended
December 31, 2016 |
||||||||||||||||||||
|
IMT
|
|
Homes
|
|
Consolidated
|
|
IMT
|
|
Homes
|
|
Consolidated
|
||||||||||||
Revenue
|
$
|
1,076,794
|
|
|
$
|
—
|
|
|
$
|
1,076,794
|
|
|
$
|
846,589
|
|
|
$
|
—
|
|
|
$
|
846,589
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Cost of revenue
|
85,203
|
|
|
—
|
|
|
85,203
|
|
|
69,262
|
|
|
—
|
|
|
69,262
|
|
||||||
Sales and marketing
|
448,201
|
|
|
—
|
|
|
448,201
|
|
|
382,419
|
|
|
—
|
|
|
382,419
|
|
||||||
Technology and development
|
319,985
|
|
|
—
|
|
|
319,985
|
|
|
255,583
|
|
|
—
|
|
|
255,583
|
|
||||||
General and administrative
|
210,816
|
|
|
—
|
|
|
210,816
|
|
|
332,007
|
|
|
—
|
|
|
332,007
|
|
||||||
Impairment costs
|
174,000
|
|
|
—
|
|
|
174,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Acquisition-related costs
|
463
|
|
|
—
|
|
|
463
|
|
|
1,423
|
|
|
—
|
|
|
1,423
|
|
||||||
Gain on divestiture of business
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,251
|
)
|
|
|
|
(1,251
|
)
|
|||||||
Total costs and expenses
|
1,238,668
|
|
|
—
|
|
|
1,238,668
|
|
|
1,039,443
|
|
|
—
|
|
|
1,039,443
|
|
||||||
Loss from operations
|
(161,874
|
)
|
|
—
|
|
|
(161,874
|
)
|
|
(192,854
|
)
|
|
—
|
|
|
(192,854
|
)
|
||||||
Loss on debt extinguishment
|
—
|
|
|
—
|
|
|
—
|
|
|
(22,757
|
)
|
|
—
|
|
|
(22,757
|
)
|
||||||
Other income
|
5,385
|
|
|
—
|
|
|
5,385
|
|
|
2,711
|
|
|
—
|
|
|
2,711
|
|
||||||
Interest expense
|
(27,517
|
)
|
|
—
|
|
|
(27,517
|
)
|
|
(7,408
|
)
|
|
—
|
|
|
(7,408
|
)
|
||||||
Loss before income taxes
|
$
|
(184,006
|
)
|
|
$
|
—
|
|
|
$
|
(184,006
|
)
|
|
$
|
(220,308
|
)
|
|
$
|
—
|
|
|
$
|
(220,308
|
)
|
|
Three Months Ended
|
||||||||||||||||||||||||||||||
|
December 31, 2018
|
|
September 30, 2018
|
|
June 30, 2018
|
|
March 31, 2018
|
|
December 31, 2017
|
|
September 30, 2017
|
|
June 30, 2017
|
|
March 31, 2017
|
||||||||||||||||
|
(in thousands, except per share data, unaudited)
|
||||||||||||||||||||||||||||||
Statement of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
IMT
|
$
|
323,988
|
|
|
$
|
332,076
|
|
|
$
|
325,246
|
|
|
$
|
299,879
|
|
|
$
|
282,330
|
|
|
$
|
281,839
|
|
|
$
|
266,850
|
|
|
$
|
245,775
|
|
Homes
|
41,347
|
|
|
11,018
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Total revenue
|
365,335
|
|
|
343,094
|
|
|
325,246
|
|
|
299,879
|
|
|
282,330
|
|
|
281,839
|
|
|
266,850
|
|
|
245,775
|
|
||||||||
Cost of revenue (exclusive of
amortization) (1)(2):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
IMT
|
28,498
|
|
|
26,386
|
|
|
25,527
|
|
|
23,919
|
|
|
22,559
|
|
|
22,152
|
|
|
20,260
|
|
|
20,232
|
|
||||||||
Homes
|
38,974
|
|
|
10,286
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Total cost of revenue
|
67,472
|
|
|
36,672
|
|
|
25,527
|
|
|
23,919
|
|
|
22,559
|
|
|
22,152
|
|
|
20,260
|
|
|
20,232
|
|
||||||||
Sales and marketing (1)
|
138,869
|
|
|
128,734
|
|
|
147,727
|
|
|
137,291
|
|
|
103,935
|
|
|
107,108
|
|
|
131,218
|
|
|
105,940
|
|
||||||||
Technology and
development (1)
|
111,195
|
|
|
105,314
|
|
|
100,376
|
|
|
93,933
|
|
|
85,187
|
|
|
83,389
|
|
|
78,541
|
|
|
72,868
|
|
||||||||
General and administrative
(1)
|
74,758
|
|
|
70,743
|
|
|
60,579
|
|
|
56,073
|
|
|
57,778
|
|
|
54,226
|
|
|
53,346
|
|
|
45,466
|
|
||||||||
Impairment costs
|
69,000
|
|
|
10,000
|
|
|
—
|
|
|
—
|
|
|
174,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Acquisition-related costs
|
268
|
|
|
1,405
|
|
|
632
|
|
|
27
|
|
|
97
|
|
|
218
|
|
|
43
|
|
|
105
|
|
||||||||
Integration costs
|
1,492
|
|
|
523
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Total costs and expenses
|
463,054
|
|
|
353,391
|
|
|
334,841
|
|
|
311,243
|
|
|
443,556
|
|
|
267,093
|
|
|
283,408
|
|
|
244,611
|
|
||||||||
Income (loss) from operations
|
(97,719
|
)
|
|
(10,297
|
)
|
|
(9,595
|
)
|
|
(11,364
|
)
|
|
(161,226
|
)
|
|
14,746
|
|
|
(16,558
|
)
|
|
1,164
|
|
||||||||
Other income
|
5,962
|
|
|
7,773
|
|
|
3,089
|
|
|
2,446
|
|
|
1,415
|
|
|
1,407
|
|
|
1,610
|
|
|
953
|
|
||||||||
Interest expense
|
(14,327
|
)
|
|
(12,668
|
)
|
|
(7,187
|
)
|
|
(7,073
|
)
|
|
(6,991
|
)
|
|
(6,906
|
)
|
|
(6,897
|
)
|
|
(6,723
|
)
|
||||||||
Income (loss) before income taxes
|
(106,084
|
)
|
|
(15,192
|
)
|
|
(13,693
|
)
|
|
(15,991
|
)
|
|
(166,802
|
)
|
|
9,247
|
|
|
(21,845
|
)
|
|
(4,606
|
)
|
||||||||
Income tax benefit (expense)
|
8,402
|
|
|
14,700
|
|
|
10,600
|
|
|
(2,600
|
)
|
|
89,627
|
|
|
(41
|
)
|
|
—
|
|
|
—
|
|
||||||||
Net income (loss)
|
$
|
(97,682
|
)
|
|
$
|
(492
|
)
|
|
$
|
(3,093
|
)
|
|
$
|
(18,591
|
)
|
|
$
|
(77,175
|
)
|
|
$
|
9,206
|
|
|
$
|
(21,845
|
)
|
|
$
|
(4,606
|
)
|
Net income (loss) per share—basic and diluted
|
$
|
(0.48
|
)
|
|
$
|
—
|
|
|
$
|
(0.02
|
)
|
|
$
|
(0.10
|
)
|
|
$
|
(0.41
|
)
|
|
$
|
0.05
|
|
|
$
|
(0.12
|
)
|
|
$
|
(0.03
|
)
|
Weighted-average shares outstanding—basic
|
203,561
|
|
|
202,416
|
|
|
194,155
|
|
|
191,464
|
|
|
189,439
|
|
|
187,692
|
|
|
185,439
|
|
|
183,158
|
|
||||||||
Weighted-average shares outstanding—diluted
|
203,561
|
|
|
202,416
|
|
|
194,155
|
|
|
191,464
|
|
|
189,439
|
|
|
196,425
|
|
|
185,439
|
|
|
183,158
|
|
||||||||
Other Financial Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Adjusted EBITDA (3)
|
$
|
32,357
|
|
|
$
|
66,165
|
|
|
$
|
56,000
|
|
|
$
|
46,310
|
|
|
$
|
70,859
|
|
|
$
|
70,957
|
|
|
$
|
39,700
|
|
|
$
|
54,799
|
|
|
Three Months Ended
|
||||||||||||||||||||||||||||||
|
December 31, 2018
|
|
September 30, 2018
|
|
June 30, 2018
|
|
March 31, 2018
|
|
December 31, 2017
|
|
September 30, 2017
|
|
June 30, 2017
|
|
March 31, 2017
|
||||||||||||||||
|
(in thousands, unaudited)
|
||||||||||||||||||||||||||||||
(1) Includes share-based compensation as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Cost of revenue
|
$
|
947
|
|
|
$
|
969
|
|
|
$
|
1,256
|
|
|
$
|
955
|
|
|
$
|
942
|
|
|
$
|
1,014
|
|
|
$
|
1,025
|
|
|
$
|
903
|
|
Sales and marketing
|
5,529
|
|
|
5,911
|
|
|
6,340
|
|
|
5,162
|
|
|
5,041
|
|
|
5,914
|
|
|
6,250
|
|
|
5,530
|
|
||||||||
Technology and development
|
15,753
|
|
|
15,031
|
|
|
14,347
|
|
|
11,542
|
|
|
10,609
|
|
|
10,438
|
|
|
10,400
|
|
|
8,491
|
|
||||||||
General and administrative
|
15,489
|
|
|
19,771
|
|
|
17,000
|
|
|
13,082
|
|
|
12,817
|
|
|
11,208
|
|
|
11,518
|
|
|
11,471
|
|
||||||||
Total
|
$
|
37,718
|
|
|
$
|
41,682
|
|
|
$
|
38,943
|
|
|
$
|
30,741
|
|
|
$
|
29,409
|
|
|
$
|
28,574
|
|
|
$
|
29,193
|
|
|
$
|
26,395
|
|
(2) Amortization of website development costs and intangible assets included in technology and development
|
$
|
17,575
|
|
|
$
|
18,165
|
|
|
$
|
21,020
|
|
|
$
|
22,549
|
|
|
$
|
24,392
|
|
|
$
|
23,537
|
|
|
$
|
23,159
|
|
|
$
|
23,261
|
|
(3)
|
Adjusted EBITDA is a non-GAAP financial measure; it is not calculated or presented in accordance with GAAP. See “Adjusted EBITDA” below for more information and for a reconciliation of Adjusted EBITDA to net income (loss), the most directly comparable financial measure calculated and presented in accordance with GAAP.
|
|
Three Months Ended
|
||||||||||||||||||||||||||||||
|
December 31, 2018
|
|
September 30, 2018
|
|
June 30, 2018
|
|
March 31, 2018
|
|
December 31, 2017
|
|
September 30, 2017
|
|
June 30, 2017
|
|
March 31, 2017
|
||||||||||||||||
|
(in thousands, unaudited)
|
||||||||||||||||||||||||||||||
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Premier Agent
|
$
|
221,012
|
|
|
$
|
232,703
|
|
|
$
|
230,885
|
|
|
$
|
213,732
|
|
|
$
|
199,514
|
|
|
$
|
197,054
|
|
|
$
|
189,725
|
|
|
$
|
175,301
|
|
Rentals
|
34,917
|
|
|
37,319
|
|
|
33,288
|
|
|
29,063
|
|
|
28,851
|
|
|
28,438
|
|
|
23,710
|
|
|
21,545
|
|
||||||||
Mortgages
|
23,280
|
|
|
18,438
|
|
|
19,305
|
|
|
19,023
|
|
|
18,516
|
|
|
20,869
|
|
|
20,936
|
|
|
20,270
|
|
||||||||
Other
|
44,779
|
|
|
43,616
|
|
|
41,768
|
|
|
38,061
|
|
|
35,449
|
|
|
35,478
|
|
|
32,479
|
|
|
28,659
|
|
||||||||
Homes
|
41,347
|
|
|
11,018
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Total Revenue
|
$
|
365,335
|
|
|
$
|
343,094
|
|
|
$
|
325,246
|
|
|
$
|
299,879
|
|
|
$
|
282,330
|
|
|
$
|
281,839
|
|
|
$
|
266,850
|
|
|
$
|
245,775
|
|
|
Three Months Ended
|
||||||||||||||||||||||
|
December 31, 2018
|
|
September 30, 2018
|
|
June 30, 2018
|
|
March 31, 2018
|
|
December 31, 2017
|
|
September 30, 2017
|
|
June 30, 2017
|
|
March 31, 2017
|
||||||||
Percentage of Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Premier Agent
|
60
|
%
|
|
68
|
%
|
|
71
|
%
|
|
71
|
%
|
|
71
|
%
|
|
70
|
%
|
|
71
|
%
|
|
71
|
%
|
Rentals
|
10
|
|
|
11
|
|
|
10
|
|
|
10
|
|
|
10
|
|
|
10
|
|
|
9
|
|
|
9
|
|
Mortgages
|
6
|
|
|
5
|
|
|
6
|
|
|
6
|
|
|
7
|
|
|
7
|
|
|
8
|
|
|
8
|
|
Other
|
12
|
|
|
13
|
|
|
13
|
|
|
13
|
|
|
13
|
|
|
13
|
|
|
12
|
|
|
12
|
|
Homes
|
11
|
|
|
3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total revenue
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
Three Months Ended
|
||||||||||||||||||||||||||||||
|
December 31, 2018
|
|
September 30, 2018
|
|
June 30, 2018
|
|
March 31, 2018
|
|
December 31, 2017
|
|
September 30, 2017
|
|
June 30, 2017
|
|
March 31, 2017
|
||||||||||||||||
|
(in thousands, unaudited)
|
||||||||||||||||||||||||||||||
Reconciliation of Adjusted EBITDA to Net Income (Loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Net income (loss)
|
$
|
(97,682
|
)
|
|
$
|
(492
|
)
|
|
$
|
(3,093
|
)
|
|
$
|
(18,591
|
)
|
|
$
|
(77,175
|
)
|
|
$
|
9,206
|
|
|
$
|
(21,845
|
)
|
|
$
|
(4,606
|
)
|
Other income
|
(5,962
|
)
|
|
(7,773
|
)
|
|
(3,089
|
)
|
|
(2,446
|
)
|
|
(1,415
|
)
|
|
(1,407
|
)
|
|
(1,610
|
)
|
|
(953
|
)
|
||||||||
Depreciation and amortization expense
|
23,090
|
|
|
23,375
|
|
|
26,020
|
|
|
26,906
|
|
|
28,579
|
|
|
27,419
|
|
|
27,022
|
|
|
27,135
|
|
||||||||
Share-based compensation expense
|
37,718
|
|
|
41,682
|
|
|
38,943
|
|
|
30,741
|
|
|
29,409
|
|
|
28,574
|
|
|
29,193
|
|
|
26,395
|
|
||||||||
Impairment costs
|
69,000
|
|
|
10,000
|
|
|
—
|
|
|
—
|
|
|
174,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Acquisition-related costs
|
268
|
|
|
1,405
|
|
|
632
|
|
|
27
|
|
|
97
|
|
|
218
|
|
|
43
|
|
|
105
|
|
||||||||
Interest expense
|
14,327
|
|
|
12,668
|
|
|
7,187
|
|
|
7,073
|
|
|
6,991
|
|
|
6,906
|
|
|
6,897
|
|
|
6,723
|
|
||||||||
Income tax (benefit) expense
|
(8,402
|
)
|
|
(14,700
|
)
|
|
(10,600
|
)
|
|
2,600
|
|
|
(89,627
|
)
|
|
41
|
|
|
—
|
|
|
—
|
|
||||||||
Adjusted EBITDA
|
$
|
32,357
|
|
|
$
|
66,165
|
|
|
$
|
56,000
|
|
|
$
|
46,310
|
|
|
$
|
70,859
|
|
|
$
|
70,957
|
|
|
$
|
39,700
|
|
|
$
|
54,799
|
|
|
Average for the Three Months Ended
|
||||||||||||||||||||||
|
December 31, 2018
|
|
September 30, 2018
|
|
June 30, 2018
|
|
March 31, 2018
|
|
December 31, 2017
|
|
September 30, 2017
|
|
June 30, 2017
|
|
March 31, 2017
|
||||||||
|
(in millions)
|
||||||||||||||||||||||
Unique Users
|
157.2
|
|
|
186.6
|
|
|
186.1
|
|
|
175.5
|
|
|
151.6
|
|
|
175.2
|
|
|
178.1
|
|
|
166.6
|
|
|
Three Months Ended
|
||||||||||||||||||||||
|
December 31, 2018
|
|
September 30, 2018
|
|
June 30, 2018
|
|
March 31, 2018
|
|
December 31, 2017
|
|
September 30, 2017
|
|
June 30, 2017
|
|
March 31, 2017
|
||||||||
|
(in millions)
|
||||||||||||||||||||||
Visits
|
1,607.8
|
|
|
1,888.9
|
|
|
1,920.6
|
|
|
1,764.8
|
|
|
1,435.6
|
|
|
1,667.1
|
|
|
1,678.7
|
|
|
1,533.0
|
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(in thousands)
|
||||||||||
Cash Flow Data:
|
|
|
|
|
|
||||||
Net cash provided by operating activities
|
$
|
3,850
|
|
|
$
|
258,191
|
|
|
$
|
8,645
|
|
Net cash used in investing activities
|
(622,639
|
)
|
|
(247,394
|
)
|
|
(65,719
|
)
|
|||
Net cash provided by financing activities
|
930,137
|
|
|
97,706
|
|
|
71,528
|
|
|
Payment Due By Period
|
||||||||||||||||||
|
Total
|
|
Less Than
1 Year
|
|
1-3 Years
|
|
3-5 Years
|
|
More Than
5 Years
|
||||||||||
|
(in thousands, unaudited)
|
||||||||||||||||||
2023 Notes (1)
|
$
|
373,750
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
373,750
|
|
|
$
|
—
|
|
Interest on 2023 Notes (2)
|
25,228
|
|
|
5,606
|
|
|
11,213
|
|
|
8,409
|
|
|
—
|
|
|||||
2021 Notes (3)
|
460,000
|
|
|
—
|
|
|
460,000
|
|
|
—
|
|
|
—
|
|
|||||
Interest on 2021 Notes (4)
|
26,833
|
|
|
9,200
|
|
|
17,633
|
|
|
—
|
|
|
—
|
|
|||||
2020 Notes (5)
|
9,637
|
|
|
—
|
|
|
9,637
|
|
|
—
|
|
|
—
|
|
|||||
Interest on 2020 Notes (6)
|
530
|
|
|
265
|
|
|
265
|
|
|
—
|
|
|
—
|
|
|||||
Homes under contract (7)
|
88,943
|
|
|
88,943
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Revolving credit facility (8)
|
116,700
|
|
|
116,700
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Warehouse lines of credit (9)
|
33,018
|
|
|
33,018
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Operating lease obligations (10)
|
266,885
|
|
|
29,085
|
|
|
78,159
|
|
|
74,179
|
|
|
85,462
|
|
|||||
Purchase obligations (11)
|
160,866
|
|
|
64,124
|
|
|
96,742
|
|
|
—
|
|
|
—
|
|
|||||
Total contractual obligations
|
$
|
1,562,390
|
|
|
$
|
346,941
|
|
|
$
|
673,649
|
|
|
$
|
456,338
|
|
|
$
|
85,462
|
|
(1)
|
The aggregate principal amount of the 2023 Notes is due on July 1, 2023 if not earlier converted or redeemed.
|
(2)
|
The stated interest rate on the 2023 Notes is 1.50%
|
(3)
|
The aggregate principal amount of the 2021 Notes is due on December 1, 2021 if not earlier converted or redeemed.
|
(4)
|
The stated interest rate on the 2021 Notes is 2.00%.
|
(5)
|
The aggregate principal amount of the 2020 Notes is due on December 15, 2020 if not earlier converted or redeemed.
|
(6)
|
The stated interest rate on the 2020 Notes is 2.75%.
|
(7)
|
We have obligations to purchase homes under contract through our Zillow Offers business.
|
(8)
|
Includes principal amounts due for amounts borrowed under the Revolving Credit Facility entered into on July 31, 2018. Amount excludes estimated interest payments.
|
(9)
|
Includes principal amounts due for amounts borrowed under the warehouse lines of credit assumed in connection with the October 2018 acquisition of MLOA. Amount excludes estimated interest payments.
|
(10)
|
Our operating lease obligations consist of various operating leases for office space under noncancelable operating lease agreements. For additional information regarding our operating leases, see Note 19 to our consolidated financial statements.
|
(11)
|
We have noncancelable purchase obligations for content related to our mobile applications and websites. For additional information regarding our purchase obligations, see Note 19 to our consolidated financial statements.
|
|
|
|
Page
|
|
December 31,
|
||||||
|
2018
|
|
2017
|
||||
Assets
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
651,058
|
|
|
$
|
352,095
|
|
Short-term investments
|
903,867
|
|
|
410,444
|
|
||
Accounts receivable, net of allowance for doubtful accounts of $4,838 and $5,341 at December 31, 2018 and 2017, respectively
|
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
|
|
||
Commitments and contingencies (Note 19)
|
|
|
|
||||
Shareholders’ equity:
|
|
|
|
||||
Preferred stock, $0.0001 par value; 30,000,000 shares authorized; no shares issued and outstanding
|
—
|
|
|
—
|
|
||
Class A common stock, $0.0001 par value; 1,245,000,000 shares authorized; 58,051,448 and 56,629,103 shares issued and outstanding as of December 31, 2018 and 2017, respectively
|
6
|
|
|
6
|
|
||
Class B common stock, $0.0001 par value; 15,000,000 shares authorized; 6,217,447 shares issued and outstanding as of December 31, 2018 and 2017
|
1
|
|
|
1
|
|
||
Class C capital stock, $0.0001 par value; 600,000,000 shares authorized; 139,635,370 and 127,268,598 shares issued and outstanding as of December 31, 2018 and 2017, respectively
|
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
|
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Revenue:
|
|
|
|
|
|
|
|
|
|||
IMT
|
$
|
1,281,189
|
|
|
$
|
1,076,794
|
|
|
$
|
846,589
|
|
Homes
|
52,365
|
|
|
—
|
|
|
—
|
|
|||
Total revenue
|
1,333,554
|
|
|
1,076,794
|
|
|
846,589
|
|
|||
Cost of revenue (exclusive of amortization) (1):
|
|
|
|
|
|
||||||
IMT
|
104,330
|
|
|
85,203
|
|
|
69,262
|
|
|||
Homes
|
49,260
|
|
|
—
|
|
|
—
|
|
|||
Total cost of revenue
|
153,590
|
|
|
85,203
|
|
|
69,262
|
|
|||
Sales and marketing
|
552,621
|
|
|
448,201
|
|
|
382,419
|
|
|||
Technology and development
|
410,818
|
|
|
319,985
|
|
|
255,583
|
|
|||
General and administrative
|
262,153
|
|
|
210,816
|
|
|
332,007
|
|
|||
Impairment costs
|
79,000
|
|
|
174,000
|
|
|
—
|
|
|||
Acquisition-related costs
|
2,332
|
|
|
463
|
|
|
1,423
|
|
|||
Integration costs
|
2,015
|
|
|
—
|
|
|
—
|
|
|||
Gain on divestiture of business
|
—
|
|
|
—
|
|
|
(1,251
|
)
|
|||
Total costs and expenses
|
1,462,529
|
|
|
1,238,668
|
|
|
1,039,443
|
|
|||
Loss from operations
|
(128,975
|
)
|
|
(161,874
|
)
|
|
(192,854
|
)
|
|||
Loss on debt extinguishment
|
—
|
|
|
—
|
|
|
(22,757
|
)
|
|||
Other income
|
19,270
|
|
|
5,385
|
|
|
2,711
|
|
|||
Interest expense
|
(41,255
|
)
|
|
(27,517
|
)
|
|
(7,408
|
)
|
|||
Loss before income taxes
|
(150,960
|
)
|
|
(184,006
|
)
|
|
(220,308
|
)
|
|||
Income tax benefit (expense)
|
31,102
|
|
|
89,586
|
|
|
(130
|
)
|
|||
Net loss
|
$
|
(119,858
|
)
|
|
$
|
(94,420
|
)
|
|
$
|
(220,438
|
)
|
Net loss per share — basic and diluted
|
$
|
(0.61
|
)
|
|
$
|
(0.51
|
)
|
|
$
|
(1.22
|
)
|
Weighted-average shares outstanding — basic and diluted
|
197,944
|
|
|
186,453
|
|
|
180,149
|
|
(1) Amortization of website development costs and intangible assets included in technology and development
|
$
|
79,309
|
|
|
$
|
94,349
|
|
|
$
|
87,060
|
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Net loss
|
$
|
(119,858
|
)
|
|
$
|
(94,420
|
)
|
|
$
|
(220,438
|
)
|
Other comprehensive income (loss):
|
|
|
|
|
|
||||||
Unrealized gains (losses) on investments
|
144
|
|
|
(858
|
)
|
|
229
|
|
|||
Currency translation adjustments
|
51
|
|
|
—
|
|
|
—
|
|
|||
Total other comprehensive income (loss)
|
195
|
|
|
(858
|
)
|
|
229
|
|
|||
Comprehensive loss
|
$
|
(119,663
|
)
|
|
$
|
(95,278
|
)
|
|
$
|
(220,209
|
)
|
|
Class A Common
Stock, Class B
Common Stock and
Class C Capital Stock
|
|
Additional
Paid-In
Capital
|
|
Accumulated
Deficit
|
|
Accumulated
Other
Comprehensive
Loss
|
|
Total
Shareholders’
Equity
|
||||||||||||||
Shares
|
|
Amount
|
|
||||||||||||||||||||
Balance at December 31, 2015
|
178,474,917
|
|
|
$
|
18
|
|
|
$
|
2,956,111
|
|
|
$
|
(276,605
|
)
|
|
$
|
(471
|
)
|
|
$
|
2,679,053
|
|
|
Issuance of common and capital stock upon exercise of stock options
|
2,518,172
|
|
|
—
|
|
|
31,211
|
|
|
—
|
|
|
—
|
|
|
31,211
|
|
||||||
Vesting of restricted stock units
|
1,487,263
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Shares and value of restricted stock units withheld for tax liability
|
(21,634
|
)
|
|
—
|
|
|
(616
|
)
|
|
—
|
|
|
—
|
|
|
(616
|
)
|
||||||
Share-based compensation expense
|
—
|
|
|
—
|
|
|
116,979
|
|
|
—
|
|
|
—
|
|
|
116,979
|
|
||||||
Portion of repurchase price recorded in additional paid-in capital in connection with partial repurchase of 2020
|
—
|
|
|
—
|
|
|
(127,615
|
)
|
|
—
|
|
|
—
|
|
|
(127,615
|
)
|
||||||
Equity component of issuance of 2021 Notes, net of issuance costs of $2,494
|
—
|
|
|
—
|
|
|
91,400
|
|
|
—
|
|
|
—
|
|
|
91,400
|
|
||||||
Premiums paid for Capped Call Confirmations
|
—
|
|
|
—
|
|
|
(36,616
|
)
|
|
—
|
|
|
—
|
|
|
(36,616
|
)
|
||||||
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
(220,438
|
)
|
|
—
|
|
|
(220,438
|
)
|
||||||
Other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
229
|
|
|
229
|
|
||||||
Balance at December 31, 2016
|
182,458,718
|
|
|
18
|
|
|
3,030,854
|
|
|
(497,043
|
)
|
|
(242
|
)
|
|
2,533,587
|
|
||||||
Cumulative-effect adjustment from adoption of guidance on accounting for share-based payment transactions
|
—
|
|
|
—
|
|
|
780
|
|
|
(780
|
)
|
|
—
|
|
|
—
|
|
||||||
Issuance of common and capital stock upon exercise of stock options
|
6,202,421
|
|
|
2
|
|
|
98,070
|
|
|
—
|
|
|
—
|
|
|
98,072
|
|
||||||
Vesting of restricted stock units
|
1,463,825
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Shares and value of restricted stock units withheld for tax liability
|
(9,816
|
)
|
|
—
|
|
|
(365
|
)
|
|
—
|
|
|
—
|
|
|
(365
|
)
|
||||||
Share-based compensation expense
|
—
|
|
|
—
|
|
|
124,807
|
|
|
—
|
|
|
—
|
|
|
124,807
|
|
||||||
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
(94,420
|
)
|
|
—
|
|
|
(94,420
|
)
|
||||||
Other comprehensive loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(858
|
)
|
|
(858
|
)
|
||||||
Balance at December 31, 2017
|
190,115,148
|
|
|
20
|
|
|
3,254,146
|
|
|
(592,243
|
)
|
|
(1,100
|
)
|
|
2,660,823
|
|
||||||
Cumulative-effect adjustment from adoption of guidance on revenue from contracts with customers
|
—
|
|
|
—
|
|
|
—
|
|
|
40,322
|
|
|
—
|
|
|
40,322
|
|
||||||
Issuance of common and capital stock upon exercise of stock options
|
5,472,728
|
|
|
—
|
|
|
120,074
|
|
|
—
|
|
|
—
|
|
|
120,074
|
|
||||||
Vesting of restricted stock units
|
1,740,134
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Shares and value of restricted stock units withheld for tax liability
|
(1,489
|
)
|
|
—
|
|
|
(70
|
)
|
|
—
|
|
|
—
|
|
|
(70
|
)
|
||||||
Share-based compensation expense
|
—
|
|
|
—
|
|
|
157,674
|
|
|
—
|
|
|
—
|
|
|
157,674
|
|
||||||
Portion of conversion recorded in additional paid-in-capital in connection with partial conversion of 2020 Notes
|
20,727
|
|
|
—
|
|
|
500
|
|
|
—
|
|
|
—
|
|
|
500
|
|
||||||
Issuance of Class C capital stock in connection with equity offering, net of issuance costs of $13,425
|
6,557,017
|
|
|
1
|
|
|
360,345
|
|
|
—
|
|
|
—
|
|
|
360,346
|
|
||||||
Premiums paid for Capped Call Confirmations
|
—
|
|
|
—
|
|
|
(29,414
|
)
|
|
—
|
|
|
—
|
|
|
(29,414
|
)
|
||||||
Equity component of issuance of 2023 Notes, net of issuance costs of $2,047
|
—
|
|
|
—
|
|
|
76,587
|
|
|
—
|
|
|
—
|
|
|
76,587
|
|
||||||
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
(119,858
|
)
|
|
—
|
|
|
(119,858
|
)
|
||||||
Other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
195
|
|
|
195
|
|
||||||
Balance at December 31, 2018
|
203,904,265
|
|
|
$
|
21
|
|
|
$
|
3,939,842
|
|
|
$
|
(671,779
|
)
|
|
$
|
(905
|
)
|
|
$
|
3,267,179
|
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Operating activities
|
|
|
|
|
|
||||||
Net loss
|
$
|
(119,858
|
)
|
|
$
|
(94,420
|
)
|
|
$
|
(220,438
|
)
|
Adjustments to reconcile net loss to net cash provided by operating activities:
|
|
|
|
|
|
||||||
Depreciation and amortization
|
99,391
|
|
|
110,155
|
|
|
100,590
|
|
|||
Share-based compensation expense
|
149,084
|
|
|
113,571
|
|
|
106,918
|
|
|||
Amortization of contract cost assets
|
36,013
|
|
|
—
|
|
|
—
|
|
|||
Loss on debt extinguishment
|
—
|
|
|
—
|
|
|
22,757
|
|
|||
Amortization of discount and issuance costs on 2023 and 2021 Notes
|
26,672
|
|
|
18,012
|
|
|
883
|
|
|||
Impairment costs
|
79,000
|
|
|
174,000
|
|
|
—
|
|
|||
Deferred income taxes
|
(31,102
|
)
|
|
(89,586
|
)
|
|
(1,370
|
)
|
|||
Loss on disposal of property and equipment
|
3,617
|
|
|
5,678
|
|
|
3,689
|
|
|||
Gain on divestiture of business, net
|
—
|
|
|
—
|
|
|
(1,360
|
)
|
|||
Bad debt expense
|
869
|
|
|
7,349
|
|
|
2,681
|
|
|||
Deferred rent
|
(2,045
|
)
|
|
7,085
|
|
|
1,730
|
|
|||
Amortization (accretion) of bond premium (discount)
|
(4,313
|
)
|
|
431
|
|
|
1,489
|
|
|||
Changes in operating assets and liabilities:
|
|
|
|
|
|
||||||
Accounts receivable
|
(12,556
|
)
|
|
(21,203
|
)
|
|
(13,324
|
)
|
|||
Inventory
|
(162,829
|
)
|
|
—
|
|
|
—
|
|
|||
Mortgage loans held for sale
|
(1,161
|
)
|
|
—
|
|
|
—
|
|
|||
Prepaid expenses and other assets
|
(34,068
|
)
|
|
10,807
|
|
|
(13,260
|
)
|
|||
Contract cost assets
|
(41,510
|
)
|
|
—
|
|
|
—
|
|
|||
Accounts payable
|
1,311
|
|
|
(373
|
)
|
|
856
|
|
|||
Accrued expenses and other current liabilities
|
1,920
|
|
|
19,000
|
|
|
(5,065
|
)
|
|||
Accrued compensation and benefits
|
11,291
|
|
|
(4,948
|
)
|
|
12,463
|
|
|||
Deferred revenue
|
2,162
|
|
|
2,633
|
|
|
7,794
|
|
|||
Other long-term liabilities
|
1,962
|
|
|
—
|
|
|
1,612
|
|
|||
Net cash provided by operating activities
|
3,850
|
|
|
258,191
|
|
|
8,645
|
|
|||
Investing activities
|
|
|
|
|
|
||||||
Proceeds from maturities of investments
|
399,228
|
|
|
259,227
|
|
|
199,369
|
|
|||
Purchases of investments
|
(901,761
|
)
|
|
(407,032
|
)
|
|
(175,210
|
)
|
|||
Proceeds from sales of investments
|
13,567
|
|
|
—
|
|
|
4,963
|
|
|||
Purchases of property and equipment
|
(66,054
|
)
|
|
(66,728
|
)
|
|
(62,060
|
)
|
|||
Purchases of intangible assets
|
(12,481
|
)
|
|
(11,907
|
)
|
|
(9,662
|
)
|
|||
Purchase of equity investment
|
—
|
|
|
(10,000
|
)
|
|
(10,000
|
)
|
|||
Proceeds from divestiture of business
|
—
|
|
|
579
|
|
|
3,200
|
|
|||
Cash paid for acquisition, net
|
(55,138
|
)
|
|
(11,533
|
)
|
|
(16,319
|
)
|
|||
Net cash used in investing activities
|
(622,639
|
)
|
|
(247,394
|
)
|
|
(65,719
|
)
|
|||
Financing activities
|
|
|
|
|
|
||||||
Proceeds from issuance of 2023 and 2021 Notes, net of issuance costs
|
364,020
|
|
|
—
|
|
|
447,784
|
|
|||
Premiums paid for Capped Call Confirmations
|
(29,414
|
)
|
|
—
|
|
|
(36,616
|
)
|
|||
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
|
|
|
—
|
|
|
—
|
|
|||
Partial repurchase of 2020 Notes
|
—
|
|
|
—
|
|
|
(370,235
|
)
|
|||
Proceeds from exercise of stock options
|
120,074
|
|
|
98,071
|
|
|
31,211
|
|
|||
Value of equity awards withheld for tax liability
|
(70
|
)
|
|
(365
|
)
|
|
(616
|
)
|
|||
Contingent merger consideration
|
(2,000
|
)
|
|
—
|
|
|
—
|
|
|||
Net cash provided by financing activities
|
930,137
|
|
|
97,706
|
|
|
71,528
|
|
Net increase in cash, cash equivalents and restricted cash during period
|
311,348
|
|
|
108,503
|
|
|
14,454
|
|
|||
Cash, cash equivalents and restricted cash at beginning of period
|
352,095
|
|
|
243,592
|
|
|
229,138
|
|
|||
Cash, cash equivalents and restricted cash at end of period
|
$
|
663,443
|
|
|
$
|
352,095
|
|
|
$
|
243,592
|
|
Supplemental disclosures of cash flow information
|
|
|
|
|
|
||||||
Cash paid for interest
|
$
|
15,473
|
|
|
$
|
9,198
|
|
|
$
|
6,325
|
|
Noncash transactions:
|
|
|
|
|
|
||||||
Capitalized share-based compensation
|
$
|
8,590
|
|
|
$
|
11,236
|
|
|
$
|
10,061
|
|
Write-off of fully depreciated property and equipment
|
$
|
22,364
|
|
|
$
|
15,004
|
|
|
$
|
14,564
|
|
Write-off of fully amortized intangible assets
|
$
|
12,999
|
|
|
$
|
5,473
|
|
|
$
|
9,293
|
|
Computer equipment
|
|
2 to 3 years
|
Office equipment, furniture and fixtures
|
|
5 to 7 years
|
Leasehold improvements
|
|
Shorter of expected useful life or lease term
|
|
|
New Guidance
|
|
Prior Guidance
|
|
Change
|
||||||
Consolidated Statement of Operations:
|
|
|
|
|
|
|
||||||
Sales and marketing
|
|
$
|
552,621
|
|
|
$
|
558,118
|
|
|
$
|
(5,497
|
)
|
Total costs and expenses
|
|
1,462,529
|
|
|
1,468,026
|
|
|
(5,497
|
)
|
|||
Loss from operations
|
|
(128,975
|
)
|
|
(134,472
|
)
|
|
5,497
|
|
|||
Loss before income taxes
|
|
(150,960
|
)
|
|
(156,457
|
)
|
|
5,497
|
|
|||
Income tax benefit
|
|
31,102
|
|
|
32,024
|
|
|
(922
|
)
|
|||
Net loss
|
|
(119,858
|
)
|
|
(124,433
|
)
|
|
4,575
|
|
|||
Net loss per share — basic and diluted
|
|
(0.61
|
)
|
|
(0.63
|
)
|
|
0.02
|
|
|||
Consolidated Balance Sheet:
|
|
|
|
|
|
|
||||||
Contract cost assets
|
|
45,819
|
|
|
—
|
|
|
45,819
|
|
|||
Total assets
|
|
4,291,116
|
|
|
4,245,297
|
|
|
45,819
|
|
|||
Deferred tax liabilities and other long-term liabilities
|
|
17,474
|
|
|
16,552
|
|
|
922
|
|
|||
Total liabilities
|
|
1,023,937
|
|
|
1,023,015
|
|
|
922
|
|
|||
Accumulated deficit
|
|
(671,779
|
)
|
|
(716,676
|
)
|
|
44,897
|
|
|||
Total shareholders’ equity
|
|
3,267,179
|
|
|
3,222,282
|
|
|
44,897
|
|
|||
Total liabilities and shareholders’ equity
|
|
$
|
4,291,116
|
|
|
$
|
4,245,297
|
|
|
$
|
45,819
|
|
•
|
Level 1—Quoted prices in active markets for identical assets or liabilities.
|
•
|
Level 2—Assets and liabilities valued based on observable market data for similar instruments, such as quoted prices for similar assets or liabilities.
|
•
|
Level 3—Unobservable inputs that are supported by little or no market activity; instruments valued based on the best available data, some of which is internally developed, and considers risk premiums that a market participant would require.
|
|
December 31, 2018
|
||||||||||
|
Total
|
|
Level 1
|
|
Level 2
|
||||||
Cash equivalents:
|
|
|
|
|
|
||||||
Money market funds
|
$
|
541,575
|
|
|
$
|
541,575
|
|
|
$
|
—
|
|
Commercial paper
|
3,999
|
|
|
—
|
|
|
3,999
|
|
|||
Short-term investments:
|
|
|
|
|
|
||||||
U.S. government agency securities
|
646,496
|
|
|
—
|
|
|
646,496
|
|
|||
Corporate notes and bonds
|
112,933
|
|
|
—
|
|
|
112,933
|
|
|||
Commercial paper
|
85,506
|
|
|
—
|
|
|
85,506
|
|
|||
Municipal securities
|
39,306
|
|
|
—
|
|
|
39,306
|
|
|||
Foreign government securities
|
14,915
|
|
|
—
|
|
|
14,915
|
|
|||
Certificates of deposit
|
4,711
|
|
|
—
|
|
|
4,711
|
|
|||
Mortgage origination-related:
|
|
|
|
|
|
||||||
Mortgage loans held for sale
|
35,409
|
|
|
—
|
|
|
35,409
|
|
|||
Interest rate lock commitments
|
847
|
|
|
—
|
|
|
847
|
|
|||
Forward contracts
|
(125
|
)
|
|
—
|
|
|
(125
|
)
|
|||
Total
|
$
|
1,485,572
|
|
|
$
|
541,575
|
|
|
$
|
943,997
|
|
|
December 31, 2017
|
||||||||||
|
Total
|
|
Level 1
|
|
Level 2
|
||||||
Cash equivalents:
|
|
|
|
|
|
||||||
Money market funds
|
$
|
233,508
|
|
|
$
|
233,508
|
|
|
$
|
—
|
|
Corporate notes and bonds
|
6,199
|
|
|
—
|
|
|
6,199
|
|
|||
Commercial paper
|
3,987
|
|
|
—
|
|
|
3,987
|
|
|||
U.S. government agency securities
|
1,748
|
|
|
—
|
|
|
1,748
|
|
|||
Certificates of deposit
|
249
|
|
|
—
|
|
|
249
|
|
|||
Short-term investments:
|
|
|
|
|
|
||||||
U.S. government agency securities
|
298,758
|
|
|
—
|
|
|
298,758
|
|
|||
Corporate notes and bonds
|
44,607
|
|
|
—
|
|
|
44,607
|
|
|||
Commercial paper
|
39,325
|
|
|
—
|
|
|
39,325
|
|
|||
Municipal securities
|
11,459
|
|
|
—
|
|
|
11,459
|
|
|||
Certificates of deposit
|
10,297
|
|
|
—
|
|
|
10,297
|
|
|||
Foreign government securities
|
5,998
|
|
|
—
|
|
|
5,998
|
|
|||
Total
|
$
|
656,135
|
|
|
$
|
233,508
|
|
|
$
|
422,627
|
|
|
December 31, 2018
|
||||||||||||||
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Estimated
Fair
Market
Value
|
||||||||
Cash
|
$
|
105,484
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
105,484
|
|
Cash equivalents:
|
|
|
|
|
|
|
|
||||||||
Money market funds
|
541,575
|
|
|
—
|
|
|
—
|
|
|
541,575
|
|
||||
Commercial paper
|
3,999
|
|
|
—
|
|
|
—
|
|
|
3,999
|
|
||||
Short-term investments:
|
|
|
|
|
|
|
|
||||||||
U.S. government agency securities
|
647,266
|
|
|
51
|
|
|
(821
|
)
|
|
646,496
|
|
||||
Corporate notes and bonds
|
113,109
|
|
|
1
|
|
|
(177
|
)
|
|
112,933
|
|
||||
Commercial paper
|
85,506
|
|
|
—
|
|
|
—
|
|
|
85,506
|
|
||||
Municipal securities
|
39,316
|
|
|
23
|
|
|
(33
|
)
|
|
39,306
|
|
||||
Foreign government securities
|
14,929
|
|
|
—
|
|
|
(14
|
)
|
|
14,915
|
|
||||
Certificates of deposit
|
4,711
|
|
|
1
|
|
|
(1
|
)
|
|
4,711
|
|
||||
Restricted cash
|
12,385
|
|
|
—
|
|
|
—
|
|
|
12,385
|
|
||||
Total
|
$
|
1,568,280
|
|
|
$
|
76
|
|
|
$
|
(1,046
|
)
|
|
$
|
1,567,310
|
|
|
December 31, 2017
|
||||||||||||||
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Estimated
Fair
Market
Value
|
||||||||
Cash
|
$
|
106,404
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
106,404
|
|
Cash equivalents:
|
|
|
|
|
|
|
|
||||||||
Money market funds
|
233,508
|
|
|
—
|
|
|
—
|
|
|
233,508
|
|
||||
Corporate notes and bonds
|
6,200
|
|
|
—
|
|
|
(1
|
)
|
|
6,199
|
|
||||
Commercial paper
|
3,987
|
|
|
—
|
|
|
—
|
|
|
3,987
|
|
||||
U.S. government agency securities
|
1,748
|
|
|
—
|
|
|
—
|
|
|
1,748
|
|
||||
Certificates of deposit
|
249
|
|
|
—
|
|
|
—
|
|
|
249
|
|
||||
Short-term investments:
|
|
|
|
|
|
|
|
||||||||
U.S. government agency securities
|
299,814
|
|
|
—
|
|
|
(1,056
|
)
|
|
298,758
|
|
||||
Corporate notes and bonds
|
44,661
|
|
|
1
|
|
|
(55
|
)
|
|
44,607
|
|
||||
Commercial paper
|
39,325
|
|
|
—
|
|
|
—
|
|
|
39,325
|
|
||||
Municipal securities
|
11,494
|
|
|
—
|
|
|
(35
|
)
|
|
11,459
|
|
||||
Certificates of deposit
|
10,296
|
|
|
2
|
|
|
(1
|
)
|
|
10,297
|
|
||||
Foreign government securities
|
6,000
|
|
|
—
|
|
|
(2
|
)
|
|
5,998
|
|
||||
Total
|
$
|
763,686
|
|
|
$
|
3
|
|
|
$
|
(1,150
|
)
|
|
$
|
762,539
|
|
|
Amortized
Cost
|
|
Estimated Fair Market Value
|
||||
Due in one year or less
|
$
|
801,828
|
|
|
$
|
800,827
|
|
Due after one year through two years
|
103,009
|
|
|
103,040
|
|
||
Total
|
$
|
904,837
|
|
|
$
|
903,867
|
|
|
December 31,
|
||||||
|
2018
|
|
2017
|
||||
Accounts receivable
|
$
|
61,134
|
|
|
$
|
51,334
|
|
Unbilled accounts receivable
|
9,787
|
|
|
8,403
|
|
||
Less: allowance for doubtful accounts
|
(4,838
|
)
|
|
(5,341
|
)
|
||
Accounts receivable, net
|
$
|
66,083
|
|
|
$
|
54,396
|
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Allowance for doubtful accounts:
|
|
|
|
|
|
||||||
Balance, beginning of period
|
$
|
5,341
|
|
|
$
|
1,337
|
|
|
$
|
3,378
|
|
Additions charged to expense
|
869
|
|
|
7,349
|
|
|
2,681
|
|
|||
Less: write-offs, net of recoveries and other adjustments
|
(1,372
|
)
|
|
(3,345
|
)
|
|
(4,722
|
)
|
|||
Balance, end of period
|
$
|
4,838
|
|
|
$
|
5,341
|
|
|
$
|
1,337
|
|
|
December 31,
|
||||||
|
2018
|
|
2017
|
||||
Work-in-progress
|
$
|
45,943
|
|
|
$
|
—
|
|
Finished goods
|
116,886
|
|
|
—
|
|
||
Inventory
|
$
|
162,829
|
|
|
$
|
—
|
|
|
December 31,
|
||||||
|
2018
|
|
2017
|
||||
Website development costs
|
$
|
149,891
|
|
|
$
|
130,072
|
|
Computer equipment
|
22,477
|
|
|
30,071
|
|
||
Leasehold improvements
|
65,012
|
|
|
47,321
|
|
||
Construction-in-progress
|
29,037
|
|
|
28,150
|
|
||
Office equipment, furniture and fixtures
|
39,510
|
|
|
22,887
|
|
||
Property and equipment
|
305,927
|
|
|
258,501
|
|
||
Less: accumulated amortization and depreciation
|
(170,755
|
)
|
|
(146,230
|
)
|
||
Property and equipment, net
|
$
|
135,172
|
|
|
$
|
112,271
|
|
Cash and cash equivalents
|
$
|
10,796
|
|
Restricted cash
|
753
|
|
|
Mortgage loans available for sale
|
34,248
|
|
|
Property, plant and equipment
|
1,315
|
|
|
Intangible assets
|
2,600
|
|
|
Goodwill
|
53,831
|
|
|
Other acquired assets
|
3,079
|
|
|
Accounts payable
|
(1,953
|
)
|
|
Accrued expenses
|
(2,591
|
)
|
|
Warehouse lines of credit
|
(32,536
|
)
|
|
Other assumed liabilities
|
(2,855
|
)
|
|
Total purchase price
|
$
|
66,687
|
|
Current assets
|
$
|
371
|
|
Identifiable intangible assets
|
3,700
|
|
|
Goodwill
|
10,610
|
|
|
Current liabilities
|
(101
|
)
|
|
Deferred tax liabilities
|
(1,416
|
)
|
|
Total purchase price
|
$
|
13,164
|
|
Balance as of December 31, 2017
|
$
|
1,931,076
|
|
Goodwill recorded in connection with acquisition of MLOA
|
53,831
|
|
|
Balance as of December 31, 2018
|
$
|
1,984,907
|
|
|
December 31, 2018
|
||||||||||
|
Cost
|
|
Accumulated
Amortization
|
|
Net
|
||||||
Purchased content
|
$
|
42,110
|
|
|
$
|
(30,477
|
)
|
|
$
|
11,633
|
|
Software
|
24,296
|
|
|
(13,925
|
)
|
|
10,371
|
|
|||
Customer relationships
|
103,900
|
|
|
(60,733
|
)
|
|
43,167
|
|
|||
Developed technology
|
111,980
|
|
|
(72,788
|
)
|
|
39,192
|
|
|||
Trade names and trademarks
|
4,900
|
|
|
(4,683
|
)
|
|
217
|
|
|||
MLOA lender licenses
|
400
|
|
|
(17
|
)
|
|
383
|
|
|||
Intangibles-in-progress
|
2,941
|
|
|
—
|
|
|
2,941
|
|
|||
Total
|
$
|
290,527
|
|
|
$
|
(182,623
|
)
|
|
$
|
107,904
|
|
|
December 31, 2017
|
||||||||||
|
Cost
|
|
Accumulated
Amortization
|
|
Net
|
||||||
Purchased content
|
$
|
35,260
|
|
|
$
|
(20,480
|
)
|
|
$
|
14,780
|
|
Software
|
18,957
|
|
|
(8,899
|
)
|
|
10,058
|
|
|||
Customer relationships
|
103,900
|
|
|
(46,365
|
)
|
|
57,535
|
|
|||
Developed technology
|
113,380
|
|
|
(56,664
|
)
|
|
56,716
|
|
|||
Trade names and trademarks
|
4,900
|
|
|
(3,943
|
)
|
|
957
|
|
|||
Advertising relationships
|
9,000
|
|
|
(8,525
|
)
|
|
475
|
|
|||
Intangibles-in-progress
|
2,190
|
|
|
—
|
|
|
2,190
|
|
|||
Total
|
$
|
287,587
|
|
|
$
|
(144,876
|
)
|
|
$
|
142,711
|
|
2019
|
$
|
42,648
|
|
2020
|
39,420
|
|
|
2021
|
33,908
|
|
|
2022
|
5,480
|
|
|
2023
|
373
|
|
|
Total future amortization expense
|
$
|
121,829
|
|
|
December 31,
|
||||||
|
2018
|
|
2017
|
||||
Accrued marketing and advertising
|
$
|
18,559
|
|
|
$
|
17,180
|
|
Accrued purchased content
|
4,256
|
|
|
5,984
|
|
||
Accrued estimated legal liabilities and legal fees
|
7,305
|
|
|
9,052
|
|
||
Merger consideration payable to former stockholders of certain acquired entities
|
5,904
|
|
|
5,904
|
|
||
Other accrued expenses and other current liabilities
|
27,077
|
|
|
23,253
|
|
||
Total accrued expenses and other current liabilities
|
$
|
63,101
|
|
|
$
|
61,373
|
|
|
Year Ended December 31, 2018
|
||
Balance as of January 1, 2018
|
$
|
31,918
|
|
Deferral of revenue
|
982,647
|
|
|
Less: Revenue recognized
|
(980,485
|
)
|
|
Balance as of December 31, 2018
|
$
|
34,080
|
|
|
Outstanding
Principal
Amount
|
|
Unamortized
Debt Discount
and Debt
Issuance Costs
|
|
Carrying
Value
|
||||||
December 31, 2018
|
$
|
373,750
|
|
|
$
|
(79,012
|
)
|
|
$
|
294,738
|
|
|
Outstanding
Principal
Amount
|
|
Unamortized
Debt Discount
and Debt
Issuance Costs
|
|
Carrying
Value
|
||||||
December 31, 2018
|
$
|
460,000
|
|
|
$
|
(65,355
|
)
|
|
$
|
394,645
|
|
December 31, 2017
|
$
|
460,000
|
|
|
$
|
(84,721
|
)
|
|
$
|
375,279
|
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Current income tax expense
|
|
|
|
|
|
||||||
Foreign
|
$
|
161
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Total current income tax expense
|
161
|
|
|
—
|
|
|
—
|
|
|||
Deferred income tax (benefit) expense
|
|
|
|
|
|
||||||
Federal
|
(28,502
|
)
|
|
(84,238
|
)
|
|
(1,248
|
)
|
|||
State
|
(2,441
|
)
|
|
(5,348
|
)
|
|
1,378
|
|
|||
Foreign
|
(320
|
)
|
|
—
|
|
|
—
|
|
|||
Total deferred income tax (benefit) expense
|
(31,263
|
)
|
|
(89,586
|
)
|
|
130
|
|
|||
Total income tax (benefit) expense
|
$
|
(31,102
|
)
|
|
$
|
(89,586
|
)
|
|
$
|
130
|
|
|
Year Ended December 31,
|
|||||||
|
2018
|
|
2017
|
|
2016
|
|||
Tax expense at federal statutory rate
|
(21.0
|
)%
|
|
(35.0
|
)%
|
|
(35.0
|
)%
|
State income taxes, net of federal tax benefit
|
(5.9
|
)
|
|
(4.4
|
)
|
|
(1.9
|
)
|
Nondeductible expenses
|
—
|
|
|
0.8
|
|
|
4.9
|
|
Share-based compensation
|
(16.5
|
)
|
|
(20.6
|
)
|
|
(0.2
|
)
|
IRC section 162(m)
|
1.0
|
|
|
—
|
|
|
—
|
|
Research and development credits
|
(8.4
|
)
|
|
(6.3
|
)
|
|
(1.5
|
)
|
Meals and entertainment
|
1.8
|
|
|
—
|
|
|
—
|
|
Return to provision adjustments
|
(4.2
|
)
|
|
—
|
|
|
—
|
|
Enactment of Tax Act
|
(1.9
|
)
|
|
(13.1
|
)
|
|
—
|
|
Other
|
0.4
|
|
|
2.2
|
|
|
(0.9
|
)
|
Valuation allowance
|
34.0
|
|
|
27.7
|
|
|
34.7
|
|
Effective tax rate
|
(20.7
|
)%
|
|
(48.7
|
)%
|
|
0.1
|
%
|
|
December 31,
|
||||||
|
2018
|
|
2017
|
||||
Deferred tax assets:
|
|
|
|
||||
Federal and state net operating loss carryforwards
|
$
|
259,629
|
|
|
$
|
234,316
|
|
Share-based compensation
|
55,280
|
|
|
47,655
|
|
||
Start-up and organizational costs
|
99
|
|
|
146
|
|
||
Research and development credits
|
48,805
|
|
|
35,793
|
|
||
Other tax credits
|
910
|
|
|
910
|
|
||
Accruals and reserves
|
3,000
|
|
|
2,729
|
|
||
Deferred rent
|
4,842
|
|
|
5,484
|
|
||
Other deferred tax assets
|
14,267
|
|
|
8,342
|
|
||
Total deferred tax assets
|
386,832
|
|
|
335,375
|
|
||
Deferred tax liabilities:
|
|
|
|
||||
Website and software development costs
|
(14,685
|
)
|
|
(13,202
|
)
|
||
Goodwill
|
(598
|
)
|
|
(688
|
)
|
||
Intangible assets
|
(45,035
|
)
|
|
(69,241
|
)
|
||
Discount on 2021 Notes and 2023 Notes not deductible for tax
|
(31,450
|
)
|
|
(19,374
|
)
|
||
Depreciation and amortization
|
(888
|
)
|
|
(2,425
|
)
|
||
Total deferred tax liabilities
|
(92,656
|
)
|
|
(104,930
|
)
|
||
Net deferred tax assets before valuation allowance
|
294,176
|
|
|
230,445
|
|
||
Less: valuation allowance
|
(307,599
|
)
|
|
(274,810
|
)
|
||
Net deferred tax liabilities
|
$
|
(13,423
|
)
|
|
$
|
(44,365
|
)
|
Balance at January 1, 2016
|
$
|
13,980
|
|
Gross increases—prior and current period tax positions
|
2,619
|
|
|
Gross decreases—prior period tax positions
|
(1,204
|
)
|
|
Balance at December 31, 2016
|
$
|
15,395
|
|
Gross increases—current period tax positions
|
5,216
|
|
|
Gross increases—prior period tax positions
|
1,002
|
|
|
Balance at December 31, 2017
|
$
|
21,613
|
|
Gross increases—current period tax positions
|
6,421
|
|
|
Gross increases—prior period tax positions
|
591
|
|
|
Balance at December 31, 2018
|
$
|
28,625
|
|
|
December 31, 2018
|
|
December 31, 2017
|
||
Option awards outstanding
|
27,310,110
|
|
|
26,645,206
|
|
Restricted stock units outstanding
|
5,266,324
|
|
|
4,016,405
|
|
Class A common stock and Class C capital stock available for grant under 2011 Plan
|
3,675,082
|
|
|
5,076,898
|
|
Shares issuable upon conversion of outstanding Class B common stock
|
6,217,447
|
|
|
6,217,447
|
|
Total
|
42,468,963
|
|
|
41,955,956
|
|
|
Number
of Shares
Subject to
Existing
Options
|
|
Weighted-
Average
Exercise
Price Per
Share
|
|
Weighted-
Average
Remaining
Contractual
Life (Years)
|
|
Aggregate
Intrinsic
Value
(in
thousands)
|
|||||
Outstanding at January 1, 2018
|
26,645,206
|
|
|
$
|
27.70
|
|
|
5.72
|
|
$
|
355,739
|
|
Granted
|
6,963,320
|
|
|
48.95
|
|
|
|
|
|
|||
Exercised
|
(5,472,728
|
)
|
|
21.94
|
|
|
|
|
|
|||
Forfeited or cancelled
|
(825,688
|
)
|
|
35.32
|
|
|
|
|
|
|||
Outstanding at December 31, 2018
|
27,310,110
|
|
|
34.04
|
|
|
6.23
|
|
97,941
|
|
||
Vested and exercisable at December 31, 2018
|
15,287,932
|
|
|
29.73
|
|
|
4.72
|
|
75,867
|
|
|
Year Ended December 31,
|
||||
|
2018
|
|
2017
|
|
2016
|
Expected volatility
|
42% – 45%
|
|
45% – 49%
|
|
49% – 51%
|
Expected dividend yield
|
—
|
|
—
|
|
—
|
Risk-free interest rate
|
2.52% – 2.84%
|
|
1.67% – 2.06%
|
|
0.89% – 1.89%
|
Weighted-average expected life
|
4.50 – 5.00 years
|
|
4.25 – 4.75 years
|
|
3.75 – 4.25 years
|
Weighted-average fair value of options granted
|
$19.11
|
|
$14.51
|
|
$9.42
|
|
Restricted
Stock Units
|
|
Weighted-
Average Grant-
Date Fair
Value
|
|||
Unvested outstanding at January 1, 2018
|
4,016,405
|
|
|
$
|
33.22
|
|
Granted
|
3,725,726
|
|
|
48.26
|
|
|
Vested
|
(1,740,134
|
)
|
|
35.63
|
|
|
Forfeited or cancelled
|
(735,673
|
)
|
|
39.59
|
|
|
Unvested outstanding at December 31, 2018
|
5,266,324
|
|
|
42.19
|
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Cost of revenue
|
$
|
4,127
|
|
|
$
|
3,884
|
|
|
$
|
3,550
|
|
Sales and marketing
|
22,942
|
|
|
22,735
|
|
|
23,320
|
|
|||
Technology and development
|
56,673
|
|
|
39,938
|
|
|
31,466
|
|
|||
General and administrative
|
65,342
|
|
|
47,014
|
|
|
48,582
|
|
|||
|
$
|
149,084
|
|
|
$
|
113,571
|
|
|
$
|
106,918
|
|
|
Year Ended December 31,
|
|||||||
|
2018
|
|
2017
|
|
2016
|
|||
Weighted-average Class A common stock and Class C capital stock option awards outstanding
|
22,736
|
|
|
27,998
|
|
|
19,993
|
|
Weighted-average Class A common stock and Class C capital stock restricted stock units outstanding
|
4,949
|
|
|
4,262
|
|
|
3,607
|
|
Class A common stock issuable upon conversion of the 2020 Notes
|
400
|
|
|
435
|
|
|
440
|
|
Total Class A common stock and Class C capital stock equivalents
|
28,085
|
|
|
32,695
|
|
|
24,040
|
|
2019
|
$
|
29,085
|
|
2020
|
38,060
|
|
|
2021
|
40,099
|
|
|
2022
|
37,721
|
|
|
2023
|
36,458
|
|
|
All future years
|
85,462
|
|
|
Total future minimum lease payments
|
$
|
266,885
|
|
|
Purchase Obligations
|
|
Homes Under Contract
|
||||
2019
|
$
|
64,124
|
|
|
$
|
88,943
|
|
2020
|
64,007
|
|
|
—
|
|
||
2021
|
32,735
|
|
|
—
|
|
||
Total future purchase commitments
|
$
|
160,866
|
|
|
$
|
88,943
|
|
|
Year Ended December 31, 2018
|
||||||||||
|
IMT
|
|
Homes
|
|
Consolidated
|
||||||
Revenue:
|
|
|
|
|
|
||||||
Premier Agent
|
$
|
898,332
|
|
|
$
|
—
|
|
|
$
|
898,332
|
|
Rentals
|
134,587
|
|
|
—
|
|
|
134,587
|
|
|||
Mortgages
|
80,046
|
|
|
—
|
|
|
80,046
|
|
|||
Other
|
168,224
|
|
|
—
|
|
|
168,224
|
|
|||
Homes
|
—
|
|
|
52,365
|
|
|
52,365
|
|
|||
Total revenue
|
1,281,189
|
|
|
52,365
|
|
|
1,333,554
|
|
|||
Costs and expenses:
|
|
|
|
|
|
||||||
Cost of revenue
|
104,330
|
|
|
49,260
|
|
|
153,590
|
|
|||
Sales and marketing
|
534,038
|
|
|
18,583
|
|
|
552,621
|
|
|||
Technology and development
|
389,539
|
|
|
21,279
|
|
|
410,818
|
|
|||
General and administrative
|
238,727
|
|
|
23,426
|
|
|
262,153
|
|
|||
Impairment costs
|
79,000
|
|
|
—
|
|
|
79,000
|
|
|||
Acquisition-related costs
|
2,332
|
|
|
—
|
|
|
2,332
|
|
|||
Integration costs
|
2,015
|
|
|
—
|
|
|
2,015
|
|
|||
Total costs and expenses
|
1,349,981
|
|
|
112,548
|
|
|
1,462,529
|
|
|||
Income (loss) from operations
|
(68,792
|
)
|
|
(60,183
|
)
|
|
(128,975
|
)
|
|||
Other income
|
19,270
|
|
|
—
|
|
|
19,270
|
|
|||
Interest expense
|
(39,078
|
)
|
|
(2,177
|
)
|
|
(41,255
|
)
|
|||
Loss before income taxes
|
$
|
(88,600
|
)
|
|
$
|
(62,360
|
)
|
|
$
|
(150,960
|
)
|
(i)
|
The application of accounting principles to a specified transaction, either completed or proposed, or
|
(ii)
|
The type of audit opinion that might be rendered on the Company’s financial statements, and either a written report was provided to the Company or oral advice was provided that Deloitte concluded was an important factor considered by the Company in reaching a decision as to an accounting, auditing or financial reporting issue; or
|
(iii)
|
Any matter that was either the subject of a disagreement or a reportable event, as each term is defined in Items 304(a)(1)(iv) or (v) of Regulation S-K, respectively.
|
Exhibit
Number
|
|
Description
|
|
|
|
2.1+
|
|
|
|
|
|
3.1
|
|
|
|
|
|
3.2
|
|
|
|
|
|
4.1
|
|
|
|
|
|
4.2
|
|
|
|
|
|
4.3
|
|
|
|
|
|
4.4
|
|
|
|
|
|
Exhibit
Number
|
|
Description
|
4.5
|
|
|
|
|
|
4.6
|
|
|
|
|
|
4.7
|
|
|
|
|
|
4.8
|
|
|
|
|
|
4.9
|
|
|
|
|
|
4.10
|
|
|
|
|
|
4.11
|
|
|
|
|
|
4.12
|
|
|
|
|
|
10.1*
|
|
|
|
|
|
10.2*
|
|
|
|
|
|
10.3*
|
|
|
|
|
|
10.4*
|
|
|
|
|
|
10.5*
|
|
|
|
|
|
10.6*
|
|
|
|
|
|
10.7*
|
|
|
|
|
|
Exhibit
Number
|
|
Description
|
10.8*
|
|
|
|
|
|
10.9*
|
|
|
|
|
|
10.10*
|
|
|
|
|
|
10.11*
|
|
|
|
|
|
10.12*
|
|
|
|
|
|
10.13*
|
|
|
|
|
|
10.14*
|
|
|
|
|
|
10.15*
|
|
|
|
|
|
10.16*
|
|
|
|
|
|
10.17*
|
|
|
|
|
|
10.18*
|
|
|
|
|
|
10.19*
|
|
|
|
|
|
10.20*
|
|
|
|
|
|
10.21*
|
|
|
|
|
|
10.22*
|
|
|
|
|
|
10.23*
|
|
|
|
|
|
10.24*
|
|
|
|
|
|
Exhibit
Number
|
|
Description
|
10.25*
|
|
|
|
|
|
10.26*
|
|
|
|
|
|
10.27*
|
|
|
|
|
|
10.28*
|
|
|
|
|
|
10.29*
|
|
|
|
|
|
10.30*
|
|
|
|
|
|
10.31*
|
|
|
|
|
|
10.32
|
|
|
|
|
|
10.33
|
|
|
|
|
|
10.34
|
|
|
|
|
|
10.35
|
|
|
|
|
|
10.36
|
|
|
|
|
|
10.37
|
|
|
|
|
|
10.38
|
|
|
|
|
|
10.39
|
|
|
|
|
|
10.40
|
|
|
|
|
|
10.41
|
|
|
|
|
|
Exhibit
Number
|
|
Description
|
10.42
|
|
|
|
|
|
10.43
|
|
|
|
|
|
10.44
|
|
|
|
|
|
10.45
|
|
|
|
|
|
10.46
|
|
|
|
|
|
10.47
|
|
|
|
|
|
10.48
|
|
|
|
|
|
10.49
|
|
|
|
|
|
10.50
|
|
|
|
|
|
10.51
|
|
|
|
|
|
10.52
|
|
|
|
|
|
10.53
|
|
|
|
|
|
10.54
|
|
|
|
|
|
10.55
|
|
|
|
|
|
10.56
|
|
|
|
|
|
10.57*
|
|
|
|
|
|
10.58*
|
|
|
|
|
|
|
|
|
|
|
|
ZILLOW GROUP, INC.
|
|
|
|
|
|
Date:
|
February 21, 2019
|
By:
|
/s/ JENNIFER ROCK
|
|
|
Name:
|
Jennifer Rock
|
|
|
Title:
|
Chief Accounting Officer
|
|
|
|
Signature
|
|
Title
|
|
|
|
/s/ SPENCER M. RASCOFF
|
|
Chief Executive Officer (Principal Executive Officer) and Director
|
Spencer M. Rascoff
|
|
|
|
|
|
/s/ ALLEN PARKER
|
|
Chief Financial Officer (Principal Financial Officer)
|
Allen Parker
|
|
|
|
|
|
/s/ JENNIFER ROCK
|
|
Chief Accounting Officer (Principal Accounting Officer)
|
Jennifer Rock
|
|
|
|
|
|
/s/ RICHARD BARTON
|
|
Executive Chairman and Director
|
Richard Barton
|
|
|
|
|
|
/s/ LLOYD D. FRINK
|
|
Vice Chairman, President and Director
|
Lloyd D. Frink
|
|
|
|
|
|
/s/ ERIK BLACHFORD
|
|
Director
|
Erik Blachford
|
|
|
|
|
|
/s/ APRIL UNDERWOOD
|
|
Director
|
April Underwood
|
|
|
|
|
|
/s/ JAY C. HOAG
|
|
Director
|
Jay C. Hoag
|
|
|
|
|
|
/s/ GREGORY B. MAFFEI
|
|
Director
|
Gregory B. Maffei
|
|
|
|
|
|
/s/ GORDON STEPHENSON
|
|
Director
|
Gordon Stephenson
|
|
|
|
|
|
/s/ AMY BOHUTINSKY
|
|
Director
|
Amy Bohutinsky
|
|
Name
|
|
Place of Organization
|
|
|
|
MFTB Holdco, Inc.
|
|
Washington Corporation
|
|
|
|
Zillow, Inc.
|
|
Washington Corporation
|
|
|
|
Zillow Group Marketplace, Inc.
|
|
Washington Corporation
|
|
|
|
Zillow (Canada), Inc.
|
|
British Columbia Corporation
|
|
|
|
Trulia, LLC
|
|
Delaware Limited Liability Company
|
|
|
|
Naked Apartments, LLC
|
|
Delaware Limited Liability Company
|
|
|
|
Bridge Interactive Group, LLC
|
|
Georgia Limited Liability Company
|
|
|
|
DotLoop, LLC
|
|
Delaware Limited Liability Company
|
|
|
|
FastStart Real Estate Services Holdco, Inc.
|
|
Washington Corporation
|
|
|
|
FastStart Real Estate Services, LLC
|
|
Nevada Limited Liability Company
|
|
|
|
RealEstate.com Inc.
|
|
Nevada Corporation
|
|
|
|
FastStart Real Estate Services (Canada) Corporation
|
|
Nova Scotia Corporation
|
|
|
|
FastStart Real Estate Services (California), Inc.
|
|
Nevada Corporation
|
|
|
|
New Home Feed, Inc.
|
|
California Corporation
|
|
|
|
Signpost Homes, Inc.
|
|
Washington Corporation
|
|
|
|
Mortgage Lenders of America, L.L.C.
|
|
Kansas Limited Liability Company
|
|
|
|
SPH Property One, LLC
|
|
Delaware Limited Liability Company
|
|
|
|
ZGM Holdco, Inc.
|
|
Washington Corporation
|
|
s/ DELOITTE & TOUCHE LLP
|
Seattle, Washington
|
|
February 21, 2019
|
|
(1)
|
Registration Statement (Form S-3 (Post-Effective Amendment No. 1 to Form S-4) No. 333-198695) of Zillow Group, Inc. and in the related Prospectus,
|
(2)
|
Registration Statement (Form S-8 No. 333-202132) of Zillow Group, Inc. pertaining to the Zillow, Inc. Amended and Restated 2011 Incentive Plan, as amended, the Zillow, Inc. Amended and Restated 2005 Equity Incentive Plan, the Trulia, Inc. 2012 Equity Incentive Plan, as amended and restated, the Trulia, Inc. 2005 Stock Incentive Plan, as amended, and the Market Leader, Inc. Amended and Restated 2004 Equity Incentive Plan,
|
(3)
|
Registration Statement (Form S-8 No. 333-206434) of Zillow Group, Inc. pertaining to the Zillow Group, Inc. Amended and Restated 2011 Incentive Plan, the Zillow, Inc. Amended and Restated 2005 Equity Incentive Plan, the Trulia, Inc. 2012 Equity Incentive Plan, as amended and restated, the Trulia, Inc. 2005 Stock Incentive Plan, as amended, and the Market Leader, Inc. Amended and Restated 2004 Equity Incentive Plan, and
|
(4)
|
Registration Statements (Form S-8 Nos. 333-216002, 333-206512, 333-209951, 333-212933 and 333-223045) of Zillow Group, Inc. pertaining to the Zillow Group, Inc. Amended and Restated 2011 Incentive Plan,
|
(5)
|
Registration Statement (Form S-3 No. 333-225918) of Zillow Group, Inc. and in the related Prospectus,
|
|
/s/ ERNST & YOUNG LLP
|
Seattle, Washington
|
|
February 21, 2019
|
|
1.
|
I have reviewed this Annual Report on Form 10-K of Zillow Group, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
|
|
ZILLOW GROUP, INC.
|
||
|
|
|
|
|
Date: February 21, 2019
|
|
By:
|
|
/s/ SPENCER M. RASCOFF
|
|
|
Name:
|
|
Spencer M. Rascoff
|
|
|
Title:
|
|
Chief Executive Officer
|
1.
|
I have reviewed this Annual Report on Form 10-K of Zillow Group, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
|
|
ZILLOW GROUP, INC.
|
||
|
|
|
|
|
Date: February 21, 2019
|
|
By:
|
|
/s/ ALLEN PARKER
|
|
|
Name:
|
|
Allen Parker
|
|
|
Title:
|
|
Chief Financial Officer
|
(1)
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
|
|
ZILLOW GROUP, INC.
|
||
|
|
|
|
|
Date: February 21, 2019
|
|
By:
|
|
/s/ SPENCER M. RASCOFF
|
|
|
Name:
|
|
Spencer M. Rascoff
|
|
|
Title:
|
|
Chief Executive Officer
|
(1)
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
|
|
ZILLOW GROUP, INC.
|
||
|
|
|
|
|
Date: February 21, 2019
|
|
By:
|
|
/s/ ALLEN PARKER
|
|
|
Name:
|
|
Allen Parker
|
|
|
Title:
|
|
Chief Financial Officer
|