UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~March 31,~~September 30, 2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 001-36853

ZILLOW GROUP, INC.

(Exact name of registrant as specified in its charter)

_____________________________________________________


Washington						47-1645716
(State or other jurisdiction of						(I.R.S. Employer
incorporation or organization)						Identification No.)

1301 Second Avenue, Floor 31,

Seattle, Washington 98101

(Address of principal executive offices) (Zip Code)

(206) 470-7000

(Registrant’s telephone number, including area code)

_____________________________________________________

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A Common Stock, par value $0.0001 per share	ZG	The Nasdaq Global Select Market
Class C Capital Stock, par value $0.0001 per share	Z	The Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~April 28,~~October 26, 2022, ~~60,119,308~~58,197,059 shares of Class A common stock, 6,217,447 shares of Class B common stock and ~~179,972,714~~173,312,042 shares of Class C capital stock were outstanding.

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ZILLOW GROUP, INC.

Quarterly Report on Form 10-Q

For the Three Months Ended ~~March 31,~~September 30, 2022

TABLE OF CONTENTS

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As used in this Quarterly Report on Form 10-Q, the terms “Zillow Group,” “the Company,” “we,” “us” and “our” refer to Zillow Group, Inc., unless the context indicates otherwise.

NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, including Part I, Item 2 (Management’s Discussion and Analysis of Financial Condition and Results of Operations), contains forward-looking statements based on our management’s beliefs and assumptions and on information currently available to our management. Forward-looking statements include all statements that are not historical facts and generally may be identified by terms such as “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “could,” “would,” “project,” “plan,” “expect” or the negative or plural of these words or similar expressions.

These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those risks, uncertainties and assumptions described in Part I, Item 1A (Risk Factors) in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, including, but not limited to risks related to:

•the current and future health and stability of the economy, financial conditions and residential housing market, including any extended downturn or slowdown;

•changes in general economic and financial conditions (including federal monetary policy, interest ~~rate changes,~~rates, inflation, home price ~~appreciation,~~fluctuations, and housing inventory) that may reduce demand for our products and services, lower our profitability or reduce our access to financing;

•actual or anticipated changes in our rates of growth and innovation relative to ~~that~~those of our competitors;

•actual or anticipated fluctuations in our financial condition and results of operations;

•changes in projected operational and financial results;

•investment of resources to pursue strategies and develop new products and services that may not prove effective or that are not attractive to customers and real estate partners;

•the duration and impact of the COVID-19 pandemic (including variants) or other public health crises on our ability to operate, demand for our products or services, or general economic conditions;

•disruptions in operations and relationships with customers, suppliers, vendors, broker partners, contractors, employees and lenders given our decision to wind down Zillow Offers, our iBuying operations;

•~~unanticipated developments that may prevent, delay or increase the costs associated with our wind down activities;~~

•~~actual or anticipated fluctuations in our financial condition and results of operations;~~

•~~changes in projected operational and financial results;~~

•addition or loss of a significant number of customers;

•acquisitions, strategic partnerships, joint ventures, capital-raising activities or other corporate transactions or commitments by us or our competitors;

•actual or anticipated changes in technology, products, markets or services by us or our competitors;

•ability to protect the information and privacy of our customers and other third parties;

•ability to protect our brand and intellectual property;

•ability to obtain or maintain licenses and permits to support our current and future businesses;

•ability to comply with ~~MLS~~multiple listing service rules and requirements to access and use listing data, and to maintain or establish relationships with listings and data providers;

•ability to operate and grow our mortgage origination business, including the ability to obtain sufficient ~~financing;~~financing and resell originated mortgages on the secondary market;

•the impact of natural disasters and other catastrophic events;

•changes in laws or government regulation affecting our ~~business~~business; and

•the impact of pending or future litigation or regulatory actions.

Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the effect of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this report may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

You should not rely on forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. Moreover, except as required by law, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements, and we undertake no obligation to update publicly any forward-looking statements for any reason after the date of this report to conform these statements to actual results or to changes in our expectations.

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In addition, statements such as “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based on information available to us as of the date of this Quarterly Report on Form 10-Q. While we believe that such information provides a reasonable basis for these statements, that information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely on these statements.

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WHERE YOU CAN FIND MORE INFORMATION

Our filings with the Securities and Exchange Commission ~~or SEC,~~(“SEC”), including our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports, are available on the “Investors” section of our website at www.zillowgroup.com, free of charge, as soon as reasonably practicable after the electronic filing of these reports with the SEC. The information contained on our website is not a part of this Quarterly Report on Form 10-Q or any other document we file with the SEC.

Investors and others should note that Zillow Group announces material financial information to its investors using its press releases, SEC filings and public conference calls and webcasts. Zillow Group intends to also use the following channels as a means of disclosing information about Zillow Group, its services and other matters, and for complying with its disclosure obligations under Regulation FD:

•Zillow Group Investor Relations Webpage ~~(http:~~(https://investors.zillowgroup.com)

•Zillow Group Blog (https://www.zillowgroup.com/news/)

•Zillow Group Twitter Account (https://twitter.com/zillowgroup)

The information Zillow Group posts through these channels may be deemed material. Accordingly, investors should monitor these channels, in addition to following Zillow Group’s press releases, SEC filings and public conference calls and webcasts. This list may be updated from time to time and reflects current updated channels as of the date of this Quarterly Report on Form 10-Q. The information we post through these channels is not a part of this Quarterly Report on Form 10-Q or any other document we file with the SEC, and the inclusion of our website addresses and Twitter account are as inactive textual references only.

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PART I – FINANCIAL INFORMATION

Item 1. Financial Statements (unaudited)

ZILLOW GROUP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions, except share data, unaudited)


		March 31, 2022		December 31, 2021			September 30, 2022		December 31, 2021
Assets	Assets					Assets
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	2,594	$	2,611	Cash and cash equivalents	$	1,973	$	2,315
Short-term investments	Short-term investments	1,032		514		Short-term investments	1,516		514
Accounts receivable, net of allowance for doubtful accounts of $4 at March 31, 2022 and December 31, 2021		99		155
Accounts receivable, net of allowance for doubtful accounts of $4 and $4, respectively						Accounts receivable, net of allowance for doubtful accounts of $4 and $4, respectively	78		77
Mortgage loans held for sale	Mortgage loans held for sale	93		107		Mortgage loans held for sale	49		107
Inventory		494		3,913
Prepaid expenses and other current assets	Prepaid expenses and other current assets	386		153		Prepaid expenses and other current assets	153		140
Restricted cash	Restricted cash	92		227		Restricted cash	2		1
Current assets of discontinued operations						Current assets of discontinued operations	—		4,526
Total current assets	Total current assets	4,790		7,680		Total current assets	3,771		7,680
Contract cost assets	Contract cost assets	31		35		Contract cost assets	25		35
Property and equipment, net	Property and equipment, net	234		215		Property and equipment, net	261		215
Right of use assets	Right of use assets	140		130		Right of use assets	127		130
Goodwill	Goodwill	2,374		2,374		Goodwill	2,374		2,374
Intangible assets, net	Intangible assets, net	165		180		Intangible assets, net	149		176
Other assets	Other assets	86		81		Other assets	11		3
Noncurrent assets of discontinued operations						Noncurrent assets of discontinued operations	—		82
Total assets	Total assets	$	7,820	$	10,695	Total assets	$	6,718	$	10,695
Liabilities and shareholders’ equity	Liabilities and shareholders’ equity					Liabilities and shareholders’ equity
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	24	$	17	Accounts payable	$	19	$	11
Accrued expenses and other current liabilities	Accrued expenses and other current liabilities	119		161		Accrued expenses and other current liabilities	112		89
Accrued compensation and benefits	Accrued compensation and benefits	102		108		Accrued compensation and benefits	56		61
Borrowings under credit facilities	Borrowings under credit facilities	88		2,312		Borrowings under credit facilities	45		113
Deferred revenue	Deferred revenue	56		51		Deferred revenue	50		51
Lease liabilities, current portion	Lease liabilities, current portion	23		24		Lease liabilities, current portion	30		24
Securitization term loans		790		1,209
Current liabilities of discontinued operations						Current liabilities of discontinued operations	—		3,533
Total current liabilities	Total current liabilities	1,202		3,882		Total current liabilities	312		3,882
Lease liabilities, net of current portion	Lease liabilities, net of current portion	156		148		Lease liabilities, net of current portion	141		148
Convertible senior notes	Convertible senior notes	1,656		1,319		Convertible senior notes	1,659		1,319
Other long-term liabilities	Other long-term liabilities	4		5		Other long-term liabilities	11		5
Total liabilities	Total liabilities	3,018		5,354		Total liabilities	2,123		5,354
Commitments and contingencies (Note 16)	Commitments and contingencies (Note 16)	0		0		Commitments and contingencies (Note 16)
Shareholders’ equity:	Shareholders’ equity:					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; 60,119,308 and 61,513,634 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively		—		—
Class B common stock, $0.0001 par value; 15,000,000 shares authorized; 6,217,447 shares issued and outstanding		—		—
Class C capital stock, $0.0001 par value; 600,000,000 shares authorized; 179,931,577 and 182,898,987 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively		—		—
Preferred stock, $0.0001 par value; authorized — 30,000,000 shares; no shares issued and outstanding						Preferred stock, $0.0001 par value; authorized — 30,000,000 shares; no shares issued and outstanding	—		—
Class A common stock, $0.0001 par value; authorized — 1,245,000,000 shares; issued and outstanding — 58,197,059 and 61,513,634 shares, respectively						Class A common stock, $0.0001 par value; authorized — 1,245,000,000 shares; issued and outstanding — 58,197,059 and 61,513,634 shares, respectively	—		—
Class B common stock, $0.0001 par value; authorized — 15,000,000 shares; issued and outstanding — 6,217,447						Class B common stock, $0.0001 par value; authorized — 15,000,000 shares; issued and outstanding — 6,217,447	—		—
Class C capital stock, $0.0001 par value; authorized — 600,000,000 shares; issued and outstanding — 173,279,780 and 182,898,987 shares, respectively						Class C capital stock, $0.0001 par value; authorized — 600,000,000 shares; issued and outstanding — 173,279,780 and 182,898,987 shares, respectively	—		—
Additional paid-in capital	Additional paid-in capital	6,298		7,001		Additional paid-in capital	6,154		7,001
Accumulated other comprehensive income (loss)	Accumulated other comprehensive income (loss)	(1)		7		Accumulated other comprehensive income (loss)	(19)		7
Accumulated deficit	Accumulated deficit	(1,495)		(1,667)		Accumulated deficit	(1,540)		(1,667)
Total shareholders’ equity	Total shareholders’ equity	4,802		5,341		Total shareholders’ equity	4,595		5,341
Total liabilities and shareholders’ equity	Total liabilities and shareholders’ equity	$	7,820	$	10,695	Total liabilities and shareholders’ equity	$	6,718	$	10,695

See accompanying notes to the condensed consolidated financial statements.

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ZILLOW GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions, except share data, which are presented in thousands, and per share data, unaudited)

Three Months Ended
March 31,
2022 2021
Revenue:
Homes $ 3,721 $ 704
IMT 490 446
Mortgages 46 68
Total revenue 4,257 1,218
Cost of revenue:
Homes 3,537 645
IMT 65 47
Mortgages 20 19
Total cost of revenue 3,622 711
Gross profit 635 507
Operating expenses:
Sales and marketing 307 197
Technology and development 114 120
General and administrative 119 101
Restructuring costs 38 —
Acquisition-related costs — 1
Total operating expenses 578 419
Income from operations 57 88
Loss on extinguishment of debt (14) (1)
Other income 8 2
Interest expense (44) (40)
Income before income taxes 7 49
Income tax benefit 9 3
Net income $ 16 $ 52
Net income per share:
Basic $ 0.06 $ 0.21
Diluted $ 0.06 $ 0.20
Weighted-average shares outstanding:
Basic 248,542 243,234
Diluted 251,963 259,346


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Revenue	$	483	$	550	$	1,523	$	1,597
Cost of revenue	89		82		278		228
Gross profit	394		468		1,245		1,369
Operating expenses:
Sales and marketing	165		205		502		532
Technology and development	142		101		369		319
General and administrative	138		104		370		303
Restructuring costs	—		—		14		—
Acquisition-related costs	—		3		—		8
Total operating expenses	445		413		1,255		1,162
Income (loss) from continuing operations	(51)		55		(10)		207
Loss on extinguishment of debt	—		(15)		—		(17)
Other income, net	12		2		19		5
Interest expense	(9)		(29)		(26)		(99)
Income (loss) from continuing operations before income taxes	(48)		13		(17)		96
Income tax benefit (expense)	(3)		5		1		—
Net income (loss) from continuing operations	(51)		18		(16)		96
Net loss from discontinued operations, net of income taxes	(2)		(347)		(13)		(363)
Net loss	$	(53)	$	(329)	$	(29)	$	(267)
Net income (loss) from continuing operations per share:
Basic	$	(0.21)	$	0.07	$	(0.07)	$	0.39
Diluted	$	(0.21)	$	0.07	$	(0.07)	$	0.37
Net loss per share:
Basic	$	(0.22)	$	(1.29)	$	(0.12)	$	(1.07)
Diluted	$	(0.22)	$	(1.24)	$	(0.12)	$	(1.02)
Weighted-average shares outstanding:
Basic	240,080		254,074		244,157		248,564
Diluted	240,080		265,112		244,157		262,043

See accompanying notes to the condensed consolidated financial statements.

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ZILLOW GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE ~~INCOME~~LOSS

(in millions, unaudited)


		Three Months Ended March 31,					Three Months Ended September 30,				Nine Months Ended September 30,
		2022		2021			2022		2021		2022		2021
Net income		$	16	$	52
Net loss						Net loss	$	(53)	$	(329)	$	(29)	$	(267)
Other comprehensive loss:	Other comprehensive loss:					Other comprehensive loss:
Unrealized losses on investments	Unrealized losses on investments	(8)		—		Unrealized losses on investments	(6)		—		(26)		—
Total other comprehensive loss	Total other comprehensive loss	(8)		—		Total other comprehensive loss	(6)		—		(26)		—
Comprehensive income		$	8	$	52
Comprehensive loss						Comprehensive loss	$	(59)	$	(329)	$	(55)	$	(267)

See accompanying notes to the condensed consolidated financial statements.

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ZILLOW GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(in millions, except share data, which are presented in thousands, unaudited)


		Class A Common Stock, Class B Common Stock and Class C Capital Stock			Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Total Shareholders’ Equity			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
																									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											Shares	Amount
Balance at January 1, 2022		250,630	$	—	$	7,001	$	(1,667)	$	7	$	5,341
Cumulative-effect adjustment from adoption of guidance on accounting for convertible instruments and contracts in an entity’s own equity		—	—		(492)		156		—		(336)
Balance at July 1, 2022													Balance at July 1, 2022	241,141	$	—	$	6,167	$	(1,487)	$	(13)	$	4,667
Issuance of common and capital stock upon exercise of stock options	Issuance of common and capital stock upon exercise of stock options	807	—		36		—		—		36		Issuance of common and capital stock upon exercise of stock options	83	—		2		—		—		2
Vesting of restricted stock units	Vesting of restricted stock units	689	—		—		—		—		—		Vesting of restricted stock units	1,467	—		—		—		—		—
Share-based compensation expense	Share-based compensation expense	—	—		101		—		—		101		Share-based compensation expense	—	—		161		—		—		161
Repurchases of Class A common stock and Class C capital stock	Repurchases of Class A common stock and Class C capital stock	(5,858)	—		(348)		—		—		(348)		Repurchases of Class A common stock and Class C capital stock	(4,997)	—		(176)		—		—		(176)
Net income		—	—		—		16		—		16
Net loss													Net loss	—	—		—		(53)		—		(53)
Other comprehensive loss	Other comprehensive loss	—	—		—		—		(8)		(8)		Other comprehensive loss	—	—		—		—		(6)		(6)
Balance at March 31, 2022		246,268	$	—	$	6,298	$	(1,495)	$	(1)	$	4,802
Balance at September 30, 2022													Balance at September 30, 2022	237,694	$	—	$	6,154	$	(1,540)	$	(19)	$	4,595

Class A Common
Stock, Class B
Common Stock and
Class C Capital Stock Additional
Paid-In
Capital Accumulated
Deficit Accumulated
Other
Comprehensive
Income Total
Shareholders’
Equity
Shares Amount
Balance at January 1, 2021 240,526 $ — $ 5,881 $ (1,139) $ — $ 4,742
Issuance of common and capital stock upon exercise of stock options 1,603 — 61 — — 61
Vesting of restricted stock units 813 — — — — —
Restricted stock units withheld for tax liability (1) — — — — —
Share-based compensation expense — — 67 — — 67
Issuance of Class C capital stock in connection with equity offering, net of issuance costs 3,164 — 545 — — 545
Settlement of convertible senior notes 1,203 — 43 — — 43
Net income — — — 52 — 52
Other comprehensive income — — — — — —
Balance at March 31, 2021 247,308 $ — $ 6,597 $ (1,087) $ — $ 5,510

~~See accompanying notes to the condensed consolidated financial statements.~~


	Class A Common Stock, Class B Common Stock and Class C Capital Stock			Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Income		Total Shareholders’ Equity

	Shares	Amount
Balance at July 1, 2021	248,863	$	—	$	6,721	$	(1,077)	$	—	$	5,644
Issuance of common and capital stock upon exercise of stock options	533	—		22		—		—		22
Vesting of restricted stock units	712	—		—		—		—		—
Share-based compensation expense	—	—		90		—		—		90
Settlement of convertible senior notes	4,675	—		344		—		—		344
Net loss	—	—		—		(329)		—		(329)
Other comprehensive loss	—	—		—		—		—		—
Balance at September 30, 2021	254,782	$	—	$	7,177	$	(1,406)	$	—	$	5,771

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~~ZILLOW GROUP, INC.~~

~~CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS~~


	Class A Common Stock, Class B Common Stock and Class C Capital Stock			Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Total Shareholders’ Equity

	Shares	Amount
Balance at January 1, 2022	250,630	$	—	$	7,001	$	(1,667)	$	7	$	5,341
Cumulative-effect adjustment from adoption of guidance on accounting for convertible instruments and contracts in an entity’s own equity	—	—		(492)		156		—		(336)
Issuance of common and capital stock upon exercise of stock options	1,078	—		44		—		—		44
Vesting of restricted stock units	3,278	—		—		—		—		—
Share-based compensation expense	—	—		374		—		—		374
Repurchases of Class A common stock and Class C capital stock	(17,292)	—		(773)		—		—		(773)
Net loss	—	—		—		(29)		—		(29)
Other comprehensive loss	—	—		—		—		(26)		(26)
Balance at September 30, 2022	237,694	$	—	$	6,154	$	(1,540)	$	(19)	$	4,595

~~(in millions, unaudited)~~

Three Months Ended
March 31,
2022 2021
Operating activities
Net income $ 16 $ 52
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 43 29
Share-based compensation 91 64
Amortization of right of use assets 6 7
Amortization of contract cost assets 8 10
Amortization of debt discount and debt issuance costs 23 25
Loss on extinguishment of debt 14 1
Inventory valuation adjustment 5 —
Deferred income taxes — (3)
Other adjustments to reconcile net income to cash provided by operating activities (3) 9
Changes in operating assets and liabilities:
Accounts receivable 56 (13)
Mortgage loans held for sale 14 57
Inventory 3,414 19
Prepaid expenses and other assets (247) (29)
Contract cost assets (4) (10)
Lease liabilities (9) (7)
Accounts payable 6 (2)
Accrued expenses and other current liabilities (43) 25
Accrued compensation and benefits (6) 2
Deferred revenue 5 5
Other long-term liabilities 3 —
Net cash provided by operating activities 3,392 241
Investing activities
Proceeds from maturities of investments — 920
Purchases of investments (525) —
Purchases of property and equipment (33) (12)
Purchases of intangible assets (5) (4)
Net cash provided by (used in) investing activities (563) 904
Financing activities
Proceeds from issuance of Class C capital stock, net of issuance costs — 545
Proceeds from borrowings on credit facilities — 126
Repayments of borrowings on credit facilities (2,205) (88)
Net repayments on warehouse line of credit and repurchase agreements (25) (46)
Repurchases of Class A common stock and Class C capital stock (348) —
Settlement of long term debt (439) —
Proceeds from exercise of stock options 36 61
Net cash provided by (used in) financing activities (2,981) 598
Net increase (decrease) in cash, cash equivalents and restricted cash during period (152) 1,743
Cash, cash equivalents and restricted cash at beginning of period 2,838 1,779
Cash, cash equivalents and restricted cash at end of period $ 2,686 $ 3,522
Supplemental disclosures of cash flow information
Cash paid for interest $ 25 $ 14
Noncash transactions:
Write-off of fully amortized intangible assets $ 168 $ 1
Write-off of fully depreciated property and equipment 18 12
Recognition of operating right of use assets and lease liabilities 16 —
Capitalized share-based compensation 10 4
Property and equipment purchased on account 1 1


	Class A Common Stock, Class B Common Stock and Class C Capital Stock			Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Income		Total Shareholders’ Equity

	Shares	Amount
Balance at January 1, 2021	240,526	$	—	$	5,881	$	(1,139)	$	—	$	4,742
Issuance of common and capital stock upon exercise of stock options	2,524	—		98		—		—		98
Vesting of restricted stock units	2,305	—		—		—		—		—
Restricted stock units withheld for tax liability	(1)	—		—		—		—		—
Share-based compensation expense	—	—		250		—		—		250
Issuance of Class C capital stock in connection with equity offering, net of issuance costs	3,164	—		545		—		—		545
Settlement of convertible senior notes	6,265	—		403		—		—		403
Net loss	—	—		—		(267)		—		(267)

Balance at September 30, 2021	254,782	$	—	$	7,177	$	(1,406)	$	—	$	5,771

See accompanying notes to the condensed consolidated financial statements.

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ZILLOW GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions, unaudited)


	Nine Months Ended September 30,
	2022		2021
Operating activities
Net loss	$	(29)	$	(267)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	121		88
Share-based compensation	341		231
Amortization of right of use assets	17		18
Amortization of contract cost assets	23		32
Amortization of debt discount and debt issuance costs	24		72
Loss on extinguishment of debt	21		17
Inventory valuation adjustment	9		304
Other adjustments to reconcile net loss to cash provided by (used in) operating activities	(9)		10
Changes in operating assets and liabilities:
Accounts receivable	76		(89)
Mortgage loans held for sale	58		110
Inventory	3,904		(3,570)
Prepaid expenses and other assets	(13)		(70)
Contract cost assets	(13)		(22)
Lease liabilities	(15)		(21)
Accounts payable	1		17
Accrued expenses and other current liabilities	(49)		163
Accrued compensation and benefits	(52)		11
Deferred revenue	(1)		4
Other long-term liabilities	6		—
Net cash provided by (used in) operating activities	4,420		(2,962)
Investing activities
Proceeds from maturities of investments	455		1,696
Purchases of investments	(1,474)		(509)
Purchases of property and equipment	(87)		(45)
Purchases of intangible assets	(17)		(24)
Cash paid for acquisition, net	—		(497)
Net cash provided by (used in) investing activities	(1,123)		621
Financing activities
Proceeds from issuance of Class C capital stock, net of issuance costs	—		545
Proceeds from issuance of term loan, net of issuance costs	—		443
Proceeds from borrowings on credit facilities	—		2,639
Repayments of borrowings on credit facilities	(2,205)		(535)
Net repayments on warehouse line of credit and repurchase agreements	(68)		(101)
Repurchases of Class A common stock and Class C capital stock	(773)		—
Settlement of long-term debt	(1,158)		(1)
Proceeds from exercise of stock options	44		98
Net cash provided by (used in) financing activities	(4,160)		3,088
Net increase (decrease) in cash, cash equivalents and restricted cash during period	(863)		747
Cash, cash equivalents and restricted cash at beginning of period	2,838		1,779
Cash, cash equivalents and restricted cash at end of period	$	1,975	$	2,526
Supplemental disclosures of cash flow information
Cash paid for interest	$	42	$	58
Cash paid for taxes	5		—
Noncash transactions:
Write-off of fully amortized intangible assets	$	200	$	55
Write-off of fully depreciated property and equipment	48		38
Capitalized share-based compensation	33		19
Recognition (derecognition) of operating right of use assets and lease liabilities	14		(12)
Property and equipment purchased on account	2		2
Issuance (settlement) of beneficial interests in securitizations	(79)		25

See accompanying notes to the condensed consolidated financial statements.

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ZILLOW GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 1. Organization and Description of Business

Zillow Group ~~Inc.~~ is reimagining real estate to make it easier to unlock life’s next chapter. As the most visited real estate website in the United States, Zillow and its affiliates ~~help high-intent movers find~~offer customers an on-demand experience for selling, buying, renting or financing with transparency and ~~win their home through digital solutions, first class partners and easier buying, selling, financing and renting experiences. We help customers find and win their home with referrals to trusted~~ease.

Our portfolio of consumer brands includes Zillow Premier Agent, and Premier Broker partners and our portfolio of Zillow-branded and affiliated transaction-oriented services. Zillow Offers, our iBuying business, has purchased and sold homes directly in markets across the country. In the fourth quarter of 2021, we began to wind down Zillow Offers operations with expected completion in the second half of 2022. Zillow Home Loans, our affiliate lender, ~~provides our customers with an easy option to get pre-approved and secure financing for their next home purchase.~~

~~Other consumer brands include~~Zillow Closing Services, Zillow Rentals, Trulia, StreetEasy, ~~Zillow Closing Services,~~ HotPads and Out East. In addition, Zillow Group provides a comprehensive suite of marketing software and technology solutions for the real estate industry which include Mortech, ~~dotloop, Bridge Interactive,~~ New Home Feed and ~~ShowingTime.com, Inc. (“ShowingTime”).~~ShowingTime+, which houses ShowingTime, Bridge Interactive, dotloop and interactive floor plans.

In the fourth quarter of 2021, we began to wind down the operations of Zillow Offers, our iBuying business which purchased and sold homes directly in markets across the country. The wind down was complete as of September 30, 2022, and we have presented the financial results of Zillow Offers as discontinued operations in our condensed consolidated financial statements for all periods presented. See Note 3 for additional information.

Certain Significant Risks and Uncertainties

We operate in a dynamic industry and, accordingly, can be affected by a variety of factors. For example, we believe that changes in any of the following areas could have a significant negative effect on us in terms of our future financial position, results of operations or cash flows: current and future health and stability of the economy, financial conditions, and ~~residential~~ housing market, and changes in general economic and financial conditions (including federal monetary policy, interest ~~rate changes,~~rates, inflation, home price ~~appreciation~~fluctuations and housing inventory); our investment inof resources to pursue strategies and develop new products and services that may not prove effective or that are not attractive for customers and real estate partners; the duration and impact of public health crises, like the COVID-19 pandemic (including variants) on our ability to operate, demand for our products or services or general economic conditions; disruptions in operations and relationships with customers, suppliers, vendors, broker partners, contractors, employees, lenders and consumers given our decision to wind down iBuying operations; unanticipated developments that may prevent, delay or increase the costs associated with our wind down activities; addition or loss of a significant number of customers; our ability to successfully integrate and realize the benefits of our past or future strategic partnerships, acquisitions, business combinations or investments; our ability to manage advertising inventory or pricing; engagement and usage of our products; competition and innovation in our markets; actual or anticipated changes in technology, products, markets or services by us or our competitors; our ability to maintain or establish relationships with listings and data providers; our ability to obtain or maintain licenses and permits to support our current and future businesses; our ability to operate and grow our mortgage origination business, including the ability to obtain sufficient financing and resell originated mortgages on the secondary market; changes in laws or government regulation affecting our business; outcomes of legal proceedings; natural disasters and other catastrophic events; our ability to attract and retain qualified employees and key personnel; protection of customers’ information and other privacy concerns; protection of our brand and intellectual property; and intellectual property infringement and other claims, among other things.

Note 2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying condensed consolidated financial statements include Zillow Group, Inc. and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. These condensed consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Accordingly, these interim condensed consolidated financial statements should be read in conjunction with the audited financial statements and accompanying notes included in Zillow Group, Inc.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021, which was filed with the SEC on February 10, 2022. The condensed consolidated balance sheet as of December 31, 2021, included herein, was derived from the audited financial statements of Zillow Group, Inc. as of that ~~date.~~date, adjusted for the reclassification of discontinued operations discussed in Note 3.

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The unaudited condensed consolidated interim financial statements, in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments, necessary to present fairly our financial position as of ~~March 31,~~September 30, 2022 and our results of operations, comprehensive ~~income,~~loss, and shareholders’ equity for the three and nine month periods ended September 30, 2022 and 2021, and our cash flows for the ~~three months~~nine month periods ended ~~March 31,~~September 30, 2022 and 2021. The results for the three and nine months ended ~~March 31,~~September 30, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022, or for any interim period, or for any other future year.

~~Reclassifications~~

~~Certain reclassifications have been made~~ Unless indicated otherwise, the information in the ~~condensed consolidated statements of operations~~Notes to ~~conform data for prior periods~~Condensed Consolidated Financial Statements relates to the ~~current format. Beginning with~~Company’s continuing operations and does not include the ~~three and six month periods ended June 30, 2021, we presented a gross profit subtotal in our condensed consolidated statements~~results of operations, which requires certain depreciation expense and amortization expense to be included within cost of revenue. We believe the presentation of gross profit is preferable as it facilitates investors’ ability to model across our segments and enhances comparability with our public company peers. To effect the presentation of gross profit, we present the amortization expense for certain intangible assets and data acquisition costs within cost of revenue and have reclassified certain amounts in prior periods in the condensed consolidated statements of operations from technology and development expenses to cost of revenue. Additionally, we reclassified the amortization expense for trade names and trademarks and customer relationship intangible assets from technology and development expenses to sales and marketing expenses. This change has no impact on income from operations or net income.

~~Amounts previously reported in the condensed consolidated statements of operations for the periods presented were revised herein as shown below (in millions):~~

Three Months Ended
March 31, 2021
As Reported As Revised Effect of Change
Cost of revenue:
Homes $ 641 $ 645 $ 4
IMT 28 47 19
Mortgages 18 19 1
Total cost of revenue 687 711 24
Operating expenses:
Sales and marketing 193 197 4
Technology and development 149 120 (29)
General and administrative 100 101 1

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discontinued operations.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and the related disclosures at the date of the financial statements, as well as the reported amounts of revenue and expenses during the periods presented. On an ongoing basis, we evaluate our estimates, including those related to the accounting for certain revenue offerings, ~~the net realizable value of inventory,~~ restructuring costs, amortization period and recoverability of contract cost assets, website and software development costs, recoverability of long-lived assets and intangible assets, share-based compensation, income taxes, the presentation of discontinued and continuing operations, business combinations and the recoverability of goodwill, among others. To the extent there are material differences between these estimates, judgments or assumptions and actual results, our financial statements will be affected. The health of the residential housing market, interest rate environment and the COVID-19 pandemic ~~and our wind down of Zillow Offers operations~~ have introduced significant additional uncertainty with respect to estimates, judgments and assumptions, which may materially impact the estimates previously listed, among others.

Recently ~~Adopted Accounting Standards~~

In August 2020, the Financial Accounting Standards Board (“FASB”) issued guidance which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts in an entity’s own equity. Among other changes, the guidance removes the liability and equity separation models for convertible instruments. Instead, entities will account for convertible debt instruments wholly as debt unless convertible instruments contain features that require bifurcation as a derivative or that result in substantial premiums accounted for as paid-in capital. The guidance also requires the application of the if-converted method to calculate the impact of convertible instruments on diluted earnings per share. The guidance is effective for fiscal years beginning after December 15, 2021, with early adoption permitted for fiscal years beginning after December 15, 2020, and can be adopted on either a retrospective or modified retrospective basis. We adopted this guidance on January 1, 2022 using the modified retrospective approach whereby amounts previously reported have not been revised. Upon adoption we recognized a decrease to additional paid-in capital of $492 million, an increase to long-term debt of $336 million and a cumulative-effect adjustment to accumulated deficit of $156 million.

~~Recently~~ Issued Accounting Standards Not Yet Adopted

In ~~October 2021,~~June 2022, the ~~FASB~~Financial Accounting Standards Board issued guidance ~~which requires contract assets~~to improve existing measurement and ~~contract liabilities acquired in~~disclosure requirements for equity securities that are subject to a business combination to be recognized and measured in accordance with guidance governing revenue from contracts with customers. We currently recognize contract assets and contract liabilities at the acquisition date based on fair value estimates, which historically has resulted in a reduction to unearned revenue on the balance sheet, and therefore, a reduction to revenue that would have otherwise been recorded as an independent entity. Thecontractual sale restriction. This guidance is effective for interim and annual periods beginning after December 15, ~~2022~~2023 on a prospective basis, with early adoption permitted. We expect to adopt this guidance on January 1, ~~2023.~~2024. We ~~are currently evaluating~~have not yet determined the ~~potential~~ impact the adoption of ~~the~~this guidance will have on our financial position, results of operations and cash flows.

Note 3. Discontinued Operations

Zillow Offers Wind Down

In November 2021, the Board of Directors of Zillow Group made the determination to wind down Zillow Offers operations, and the financial results of Zillow Offers have historically been reported within our Homes segment. This decision was made in light of home pricing unpredictability, capacity constraints and other operational challenges faced by Zillow Offers that were exacerbated by an unprecedented housing market, a global pandemic and a difficult labor and supply chain environment, all of which led us to conclude that, despite its initial promise in earlier quarters, Zillow Offers was unlikely to be a sufficiently stable line of business to meet our goals going forward.

The wind down of Zillow Offers was complete as of September 30, 2022, at which time Zillow Offers met the criteria for discontinued operations. We have presented the assets and liabilities and results of operations, excluding allocation of any general corporate expenses, of Zillow Offers for all periods presented as discontinued operations in our condensed consolidated financial statements. No assets or liabilities were classified as discontinued operations as of September 30, 2022.

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The following table presents the major classes of assets and liabilities of discontinued operations as of December 31, 2021 (in millions):


Assets
Current assets:
Cash and cash equivalents	$	296
Accounts receivable, net	78
Inventory	3,913
Prepaid expenses and other current assets	13
Restricted cash	226
Total current assets of discontinued operations	4,526
Intangible assets, net	4
Other assets	78
Total assets of discontinued operations	$	4,608
Liabilities
Current liabilities:
Accounts payable	$	6
Accrued expenses and other current liabilities	72
Accrued compensation and benefits	47
Borrowings under credit facilities	2,199
Securitization term loans	1,209
Total current liabilities of discontinued operations	$	3,533

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The following table presents the major classes of line items of the discontinued operations included in the condensed consolidated statements of operations for the periods presented (in millions):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Revenue	$	23	$	1,187	$	4,249	$	2,668
Cost of revenue	24		1,414		4,023		2,751
Gross profit (loss)	(1)		(227)		226		(83)
Operating expenses:
Sales and marketing	1		90		153		189
Technology and development	—		10		6		41
General and administrative	—		10		10		26
Restructuring costs	—		—		25		—
Total operating expenses	1		110		194		256
Income (loss) from discontinued operations	(2)		(337)		32		(339)
Loss on extinguishment of debt	—		—		(21)		—
Other income	—		—		13		—
Interest expense	—		(16)		(36)		(25)
Loss from discontinued operations before income taxes	(2)		(353)		(12)		(364)
Income tax benefit (expense)	—		6		(1)		1
Net loss from discontinued operations	$	(2)	$	(347)	$	(13)	$	(363)
Net loss from discontinued operations per share:
Basic	$	(0.01)	$	(1.37)	$	(0.05)	$	(1.46)
Diluted	$	(0.01)	$	(1.31)	$	(0.05)	$	(1.38)

The following table presents significant non-cash items and capital expenditures of the discontinued operations for the periods presented (in millions):


	Nine Months Ended September 30,
	2022		2021
Amortization of debt discount and debt issuance costs	$	21	$	1
Loss on debt extinguishment	21		—
Share-based compensation	16		27
Inventory valuation adjustment	9		304
Depreciation and amortization	7		7
Capital expenditures	1		6
Issuance (settlement) of beneficial interests in securitizations	(79)		25

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Restructuring

There were no restructuring charges attributable to discontinued operations for the three months ended September 30, 2022. The following table presents a summary of restructuring charges attributable to discontinued operations for the periods presented (in millions):


	Line Item of Discontinued Operations	Nine Months Ended September 30, 2022		Cumulative Amount Recognized
Inventory write-down	Cost of revenue	$	9	N/A
Other charges:
Employee termination costs	Restructuring costs	$	20	$	72
Financing-related charges	Interest expense and Loss on debt extinguishment	37		43
Contract termination costs	Restructuring costs	4		14
Accelerated depreciation and amortization	Cost of revenue	14		19
Asset write-offs	Restructuring costs	—		1
Other charges	Restructuring costs	1		1
Total other charges		76		150
Total		$	85	$	150

Restructuring charges attributable to continued operations relate to employee termination costs within our IMT and Mortgages segments and certain indirect costs of the Homes segment that do not qualify as discontinued operations. These costs were not material for the three months ended September 30, 2022 and totaled $6 million, $2 million and $6 million, respectively, for the nine months ended September 30, 2022. Cumulative restructuring charges attributable to continued operations as of September 30, 2022 totaled $23 million. The remaining liability balance associated with such restructuring charges as of September 30, 2022 is not material.

Note 3.4. Fair Value Measurements

We apply the following methods and assumptions in estimating our fair value measurements:

Cash equivalents — The fair value measurement of money market funds is based on quoted market prices in active markets (Level 1). The fair value measurement of other cash equivalents is based on observable market-based inputs principally derived from or corroborated by observable market data (Level 2).

Short-term investments — The fair value measurement of our short-term investments is based on observable market-based inputs or inputs that are derived principally from or corroborated by observable market data by correlation or other means (Level 2).

Restricted cash — The carrying value of restricted cash approximates fair value due to the short period of time amounts are ~~borrowed on our credit facilities, home sales proceeds are held in restricted accounts associated with our credit facilities and securitizations, and amounts are~~ held in escrow (Level 1).

Mortgage loans held for sale — The fair value of mortgage loans held for sale is generally calculated by reference to quoted prices in secondary markets for commitments to sell mortgage loans with similar characteristics (Level 2).

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Forward contracts — The fair value of mandatory loan sales commitments and derivative instruments such as forward sales of mortgage-backed securities that are utilized as economic hedging instruments is calculated by reference to quoted prices for similar assets (Level 2).

Interest rate lock commitments — The fair value of interest rate lock commitments (“IRLCs”) is calculated by reference to quoted prices in secondary markets for commitments to sell mortgage loans with similar characteristics. Expired commitments are excluded from the fair value measurement. Since not all IRLCs will become closed loans, we adjust our fair value measurements for the estimated amount of IRLCs that will not close. This adjustment is effected through the pull-through rate, which represents the probability that an ~~interest rate lock commitment~~IRLC will ultimately result in a closed loan. For IRLCs that are cancelled or expire, any recorded gain or loss is reversed at the end of the commitment period (Level 3).

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The following table presents the range and weighted-average pull-through rates used in determining the fair value of IRLCs as of the dates presented:


		March 31, 2022	December 31, 2021		September 30, 2022	December 31, 2021
Range	Range	40% - 100%	42% - 100%	Range	46% - 100%	42% - 100%
Weighted-average	Weighted-average	83%	85%	Weighted-average	87%	85%

~~Beneficial interests~~Warrant —In July 2022, we entered into a warrant agreement in ~~securitizations~~ —conjunction with a commercial agreement with a publicly traded company that vests, subject to meeting certain conditions, over a period of five years. The warrant is accounted for as a derivative instrument recorded at fair value with gains and losses recognized in other income, net in our condensed consolidated statements of ~~beneficial interests in securitizations~~operations. The warrant is calculated using a discounted cash flow methodology. We rely on significant unobservable valuation inputs as the investments do not trade in active markets with readily observable prices and there is limited observable market data for reference. The primary unobservable inputs include the assumptions related to the expected timing and amount of prepayments and the discount rate of approximately 8% applied to the projected cash flows (Level 3). An increase in the amount of prepayments, in isolation, would result in an increase in the fair value measurement. An increase in the discount rate, in isolation, would result in a decrease in the fair value measurement. The beneficial interests in securitizations are recorded within other assets in our condensed consolidated balance ~~sheets. As~~sheet as of ~~March 31,~~September 30, 2022. The fair value measurement is adjusted for the estimated amount of tranches that will not vest. For the three and nine months ended September 30, 2022, we ~~have included~~recorded a loss of $4 million in our condensed consolidated statements of operations related to the ~~impact~~change in fair value of the ~~expected full prepayment of both beneficial interests during the second quarter of 2022 due to the wind down of Zillow Offers operations.~~warrant (Level 3).

The following tables present the balances of assets ~~and liabilities~~(liabilities) measured at fair value on a recurring basis, by level within the fair value hierarchy, as of the dates presented (in millions):


		March 31, 2022									September 30, 2022
		Total		Level 1		Level 2		Level 3			Total		Level 1		Level 2		Level 3
Cash equivalents:	Cash equivalents:									Cash equivalents:
Money market funds	Money market funds	$	2,315	$	2,315	$	—	$	—	Money market funds	$	1,820	$	1,820	$	—	$	—
Treasury bills		13		—		13		—
Short-term investments:	Short-term investments:									Short-term investments:
U.S. government agency securities	U.S. government agency securities	797		—		797		—		U.S. government agency securities	1,353		—		1,353		—
Corporate bonds										Corporate bonds	118		—		118		—
Treasury bills	Treasury bills	189		—		189		—		Treasury bills	45		—		45		—
Corporate bonds		36		—		36		0
Commercial paper		10		—		10		0
Beneficial interests in securitizations		78		—		—		78

Warrant										Warrant	4		—		—		4
Mortgage origination-related:	Mortgage origination-related:									Mortgage origination-related:
Mortgage loans held for sale	Mortgage loans held for sale	93		—		93		—		Mortgage loans held for sale	49		—		49		—
IRLCs										IRLCs	(1)		—		—		(1)
Forward contracts - other current assets	Forward contracts - other current assets	3		—		3		—		Forward contracts - other current assets	3		—		3		—
Total	Total	$	3,534	$	2,315	$	1,141	$	78	Total	$	3,391	$	1,820	$	1,568	$	3


	December 31, 2021
	Total		Level 1		Level 2		Level 3
Cash equivalents:
Money market funds	$	2,132	$	2,132	$	—	$	—
Short-term investments:
U.S. government agency securities	471		—		471		—
Corporate bonds	33		—		33		—
Commercial paper	10		—		10		—
Mortgage origination-related:
Mortgage loans held for sale	107		—		107		—
IRLCs	5		—		—		5
Total	$	2,758	$	2,132	$	621	$	5

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December 31, 2021
Total Level 1 Level 2 Level 3
Cash equivalents:
Money market funds $ 2,132 $ 2,132 $ — $ —
Short-term investments:
U.S. government agency securities 471 — 471 —
Corporate bonds 33 — 33 —
Commercial paper 10 — 10 —
Beneficial interests in securitizations 75 — — 75
Mortgage origination-related:
Mortgage loans held for sale 107 — 107 —
IRLCs 5 — — 5
Forward contracts - other current assets — — — —
Forward contracts - other current liabilities — — — —
Total $ 2,833 $ 2,132 $ 621 $ 80

~~The changes in our beneficial interests in securitizations were not material for the three months ended March 31, 2022.~~ The following table presents the changes in our IRLCs for the periods presented (in millions):


		Three Months Ended March 31,					Three Months Ended September 30,				Nine Months Ended September 30,
		2022		2021			2022		2021		2022		2021
Balance, beginning of the period	Balance, beginning of the period	$	5	$	12	Balance, beginning of the period	$	2	$	6	$	5	$	12
Issuances	Issuances	6		18		Issuances	2		23		12		58
Transfers	Transfers	(9)		(24)		Transfers	(4)		(23)		(15)		(64)
Fair value changes recognized in earnings	Fair value changes recognized in earnings	(2)		(1)		Fair value changes recognized in earnings	(1)		1		(3)		1
Balance, end of period	Balance, end of period	$	—	$	5	Balance, end of period	$	(1)	$	7	$	(1)	$	7

At ~~March 31,~~September 30, 2022, the notional amounts of the hedging instruments related to our mortgage loans held for sale were ~~$143~~$79 million and ~~$219~~$131 million for our IRLCs and forward contracts, respectively. At December 31, 2021, the notional amounts of the hedging instruments related to our mortgage loans held for sale were $305 million and $388 million for our IRLCs and forward contracts, respectively. We do not have the right to offset our derivative positions.

See Note 11 for the carrying ~~amount~~amounts and estimated fair ~~value~~values of our convertible senior ~~notes and securitization term loans.~~

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Note 4.5. Cash and Cash Equivalents, Investments and Restricted Cash

The following tables present the amortized cost, gross unrealized gains and losses and estimated fair market value of our cash and cash equivalents, investments, ~~including beneficial interests in securitizations,~~ and restricted cash as of the dates presented (in millions):


		March 31, 2022									September 30, 2022
		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Market Value			Amortized Cost		Gross Unrealized Losses		Estimated Fair Market Value
Cash	Cash	$	266	$	—	$	—	$	266	Cash	$	153	$	—	$	153
Cash equivalents:	Cash equivalents:									Cash equivalents:
Money market funds	Money market funds	2,315		—		—		2,315		Money market funds	1,820		—		1,820
Treasury bills		13		—		—		13
Short-term investments:	Short-term investments:									Short-term investments:
U. S. government agency securities	U. S. government agency securities	804		—		(7)		797		U. S. government agency securities	1,371		(18)		1,353
Corporate bonds										Corporate bonds	119		(1)		118
Treasury bills	Treasury bills	189		—		—		189		Treasury bills	45		—		45
Corporate bonds		36		—		—		36
Commercial paper		10		—		—		10
Restricted cash	Restricted cash	92		—		—		92		Restricted cash	2		—		2
Beneficial interests in securitizations		71		9		(2)		78
Total	Total	$	3,796	$	9	$	(9)	$	3,796	Total	$	3,510	$	(19)	$	3,491


		December 31, 2021									December 31, 2021
		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Market Value			Amortized Cost		Gross Unrealized Losses		Estimated Fair Market Value
Cash	Cash	$	479	$	—	$	—	$	479	Cash	$	183	$	—	$	183
Cash equivalents:	Cash equivalents:									Cash equivalents:
Money market funds	Money market funds	2,132		—		—		2,132		Money market funds	2,132		—		2,132
Short-term investments:	Short-term investments:									Short-term investments:
U.S. government agency securities	U.S. government agency securities	473		—		(2)		471		U.S. government agency securities	473		(2)		471
Corporate bonds	Corporate bonds	33		—		—		33		Corporate bonds	33		—		33
Commercial paper	Commercial paper	10		—		—		10		Commercial paper	10		—		10
Restricted cash	Restricted cash	227		—		—		227		Restricted cash	1		—		1
Beneficial interests in securitizations		66		9		—		75

Total	Total	$	3,420	$	9	$	(2)	$	3,427	Total	$	2,832	$	(2)	$	2,830

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The following table presents available-for-sale investments by contractual maturity date as of ~~March 31,~~September 30, 2022 (in millions):

Amortized Cost Estimated Fair
Market Value
Due in one year or less $ 920 $ 923
Due after one year 191 187
Total $ 1,111 $ 1,110


	Amortized Cost		Estimated Fair Market Value
Due in one year or less	$	1,096	$	1,083
Due after one year	439		433
Total	$	1,535	$	1,516

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~~Note 5. Inventory~~

~~The following table presents the components of inventory, net of applicable lower of cost or net realizable value adjustments, as of the dates presented (in millions):~~

March 31, 2022 December 31, 2021
Finished goods $ 484 $ 2,728
Work-in-process 10 1,185
Inventory $ 494 $ 3,913

~~We have recorded a write-down for homes in inventory of $31 million and $211 million as of March 31, 2022 and December 31, 2021, respectively.~~

Note 6. Contract Balances

Contract assets were ~~$101~~$80 million and $78 million as of ~~March 31,~~September 30, 2022 and December 31, 2021, respectively. Contract assets represent amounts for which we have recognized revenue for contracts that have not yet been invoiced to our customers. Contract assets are primarily related to our Premier Agent Flex, ~~rentals pay per lease~~Zillow Lease Connect and StreetEasy Experts offerings, whereby we estimate variable consideration based on the expected number of real estate transactions to be closed for Premier Agent Flex and StreetEasy Experts, and qualified leases to be secured for ~~rentals pay per lease.~~Zillow Lease Connect. We recognize revenue when we satisfy our performance obligations under the corresponding contracts. StreetEasy Experts is our pay for performance pricing model available in the New York City market for which agents and brokers are provided with leads at no initial cost and pay a performance ~~advertising~~referral fee only when a real estate purchase transaction is closed with one of the leads. Under the StreetEasy Experts pricing model, the transaction price represents variable consideration, as the amount to which we expect to be entitled varies based on the number of leads that convert into real estate transactions and the value of those transactions. We record a corresponding contract asset for the estimate of variable consideration for StreetEasy Experts when the right to the consideration is conditional. When the right to consideration becomes unconditional, we reclassify amounts to accounts receivable. Contract assets are recorded within prepaid expenses and other current assets in our condensed consolidated balance sheets.

For the three months ended ~~March 31,~~September 30, 2022 and 2021, we recognized revenue of ~~$45~~$50 million and ~~$47~~$51 million, respectively, that was included in the deferred revenue balance at the beginning of the ~~respective~~related period. For the nine months ended September 30, 2022 and 2021, we recognized revenue of $51 million and $48 million, respectively, that was included in the deferred revenue balance at the beginning of the related period.

Note 7. Contract Cost Assets

As of ~~March 31,~~September 30, 2022 and December 31, 2021, we had ~~$31~~$25 million and $35 million, respectively, of contract cost assets. For the three and nine months ended ~~March 31,~~September 30, 2022 and 2021, we did not incur any material impairment losses to our contract cost assets.

We recorded amortization expense related to contract cost assets of $8$7 million and ~~$10~~$12 million for the three months ended ~~March 31,~~September 30, 2022 and 2021, respectively, and $23 million and $32 million for the nine months ended September 30, 2022 and 2021, respectively.

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Note 8. Property and Equipment, net

The following table presents the detail of property and equipment as of the dates presented (in millions):


		March 31, 2022		December 31, 2021			September 30, 2022		December 31, 2021
Website development costs	Website development costs	$	212	$	175	Website development costs	$	256	$	175
Leasehold improvements	Leasehold improvements	95		107		Leasehold improvements	90		107
Office equipment, furniture and fixtures	Office equipment, furniture and fixtures	29		26		Office equipment, furniture and fixtures	26		26
Computer equipment	Computer equipment	19		19		Computer equipment	19		19
Construction-in-progress	Construction-in-progress	2		7		Construction-in-progress	8		7
Property and equipment	Property and equipment	357		334		Property and equipment	399		334
Less: accumulated amortization and depreciation	Less: accumulated amortization and depreciation	(123)		(119)		Less: accumulated amortization and depreciation	(138)		(119)
Property and equipment, net	Property and equipment, net	$	234	$	215	Property and equipment, net	$	261	$	215

We recorded depreciation expense related to property and equipment (other than website development costs) of $6 million and $8 million for the three months ended ~~March 31,~~September 30, 2022 and ~~2021.~~2021, respectively, and $19 million and $20 million for the nine months ended September 30, 2022 and 2021, respectively.

We capitalized ~~$34~~$37 million and ~~$12~~$27 million in website development costs for the three months ended ~~March 31,~~September 30, 2022 and 2021, respectively, and $104 million and $51 million for the nine months ended September 30, 2022 and 2021, respectively. Amortization expense for website development costs included in cost of revenue was ~~$13~~$17 million and $8 million for the three months ended ~~March 31,~~September 30, 2022 and 2021, respectively, and $48 million and $24 million for the nine months ended September 30, 2022 and 2021, respectively.

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Note 9. Acquisition

Acquisition of ShowingTime.com, Inc.

On September 30, 2021, Zillow Group acquired ~~ShowingTime~~ShowingTime.com, Inc. (“ShowingTime”) in exchange for approximately $512 million in cash, subject to certain adjustments. Our acquisition of ShowingTime has been accounted for as a business combination, and assets acquired and liabilities assumed were recorded at their ~~preliminary~~ estimated fair values as of September 30, 2021. Goodwill, which represents the expected synergies from combining the acquired assets and the operations of the acquirer, as well as intangible assets that do not qualify for separate recognition, is measured as of the acquisition date as the excess of consideration transferred, which is also measured at fair value, and the net of the fair values of the assets acquired and the liabilities assumed as of the acquisition date.

The total ~~preliminary~~ purchase price has been allocated to the assets acquired and liabilities assumed, including identifiable intangible assets, based on their respective fair values at the acquisition date. The total ~~preliminary~~ purchase price was allocated as follows (in millions):


Cash and cash equivalents	$	15
Identifiable intangible assets	111
Goodwill	389
Other acquired assets	6
Deferred tax liability	(4)
Other assumed liabilities	(5)
Total ~~preliminary estimated~~ purchase price	$	512

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The estimated fair value of identifiable intangible assets acquired and associated useful lives consisted of the following (in millions):


	Estimated Fair Value		Estimated Weighted-Average Useful Life (in years)
Customer relationships	$	55	8
Developed technology	47		4
Trade names and trademarks	9		10
Total	$	111

We used an income approach to measure the fair value of the customer relationships based on the excess earnings method, whereby the fair value is estimated based upon the present value of cash flows that the applicable asset is expected to generate. We used an income approach to measure the fair value of the developed technology and the trade names and trademarks based on the relief-from-royalty method. These fair value measurements were based on Level 3 inputs under the fair value hierarchy.

Our estimates and assumptions related to the purchase price allocation are preliminary and subject to change during the measurement period (up to one year from the acquisition date) as we finalize the amount of goodwill and deferred taxes recorded in connection with the acquisition.

Acquisition-related costs incurred, which primarily included legal, accounting and other external costs directly related to the acquisition, are included within acquisition-related costs in our condensed consolidated statements of operations and were expensed as incurred.

Unaudited pro forma earnings information has not been presented as the effects were not material to our condensed consolidated financial statements.

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Note 10. Intangible Assets, net

The following tables present the detail of intangible assets as of the dates presented (in millions):


		March 31, 2022							September 30, 2022
		Cost		Accumulated Amortization		Net			Cost		Accumulated Amortization		Net
Customer relationships	Customer relationships	$	55	$	(4)	$	51	Customer relationships	$	55	$	(8)	$	47
Developed technology	Developed technology	50		(8)		42		Developed technology	50		(14)		36
Software	Software	65		(29)		36		Software	46		(13)		33
Trade names and trademarks	Trade names and trademarks	46		(11)		35		Trade names and trademarks	45		(13)		32
Purchased content	Purchased content	5		(4)		1		Purchased content	7		(6)		1
Total	Total	$	221	$	(56)	$	165	Total	$	203	$	(54)	$	149

December 31, 2021
Cost Accumulated Amortization Net
Customer relationships $ 139 $ (84) $ 55
Developed technology 133 (86) 47
Software 59 (20) 39
Trade names and trademarks 45 (9) 36
Intangibles-in-progress 2 — 2
Purchased content 4 (3) 1
Total $ 382 $ (202) $ 180

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	December 31, 2021
	Cost		Accumulated Amortization		Net
Customer relationships	$	139	$	(84)	$	55
Developed technology	133		(86)		47
Trade names and trademarks	45		(9)		36
Software	53		(18)		35
Intangibles-in-progress	2		—		2
Purchased content	4		(3)		1
Total	$	376	$	(200)	$	176

Amortization expense recorded for intangible assets for the three months ended ~~March 31,~~September 30, 2022 and 2021 was ~~$22~~$11 million and ~~$13~~$12 million, respectively, and $47 million and $37 million for the nine months ended September 30, 2022 and 2021, respectively. Amortization expense for trade names and trademarks and customer relationships intangible assets is included in sales and marketing expenses. Amortization expense for all other intangible assets is included in cost of revenue.

We did not record any impairment costs related to our intangible assets for the three or nine months ended ~~March 31,~~September 30, 2022 and 2021.

Note 11. Debt

The following table presents the carrying values of Zillow Group’s debt as of the dates presented (in millions):

March 31, 2022 December 31, 2021
Homes segment
Credit facilities:
Goldman Sachs Bank USA $ — $ 548
Citibank, N.A. — 770
Credit Suisse AG, Cayman Islands — 835
Securitizations:
2021-1 variable funding line — 17
2021-1 term loan 320 472
2021-2 variable funding line — 29
2021-2 term loan 470 737
Total Homes segment debt 790 3,408
Mortgages segment
Repurchase agreements:
Credit Suisse AG, Cayman Islands 64 77
Citibank, N.A. 13 17
Warehouse line of credit:
Comerica Bank 11 19
Total Mortgages segment debt 88 113
Convertible senior notes
1.375% convertible senior notes due 2026 495 369
2.75% convertible senior notes due 2025 557 443
0.75% convertible senior notes due 2024 604 507
Total convertible senior notes 1,656 1,319
Total debt $ 2,534 $ 4,840

~~Homes Segment~~

~~Variable Interest Entities~~

As of March 31, 2022 and December 31, 2021, the total assets of the special purpose entities (“SPEs”) and titling trust associated with our Zillow Offers business were $838 million and $4.2 billion, respectively, of which $494 million and $3.9 billion are inventory, respectively, $90 million and $225 million are restricted cash, respectively, $29 million and $78 million are accounts receivable, respectively, and $224 million are prepaids and other current assets as of March 31, 2022. As of March 31, 2022 and December 31, 2021, the total liabilities of the SPEs and titling trust were $810 million and $3.5 billion, respectively, of which $790 million and $3.4 billion are credit facility and securitization-related borrowings, respectively, and $18 million and $55 million are accrued expenses, respectively. For additional details related to our SPEs, see Note 13 in the Notes to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.


	September 30, 2022		December 31, 2021
Mortgages segment
Repurchase agreements:
Credit Suisse AG, Cayman Islands	$	22	$	77
Citibank, N.A.	2		17
Warehouse line of credit:
Comerica Bank	21		19
Total Mortgages segment debt	45		113
Convertible senior notes:
1.375% convertible senior notes due 2026	495		369
2.75% convertible senior notes due 2025	559		443
0.75% convertible senior notes due 2024	605		507
Total convertible senior notes	1,659		1,319
Total debt	$	1,704	$	1,432

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~~Credit Facilities~~

During the three months ended March 31, 2022, certain wholly owned subsidiaries of Zillow Group repaid all amounts drawn on the Zillow Offers credit facilities. No additional amounts may be drawn on these facilities. For additional details related to our credit facilities, see Note 13 in the Notes to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

~~Securitization Transactions~~

During the three months ended March 31, 2022, we repaid all amounts drawn on the variable funding lines entered into in conjunction with the securitizations for our Zillow Offers business. For additional details related to our securitization variable funding lines, see Note 13 in the Notes to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

The term loans supporting our securitization transactions include customary representations and warranties, provisions regarding events of default and covenants. The term loans require Zillow Group and certain of its subsidiaries, as applicable, to comply with a number of customary financial and other covenants, such as maintaining certain levels of liquidity, tangible net worth and leverage ratios. As of March 31, 2022, Zillow Group was in compliance with all financial covenants and no event of default had occurred. Except for certain limited circumstances, the term loans are non-recourse to Zillow Group. For additional details related to our securitization transactions, see Note 13 in the Notes to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

In connection with the wind down of Zillow Offers operations, during the three months ended March 31, 2022, we repaid $159 million and $276 million of principal and $1 million and $2 million of prepayment fees associated with the 2021-1 and 2021-2 term loans, respectively, plus accrued interest. We recorded a total loss on debt extinguishment of $6 million representing the difference between the principal amount repaid, prepayment penalties incurred and the carrying amount extinguished for each of the term loans upon repayment. In addition, we remitted cash consideration of $87 million and $132 million of principal associated with the 2021-1 and 2021-2 term loans, respectively, and $1 million of prepayment fees associated with each of the term loans, plus accrued interest, which payments are classified within prepaid expenses and other current assets in our condensed consolidated balance sheet as of March 31, 2022. The fixed rate components of the 2021-1 term loan have stated interest rates of 2.3425% and 3.3524%, respectively, and principal amounts of $239 million and $51 million, respectively, as of March 31, 2022. The principal-only component of the 2021-1 term loan has a principal amount of $30 million as of March 31, 2022. The two fixed rate components of the 2021-2 term loan have stated interest rates of 2.4294% and 3.5860%, respectively, and principal amounts of $349 million and $75 million, respectively, as of March 31, 2022. The principal-only component of the 2021-2 term loan has a principal amount of $49 million as of March 31, 2022.

~~The following tables summarize certain additional details related to our term loans as of the dates presented or for the periods ended (in millions, except interest rates):~~

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March 31, 2022 December 31, 2021
Securitization Maturity Date Aggregate Principal
Amount Weighted Average Effective Interest Rate (1) First Interest Payment
Date Reinvestment Period Unamortized Debt Discount and Debt Issuance Costs Fair Value (2) Unamortized Debt Discount and Debt Issuance Costs Fair Value (2)
2021-1 term loan February 9, 2024 $ 320 4.14 % September 9, 2021 24 months $ — $ 320 $ 8 $ 480
2021-2 term loan October 9, 2024 473 11.29 % November 9, 2021 30 months 3 473 12 747
Total $ 793 $ 3 $ 793 $ 20 $ 1,227
(1) The weighted average effective interest rate is calculated using the outstanding principal amounts and effective interest rates for the two fixed rate components and the single principal-only component of each of the term loans. Debt discount and debt issuance costs have been allocated to the components of each term loan and will be amortized using the effective interest method with the amortization classified as a component of interest expense.
(2) The estimated fair value of each of the term loans was calculated using a discounted cash flow methodology. The fair value is classified as Level 3 due to reliance on significant unobservable valuation inputs.

Three Months Ended
March 31, 2022
Securitization Contractual Coupon Interest Amortization of Debt Discount Amortization of Debt Issuance Costs Interest Expense
2021-1 term loan $ 3 $ 3 $ 4 $ 10
2021-2 term loan 4 5 2 11
Total $ 7 $ 8 $ 6 $ 21

Mortgages Segment

To provide capital for Zillow Home Loans, we utilize master repurchase agreements and a warehouse line of credit which are classified as current liabilities in our condensed consolidated balance sheets. The repurchase agreements and warehouse line of credit provide short-term financing between the issuance of a mortgage loan and when Zillow Home Loans sells the loan to an investor or directly to an agency.credit. The following table summarizes certain details related to our repurchase agreements and warehouse line of credit (in millions, except interest rates):

Lender Maturity Date Maximum Borrowing Capacity Weighted-Average Interest Rate
Credit Suisse AG, Cayman Islands March 17, 2023 $ 100 2.00 %
Citibank, N.A. June 10, 2022 100 2.20 %
Comerica Bank June 25, 2022 60 2.51 %
Total $ 260

On March 18, 2022, Zillow Home Loans amended its Credit Suisse AG, Cayman Islands (“Credit Suisse”) master repurchase agreement to decrease the uncommitted total maximum borrowing capacity to $100 million with a maturity date of March 17, 2023 and to update the reference rate from one-month LIBOR to Adjusted Daily Simple Secured Overnight Financing Rate (“Adjusted Daily Simple SOFR”).

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Lender	Maturity Date	Maximum Borrowing Capacity		Weighted-Average Interest Rate
Credit Suisse AG, Cayman Islands	March 17, 2023	$	100	4.73	%
Citibank, N.A.	June 9, 2023	100		4.89	%
Comerica Bank	June 24, 2023	50		4.95	%
	Total	$	250

In accordance with the master repurchase agreements, Credit Suisse and Citibank ~~N.A.~~ (together the “Lenders”) have agreed to pay Zillow Home Loans a negotiated purchase price for eligible loans, and Zillow Home Loans has simultaneously agreed to repurchase such loans from the Lenders under a specified timeframe at an agreed upon price that includes interest. The master repurchase agreements contain margin call provisions that provide the Lenders with certain rights in the event of a decline in the market value of the assets purchased under the master repurchase agreements. As of ~~March 31,~~September 30, 2022 and December 31, 2021, ~~$82~~$26 million and $87 million, respectively, in mortgage loans held for sale were pledged as collateral under the master repurchase agreements.

Borrowings on the repurchase agreements and warehouse line of credit bear interest either at a floating rate based on Secured Overnight Financing Rate (“SOFR”) plus an applicable margin, as defined by the governing agreements, or Bloomberg Short-Term Bank Yield Index Rate (“BSBY”) plus an applicable margin, as defined by the governing agreements. The repurchase agreements and warehouse line of credit include customary representations and warranties, covenants and provisions regarding events of default. As of ~~March 31,~~September 30, 2022, Zillow Home Loans was in compliance with all financial covenants and no event of default had occurred. The repurchase agreements and warehouse line of credit are recourse to Zillow Home Loans, and have no recourse to Zillow Group or any of its other subsidiaries.

For additional details related to our warehouse line of credit and repurchase agreements, see Note 13 in the Notes to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

Convertible Senior Notes

Effective January 1, 2022, ~~the Company~~we adopted guidance which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts in an entity’s own equity. ~~This guidance was adopted using a modified retrospective approach.~~ Refer to Note 2 in the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 for additional information regarding the adoption of this guidance.

The following tables summarize certain details related to our outstanding convertible senior notes as of the dates presented or for the periods ended (in millions, except interest rates):


								September 30, 2022				December 31, 2021
Maturity Date	Aggregate Principal Amount		Stated Interest Rate		Effective Interest Rate		Semi-Annual Interest Payment Dates	Unamortized Debt Issuance Costs		Fair Value		Unamortized Debt Discount and Debt Issuance Costs		Fair Value
September 1, 2026	$	499	1.375	%	1.57	%	March 1; September 1	$	4	$	484	$	130	$	781
May 15, 2025	565		2.75	%	3.20	%	May 15; November 15	6		522		122		725
September 1, 2024	608		0.75	%	1.02	%	March 1; September 1	3		608		101		945
Total	$	1,672						$	13	$	1,614	$	353	$	2,451

March 31, 2022 December 31, 2021
Maturity Date Aggregate Principal Amount Stated Interest Rate Effective Interest Rate Semi-Annual Interest Payment Dates Unamortized Debt Issuance Costs Fair Value Unamortized Debt Discount and Debt Issuance Costs Fair Value
September 1, 2026 $ 499 1.375 % 1.57 % March 1; September 1 $ 4 $ 663 $ 130 $ 781
May 15, 2025 565 2.75 % 3.20 % May 15; November 15 8 642 122 725
September 1, 2024 608 0.75 % 1.02 % March 1; September 1 4 784 101 945
Total $ 1,672 $ 16 $ 2,089 $ 353 $ 2,451

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		Three Months Ended March 31, 2022						Three Months Ended March 31, 2021									Three Months Ended September 30, 2022						Three Months Ended September 30, 2021
Maturity Date	Maturity Date	Contractual Coupon Interest		Amortization of Debt Issuance Costs		Interest Expense		Contractual Coupon Interest		Amortization of Debt Discount		Amortization of Debt Issuance Costs		Interest Expense		Maturity Date	Contractual Coupon Interest		Amortization of Debt Issuance Costs		Interest Expense		Contractual Coupon Interest		Amortization of Debt Discount		Amortization of Debt Issuance Costs		Interest Expense
September 1, 2026	September 1, 2026	$	2	$	—	$	2	$	2	$	5	$	—	$	7	September 1, 2026	$	2	$	—	$	2	$	2	$	5	$	—	$	7
May 15, 2025	May 15, 2025	4		—		4		4		7		—		11		May 15, 2025	4		1		5		4		7		—		11
September 1, 2024	September 1, 2024	1		—		1		1		8		1		10		September 1, 2024	1		1		2		1		8		1		10
July 1, 2023	July 1, 2023	—		—		—		1		4		1		6		July 1, 2023	—		—		—		—		—		—		—
Total	Total	$	7	$	—	$	7	$	8	$	24	$	2	$	34	Total	$	7	$	2	$	9	$	7	$	20	$	1	$	28


	Nine Months Ended September 30, 2022						Nine Months Ended September 30, 2021
Maturity Date	Contractual Coupon Interest		Amortization of Debt Issuance Costs		Interest Expense		Contractual Coupon Interest		Amortization of Debt Discount		Amortization of Debt Issuance Costs		Interest Expense
September 1, 2026	$	5	$	—	$	5	$	5	$	16	$	—	$	21
May 15, 2025	12		2		14		12		21		1		34
September 1, 2024	4		1		5		3		23		2		28
July 1, 2023	—		—		—		3		8		1		12
Total	$	21	$	3	$	24	$	23	$	68	$	4	$	95

The convertible notes are senior unsecured obligations. The convertible senior notes maturing in 2026 (“2026 Notes”), 2025 (“2025 Notes”) and 2024 (“2024 Notes”) (together, the “Notes”) are classified as long-term debt in our condensed consolidated balance sheets based on their contractual maturity dates. Interest on the convertible notes is paid semi-annually in

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arrears. The estimated fair value of the convertible senior notes is classified as Level 2 and was determined through consideration of quoted market ~~prices. The fair value is classified as Level 3 due to the limited trading activity for each of the convertible senior notes.~~prices in markets that are not active.

The Notes are convertible into cash, shares of Class C capital stock or a combination thereof, at our election, and may be settled as described below. They will mature on their respective maturity date, unless earlier repurchased, redeemed or converted in accordance with their terms.

The following table summarizes the conversion and redemption options with respect to the Notes:

Maturity Date

Early Conversion Date

Conversion Rate

Conversion Price

Optional Redemption Date

September 1, 2026

March 1, 2026

22.9830

43.51

September 5, 2023

May 15, 2025

November 15, 2024

14.8810

67.20

May 22, 2023

September 1, 2024

March 1, 2024

22.9830

43.51

September 5, 2022

The following table summarizes certain details related to the capped call confirmations with respect to ~~certain of~~ the convertible senior notes:


Maturity Date	Initial Cap Price		Cap Price Premium
September 1, 2026	$	80.5750	150	%
September 1, 2024	72.5175		125	%
July 1, 2023	105.45		85	%

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There were no conversions of convertible senior notes during the three and nine months ended ~~March 31,~~September 30, 2022. ~~Each series of the Notes was convertible during the three months ended March 31, 2021, at the option of the holders.~~ The following table summarizes the activity for our convertible senior notes maturing in 2023 (“2023 Notes”) for the ~~period presented~~three months ended September 30, 2021 (in millions, except share data which are presented in thousands):

Three Months Ended
March 31, 2021
2023 Notes 2024 Notes 2026 Notes Total
Aggregate principal amount settled $ 1 $ 51 $ 1 $ 53
Shares of Class C capital stock issued 12 1,163 28 1,203
Total fair value of consideration transferred (1) $ 2 $ 154 $ 4 $ 160
Loss on extinguishment of debt:
Consideration allocated to the liability component (2) $ 1 $ 41 $ 1 $ 43
Carrying value of the liability component, net of unamortized debt discount and debt issuance costs 1 40 1 42
Loss on extinguishment of debt $ — $ 1 $ — $ 1
Consideration allocated to the equity component $ 1 $ 113 $ 3 $ 117
(1) The total fair value of consideration transferred includes the value of shares transferred to note holders using the daily volume weighted-average price of our Class C capital stock on the conversion date and an immaterial amount of cash paid in lieu of fractional shares.
(2) Consideration allocated to the liability component is based on the fair value of the liability component immediately prior to settlement, which was calculated using a discounted cash flow analysis with a market interest rate of a similar liability that does not have an associated convertible feature.




Aggregate principal amount settled	$	368
Cash paid	$	1
Shares of Class C capital stock issued	4,675
Total fair value of consideration transferred (1)	$	562
Loss on extinguishment of debt:
Consideration allocated to the liability component (2)	$	343
Carrying value of the liability component, net of unamortized debt discount and debt issuance costs	328
Loss on extinguishment of debt	$	15
Consideration allocated to the equity component	$	219

The following table summarizes the activity for our 2023 Notes, 2024 Notes and 2026 Notes for the nine months ended September 30, 2021 (in millions, except share data which are presented in thousands):



	2023 Notes		2024 Notes		2026 Notes		Total
Aggregate principal amount settled	$	374	$	65	$	1	$	440
Cash paid	$	1	$	—	$	—	$	1
Shares of Class C capital stock issued	4,752		1,485		28		6,265
Total fair value of consideration transferred (1)	$	572	$	200	$	4	$	776
Loss on extinguishment of debt:
Consideration allocated to the liability component (2)	$	349	$	53	$	1	$	403
Carrying value of the liability component, net of unamortized debt discount and debt issuance costs	334		51		1		386
Loss on extinguishment of debt	$	15	$	2	$	—	$	17
Consideration allocated to the equity component	$	223	$	147	$	3	$	373

(1) For convertible senior notes converted by note holders, the total fair value of consideration transferred includes the value of shares transferred to note holders using the daily volume weighted-average price of our Class C capital stock on the conversion date and an immaterial amount of cash paid in lieu of fractional shares. For convertible senior notes redeemed, the total fair value of consideration transferred comprises cash transferred to note holders to settle the related notes.

(2) Consideration allocated to the liability component is based on the fair value of the liability component immediately prior to settlement, which was calculated using a discounted cash flow analysis with a market interest rate of a similar liability that does not have an associated convertible feature.

The last reported sale price of our Class C capital stock did not exceed 130% of the conversion price of each series of the Notes for more than 20 trading days during the 30 consecutive trading days ended ~~March 31,~~September 30, 2022. Accordingly, each series of the Notes is not redeemable or convertible at the option of the holders from ~~April~~October 1 through ~~June 30,~~December 31, 2022.

For additional details related to our convertible senior notes, see Note 13 in the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

Convertible Senior Notes Repurchase Authorization

On December 2, 2021, Zillow Group’s Board of Directors authorized the repurchase of up to $750 million of our Class A common stock, Class C capital stock or a combination thereof. On May 4, 2022, the Board of Directors authorized the repurchase of up to an additional $1.0 billion (together the “Repurchase Authorizations”) of our Class A common stock, Class C capital stock or a combination thereof. On November 1, 2022, Zillow Group’s Board of Directors further expanded the Repurchase Authorizations to allow for the repurchase of a portion of our outstanding Notes. Repurchases of outstanding Notes may be made in open-market transactions or privately negotiated transactions, or in such other manner as deemed appropriate by management, and may be made from time to time as determined by management depending on market conditions, market price of the Notes, trading volume, cash needs and other business factors, in each case as permitted by securities laws and other

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legal requirements. As of September 30, 2022, $674 million remained available for future repurchases pursuant to the Repurchase Authorizations. For additional details related to the Repurchase Authorizations, see Note 13 under the subsection titled “Stock Repurchase Authorizations”.

Note 12. Income Taxes

Our income tax expense or benefit for interim periods is determined using an estimate of our annual effective tax rate, adjusted for discrete items, if any, that are taken into account for the relevant period. We update our estimate of the annual effective tax rate on a quarterly basis and make year-to-date adjustments to the tax provision or benefit, as applicable. We recorded an income tax ~~benefit of $9 million for the three months ended March 31, 2022 and an income tax benefit~~expense of $3 million for the three months ended ~~March 31,~~September 30, 2022 primarily driven by state taxes, and an income tax benefit of $5 million for the three months ended September 30, 2021 primarily ~~related to~~driven by state ~~income taxes.~~taxes and the decrease in the valuation allowance associated with our September 2021 acquisition of ShowingTime.

Note 13. Shareholders’ Equity

Preferred Stock

Our board of directors has the authority to fix and determine and to amend the number of shares of any series of preferred stock that is wholly unissued or to be established and to fix and determine and to amend the designation, preferences, voting powers and limitations and the relative, participating, optional or other rights, of any series of shares of preferred stock that is wholly unissued or to be established, subject in each case to certain approval rights of holders of our outstanding Class B common stock. There was no preferred stock issued and outstanding as of ~~March 31,~~September 30, 2022 or December 31, 2021.

Common and Capital Stock

Our Class A common stock has no preferences or privileges and is not redeemable. Holders of Class A common stock are entitled to 1one vote for each share.

Our Class B common stock has no preferences or privileges and is not redeemable. At any time after the date of issuance, each share of Class B common stock, at the option of the holder, may be converted into 1one share of Class A common stock, or automatically converted into Class A common stock upon the affirmative vote by or written consent of holders of a majority of the shares of the Class B common stock. Holders of Class B common stock are entitled to 10 votes for each share.

Our Class C capital stock has no preferences or privileges, is not redeemable and, except in limited circumstances, is non-voting.

Equity Distribution Agreement

There were no shares issued under the equity distribution agreement during the three and nine months ended ~~March 31,~~September 30, 2022.

The following table summarizes the activity pursuant to the equity distribution agreement for the ~~period presented~~nine months ended September 30, 2021 (in millions, except share data which are presented in thousands, and per share amounts):


	Three Months Ended March 31, 2021
Shares of Class C capital stock issued	3,164
Weighted-average issuance price per share	$	174.05
Gross proceeds (1)	$	551

(1) Net proceeds were $545 million after deducting $6 million of commissions and other offering expenses incurred.

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Stock Repurchase ~~Program~~Authorizations

~~On December 2, 2021, Zillow Group’s Board~~Repurchases of ~~Directors authorized the repurchase of up to $750 million of its Class A common~~ stock ~~Class C capital stock or a combination thereof (the “Stock Repurchase Program”). Repurchases~~ under the ~~Stock~~ Repurchase ~~Program~~Authorizations may be made in open-market transactions or privately negotiated transactions, or in such other manner as deemed appropriate by management, and may be made from time to time as determined by management depending on market conditions, share price, trading volume, cash needs and other business factors, in each case as permitted by securities laws and

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other legal requirements. As of ~~March 31,~~September 30, 2022, ~~$100~~$674 million remained available for future repurchases pursuant to the ~~Stock~~ Repurchase ~~Program.~~Authorizations.

The following table summarizes, on a settlement date basis, our Class A common stock and Class C capital stock repurchase activity under the ~~Stock~~ Repurchase ~~Program~~Authorizations for the ~~period~~periods presented (in millions, except share data, which are presented in thousands, and per share amounts):


		Three Months Ended March 31, 2022					Three Months Ended September 30, 2022				Nine Months Ended September 30, 2022
		Class A common stock		Class C capital stock			Class A common stock		Class C capital stock		Class A common stock		Class C capital stock
Shares repurchased	Shares repurchased	1,412		4,446		Shares repurchased	772		4,225		3,349		13,943
Weighted-average price per share	Weighted-average price per share	$	58.38	$	59.66	Weighted-average price per share	$	35.52	$	35.18	$	46.13	$	44.40
Total purchase price	Total purchase price	$	83	$	265	Total purchase price	$	27	$	149	$	154	$	619

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Note 14. Share-Based Awards

~~In addition to~~During the first quarter of 2022, in connection with the 2021 annual review cycle, the Compensation Committee of the Board of Directors (the “Compensation Committee”) approved option ~~awards~~ and restricted stock ~~units typically granted~~unit awards under the Zillow Group, Inc. 2020 Incentive Plan (the “2020 Plan”), a portion of which vest quarterly over four years, ~~during the three months ended March 31,~~and a portion of which vest quarterly over a one year period beginning in May 2022. On August 3, 2022, upon recommendation of the Compensation Committee, of the Board of Directors approved ~~option and~~a supplemental grant of restricted stock ~~unit awards~~units to eligible employees. The supplemental restricted stock units were granted ~~under the 2020 Plan in connection with the 2021 annual review cycle that~~on August 8, 2022 and vest quarterly over ~~one year.~~a two-year period beginning in August 2022. The exercisability and settlement terms of these equity awards are otherwise consistent with the terms of the option awards and restricted stock units typically granted under the 2020 Plan.

When determining the grant date fair value of share-based awards, management considers whether an adjustment is required to the observable market price or volatility of the Company’s Class A common stock or Class C capital stock used in the valuation as a result of material non-public information. For additional information regarding our share-based awards, see Note 16 in the Notes to the Consolidated Financial Statements in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

Option Award Repricing

On August 3, 2022, upon recommendation of the Compensation Committee, the Board of Directors approved adjustments to the exercise price of certain outstanding vested and unvested option awards for eligible employees. The exercise price of eligible option awards was reduced to $38.78, which was the closing market price of our Class C capital stock on August 8, 2022. No other changes were made to the terms and conditions of the eligible option awards.

We have accounted for the reprice of the eligible option awards as an equity modification whereby the incremental fair value attributable to the repriced option awards, as measured on the date of reprice, will be recognized as additional share-based compensation expense. The reprice impacted 7 million stock option awards, affected 3,348 employees and is expected to result in incremental share-based compensation expense of $66 million in total, of which $29 million was recognized during the three months ended September 30, 2022, including amounts associated with vested awards. The remaining expense will be recognized over the remaining requisite service period of the original awards.

Option Awards

The following table summarizes all option award activity for the ~~three~~nine months ended ~~March 31,~~September 30, 2022:


		Number of Shares Subject to Existing Options (in thousands)	Weighted- Average Exercise Price Per Share		Weighted- Average Remaining Contractual Life (Years)	Aggregate Intrinsic Value (in millions)			Number of Shares Subject to Existing Options (in thousands)	Weighted- Average Exercise Price Per Share		Weighted- Average Remaining Contractual Life (Years)	Aggregate Intrinsic Value (in millions)
Outstanding at January 1, 2022	Outstanding at January 1, 2022	25,746	$	72.86	7.48	$	354	Outstanding at January 1, 2022	25,746	$	72.86	7.48	$	354
Granted	Granted	5,519	49.75					Granted	6,792	46.47
Exercised	Exercised	(807)	43.97					Exercised	(1,078)	40.59
Forfeited or cancelled	Forfeited or cancelled	(1,155)	92.43					Forfeited or cancelled	(3,061)	88.70
Outstanding at March 31, 2022		29,303	68.53		7.74	122
Vested and exercisable at March 31, 2022		12,890	55.63		6.19	102
Outstanding at September 30, 2022								Outstanding at September 30, 2022	28,399	45.25		7.31	8
Vested and exercisable at September 30, 2022								Vested and exercisable at September 30, 2022	15,398	44.74		6.10	8

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The fair value of all option awards granted is estimated at the date of grant using the Black-Scholes-Merton option-pricing model, assuming no dividends and with the following assumptions for the periods presented:


		Three Months Ended March 31,			Three Months Ended September 30,		Nine Months Ended September 30,
		2022	2021		2022	2021	2022	2021
Expected volatility	Expected volatility	55% - 60%	52% - 55%	Expected volatility	61%	55%	55% - 61%	52% - 56%
Expected dividend yield		—	—
Risk-free interest rate	Risk-free interest rate	1.94% - 2.54%	0.57% - 0.90%	Risk-free interest rate	3.38%	0.76%	1.94% - 3.38%	0.57% - 0.90%
Weighted-average expected life	Weighted-average expected life	4.50 - 6.00 years	4.50 - 5.75 years	Weighted-average expected life	5.00 years	4.75 years	4.50 - 6.00 years	4.50 - 5.75 years
Weighted-average fair value of options granted	Weighted-average fair value of options granted	$25.08	$59.74	Weighted-average fair value of options granted	$18.06	$45.40	$23.75	$58.96

The weighted-average total fair value of options repriced was $67.58. As of ~~March 31,~~September 30, 2022, there was a total of ~~$553~~$463 million in unrecognized compensation cost related to unvested option awards.

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Restricted Stock Units

The following table summarizes activity for all restricted stock units for the ~~three~~nine months ended ~~March 31,~~September 30, 2022:


		Restricted Stock Units (in thousands)	Weighted- Average Grant- Date Fair Value			Restricted Stock Units (in thousands)	Weighted- Average Grant- Date Fair Value
Unvested outstanding at January 1, 2022	Unvested outstanding at January 1, 2022	6,074	$	66.51	Unvested outstanding at January 1, 2022	6,074	$	66.51
Granted	Granted	4,839	49.71		Granted	10,664	42.71
Vested	Vested	(689)	59.68		Vested	(3,278)	53.87
Forfeited	Forfeited	(909)	63.29		Forfeited	(2,193)	60.45
Unvested outstanding at March 31, 2022		9,315	58.60
Unvested outstanding at September 30, 2022					Unvested outstanding at September 30, 2022	11,267	48.85

As of ~~March 31,~~September 30, 2022, there was a total of ~~$509~~$510 million in unrecognized compensation cost related to unvested restricted stock units.

Share-Based Compensation Expense

The following table presents the effects of share-based compensation expense in our condensed consolidated statements of operations during the periods presented (in millions):


		Three Months Ended March 31,					Three Months Ended September 30,				Nine Months Ended September 30,
		2022		2021			2022		2021		2022		2021
Cost of revenue	Cost of revenue	$	3	$	3	Cost of revenue	$	5	$	2	$	12	$	7
Sales and marketing	Sales and marketing	12		10		Sales and marketing	21		11		46		31
Technology and development	Technology and development	29		26		Technology and development	57		25		123		78
General and administrative	General and administrative	38		25		General and administrative	64		32		142		88
Restructuring costs	Restructuring costs	9		—		Restructuring costs	—		—		2		—
Total		$	91	$	64
Share-based compensation - continuing operations						Share-based compensation - continuing operations	147		70		325		204
Share-based compensation - discontinued operations						Share-based compensation - discontinued operations	1		9		16		27
Total share-based compensation						Total share-based compensation	$	148	$	79	$	341	$	231

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Note 15. Net ~~Income~~Loss Per Share

Basic net income per share is computed by dividing net income by the weighted-average number of shares (including Class A common stock, Class B common stock and Class C capital stock) outstanding during the period. In the calculation of basic net income per share, undistributed earnings are allocated assuming all earnings during the period were distributed.

Diluted net income per share is computed by dividing net income by the weighted-average number of shares (including Class A common stock, Class B common stock and Class C capital stock) outstanding during the period and potentially dilutive Class A common stock and Class C capital stock equivalents, except in cases where the effect of the Class A common stock or Class C capital stock equivalent would be antidilutive. Potential Class A common stock and Class C capital stock equivalents consist of Class A common stock and Class C capital stock issuable upon exercise of stock options and Class A common stock and Class C capital stock underlying unvested restricted stock units and Class C capital stock issuable upon conversion of outstanding convertible senior notes.

Class A common stock and Class C capital stock issuable upon exercise of stock options and Class A common stock and Class C capital stock underlying unvested restricted stock units are calculated using the treasury stock method.

We have applied the if-converted method for calculating any potential dilutive effect of the conversion of the outstanding convertible notes on diluted net income per share, if applicable. The following table presents the maximum number of shares and conversion price per share of Class C capital stock for each of the Notes based on the aggregate principal amount outstanding as of March 31, 2022 (in thousands, except per share amounts):

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Maturity Date Shares Conversion Price per Share
September 1, 2026 11,464 $ 43.51
May 15, 2025 8,408 67.20
September 1, 2024 13,983 43.51

For the periods presented, the following table reconciles the denominators used in the basic and diluted net loss and net income (loss) from continuing operations per share calculations (in thousands):


		Three Months Ended March 31,			Three Months Ended September 30,		Nine Months Ended September 30,
		2022	2021		2022	2021	2022	2021
Denominator for basic calculation	Denominator for basic calculation	248,542	243,234	Denominator for basic calculation	240,080	254,074	244,157	248,564
Effect of dilutive securities:	Effect of dilutive securities:			Effect of dilutive securities:
Option awards	Option awards	2,558	12,437	Option awards	—	8,874	—	10,581
Unvested restricted stock units	Unvested restricted stock units	863	3,675	Unvested restricted stock units	—	2,164	—	2,898
Denominator for dilutive calculation	Denominator for dilutive calculation	251,963	259,346	Denominator for dilutive calculation	240,080	265,112	244,157	262,043

For the periods presented, the following Class A common stock and Class C capital stock equivalents were excluded from the calculations of diluted net loss and net income (loss) from continuing operations per share because their effect would have been antidilutive (in thousands):


		Three Months Ended March 31,			Three Months Ended September 30,		Nine Months Ended September 30,
		2022	2021		2022	2021	2022	2021
Weighted-average Class A common stock and Class C capital stock option awards outstanding	Weighted-average Class A common stock and Class C capital stock option awards outstanding	5,120	2,546	Weighted-average Class A common stock and Class C capital stock option awards outstanding	2,417	209	15,942	992
Weighted-average Class A common stock and Class C capital stock restricted stock units outstanding	Weighted-average Class A common stock and Class C capital stock restricted stock units outstanding	3,188	303	Weighted-average Class A common stock and Class C capital stock restricted stock units outstanding	9,670	1,253	8,326	850
Class C capital stock issuable upon conversion of the convertible notes maturing in 2023, 2024, 2025 and 2026	Class C capital stock issuable upon conversion of the convertible notes maturing in 2023, 2024, 2025 and 2026	33,855	39,834	Class C capital stock issuable upon conversion of the convertible notes maturing in 2023, 2024, 2025 and 2026	33,855	33,927	33,855	38,316
Total Class A common stock and Class C capital stock equivalents	Total Class A common stock and Class C capital stock equivalents	42,163	42,683	Total Class A common stock and Class C capital stock equivalents	45,942	35,389	58,123	40,158

Note 16. Commitments and Contingencies

Interest Rate Lock Commitments

We have entered into IRLCs with prospective borrowers under our mortgage origination business whereby we commit to lend a certain loan amount under specific terms and at a specific interest rate to the borrower. These commitments are treated as derivatives and are carried at fair value. For additional information regarding our IRLCs, see Note 34 to our condensed consolidated financial statements.

Lease Commitments

We have entered into various non-cancelable operating lease agreements for certain of our office space and equipment with original lease periods expiring between 2022 and 2032. For additional information regarding our lease agreements, see Note 12 in the Notes to the Consolidated Financial Statements in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

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Purchase Commitments

Purchase commitments primarily include various non-cancelable agreements to purchase content related to our mobile applications and websites and certain cloud computing services. For additional information regarding our purchase obligations, see Note 18 in the Notes to the Consolidated Financial Statements in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

Escrow Balances

In conducting our title and escrow operations through Zillow Closing Services, we routinely hold customers’ assets in escrow, pending completion of real estate transactions, and are responsible for the proper disposition of these balances for our

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customers. Certain of these amounts are maintained in segregated bank accounts and have not been included in the accompanying condensed consolidated balance sheets. These balances ~~amounted to $3 million~~were not material as of September 30, 2022 and $55 million ~~respectively,~~ as of ~~March 31, 2022 and~~ December 31, ~~2021.~~2021, and pertain to discontinued operations.

Letters of Credit

As of ~~March 31,~~September 30, 2022, we have outstanding letters of credit of approximately $16 million which secure our lease obligations in connection with certain of our office space operating leases.

Surety Bonds

In the course of business, we are required to provide financial commitments in the form of surety bonds to third parties as a guarantee of our performance on and our compliance with certain obligations. If we were to fail to perform or comply with these obligations, any draws upon surety bonds issued on our behalf would then trigger our payment obligation to the surety bond issuer. We have outstanding surety bonds issued for our benefit of approximately $13 million and $12 million, respectively, as of ~~March 31,~~September 30, 2022 and December 31, 2021.

Legal Proceedings

We are involved in a number of legal proceedings concerning matters arising in connection with the conduct of our business activities, some of which are at preliminary stages and some of which seek an indeterminate amount of damages. We regularly evaluate the status of legal proceedings in which we are involved to assess whether a loss is probable or there is a reasonable possibility that a loss or additional loss may have been incurred to determine if accruals are appropriate. We further evaluate each legal proceeding to assess whether an estimate of possible loss or range of loss can be made if accruals are not appropriate. For certain cases described below, management is unable to provide a meaningful estimate of the possible loss or range of possible loss because, among other reasons, (i) the proceedings are in preliminary stages; (ii) specific damages have not been sought; (iii) damages sought are, in our view, unsupported and/or exaggerated; (iv) there is uncertainty as to the outcome of pending appeals or motions; (v) there are significant factual issues to be resolved; and/or (vi) there are novel legal issues or unsettled legal theories presented. For these cases, however, management does not believe, based on currently available information, that the outcomes of these proceedings will have a material effect on our financial position, results of operations or cash flow. For the matters discussed below, we have not recorded any material accruals as of ~~March 31,~~September 30, 2022 or December 31, 2021.

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In August and September 2017, 2two purported class action lawsuits were filed against us and certain of our executive officers, alleging, among other things, violations of federal securities laws on behalf of a class of those who purchased our common stock between February 12, 2016 and August 8, 2017. One of those purported class actions, captioned Vargosko v. Zillow Group, Inc. et al, was brought in the U.S. District Court for the Central District of California. The other purported class action lawsuit, captioned Shotwell v. Zillow Group, Inc. et al, was brought in the U.S. District Court for the Western District of Washington. The complaints allege, among other things, that during the period between February 12, 2016 and August 8, 2017, we issued materially false and misleading statements regarding our business practices. The complaints seek to recover, among other things, alleged damages sustained by the purported class members as a result of the alleged misconduct. In November 2017, an amended complaint was filed against us and certain of our executive officers in the Shotwell v. Zillow Group purported class action lawsuit, extending the beginning of the class period to November 17, 2014. In January 2018, the Vargosko v. Zillow Group purported class action lawsuit was transferred to the U.S. District Court for the Western District of Washington and consolidated with the Shotwell v. Zillow Group purported class action lawsuit. In February 2018, the plaintiffs filed a consolidated amended complaint, and in April 2018, we filed our motion to dismiss the consolidated amended complaint. In October 2018, our motion to dismiss was granted without prejudice, and in November 2018, the plaintiffs filed a second consolidated amended complaint, which we moved to dismiss in December 2018. On April 19, 2019, our motion to dismiss the second consolidated amended complaint was denied. On October 11, 2019, plaintiffs filed a motion for class certification which was granted by the court on October 28, 2020. On February 17, 2021, the Ninth Circuit Court of Appeals denied our petition for review of that decision. WeOn October 21, 2022, the parties jointly filed a notice of settlement with the U.S. District Court for the Western District of Washington to inform the court that the parties have ~~denied~~reached an agreement in principle to settle this action. The proposed settlement is subject to the ~~allegations~~negotiation and execution of ~~wrongdoing~~a settlement agreement and ~~intend~~court approval thereof. The full amount of the settlement payment is expected to ~~vigorously defend~~be paid by the ~~claims in this lawsuit. We do not believe that there is a reasonable possibility that a material loss will be incurred related to this lawsuit.~~Company’s insurance carriers under its insurance policy.

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In October and November 2017 and January and February 2018, 4four shareholder derivative lawsuits were filed in the U.S. District Court for the Western District of Washington and the Superior Court of the State of Washington, King County, against certain of our executive officers and directors seeking unspecified damages on behalf of the Company and certain other relief, such as reform to corporate governance practices. The plaintiffs in the derivative suits (in which the Company is a nominal defendant) allege, among other things, that the defendants breached their fiduciary duties in connection with oversight of the Company’s public statements and legal compliance, and as a result of the breach of such fiduciary duties, the Company was damaged, and defendants were unjustly enriched. Certain of the plaintiffs also allege, among other things, violations of Section 14(a) of the Securities Exchange Act of 1934 and waste of corporate assets. On February 5, 2018, the U.S. District Court for the Western District of Washington consolidated the 2two federal shareholder derivative lawsuits pending in that court. On February 16, 2018, the Superior Court of the State of Washington, King County, consolidated the 2two shareholder derivative lawsuits pending in that court. All 4four of the shareholder derivative lawsuits were stayed until our motion to dismiss the second consolidated amended complaint in the securities class action lawsuit discussed above was denied in April 2019. On July 8, 2019, the plaintiffs in the consolidated federal derivative lawsuit filed a consolidated shareholder derivative complaint, which we moved to dismiss on August 22, 2019. On February 28, 2020, our motion to dismiss the consolidated federal shareholder derivative complaint was denied. On February 16, 2021, the court in the consolidated state derivative matter stayed the action. On March 5, 2021, a new shareholder derivative lawsuit was filed in the U.S. District Court for the Western District of Washington against certain of our executive officers and directors seeking unspecified damages on behalf of the Company and certain other relief, such as reform to corporate governance practices, alleging, among other things, violations of federal securities laws. The U.S. District Court for the Western District of Washington formally consolidated the new lawsuit with the other consolidated federal shareholder derivative lawsuit pending in that court on June 15, 2021. The defendants intend to deny the allegations of wrongdoing and vigorously defend the claims in this consolidated lawsuit. We do not believe that there is a reasonable possibility that a material loss will be incurred related to these derivative matters.

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On September 17, 2019, International Business Machines Corporation (“IBM”) filed a complaint against us in the U.S. District Court for the Central District of California, alleging, among other things, that the Company has infringed and continues to willfully infringe 7seven patents held by IBM and seeks unspecified damages, including a request that the amount of compensatory damages be trebled, injunctive relief and costs and reasonable attorneys’ fees. On November 8, 2019, we filed a motion to transfer venue and/or to dismiss the complaint. On December 2, 2019, IBM filed an amended complaint, and on December 16, 2019 we filed a renewed motion to transfer venue and/or to dismiss the complaint. The Company’s motion to transfer venue to the U.S. District Court for the Western District of Washington was granted on May 28, 2020. On August 12, 2020, IBM filed its answer to our counterclaims. On September 18, 2020, we filed 4four Inter Partes Review (“IPR”) petitions before the U.S. Patent and Trial Appeal Board (“PTAB”) seeking the Board’s review of the patentability with respect to 3three of the patents asserted by IBM in the lawsuit. On March 15, 2021, the PTAB instituted IPR proceedings with respect to 2two of the 3three patents for which we filed petitions. On March 22, 2021, the PTAB denied institution with respect to the last of the three patents. On January 22, 2021, the court partially stayed the action with respect to all patents for which we filed an IPR and set forth a motion schedule. On March 8, 2021, IBM filed its second amended complaint. On March 25, 2021, we filed an amended motion for judgment on the pleadings. On July 15, 2021, the court rendered an order in connection with the motion for judgment on the pleadings finding in our favor on two of the four patents on which we filed our motion. On August 31, 2021, the Court ruled that the parties will proceed with respect to the two patents for which it previously denied judgment, and vacated the stay with respect to one of the three patents for which Zillow filed an IPR, which stay was ~~denied~~later reinstated by stipulation of the ~~PTAB.~~parties on May 18, 2022. On September 23, 2021, IBM filed a notice of appeal with the United States Court of Appeals for the Federal Circuit with respect to the August 31, 2021 judgment ~~entered. Oral argument~~entered, which judgment was affirmed by the Federal Circuit on ~~the appeal is scheduled for June 7,~~October 17, 2022. On March 3, 2022, the PTAB ruled on Zillow’s two remaining IPRs finding that Zillow was able to prove certain claims unpatentable, and others it was not. On October 28, 2022, the court found one of the two patents upon which the parties were proceeding in this action as invalid, and dismissed IBM’s claim relating to that patent. Following the court’s ruling, on October 28, 2022, the parties filed a joint stipulation with the court seeking a stay of this action, which was granted by the court on November 1, 2022. We deny the allegations of any wrongdoing and intend to vigorously defend the claims in the lawsuit. There is a reasonable possibility that a loss may be incurred related to this matter; however, the possible loss or range of loss is not estimable.

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On July 21, 2020, IBM filed a second action against us in the U.S. District Court for the Western District of Washington, alleging, among other things, that the Company has infringed and continues to willfully infringe 5five patents held by IBM and seeks unspecified damages. On September 14, 2020, we filed a motion to dismiss the complaint filed in the action, to which IBM responded by the filing of an amended complaint on November 5, 2020. On December 18, 2020, we filed a motion to dismiss IBM’s first amended complaint. On December 23, 2020, the Court issued a written order staying this case in full. On July 23, 2021, we filed an IPR with the PTAB with respect to 1one patent included in the second lawsuit. On October 6, 2021, the stay of this action was lifted, except for ~~proceeds~~proceedings relating to the 1one patent for which we filed an IPR. On December 1, 2021, the Court dismissed the fourth claim asserted by IBM in its amended complaint. On December 16, 2021 Zillow filed a motion to dismiss the remaining claims alleged in IBM’s amended complaint. On March 9, 2022, the Court granted Zillow’s motion to dismiss in full, dismissing IBM’s claims related to all the patents asserted by IBM in this action, except for the 1one patent for which an IPR was still pending. On March 10, 2022, the PTAB rendered its decision denying Zillow’s IPR on the 1one remaining patent, for which this case continues to remain stayed. On August 1, 2022, IBM filed an appeal of the Court’s ruling with respect to two of the dismissed patents. We deny the allegations of any wrongdoing and intend to vigorously defend the claims in the lawsuit. There is a reasonable possibility that a loss may be incurred related to this matter; however, the possible loss or range of loss is not estimable.

On November 16, 2021, November 19, 2021 and January 6, 2022, 3three purported class action lawsuits were filed against us and certain of our executive officers, alleging, among other things, violations of federal securities laws on behalf of a class of those who purchased our stock between August 7, 2020 and November 2, 2021. The 3three purported class action lawsuits, captioned Barua v. Zillow Group, Inc. et al., Silverberg v. Zillow Group, et al. and Hillier v. Zillow Group, Inc. et al. were brought in the U.S. District Court for the Western District of Washington and were consolidated on February 16, 2022. ~~The complaints allege,~~On May 12, 2022, the plaintiffs filed their amended consolidated complaint which alleges, among other things, that we issued materially false and misleading statements regarding our Zillow Offers business. The complaints seek to recover, among other things, alleged damages sustained by the purported class members as a result of the alleged misconduct. We moved to dismiss the amended consolidated complaint on July 11, 2022, plaintiffs filed their opposition to the motion to dismiss on September 2, 2022, and we filed a reply in support of the motion to dismiss on October 11, 2022. We intend to deny the allegations of wrongdoing and intend to vigorously defend the claims in ~~these lawsuits.~~this consolidated lawsuit. We do not believe that a loss related to ~~these lawsuits~~this consolidated lawsuit is probable.

On March 10, 2022, aMay 5, 2022 and July 20, 2022 shareholder derivative ~~suit was~~suits were filed in the U.S. District Court for the Western District of Washington and on July 25, 2022, a shareholder derivative suit was filed in the Superior Court of the State of Washington, King County, against us and certain of our executive officers and directors seeking unspecified damages on behalf of the Company and certain other relief, such as reform to corporate governance practices. The plaintiffs (including the Company as a nominal defendant) allege, among other things, that the defendants breached their fiduciary duties by failing to maintain an effective system of internal controls, which purportedly caused the losses the Company incurred when it decided to wind down Zillow Offers operations. Plaintiffs also allege, among other things, violations of Section 14(a) and Section 20(a) of the Securities Exchange Act of 1934, insider trading and waste of corporate assets. On June 1, 2022 and September 14, 2022, the U.S. District Court for the Western District of Washington issued orders consolidating the three federal derivative suits and staying the consolidated action until further order of the court. On September 15, 2022, the Superior Court of the State of Washington entered a temporary stay in the state derivative suit. The defendants intend to deny the allegations of wrongdoing and vigorously defend the claims in ~~this lawsuit.~~these lawsuits. We do not believe that a loss related to ~~this lawsuit~~these lawsuits is probable.

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In addition to the matters discussed above, from time to time, we are involved in litigation and claims that arise in the ordinary course of business. Although we cannot be certain of the outcome of any such litigation or claims, nor the amount of damages and exposure that we could incur, we currently believe that the final disposition of such matters will not have a material effect on our business, financial position, results of operations or cash flow. Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.

Indemnifications

In the ordinary course of business, we enter into contractual arrangements under which we agree to provide indemnification of varying scope and terms to business partners and other parties with respect to certain matters. For additional information regarding our indemnifications, see Note 18 in the Notes to the Consolidated Financial Statements in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

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Note 17. Segment Information and Revenue

We have 3three operating and reportable segments, which have been identified based on the way in which our chief operating decision-maker manages our business, makes operating decisions and evaluates operating performance. The chief executive officer acts as the chief operating decision-maker and reviews financial and operational information for the ~~Homes, IMT~~Internet, Media & Technology (“IMT”), Mortgages and ~~Mortgages~~Homes segments.

The Homes segment includes the financial results from Zillow Group’s purchase and sale of homes directly through Zillow Offers and the financial results from title and escrow services performed by Zillow Closing Services primarily in connection with the purchase and sale of Zillow Offers homes. In November 2021, our Board of Directors made the determination to wind down Zillow Offers operations. The IMT segment includes the financial results for the Premier Agent, rentals and new construction marketplaces, ~~dotloop and display,~~ as well as ~~revenue from the sale of various~~display, StreetEasy, ShowingTime+, which houses ShowingTime, Bridge Interactive, dotloop and interactive floor plans, and other ~~marketing~~advertising and business ~~products~~software solutions. In the first quarter of 2022, we began reporting rentals revenue as a separate revenue category within the IMT segment and ~~services~~prior period amounts have been recast to ~~real estate professionals.~~conform to this presentation. In the fourth quarter of 2021, we began to include the financial results of ShowingTime in the IMT segment. The Mortgages segment primarily includes the financial results for mortgage originations and the sale of mortgages on the secondary market through Zillow Home Loans and advertising sold to mortgage lenders and other mortgage professionals. The Homes segment includes the financial results from title and escrow services performed by Zillow Closing Services and certain indirect costs of the Homes segment which do not qualify as discontinued operations. As discussed in Note 3, as of September 30, 2022, the wind down of Zillow Offers was complete and we have presented the financial results of Zillow Offers as discontinued operations in our condensed consolidated financial statements, and prior period amounts have been recast to conform to this presentation.

Revenue and costs are directly attributed to our segments when possible. However, due to the integrated structure of our business, certain costs incurred by one segment may benefit the other segments. These costs primarily include headcount-related expenses, general and administrative expenses including executive, finance, accounting, legal, human resources, recruiting and facilities costs, product development and data acquisition costs, costs related to operating our mobile applications and websites and marketing and advertising costs. These costs are allocated to each segment based on the estimated benefit each segment receives from such expenditures.

The chief executive officer reviews information about our revenue categories as well as statement of operations data inclusive of income (loss) from continuing operations before income taxes by segment. This information is included in the following tables for the periods presented (in millions) and prior period amounts have been recast to conform to the current format (rentals revenue is now presented as a separate revenue category and Note 2 includes additional details regarding certain reclassifications):


	Three Months Ended September 30, 2022						Three Months Ended September 30, 2021
	IMT		Mortgages		Homes		IMT		Mortgages		Homes
Revenue:
Premier Agent	$	312	$	—	$	—	$	359	$	—	$	—
Rentals	74		—		—		67		—		—
Other	71		—		—		54		—		—
Mortgages	—		26		—		—		70		—
Total revenue	457		26		—		480		70		—
Cost of revenue (1)	67		17		5		51		22		9
Gross profit	390		9		(5)		429		48		(9)
Operating expenses (1):
Sales and marketing	145		20		—		159		29		17
Technology and development	126		16		—		75		7		19
General and administrative	110		25		3		62		18		24
Acquisition-related costs	—		—		—		3		—		—
Total operating expenses	381		61		3		299		54		60
Income (loss) from continuing operations	9		(52)		(8)		130		(6)		(69)
Segment other income (expense)	(4)		1		—		—		1		—
Segment interest expense	—		—		—		—		(1)		—
Income (loss) from continuing operations before income taxes (2)	$	5	$	(51)	$	(8)	$	130	$	(6)	$	(69)

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		Three Months Ended March 31, 2022						Three Months Ended March 31, 2021							Nine Months Ended September 30, 2022						Nine Months Ended September 30, 2021
		Homes		IMT		Mortgages		Homes		IMT		Mortgages			IMT		Mortgages		Homes		IMT		Mortgages		Homes
Revenue:	Revenue:													Revenue:
Zillow Offers		$	3,718	$	—	$	—	$	701	$	—	$	—
Premier Agent	Premier Agent	—		363		—		—		334		—		Premier Agent	$	1,008	$	—	$	—	$	1,042	$	—	$	—
Rentals	Rentals	—		61		—		—		64		—		Rentals	206		—		—		204		—		—
Other	Other	3		66		—		3		48		—		Other	208		—		—		156		—		—
Mortgages	Mortgages	—		—		46		—		—		68		Mortgages	—		101		—		—		195		—
Total revenue	Total revenue	3,721		490		46		704		446		68		Total revenue	1,422		101		—		1,402		195		—
Cost of revenue (1)	Cost of revenue (1)	3,537		65		20		645		47		19		Cost of revenue (1)	203		54		21		141		62		25
Gross profit	Gross profit	184		425		26		59		399		49		Gross profit	1,219		47		(21)		1,261		133		(25)
Operating expenses (1):	Operating expenses (1):													Operating expenses (1):
Sales and marketing	Sales and marketing	142		142		23		55		117		25		Sales and marketing	430		61		11		413		81		38
Technology and development	Technology and development	12		92		10		33		79		8		Technology and development	323		37		9		244		24		51
General and administrative	General and administrative	24		77		18		25		59		17		General and administrative	274		63		33		189		53		61
Restructuring costs	Restructuring costs	30		6		2		—		—		—		Restructuring costs	6		2		6		—		—		—
Acquisition-related costs	Acquisition-related costs	—		—		—		—		1		—		Acquisition-related costs	—		—		—		8		—		—
Total operating expenses	Total operating expenses	208		317		53		113		256		50		Total operating expenses	1,033		163		59		854		158		150
Income (loss) from operations		(24)		108		(27)		(54)		143		(1)
Segment other income		6		—		1		—		—		1
Income (loss) from continuing operations														Income (loss) from continuing operations	186		(116)		(80)		407		(25)		(175)
Segment other income (expense)														Segment other income (expense)	(4)		2		—		—		3		—
Segment interest expense	Segment interest expense	(36)		—		(1)		(4)		—		(2)		Segment interest expense	—		(2)		—		—		(4)		—
Loss on extinguishment of debt		(14)		—		—		—		—		—
Income (loss) before income taxes (2)		$	(68)	$	108	$	(27)	$	(58)	$	143	$	(2)
Income (loss) from continuing operations before income taxes (2)														Income (loss) from continuing operations before income taxes (2)	$	182	$	(116)	$	(80)	$	407	$	(26)	$	(175)

(1) The following ~~table presents~~tables present depreciation and amortization expense and share-based compensation expense for each of our segments for the periods presented (in millions):


		Three Months Ended March 31, 2022						Three Months Ended March 31, 2021							Three Months Ended September 30, 2022						Three Months Ended September 30, 2021
		Homes		IMT		Mortgages		Homes		IMT		Mortgages			IMT		Mortgages		Homes		IMT		Mortgages		Homes
Depreciation and amortization expense	Depreciation and amortization expense	$	5	$	35	$	3	$	5	$	23	$	1	Depreciation and amortization expense	$	32	$	2	$	—	$	23	$	2	$	3
Share-based compensation expense	Share-based compensation expense	$	12	$	60	$	10	$	16	$	42	$	6	Share-based compensation expense	$	123	$	23	$	1	$	50	$	9	$	11


	Nine Months Ended September 30, 2022						Nine Months Ended September 30, 2021
	IMT		Mortgages		Homes		IMT		Mortgages		Homes
Depreciation and amortization expense	$	104	$	8	$	2	$	68	$	5	$	8
Share-based compensation expense	$	263	$	46	$	14	$	150	$	25	$	29

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(2) The following table presents the reconciliation of total segment income (loss) from continuing operations before income taxes to consolidated income (loss) from continuing operations before income taxes for the periods presented (in millions):


		Three Months Ended March 31,					Three Months Ended September 30,				Nine Months Ended September 30,
		2022		2021			2022		2021		2022		2021
Total segment income before income taxes		$	13	$	83
Total segment income (loss) from continuing operations before income taxes						Total segment income (loss) from continuing operations before income taxes	$	(54)	$	55	$	(14)	$	206
Corporate interest expense	Corporate interest expense	(7)		(34)		Corporate interest expense	(9)		(28)		(24)		(95)
Corporate other income	Corporate other income	1		1		Corporate other income	15		1		21		2
Loss on extinguishment of debt	Loss on extinguishment of debt	—		(1)		Loss on extinguishment of debt	—		(15)		—		(17)
Consolidated income before income taxes		$	7	$	49
Consolidated income (loss) from continuing operations before income taxes						Consolidated income (loss) from continuing operations before income taxes	$	(48)	$	13	$	(17)	$	96

Certain corporate items are not directly attributable to any of our segments, including ~~the~~ loss on extinguishment of debt, interest income earned on our short-term investments included in other income and interest costs on our convertible senior notes included in interest expense.

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~~Note 18. Restructuring and Zillow Offers Wind Down~~

In November 2021, the Board of Directors of Zillow Group made the determination to wind down Zillow Offers operations. This decision was made in light of home pricing unpredictability, capacity constraints and other operational challenges faced by Zillow Offers that were exacerbated by an unprecedented housing market, a global pandemic and a difficult labor and supply chain environment, all of which led us to conclude that, despite its initial promise in earlier quarters, Zillow Offers was unlikely to be a sufficiently stable line of business to meet our goals and needs going forward. The wind down is expected to be completed in the second half of 2022 and result in approximately a 25% reduction of Zillow Group’s workforce of which approximately 21% has been completed. During the wind down period, we continue to renovate and sell properties in inventory.

Cumulative amounts recognized and charges incurred during the three months ended March 31, 2022 primarily related to the wind down of Zillow Offers operations, and we expect future charges to primarily relate to the wind down of Zillow Offers operations and to primarily be recorded within our Homes segment. We have and plan to continue to fund the cash costs through existing cash and investment balances.

The following table presents a summary of Zillow Offers wind down-related charges incurred for the periods presented and our estimate of the total costs we expect to incur over the wind down period (in millions):

Three Months Ended
March 31, 2022
Statement of Operations Classification Homes Segment IMT Segment Mortgages Segment Total Recognized Cumulative Amount Recognized Total Expected
Inventory write-down Cost of revenue $ 5 $ — $ — $ 5 N/A N/A
Other charges:
Employee termination costs Restructuring costs $ 25 $ 6 $ 2 $ 33 $ 94 $95 - $106
Financing-related charges Interest expense and Loss on debt extinguishment 30 — — 30 36 $40
Contract termination costs Restructuring costs 4 — — 4 14 $16 - $19
Accelerated depreciation and amortization Cost of revenue 6 — — 6 11 $17
Asset write-offs Restructuring costs — — — — 1 $1
Other Restructuring costs 1 — — 1 1 $1 - $2
Total other charges 66 6 2 74 157 $170 - $185
Total $ 71 $ 6 $ 2 $ 79 $ 157

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The following table presents the accrual activity for exit and disposal costs for three months ended March 31, 2022, primarily related to cash severance employee termination costs and contract termination costs (in millions):

Three Months Ended
March 31, 2022
Employee Termination Costs Contract Termination Costs (1) Other Total
Balance, beginning of period $ 45 $ 4 $ — $ 49
Additions charged to expense 25 14 1 40
Cash payments (27) (12) — (39)
Adjustments (1) (2) — (3)
Balance, end of period $ 42 $ 4 $ 1 $ 47
(1) Contract termination costs for exit and disposal activities include the contractual prepayment penalties associated with our Zillow Offers financing facilities further described below under the subheading “Financing-Related Charges.”

~~Inventory write-downs~~

In determining the value of our inventory, we consider indicators that net realizable value may be lower than cost at the portfolio level, market level, and in certain circumstances by structure type (single family residence, condo, etc.) by reviewing economic analyses, recent trends in home price appreciation and changes to resale strategy. Factors we analyze include gross margin on homes closed in recent months, projected gross margin on homes under contract to sell, historical list price to resale price variances, and trends in gross margin, selling prices and average selling concessions or other costs of selling homes. We recorded a write-down to inventory totaling $5 million with a corresponding increase to cost of revenue in our condensed consolidated statement of operations for the three months ended March 31, 2022. See Note 5 for additional information on inventory.

~~Employee Termination Costs~~

At March 31, 2022, accrued employee termination costs of $41 million related to one-time termination benefits and $2 million related to other severance and employee costs, primarily pertaining to ongoing employee benefit arrangements, were recorded within accrued compensation and benefits in our condensed consolidated balance sheet.

~~Accelerated Depreciation and Amortization~~

We have adjusted the useful life of certain assets impacted by the wind down of Zillow Offers operations to end on the expected cease use date. This adjustment resulted in the accelerated recognition of depreciation and amortization primarily related to internal use software and website development costs.

~~Contract Termination Costs~~

At March 31, 2022, $4 million of contract termination costs are included in accrued expenses and other current liabilities in our condensed consolidated balance sheet. These costs relate to contract termination penalties and costs that will continue to be incurred under contracts without further economic benefit.

~~Financing-Related Charges~~

Financing-related charges incurred for the three months ended March 31, 2022 include the accelerated recognition of certain deferred debt issuance costs and debt discounts recorded to interest expense in our condensed consolidated statement of operations. Financing-related charges for the period also include expenses recorded within loss on extinguishment of debt within our condensed consolidated statement of operations primarily related to prepayment penalties incurred on the repayment of Zillow Offers financing facilities. Refer to Note 11 for further discussion of the Zillow Offers debt activity for the three months ended March 31, 2022.

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~~Note 19. Subsequent Events~~

On May 4, 2022, the Board of Directors authorized the repurchase of up to $1 billion of our Class A common stock, Class C capital stock or a combination thereof. This authorization is in addition to the $750 million repurchase authorization previously announced on December 2, 2021. The repurchases may be made in open-market transactions or privately negotiated transactions, or in such other manner as deemed appropriate by management, and may be made from time to time as determined by management depending on market conditions, share price, trading volume, cash needs and other business factors. The repurchase program does not have an expiration date.

In April 2022, in connection with the wind down of Zillow Offers operations, we repaid the remaining outstanding principal associated with the 2021-1 and 2021-2 term loans of $320 million and $473 million, respectively, plus accrued interest and prepayment penalties.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and the related notes included elsewhere in this Quarterly Report on Form 10-Q. In addition to historical financial information, the following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results may differ materially from those described in or implied by any forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Quarterly Report on Form 10-Q, including in the section titled “Note Regarding Forward-Looking Statements,” and also those factors discussed in Part I, Item 1A (Risk Factors) of our Annual Report on Form 10-K for the year ended December 31, 2021.

Overview of our Business

Our portfolio of consumer brands includes Zillow Premier Agent, and Premier Broker partners and our portfolio of Zillow-branded and affiliated transaction-oriented services. Zillow Offers has purchased and sold homes directly in markets across the country. In the fourth quarter of 2021, we began to wind down Zillow Offers operations with expected completion in the second half of 2022. Zillow Home Loans, our affiliate lender, ~~provides our customers with an easy option to get pre-approved and secure financing for their next home purchase.~~

~~Other consumer brands include~~Zillow Closing Services, Zillow Rentals, Trulia, StreetEasy, ~~Zillow Closing Services,~~ HotPads and Out East. In addition, Zillow Group provides a comprehensive suite of marketing software and technology solutions for the real estate industry which include Mortech, ~~dotloop, Bridge Interactive,~~ New Home Feed and ~~ShowingTime.~~ShowingTime+, which houses ShowingTime, Bridge Interactive, dotloop and interactive floor plans.

Discontinued Operations

In the fourth quarter of 2021, the Board of Directors (the “Board”) of Zillow Group made the determination to wind down Zillow Offers, our iBuying business which purchased and sold homes directly in markets across the United States. The wind down was complete as of September 30, 2022 and has resulted in approximately a 25% reduction of Zillow Group’s workforce. The financial results of Zillow Offers have been presented in the accompanying condensed consolidated financial statements as discontinued operations and, therefore, are excluded from the following discussion of the results of our continuing operations. Given the wind down of Zillow Offers and corresponding shift in our strategic plans, financial performance for prior and current periods may not be indicative of future performance. For additional information, see Note 3 in our Notes to the Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q.

August 2022 Equity Award Actions

On August 3, 2022, upon the recommendation of the Compensation Committee of the Board, the full Board approved adjustments to the exercise price of certain outstanding vested and unvested option awards for eligible employees. The exercise price of eligible option awards was reduced to $38.78, which was the closing market price of our Class C capital stock on August 8, 2022. No other changes were made to the terms and conditions of the eligible option awards. In addition, the Board approved a supplemental grant of restricted stock units to eligible employees that was granted on August 8, 2022 and vests quarterly over a two-year period beginning in August 2022. The repricing of eligible option awards and the issuance of supplemental restricted stock units (collectively the “August 2022 Equity Award Actions”) is expected to result in total incremental share-based compensation expense of approximately $189 million, $56 million of which was recognized during the three months ended September 30, 2022. The remaining expense will be recognized over the remaining requisite service period, which is largely over the next two years. For additional information, see Note 14 in our Notes to the Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q.

Reportable Segments and Revenue Overview

Zillow Group has three reportable segments: the ~~Homes segment, the~~ Internet, Media & Technology (“IMT”) segment, the Mortgages segment and the ~~Mortgages~~Homes segment. The Homes segment includes the financial results from Zillow Group’s purchase and sale of homes directly through the Zillow Offers service and the financial results from the title and escrow services performed by Zillow Closing Services, primarily in connection with the purchase and sale of Zillow Offers homes. The IMT segment includes the financial results for the Premier Agent, rentals and new construction marketplaces, as well as display, StreetEasy, ShowingTime+, which houses ShowingTime, Bridge Interactive, dotloop ~~display,~~and interactive floor plans, and other advertising and business software solutions. In the fourth quarter of 2021, we began to include the financial results of ShowingTime in the IMT segment. For additional information regarding the September 2021 acquisition of ShowingTime, see Note 9 in our Notes to Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q. The Mortgages segment primarily includes financial results for mortgage originations through Zillow Home Loans and advertising sold to mortgage lenders and other mortgage professionals.

The Homes segment ~~has primarily generated revenue through our Zillow Offers service~~includes the financial results from ~~the resale of homes. Other Homes revenue relates to revenue associated with~~ title and escrow services ~~provided through~~performed by Zillow Closing ~~Services. As a result~~Services and certain indirect costs of the ~~decision to wind down Zillow Offers operations, we plan to report Zillow Offers~~Homes segment which do not qualify as a discontinued ~~operation beginning with the period during which disposition~~operations.

Table of ~~the business is complete. We expect the disposition to be complete in the second half of 2022.~~Contents

Premier Agent revenue is generated by the sale of advertising services, as well as marketing and technology products and services, to help real estate agents and brokers grow and manage their businesses. We offer these products and services through our Premier Agent and Premier Broker programs. Premier Agent and Premier Broker products, which include the delivery of validated customer connections, or leads, are primarily offered on a share of voice basis. Connections are distributed to Premier Agent and Premier Broker partners in proportion to their share of voice, or an agent advertiser’s share of total advertising purchased in a particular zip code. Connections are delivered when customer contact information is provided to Premier Agent and Premier Broker partners. Connections are provided as part of our suite of advertising services for Premier Agent and Premier Broker partners; we do not charge a separate fee for these customer leads.

We also offer a pay for performance pricing model called “Flex” for Premier Agent and Premier Broker services in certain markets to select partners. With the Flex model, Premier Agent and Premier Broker partners are provided with validated leads at no initial cost and pay a performance fee only when a real estate transaction is closed with one of the leads.

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Rentals revenue includes advertising sold to property managers, landlords and other rental professionals on a cost per lead, click, lease, listing or impression basis or for a fixed fee for certain advertising packages. Rentals revenue also includes revenue generated from our rental applications product, through which potential renters can submit applications to multiple properties for a flat service fee.

Other IMT revenue includes revenue generated by new construction and display advertising, as well as revenue from the sale of various other advertising and business technology solutions for real estate professionals, including StreetEasy and ShowingTime+, which houses ShowingTime, Bridge Interactive, dotloop and ~~ShowingTime.~~interactive floor plans. New construction revenue primarily includes advertising services sold to home builders on a cost per residential community or cost per impression basis. Display revenue consists of graphical mobile and web advertising sold on a cost per impression or cost per click basis to advertisers promoting their brands on our mobile applications and websites. StreetEasy revenue includes advertising services sold to real estate professionals serving the New York City market primarily on a cost per listing or performance fee basis. ShowingTime revenue is primarily generated by Appointment Center, a software-as-a-service and call center solution allowing real estate agents, brokerages and multiple listing services to efficiently schedule real estate viewing appointments on behalf of their customers. Appointment Center services also include call center specialists who provide scheduling support to customers. Appointment Center revenue is primarily billed in advance on a monthly basis.

In our Mortgages segment, we primarily generate revenue through mortgage originations and the related sale of mortgages on the secondary market through Zillow Home Loans and from advertising sold to mortgage lenders and other mortgage professionals on a cost per lead basis, including our Custom Quote and Connect services.

Homes segment revenue relates to revenue associated with title and escrow services provided through Zillow Closing Services and was not material for the periods presented.

As of ~~March 31,~~September 30, 2022, we had ~~6,549~~5,830 full-time employees compared to 8,005 full-time employees as of December 31, 2021. The reduction in ~~employee headcount~~the number of employees was primarily related to the ~~result of our decision to~~ wind down of Zillow Offers operations.

Financial ~~Highlights~~Overview

For the three months ended ~~March 31,~~September 30, 2022 and 2021, we generated total revenue of ~~$4.3 billion~~$483 million and ~~$1.2 billion,~~$550 million, respectively, representing a year-over-year ~~growth~~decrease of ~~250%~~12%. The ~~increase~~decrease in total revenue was primarily attributable to the following:

•Zillow Offers revenue increased by $3.0 billion to $3.7 billion for the three months ended March 31, 2022 due to the sale of 8,981 homes at an average selling price of $414.0 thousand per home. For the three months ended March 31, 2021, Zillow Offers revenue was $701 million due to the sale of 1,965 homes at an average selling price of $356.7 thousand per home. We expect Zillow Offers revenue to decrease in subsequent quarters as we complete our wind down of Zillow Offers.

•Premier Agent revenue ~~increased~~decreased by ~~$29~~$47 million to ~~$363~~$312 million for the three months ended ~~March 31,~~September 30, 2022 compared to ~~$334~~$359 million for the three months ended ~~March 31,~~September 30, 2021. The ~~increase~~decrease in Premier Agent revenue was primarily due to macro housing market factors including interest rate and home price increases and volatility, as well as tight inventory levels. These factors resulted in a ~~4% increase~~16% decrease in Premier Agent revenue per ~~visit, driven primarily by continued strong demand across the residential real estate industry and growth in monetization of our impressions and leads.~~visit.

•~~Other IMT~~Mortgages segment revenue ~~increased~~decreased by ~~$18~~$44 million to ~~$66~~$26 million for the three months ended ~~March 31,~~September 30, 2022 compared to ~~$48~~$70 million for the three months ended ~~March 31,~~September 30, 2021, driven by a decrease in revenue generated by Zillow Home Loans, as total loan origination volume decreased 76% primarily resulting from a decrease in demand for mortgages attributable to the rising and volatile interest rate environment. The decrease in Mortgages segment revenue was also impacted by a decrease in revenue from Custom Quote and Connect advertising services.

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•The decreases noted above were partially offset by a $17 million increase in Other IMT revenue to $71 million for the three months ended September 30, 2022 compared to $54 million for the three months ended September 30, 2021. The increase in Other IMT revenue was primarily a result of the addition of ShowingTime revenue beginning in the fourth quarter of 2021.

•Mortgages segment revenue decreased by $22 million to $46 million for the three months ended March 31, 2022 compared to $68 million for the three months ended March 31, 2021, driven by a decrease in revenue generated by Zillow Home Loans, as total loan origination volume decreased 40%. The decrease in loan origination volume was driven primarily by higher interest rates that decreased demand for refinance mortgages.

During the three months ended ~~March 31,~~September 30, 2022 and 2021, we generated total gross profit of ~~$635~~$394 million and ~~$507~~$468 million, respectively, representing a year-over-year ~~increase~~decrease of ~~25%.~~16%, due to the combined factors discussed below.

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Housing Market

~~Wind Down of Zillow Offers Operations~~

~~In November 2021, the Board of Directors of Zillow Group made the determination to wind down Zillow Offers operations. The wind down~~Our financial performance is ~~expected to be completed~~impacted by changes in the second half of 2022 and result in approximately a 25% reduction of Zillow Group’s workforce of which approximately 21% has been completed. During the wind down period, we continue to sell properties in inventory. As of early May 2022, we have sold, are under contract to sell or have reached agreement on disposition terms for all except approximately 100 homes. We expect the sale of our remaining inventory to be substantially complete during the three months ending June 30, 2022, with operations and a small amount of inventory extending into the three months ending September 30, 2022. As of January 31, 2022, we are no longer acquiring homes. For the three months ended March 31, 2022, we recorded a write-down to inventory totaling $5 million with a corresponding increase to cost of revenue as a result of purchasing homes at higher prices than our current estimateshealth of the housing market, which is impacted, in turn, by general economic conditions. Current market factors, including low housing inventory, fewer new for-sale listings, increases and volatility in mortgage interest rates as well as home price fluctuations, inflationary conditions and high rental occupancy rates may have a negative impact on the number of transactions that consumers complete using our products and services and on demand for our advertising services. The extent to which these factors impact our results and financial position will depend on future selling prices after selling costs. For the three months ended March 31, 2022, we have also incurred $30 million in restructuring costs within our Homes segment associated with our wind down of Zillow Offers operations, primarily associated with one-time termination benefit costs, other severancedevelopments, which are uncertain and employee costs and contract termination costs. Additionally, for the three months ended March 31, 2022, we incurred $30 million of charges associated with winding down Zillow Offers financing facilities, which have been recorded within interest expense and loss on extinguishment of debt, and $6 million of accelerated depreciation and amortization recordeddifficult to cost of revenue. For additional information regarding the impairment and restructuring costs, including total expected costs to be incurred and cumulative costs incurred as of March 31, 2022, see Note 18 in our Notes to Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q and the subsection below titled “Impairment and Restructuring” under the caption “Results of Operations.” Given the wind down of Zillow Offers and corresponding shift in our strategic plans, financial performance for prior and current periods may not be indicative of future performance.predict.

COVID-19 Impact

The effect and extent of the impact of the COVID-19 pandemic on our business continues to be uncertain and difficult to predict. While we have seen recovery in our business and the businesses of our customers and real estate partners from the initial economic effects of the pandemic, the duration and impact of the COVID-19 pandemic (including variants) may continue to affect our financial ~~results in 2022.~~results. The extent to which COVID-19 (including any variants) continues to ~~impact our results and financial position will depend on future developments, which are uncertain and difficult to predict.~~

~~Health of Residential Housing Market~~

Our financial performance is impacted by changes in the health of the residential housing market, which is impacted, in turn, by general economic conditions. Current market factors, including low housing inventory, decreases in new for-sale listings, increases in mortgage interest rates, inflationary conditions and high rental occupancy rates may have a negative impact on the number of transactions that consumers complete using our products and services and on demand for our advertising services. The extent to which these factors impact our results and financial position will depend on future developments, which are uncertain and difficult to predict.

Key Metrics

Management has identified visits, unique users and the volume of loans originated through Zillow Home Loans as relevant to investors’ and others’ assessment of our financial condition and results of operations. We no longer consider the number of homes sold as a key metric given the wind down of Zillow Offers operations.

Visits

The number of visits is an important metric because it is an indicator of consumers’ level of engagement with our mobile applications, websites and other services. We believe highly engaged consumers are more likely to ~~have participated in~~use our ~~Zillow Offers program, use~~products and services, including Zillow Homes Loans, or be transaction-ready real estate market participants and therefore are more sought-after by our Premier Agent and Premier Broker ~~real estate~~ partners.

We define a visit as a group of interactions by users with the Zillow, Trulia and StreetEasy mobile applications and websites. A single visit can contain multiple page views and actions, and a single user can open multiple visits across domains, web browsers, desktop or mobile devices. Visits can occur on the same day, or over several days, weeks or months.

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Zillow and StreetEasy measure visits with Google Analytics, and Trulia measures visits with Adobe Analytics. Visits to Trulia end after thirty minutes of user inactivity. Visits to Zillow and StreetEasy end either: (i) after thirty minutes of user inactivity or at midnight; or (ii) through a campaign change. A visit ends through a campaign change if a visitor arrives via one campaign or source (for example, via a search engine or referring link on a third-party website), leaves the mobile application or website, and then returns via another campaign or source.

The following table presents the number of visits to our mobile applications and websites for the periods presented (in millions):

Three Months Ended
March 31, 2021 to 2022
% Change
2022 2021
Visits 2,627 2,511 5 %


	Three Months Ended September 30,		2021 to 2022 % Change
	2022	2021
Visits	2,767	2,662	4	%

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Unique Users

Measuring unique users is important to us because much of our revenue depends in part on our ability to connect home buyers and sellers, renters and individuals with or looking for a mortgage to real estate, rental and mortgage professionals, products and services. Growth in consumer traffic to our mobile applications and websites increases the number of impressions, clicks, connections, leads and other events we can monetize to generate revenue. For example, our ~~Homes segment revenue depended in part, and our Mortgages segment~~ revenue depends in part, on users accessing our mobile applications and websites to engage in the sale, purchase and financing of homes, including with ~~Zillow Offers and~~ Zillow Home Loans, and our Premier Agent revenue, rentals revenue and display revenue depend on advertisements being served to users of our mobile applications and websites.

We count a unique user the first time an individual accesses one of our mobile applications using a mobile device during a calendar month and the first time an individual accesses one of our websites using a web browser during a calendar month. If an individual accesses our mobile applications using different mobile devices within a given month, the first instance of access by each such mobile device is counted as a separate unique user. If an individual accesses more than one of our mobile applications within a given month, the first access to each mobile application is counted as a separate unique user. If an individual accesses our websites using different web browsers within a given month, the first access by each such web browser is counted as a separate unique user. If an individual accesses more than one of our websites in a single month, the first access to each website is counted as a separate unique user since unique users are tracked separately for each domain. Zillow, StreetEasy and HotPads measure unique users with Google Analytics, and Trulia measures unique users with Adobe Analytics.

Due to third-party technological limitations, user software settings or user behavior, Google Analytics may assign a unique cookie to different instances of access by the same individual to our mobile applications and websites. In such instances, Google Analytics would count different instances of access by the same individual as separate unique users. Accordingly, reliance on the number of unique users counted by Google Analytics may overstate the actual number of unique users who access our mobile applications and websites during the period.

The following table presents our average monthly unique users for the periods presented (in millions):

Three Months Ended
March 31, 2021 to 2022
% Change
2022 2021
Average monthly unique users 211 221 (5) %

During the three months ended March 31, 2022, unique users decreased 5% compared to the three months ended March 31, 2021, driven primarily by strong residential real estate industry recovery in the comparable prior year period coupled with more normalized seasonality impacts during the three months ended March 31, 2022 compared to the three months ended March 31, 2021.

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	Three Months Ended September 30,		2021 to 2022 % Change
	2022	2021
Average monthly unique users	236	227	4	%

Loan Origination Volume

Loan origination volume is an important metric as it is a measure of how successful we are at ~~growing originations~~the origination and subsequent ~~sales~~sale of mortgage loan products through our mortgage origination business, Zillow Home Loans, which directly impacts our Mortgages segment revenue. Loan origination volume represents the total value of mortgage loan originations closed through Zillow Home Loans during the period.

The following table presents loan origination volume by purpose and in total for Zillow Home Loans for the periods presented (in millions):


		Three Months Ended March 31,				2021 to 2022 % Change			Three Months Ended September 30,				2021 to 2022 % Change
		2022		2021					2022		2021
Purchase loan origination volume	Purchase loan origination volume	$	123	$	115	7	%	Purchase loan origination volume	$	240	$	359	(33)	%
Refinance loan origination volume	Refinance loan origination volume	578		1,052		(45)	%	Refinance loan origination volume	31		754		(96)	%
Total loan origination volume	Total loan origination volume	$	701	$	1,167	(40)	%	Total loan origination volume	$	271	$	1,113	(76)	%

During the three months ended ~~March 31,~~September 30, 2022, total loan origination volume decreased ~~40%~~76% compared to the three months ended ~~March 31,~~September 30, 2021, driven primarily by higher interest rates which decreased demand for ~~refinance~~ mortgages.

Results of Operations

Given ~~the~~continued uncertainty surrounding ~~the COVID-19 pandemic,~~ the health of the ~~residential~~ housing market, interest rate environment and ~~strategic shifts in our business,~~the COVID-19 pandemic, financial performance for ~~prior~~current and ~~current~~prior periods may not be indicative of future performance.

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Revenue


										% of Total Revenue													% of Total Revenue
		Three Months Ended March 31,				2021 to 2022				Three Months Ended March 31,					Three Months Ended September 30,				2021 to 2022				Three Months Ended September 30,
		2022		2021		$ Change		% Change		2022		2021			2022		2021		$ Change		% Change		2022		2021

		(in millions, unaudited)													(in millions, unaudited)
Revenue:	Revenue:													Revenue:
Homes segment:
Zillow Offers		$	3,718	$	701	$	3,017	430	%	87	%	58	%
Other		3		3		—		—		—		—
Total Homes segment revenue		3,721		704		3,017		429		87		58
IMT segment:	IMT segment:													IMT segment:
Premier Agent	Premier Agent	363		334		29		9		9		27		Premier Agent	$	312	$	359	$	(47)	(13)	%	65	%	65	%
Rentals	Rentals	61		64		(3)		(5)		1		5		Rentals	74		67		7		10		15		12
Other	Other	66		48		18		38		2		4		Other	71		54		17		31		15		10
Total IMT segment revenue	Total IMT segment revenue	490		446		44		10		12		37		Total IMT segment revenue	457		480		(23)		(5)		95		87
Mortgages segment	Mortgages segment	46		68		(22)		(32)		1		6		Mortgages segment	26		70		(44)		(63)		5		13
Total revenue	Total revenue	$	4,257	$	1,218	$	3,039	250	%	100	%	100	%	Total revenue	$	483	$	550	$	(67)	(12)	%	100	%	100	%


									% of Total Revenue
	Nine Months Ended September 30,				2021 to 2022				Nine Months Ended September 30,
	2022		2021		$ Change		% Change		2022		2021

	(in millions, unaudited)
Revenue:
IMT segment:
Premier Agent	$	1,008	$	1,042	$	(34)	(3)	%	66	%	65	%
Rentals	206		204		2		1		14		13
Other	208		156		52		33		14		10
Total IMT segment revenue	1,422		1,402		20		1		93		88
Mortgages segment	101		195		(94)		(48)		7		12
Total revenue	$	1,523	$	1,597	$	(74)	(5)	%	100	%	100	%

Three months ended September 30, 2022 compared to three months ended September 30, 2021

Total revenue ~~increased $3.0 billion,~~decreased $67 million, or ~~250%~~12%, to ~~$4.3 billion:~~

•Homes segment revenue increased 429% to $3.7 billion, primarily due to an increase of $3.0 billion, or 430%, in Zillow Offers revenue. Zillow Offers revenue increased to $3.7 billion due to the sale of 8,981 homes at an average selling price of $414.0 thousand per home, as compared to the sale of 1,965 homes at an average selling price of $356.7 thousand per home in the comparable prior year period. The increase in revenue is due to increased acquisition volumes in 2021 subsequent to the three months ended March 31, 2021, which resulted in higher resale volumes, including accelerated resales, as we wind down Zillow Offers operations. We expect Zillow Offers revenue to decrease in subsequent quarters as we complete our wind down of Zillow Offers.

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$483 million:

•IMT segment revenue ~~increased 10%~~decreased to ~~$490~~$457 million, primarily due to a ~~$29~~$47 million, or 9%13%, decrease in Premier Agent revenue, partially offset by a $17 million, or 31%, increase in ~~Premier Agent~~Other IMT revenue. The ~~increase~~decrease in Premier Agent revenue was driven by ~~an increase~~macro housing market factors including interest rate and home price increases and volatility, as well as tight inventory levels. These factors resulted in a decrease in Premier Agent revenue per visit, which ~~increased~~decreased by 4%16% to ~~$0.138~~$0.113 for the three months ended ~~March 31,~~September 30, 2022 from ~~$0.133~~$0.135 for the three months ended ~~March 31,~~September 30, 2021. We calculate Premier Agent revenue per visit by dividing the revenue generated by our Premier Agent and Premier Broker programs by the number of visits in the period. The increase in Premier Agent revenue per visit was driven primarily by continued strong demand across the residential real estate industry which increased home sales prices and resulted in higher monetization of leads. Other IMT revenue increased primarily as a result of the addition of ShowingTime revenue beginning in the fourth quarter of 2021. We expect IMT segment revenue to decrease in absolute dollars during the three months ending December 31, 2022 primarily due to continued macroeconomic pressure on demand driven by home price affordability, which has been impacted by higher home prices and interest rate increases.

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•Mortgages segment revenue decreased ~~32%~~63% to ~~$46~~$26 million ~~primarily~~ due to a decline in mortgage originations revenue which drove 73% of the decrease in Mortgages segment revenue, and a decline in our Custom Quote and Connect advertising services revenue which drove 27% of the decrease in Mortgages segment revenue. The decrease in mortgage originations revenue was primarily due to a ~~40%~~76% decrease in total loan origination volume from ~~$1.2~~$1.1 billion to ~~$701~~$271 million, primarily resulting from a decrease in ~~refinance activity.~~demand for mortgages attributable to the rising and volatile interest rate environment. The decrease in mortgage originations revenue was also attributable to a ~~27%~~38% decrease in gain on sale margin driven by industry margin compression. Gain on sale margin represents the net gain on sale of mortgage loans divided by total loan origination volume for the period. Net gain on sale of mortgage loans includes all components related to the origination and sale of mortgage loans, including the net gain on sale of loans into the secondary market, loan origination fees, unrealized gains and losses associated with changes in fair value of interest rate lock commitments and mortgage loans held for sale, realized and unrealized gains or losses from derivative financial instruments and the provision for losses relating to representations and warranties. The decrease in our Custom Quote and Connect advertising revenue was primarily due to a 44% decrease in leads generated from marketing products sold to mortgage professionals driven by a decrease in demand for mortgages attributable to the rising and volatile interest rate environment. We expect Mortgage segment revenue to decrease for the three months ending December 31, 2022, driven primarily by adverse macro housing market factors.

Nine months ended September 30, 2022 compared to the nine months ended September 30, 2021

Total revenue decreased $74.0 million, or 5%, to $1.5 billion:

•Mortgages segment revenue decreased 48% to $101 million due to a decline in mortgage originations revenue which drove 77% of the decrease in Mortgages segment revenue, and a decline in our Custom Quote and Connect advertising services revenue which drove 23% of the decrease in Mortgages segment revenue. The decrease in mortgage originations revenue was primarily due to a 59% decrease in total loan origination volume from $3.2 billion to $1.3 billion, primarily resulting from a decrease in demand for mortgages attributable to the rising interest rate environment. The decrease in mortgage originations revenue was also attributable to a 27% decrease in gain on sale margin driven by industry margin compression. The decrease in our Custom Quote and Connect advertising revenue was primarily due to a 33% decrease in leads generated from marketing products sold to mortgage professionals driven by a decrease in demand for mortgages attributable to the rising interest rate environment.

•IMT segment revenue increased to $1.4 billion, primarily due to a $52 million, or 33%, increase in Other IMT revenue, partially offset by a $34 million, or 3%, decrease in Premier Agent revenue. Other IMT revenue increased primarily as a result of the addition of ShowingTime revenue beginning in the fourth quarter of 2021. The decrease in Premier Agent revenue was driven by macro housing market factors including interest rate and home price increases and volatility, as well as tight inventory levels. These factors resulted in a decrease in Premier Agent revenue per visit, which decreased by 8% to $0.122 for the nine months ended September 30, 2022 from $0.132 for the nine months ended September 30, 2021.

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Income (Loss) from Continuing Operations Before Income Taxes


										% of Revenue													% of Revenue
		Three Months Ended March 31,				2021 to 2022				Three Months Ended March 31,					Three Months Ended September 30,				2021 to 2022				Three Months Ended September 30,
		2022		2021		$ Change		% Change		2022		2021			2022		2021		$ Change		% Change		2022		2021

		(in millions, unaudited)													(in millions, unaudited)
Income (loss) before income taxes:
Homes segment		$	(68)	$	(58)	$	(10)	(17)	%	(2)	%	(8)	%
Income (loss) from continuing operations before income taxes:														Income (loss) from continuing operations before income taxes:
IMT segment	IMT segment	108		143		(35)		(24)		22		32		IMT segment	$	5	$	130	$	(125)	(96)	%	1	%	27	%
Mortgages segment	Mortgages segment	(27)		(2)		(25)		(1250)		(59)		(3)		Mortgages segment	(51)		(6)		(45)		(750)		(196)		(9)
Homes segment														Homes segment	(8)		(69)		61		88		N/A		N/A
Corporate items (1)	Corporate items (1)	(6)		(34)		28		82		N/A		N/A		Corporate items (1)	6		(42)		48		114		N/A		N/A
Total income before income taxes		$	7	$	49	$	(42)	(86)	%	—	%	4	%
Total income (loss) from continuing operations before income taxes														Total income (loss) from continuing operations before income taxes	$	(48)	$	13	$	(61)	(469)	%	(10)	%	2	%


									% of Revenue
	Nine Months Ended September 30,				2021 to 2022				Nine Months Ended September 30,
	2022		2021		$ Change		% Change		2022		2021

	(in millions, unaudited)
Income (loss) from continuing operations before income taxes:
IMT segment	$	182	$	407	$	(225)	(55)	%	13	%	29	%
Mortgages segment	(116)		(26)		(90)		(346)		(115)		(13)
Homes segment	(80)		(175)		95		54		N/A		N/A
Corporate items (1)	(3)		(110)		107		97		N/A		N/A
Total income (loss) from continuing operations before income taxes	$	(17)	$	96	$	(113)	(118)	%	(1)	%	6	%

(1) Certain corporate items are not directly attributable to any of our segments, including ~~the~~ loss on extinguishment of debt, interest income earned on our short-term investments included in other income and interest costs on our convertible senior notes included in interest expense.

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Adjusted EBITDA
% of Revenue
Three Months Ended
March 31, 2021 to 2022 Three Months Ended
March 31,
2022 2021 $ Change % Change 2022 2021
(in millions, unaudited)
Net income $ 16 $ 52 $ (36) (69) % — % 4 %
Adjusted EBITDA:
Homes segment $ 23 $ (33) $ 56 170 % 1 % (5) %
IMT segment 209 209 — — 43 47
Mortgages segment (12) 6 (18) (300) (26) 9
Total Adjusted EBITDA $ 220 $ 182 $ 38 21 % 5 % 15 %

The following tables summarize net loss, which includes the impact of discontinued operations, and Adjusted EBITDA in total and for each segment, both of which exclude the impact of discontinued operations:


									% of Revenue
	Three Months Ended September 30,				2021 to 2022				Three Months Ended September 30,
	2022		2021		$ Change		% Change		2022		2021

	(in millions, unaudited)
Net loss	$	(53)	$	(329)	$	276	84	%	(11)	%	(60)	%
Adjusted EBITDA:
IMT segment	164		206		(42)		(20)		36		43
Mortgages segment	(27)		5		(32)		(640)		(104)		7
Homes segment	(7)		(55)		48		87		N/A		N/A
Total Adjusted EBITDA	$	130	$	156	$	(26)	(17)	%	27	%	28	%


									% of Revenue
	Nine Months Ended September 30,				2021 to 2022				Nine Months Ended September 30,
	2022		2021		$ Change		% Change		2022		2021

	(in millions, unaudited)
Net loss	$	(29)	$	(267)	$	238	89	%	(2)	%	(17)	%
Adjusted EBITDA:
IMT segment	559		633		(74)		(12)		39		45
Mortgages segment	(60)		5		(65)		(1300)		(59)		3
Homes segment	(58)		(138)		80		58		N/A		N/A
Total Adjusted EBITDA	$	441	$	500	$	(59)	(12)	%	29	%	31	%

To provide investors with additional information regarding our financial results, we have disclosed Adjusted EBITDA in total and for each segment, each a non-GAAP financial measure, within this Quarterly Report on Form 10-Q. We have provided a reconciliation below of Adjusted EBITDA in total to net ~~income~~loss and Adjusted EBITDA by segment to income (loss) from continuing operations before income taxes for each segment, the most directly comparable U.S. generally accepted accounting principles (“GAAP”) financial measures.

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We have included Adjusted EBITDA in total and for each segment in this Quarterly Report on Form 10-Q as they are key metrics used by our management and board of directors to measure operating performance and trends and to prepare and approve our annual budget. In particular, the exclusion of certain expenses in calculating Adjusted EBITDA facilitates operating performance comparisons on a period-to-period basis.

Our use of Adjusted EBITDA in total and for each segment has limitations as an analytical tool, and you should not consider these measures in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:

•Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;

•Adjusted EBITDA does not reflect the results of discontinued operations;

•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 expenditures or contractual commitments;

•Adjusted EBITDA does not reflect restructuring costs;

•Adjusted EBITDA does not reflect acquisition-related costs;

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•Adjusted EBITDA does not reflect ~~the~~ loss on extinguishment of debt;

•Adjusted EBITDA does not reflect interest expense or other income;

•Adjusted EBITDA does not reflect income taxes; and

•Other companies, including companies in our own industry, may calculate Adjusted EBITDA differently ~~than~~from the way we do, limiting its usefulness as a comparative measure.

Because of these limitations, you should consider Adjusted EBITDA in total and for each segment alongside other financial performance measures, including various ~~cash flow~~cash-flow metrics, net ~~income,~~loss, income (loss) from continuing operations before income taxes for each segment, and our other GAAP results.

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The following tables present a reconciliation of Adjusted EBITDA to the most directly comparable GAAP financial measure, which is net ~~income~~loss on a consolidated basis and income (loss) from continuing operations before income taxes for each segment, for each of the periods presented (in millions, unaudited):

Three Months Ended
March 31, 2022
Homes IMT Mortgages Corporate Items (2) Consolidated
Reconciliation of Adjusted EBITDA to Net Income and Income (Loss) Before Income Taxes:
Net income (1) N/A N/A N/A N/A $ 16
Income taxes N/A N/A N/A N/A (9)
Income (loss) before income taxes $ (68) $ 108 $ (27) $ (6) $ 7
Other income (6) — (1) (1) (8)
Depreciation and amortization 5 35 3 — 43
Share-based compensation 12 60 10 — 82
Restructuring costs 30 6 2 — 38
Loss on extinguishment of debt 14 — — — 14
Interest expense 36 — 1 7 44
Adjusted EBITDA $ 23 $ 209 $ (12) $ — $ 220


	Three Months Ended September 30, 2022
	IMT		Mortgages		Homes		Corporate Items (2)		Consolidated
Reconciliation of Adjusted EBITDA to Net Loss and Income (Loss) From Continuing Operations Before Income Taxes:
Net loss (1)	N/A		N/A		N/A		N/A		$	(53)
Loss from discontinued operations, net of income taxes	N/A		N/A		N/A		N/A		2
Income taxes	N/A		N/A		N/A		N/A		3
Income (loss) from continuing operations before income taxes	$	5	$	(51)	$	(8)	$	6	$	(48)
Other expense (income), net	4		(1)		—		(15)		(12)
Depreciation and amortization	32		2		—		—		34
Share-based compensation	123		23		1		—		147
Interest expense	—		—		—		9		9
Adjusted EBITDA	$	164	$	(27)	$	(7)	$	—	$	130


		Three Months Ended March 31, 2021											Three Months Ended September 30, 2021
		Homes		IMT		Mortgages		Corporate Items (2)		Consolidated			IMT		Mortgages		Homes		Corporate Items (2)		Consolidated
Reconciliation of Adjusted EBITDA to Net Income and Income (Loss) Before Income Taxes:
Net income (1)		N/A		N/A		N/A		N/A		$	52
Reconciliation of Adjusted EBITDA to Net Loss and Income (Loss) From Continuing Operations Before Income Taxes:												Reconciliation of Adjusted EBITDA to Net Loss and Income (Loss) From Continuing Operations Before Income Taxes:
Net loss (1)												Net loss (1)	N/A		N/A		N/A		N/A		$	(329)
Loss from discontinued operations, net of income taxes												Loss from discontinued operations, net of income taxes	N/A		N/A		N/A		N/A		347
Income taxes	Income taxes	N/A		N/A		N/A		N/A		(3)		Income taxes	N/A		N/A		N/A		N/A		(5)
Income (loss) before income taxes		$	(58)	$	143	$	(2)	$	(34)	$	49
Other income		—		—		(1)		(1)		(2)
Income (loss) from continuing operations before income taxes												Income (loss) from continuing operations before income taxes	$	130	$	(6)	$	(69)	$	(42)	$	13
Other income, net												Other income, net	—		(1)		—		(1)		(2)
Depreciation and amortization	Depreciation and amortization	5		23		1		—		29		Depreciation and amortization	23		2		3		—		28
Share-based compensation	Share-based compensation	16		42		6		—		64		Share-based compensation	50		9		11		—		70
Acquisition-related costs	Acquisition-related costs	—		1		—		—		1		Acquisition-related costs	3		—		—		—		3
Loss on extinguishment of debt	Loss on extinguishment of debt	—		—		—		1		1		Loss on extinguishment of debt	—		—		—		15		15
Interest expense	Interest expense	4		—		2		34		40		Interest expense	—		1		—		28		29
Adjusted EBITDA	Adjusted EBITDA	$	(33)	$	209	$	6	$	—	$	182	Adjusted EBITDA	$	206	$	5	$	(55)	$	—	$	156

(1) We use income (loss) before income taxes as our profitability measure in making operating decisions and assessing the performance of our segments, therefore, net income and income tax benefit are calculated and presented only on a consolidated basis within our financial statements.
(2) Certain corporate items are not directly attributable to any of our segments, including the loss on extinguishment of debt, interest income earned on our short-term investments included in other income and interest costs on our convertible senior notes included in interest expense.

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	Nine Months Ended September 30, 2022
	IMT		Mortgages		Homes		Corporate Items (2)		Consolidated
Reconciliation of Adjusted EBITDA to Net Loss and Income (Loss) From Continuing Operations Before Income Taxes:
Net loss (1)	N/A		N/A		N/A		N/A		$	(29)
Loss from discontinued operations, net of income taxes	N/A		N/A		N/A		N/A		13
Income taxes	N/A		N/A		N/A		N/A		(1)
Income (loss) from continuing operations before income taxes	$	182	$	(116)	$	(80)	$	(3)	$	(17)
Other expense (income), net	4		(2)		—		(21)		(19)
Depreciation and amortization	104		8		2		—		114
Share-based compensation	263		46		14		—		323
Restructuring costs	6		2		6		—		14
Interest expense	—		2		—		24		26
Adjusted EBITDA	$	559	$	(60)	$	(58)	$	—	$	441


	Nine Months Ended September 30, 2021
	IMT		Mortgages		Homes		Corporate Items (2)		Consolidated
Reconciliation of Adjusted EBITDA to Net Loss and Income (Loss) From Continuing Operations Before Income Taxes:
Net loss (1)	N/A		N/A		N/A		N/A		$	(267)
Loss from discontinued operations, net of income taxes	N/A		N/A		N/A		N/A		363
Income taxes	N/A		N/A		N/A		N/A		—
Income (loss) from continuing operations before income taxes	$	407	$	(26)	$	(175)	$	(110)	$	96
Other income, net	—		(3)		—		(2)		(5)
Depreciation and amortization	68		5		8		—		81
Share-based compensation	150		25		29		—		204
Acquisition-related costs	8		—		—		—		8
Loss on extinguishment of debt	—		—		—		17		17
Interest expense	—		4		—		95		99
Adjusted EBITDA	$	633	$	5	$	(138)	$	—	$	500

(1) We use income (loss) from continuing operations before income taxes as our profitability measure in making operating decisions and assessing the performance of our segments; therefore, net loss and income taxes are calculated and presented only on a consolidated basis within our financial statements.
(2) Certain corporate items are not directly attributable to any of our segments, including the loss on extinguishment of debt, interest income earned on our short-term investments included in other income and interest costs on our convertible senior notes included in interest expense.

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Costs and Expenses, Gross Profit and Other Items


										% of Total Revenue													% of Total Revenue
		Three Months Ended March 31,				2021 to 2022				Three Months Ended March 31,					Three Months Ended September 30,				2021 to 2022				Three Months Ended September 30,
		2022		2021		$ Change		% Change		2022		2021			2022		2021		$ Change		% Change		2022		2021

		(in millions, unaudited)													(in millions, unaudited)
Cost of revenue	Cost of revenue	$	3,622	$	711	$	2,911	409	%	85	%	58	%	Cost of revenue	$	89	$	82	$	7	9	%	18	%	15	%
Gross profit	Gross profit	635		507		128		25		15		42		Gross profit	394		468		(74)		(16)		82		85
Operating expenses:	Operating expenses:													Operating expenses:
Sales and marketing	Sales and marketing	307		197		110		56		7		16		Sales and marketing	165		205		(40)		(20)		34		37
Technology and development	Technology and development	114		120		(6)		(5)		3		10		Technology and development	142		101		41		41		29		18
General and administrative	General and administrative	119		101		18		18		3		8		General and administrative	138		104		34		33		29		19
Restructuring costs		38		—		38		N/A		1		—
Acquisition-related costs	Acquisition-related costs	—		1		(1)		N/A		—		—		Acquisition-related costs	—		3		(3)		(100)		—		1
Total operating expenses	Total operating expenses	578		419		159		38		14		34		Total operating expenses	445		413		32		8		92		75
Loss on extinguishment of debt	Loss on extinguishment of debt	(14)		(1)		(13)		N/A		—		—		Loss on extinguishment of debt	—		(15)		15		100		—		(3)
Other income		8		2		6		300		—		—
Other income, net														Other income, net	12		2		10		500		2		—
Interest expense	Interest expense	(44)		(40)		(4)		(10)		(1)		(3)		Interest expense	(9)		(29)		20		69		(2)		(5)
Income tax benefit		9		3		6		200		—		—
Income tax benefit (expense)														Income tax benefit (expense)	(3)		5		(8)		(160)		(1)		1


									% of Total Revenue
	Nine Months Ended September 30,				2021 to 2022				Nine Months Ended September 30,
	2022		2021		$ Change		% Change		2022		2021

	(in millions, unaudited)
Cost of revenue	$	278	$	228	$	50	22	%	18	%	14	%
Gross profit	1,245		1,369		(124)		(9)		82		86
Operating expenses:
Sales and marketing	502		532		(30)		(6)		33		33
Technology and development	369		319		50		16		24		20
General and administrative	370		303		67		22		24		19
Restructuring costs	14		—		14		N/A		1		—
Acquisition-related costs	—		8		(8)		(100)		—		1
Total operating expenses	1,255		1,162		93		8		82		73
Loss on extinguishment of debt	—		(17)		17		100		—		(1)
Other income, net	19		5		14		280		1		—
Interest expense	(26)		(99)		73		74		(2)		(6)
Income tax benefit	1		—		1		—		—		—

Cost of Revenue

Cost of revenue consists of expenses related to operating our mobile applications and websites, including associated headcount-related expenses, such as salaries, benefits, bonuses and share-based compensation expense, as well as revenue-sharing costs related to our commercial business relationships, depreciation expense, and costs associated with hosting our mobile applications and websites. Cost of revenue also includes amortization costs related to capitalized website and development activities, amortization of software, amortization of certain intangible assets and other costs to obtain data used to populate our mobile applications and websites, and amortization of certain intangible assets recorded in connection with acquisitions, including developed technology. For our Homes segment, cost of revenue also consists of the consideration paid to acquire and make certain repairs and updates to each home, including associated overhead costs, as well as inventory valuation adjustments. For our IMT and Mortgages segments, cost of revenue also includes credit card fees and ad serving costs paid to third parties. For our Mortgages segment, cost of revenue also consists of direct costs to originate loans, including underwriting and processing costs.

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Three months ended September 30, 2022 compared to three months ended September 30, 2021

Cost of revenue increased by ~~$2.9 billion,~~$7 million, or ~~409%~~9%, primarily due to an increase of ~~$2.9 billion~~$16 million in ~~cost~~our IMT segment, partially offset by decreases of ~~revenue~~$5 million in our Mortgages segment and $4 million in our Homes segment.

•The increase in cost of revenue in our ~~Homes~~IMT segment was ~~driven~~ primarily byattributable to a ~~$2.8 billion~~$10 million increase in ~~home acquisition costs due to the~~depreciation and amortization expense driven by an increase in capitalized website and development activities and a $6 million increase in headcount-related expenses, including share-based compensation expense, which was impacted by the ~~number of homes sold from 1,965~~August 2022 Equity Award Actions during the three months ended ~~March 31, 2021 to 8,981 during the three months ended March 31,~~September 30, 2022. ~~We expect Homes segment~~

•The decrease in cost of revenue in our Mortgages segment was primarily attributable to a $5 million decrease in ~~subsequent quarters as we complete~~lead acquisition costs due to a decrease in volume associated with the macro housing market environment.

Nine months ended September 30, 2022 compared to the nine months ended September 30, 2021

Cost of revenue increased by $50 million, or 22%, primarily due to an increase of $62 million in our ~~wind down~~IMT segment, partially offset by decreases of ~~Zillow Offers.~~$8 million in our Mortgages segment and $4 million in our Homes segment.

•The increase in cost of revenue in our IMT segment was primarily attributable to a $40 million increase in depreciation and amortization expense driven by an increase in capitalized website and development activities and capitalized software costs, a $13 million increase in headcount-related expenses and an $8 million increase in data acquisition costs. Headcount-related expenses include share-based compensation expense, which was impacted by the August 2022 Equity Award Actions during the nine months ended September 30, 2022.

•The decrease in cost of revenue in our Mortgages segment was primarily attributable to a decrease in lead acquisition costs of $9 million due to a decrease in volume associated with the macro housing market environment.

Gross Profit

Gross profit is calculated as revenue less cost of revenue. Gross margin is gross profit expressed as a percentage of revenue. Our gross profit has and will continue to be affected by a number of factors, including the mix of revenue from our ~~relatively higher gross margin segments, IMT and Mortgages, and our relatively lower gross margin Homes segment.~~segments.

Three months ended September 30, 2022 compared to three months ended September 30, 2021

Gross profit ~~increased~~decreased by ~~$128~~$74 million, or ~~25%~~16%, ~~primarily~~ due to ~~an increase~~decreases in gross profit of ~~$125~~$39 million in both our IMT segment and our Mortgages segment, partially offset by an increase of $4 million in our Homes ~~segment and an increase of $26 million in our IMT segment, partially offset by a decrease in gross profit of $23 million in our Mortgages~~ segment. Total gross margin decreased from ~~42%~~85% to ~~15%~~82%.

•The increase in Homes segment gross profit was primarily driven by an increase in revenue, discussed above. Gross margin decreased from 8% for the three months ended March 31, 2021 to 5% for the three months ended March 31, 2022, as costs to acquire homes outpaced revenue generated on home sales.

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•~~The increase~~decrease in IMT segment gross profit was primarily driven by ~~an increase~~a decrease in revenue ~~discussed above.~~due to macro housing market factors, including rising interest rates and rising housing prices and volatility, which have reduced our Premier Agent revenue per visit compared to the three months ended September 30, 2021. Gross margin decreased from 89% for the three months ended ~~March 31,~~September 30, 2021 to ~~87%~~85% for the three months ended ~~March 31,~~September 30, 2022.

•The decrease in Mortgages segment gross profit was primarily driven by decreases in mortgage originations and Custom Quote and Connect advertising services revenue, discussed above. Gross margin decreased from 69% for the three months ended September 30, 2021 to 35% for the three months ended September 30, 2022.

Nine months ended September 30, 2022 compared to the nine months ended September 30, 2021

Gross profit decreased by $124 million, or 9%, primarily due to decreases in gross profit of $86 million in our Mortgages segment and $42 million in our IMT segment, partially offset by an increase of $4 million in our Homes segment. Total gross margin decreased from 86% to 82%.

•The decrease in Mortgages segment gross profit was driven by a decrease in ~~gross margin from 72% to 57%, primarily associated with decreased~~mortgage originations and Custom Quote and Connect advertising services revenue, discussed above. Gross margin decreased from 68% for the nine months ended September 30, 2021 to 47% for the nine months ended September 30, 2022.

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•The decrease in IMT segment gross profit was driven by a decrease in revenue due to macro housing market factors, including rising interest rates and housing prices and volatility, which have reduced our Premier Agent revenue per visit compared to the nine months ended September 30, 2021. Gross margin decreased from 90% for the nine months ended September 30, 2021 to 86% or the nine months ended September 30, 2022.

Sales and Marketing

Sales and marketing expenses consist of advertising costs and other sales expenses related to promotional and marketing activities, headcount-related expenses, including salaries, commissions, benefits, bonuses and share-based compensation expense for sales, sales support, customer support, including the customer connections team, marketing and public relations employees, depreciation expense and amortization of certain intangible assets recorded in connection with acquisitions, including trade names and trademarks and customer relationships. For our Homes segment, sales and marketing expenses also consist of selling costs, such as real estate agent commissions, escrow and title fees, and staging costs, as well as holding costs incurred during the period that homes are listed for sale, including utilities, taxes and maintenance. For our Mortgages segment, sales and marketing expenses include headcount-related expenses for loan officers and specialists supporting Zillow Home Loans.

Three months ended September 30, 2022 compared to three months ended September 30, 2021

Sales and marketing expenses ~~increased $110~~decreased $40 million, or ~~56%~~20%, due to ~~increases~~decreases of ~~$87~~$17 million in our Homes segment, ~~and $25~~$14 million in our IMT segment ~~partially offset by a $2~~and $9 million ~~decrease~~ in our Mortgages segment.

•The ~~increase~~decrease in sales and marketing expenses in the Homes segment was primarily attributable to an $86 million increase in home holding and selling costs driven by the increase in the number of homes sold during the three months ended March 31, 2022 compared to the three months ended March 31, 2021. Sales and marketing expenses in our Homes segment included $8 million ~~and $4 million in holding costs for the three months ended March 31, 2022 and 2021, respectively. We expect sales and marketing expenses within the Homes segment to~~ decrease in ~~subsequent quarters due to~~headcount-related expenses, including share-based compensation expense, and a $7 million decrease in marketing and advertising costs. The decreases resulted from the wind down of Zillow Offers ~~operations.~~and the reduction in indirect costs related to the Homes segment.

•The decrease in sales and marketing expenses in the IMT segment was primarily attributable to a $28 million decrease in marketing and advertising costs driven by active cost management, partially offset by a $16 million increase in headcount-related costs, including share-based compensation expense, primarily due to the impact of the August 2022 Equity Award Actions.

•The decrease in sales and marketing expenses in the Mortgages segment was primarily attributable to a $5 million decrease in headcount-related expenses and a $4 million decrease in marketing and advertising costs driven by active cost management.

Nine months ended September 30, 2022 compared to the nine months ended September 30, 2021

Sales and marketing expenses decreased $30 million, or 6%, due to decreases of $27 million in our Homes segment and $20 million in our Mortgages segment, partially offset by an increase of $17 million in our IMT segment.

•The decrease in sales and marketing expenses in the Homes segment was primarily attributable to a $15 million decrease in marketing and advertising costs and a $9 million decrease in headcount-related expenses, including share-based compensation expense. The decreases resulted from the wind down of Zillow Offers and the reduction in indirect costs related to the Homes segment.

•The decrease in sales and marketing expenses in the Mortgages segment was primarily attributable to a $14 million decrease in headcount-related expenses, including share-based compensation expense, and a $7 million decrease in marketing and advertising costs driven by active cost management.

•The increase in sales and marketing expenses in the IMT segment was primarily attributable to a ~~$12~~$39 million increase in headcount-related expenses, including share-based compensation expense, primarily driven by the impact of the August 2022 Equity Award Actions, a $5 million increase in travel expenses, a $4 million increase in trade shows and events, and a ~~$10~~$3 million increase in software and hardware costs. These increases were partially offset by a $26 million decrease in marketing and advertising ~~costs.~~costs and a $6 million decrease in professional services, both driven by active cost management.

Technology and Development

Technology and development expenses consist of headcount-related expenses, including salaries, benefits, bonuses and share-based compensation expense for individuals engaged in the design, development and testing of our products, mobile applications and websites and the tools and applications that support our products. Technology and development expenses also include equipment and maintenance costs and depreciation expense.

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Three months ended September 30, 2022 compared to three months ended September 30, 2021

Technology and development expenses ~~decreased $6~~increased $41 million, or 5%41%, primarily due to ~~a decrease of $21 million in our Homes segment, partially offset by~~ increases of ~~$13~~$51 million in our IMT segment and $2$9 million in our Mortgages segment, partially offset by a decrease of $19 million in our Homes segment.

•The ~~decrease~~increase in technology and development expenses ~~for~~in the ~~Homes~~IMT segment was primarily attributable to a ~~$20~~$44 million ~~decrease~~increase in ~~headcount-related expenses,~~headcount related costs, including share-based compensation ~~expense. We expect technology~~expense, primarily driven by the August 2022 Equity Award Actions, and ~~development expenses within the Homes segment to decrease~~a $4 million increase in ~~subsequent quarters due to the wind down of Zillow Offers operations.~~professional services.

•The increase in technology and development expenses ~~for~~in the Mortgages segment was primarily attributable to a $5 million increase in headcount-related costs, including share-based compensation expense, primarily driven by the August 2022 Equity Award Actions.

•The decrease in technology and development expenses in the Homes segment was primarily attributable to a $16 million decrease in headcount-related costs, including share-based compensation expense, which was primarily driven by the wind down of Zillow Offers and the reduction in indirect costs related to the Homes segment.

Nine months ended September 30, 2022 compared to the nine months ended September 30, 2021

Technology and development expenses increased $50 million, or 16%, primarily due to increases of $79 million in our IMT segment and $13 million in our Mortgages segment, partially offset by a decrease of $42 million in our Homes segment.

•The increase in technology and development expenses in the IMT segment was primarily attributable to ~~an $8~~a $60 million increase in headcount related costs, including share-based compensation expense, primarily driven by the August 2022 Equity Award Actions, and a $12 million increase in professional services.

•The increase in technology and development expenses in the Mortgages segment was primarily attributable to a $9 million increase in headcount-related ~~expenses,~~costs, including share-based compensation expense, primarily driven by the August 2022 Equity Award Actions, and a $4$3 million increase in professional services. ~~We expect~~

•The decrease in technology and development expenses ~~to increase in absolute dollars in future quarters for our IMT segment due to increased headcount-related spend as we continue to invest~~ in the ~~development~~Homes segment was primarily attributable to a $39 million decrease in headcount-related costs, including share-based compensation expense, which was primarily driven by the wind down of ~~technology~~Zillow Offers and the reduction in indirect costs related to ~~help high-intent movers find and win their homes.~~the Homes segment.

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General and Administrative

General and administrative expenses consist of headcount-related expenses, including salaries, benefits, bonuses and share-based compensation expense for executive, finance, accounting, legal, human resources, recruiting, corporate information technology costs and other administrative support. General and administrative expenses also include legal settlement costs and estimated legal liabilities, legal, accounting and other third-party professional service fees, rent expense, depreciation expense and bad debt expense.

Three months ended September 30, 2022 compared to three months ended September 30, 2021

General and administrative expenses increased ~~$18~~$34 million, or ~~18%~~33%, due to increases of ~~$18~~$48 million in our IMT segment and $1$7 million in our Mortgages segment, partially offset by a decrease of $1$21 million in our Homes segment.

•The increase in general and administrative expenses for our IMT and Mortgages segments was primarily attributable to increases in headcount-related expenses, including share-based compensation expense, primarily driven by the August 2022 Equity Award Actions, of $39 million and $7 million, respectively.

•The decrease in general and administrative expenses for our Homes segment was primarily attributable to a $14 million decrease in headcount-related expenses and a $3 million decrease in software and hardware costs as we wound down Zillow Offers operations.

Nine months ended September 30, 2022 compared to the nine months ended September 30, 2021

General and administrative expenses increased $67 million, or 22%, primarily due to increases of $85 million in our IMT segment and $10 million in our Mortgages, partially offset by a decrease of $28 million in our Homes segments.

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•The decrease in ~~professional services. We expect~~ general and administrative expenses ~~within the IMT~~for our Homes segment was primarily attributable to ~~increase~~a $16 million decrease in ~~absolute dollars~~headcount-related expenses, including share-based compensation expense, a $5 million decrease in ~~future quarters~~facilities costs and a $3 million decrease in software and hardware costs as we ~~continue to invest to grow our business. We expect general and administrative expenses within~~wound down Zillow Offers operations.

Restructuring Costs

Restructuring costs of $14 million for the ~~Homes segment to decrease in absolute dollars in future periods due~~nine months ended September 30, 2022 were primarily attributable to the wind down of Zillow Offers operations.

~~Restructuring Costs~~

Restructuring costs ~~for~~within our IMT and Mortgages segments and certain indirect costs of the ~~three months ended March 31, 2022 primarily relate~~Homes segment which do not qualify as discontinued operations related to ~~our wind down of Zillow Offers operations and include~~ employee termination costs ~~contract termination costs~~ and ~~other exit~~totaled $6 million, $2 million, and ~~disposal activities. Restructuring costs of $38~~$6 million, respectively, for the ~~three~~nine months ended ~~March 31, 2022 include $33 million for employee termination costs, $4 million of contract termination costs, and $1 million related to other exit and disposal activities.~~September 30, 2022. For additional information regarding the restructuring, see Note 183 of our Notes to Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q. We expect restructuring costs to increase for the three months ending December 31, 2022 as compared to the three months ended September 30, 2022, driven by cost actions to streamline our operations and prioritize investments.

Loss on Extinguishment of Debt

We recorded a ~~$14~~$15 million loss on extinguishment of debt during the three months ended ~~March 31, 2022 due to the repayment of outstanding borrowings~~September 30, 2021 associated with the ~~Zillow Offers credit facilities~~conversion of $366 million of aggregate principal of the convertible senior notes maturing in 2023 (“2023 Notes”) and the ~~partial repayment~~redemption of the ~~term loans supporting our securitization transactions. The loss on extinguishment includes prepayment penalties incurred related to these repayments.~~ remaining $1 million of aggregate principal of the 2023 Notes.

We recorded a $1$17 million loss on extinguishment of debt during the ~~three~~nine months ended ~~March 31,~~September 30, 2021 associated with conversions of the 2023 Notes, convertible ~~senior~~ notes maturing in ~~2023,~~ 2024 (“2024 Notes”) and ~~2026.~~ 2026 (“2026 Notes”).

For additional information on the loss on extinguishment, see Note 11 of our Notes to Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q.

Other Income, net

Other income, net consists primarily of interest income earned on our cash, cash equivalents and ~~investments.~~investments and fair value adjustments on our outstanding warrant.

Other income, net increased $6$10 million or 300%, primarily due to an increase in other income in the Homes segment driven by the accretion of interest income associated with the beneficial interests in our securitization transactions we entered into in the second half of 2021. We expect Homes segment interest income to decrease beginning withfor the three months ~~ending~~ended September 30, 2022 as compared to the three months ended September 30, 2021 and increased $14 million for the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021. These increases were primarily driven by increases in returns on investments due to the expected pay-down of the securitization transactions in connection with the wind down of Zillow Offers operations. While our investment mix continues to be low-risk, we expect other income related to our investment portfolio returns to grow modestly in future quarters driven by our expectation of continued rising interest ~~rates.~~rates, partially offset by a $4 million fair value adjustment on an outstanding warrant recorded within our IMT segment.

Interest Expense

Our corporate interest expense consists of interest onand deferred issuance costs associated with our convertible senior ~~notes and also includes deferred issuance costs for the convertible senior~~ notes. ~~As discussed in Note 2 of our Notes to Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q,~~On January 1, 2022, we adopted guidance which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts in an entity’s own ~~equity, effective January 1, 2022.~~equity. Upon adoption, we de-recognized the remaining debt discounts on the convertible senior notes and no longer recognize amortization of debt discounts to interest expense. Refer to Note 11 of our Notes to Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q for stated interest rates and interest payment dates for each of our convertible senior notes.

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For our Homes segment, interest expense includes interest on borrowings, funding fees and other fees, including the amortization of deferred issuance costs, on the credit facilities related to Zillow Offers. Borrowings on these credit facilities bore interest at the one-month London Inter-Bank Offered Rate (“LIBOR”) plus an applicable margin, and in certain cases were subject to a LIBOR floor, as defined in the credit agreements. During the three months ended March 31, 2022, certain wholly owned subsidiaries of Zillow Group repaid all amounts drawn on the Zillow Offers credit facilities. Interest expense also includes interest on the term loans and variable funding lines associated with our 2021-1 and 2021-2 securitization transactions, including the amortization of the debt discount for the term loans and the amortization of deferred issuance costs for the term loans and variable funding lines. The term loans bear interest at a fixed rate and the variable funding lines bore interest at LIBOR plus an applicable margin. During the three months ended March 31, 2022, we repaid all amounts drawn on the variable funding lines. Refer to Note 11 of our Notes to Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q for additional information on Homes segment financing.

For our Mortgages segment, interest expense includes interest on the warehouse line of credit and interest on the master repurchase agreements related to our Zillow Home Loans business. ~~Beginning March 18, 2022, borrowings~~Borrowings on the ~~Credit Suisse~~ repurchase ~~agreement~~agreements bear interest at ~~Adjusted Daily Simple~~ Secured Overnight Financing Rate (“~~Adjusted Daily Simple~~ SOFR”) plus an applicable margin, ~~and includes an Adjusted Daily Simple SOFR floor,~~ as defined in the governing agreements. Borrowings on the ~~Citibank, N.A. repurchase agreement, the Credit Suisse repurchase agreement prior to March 18, 2022, and the Comerica Bank~~ warehouse line of credit bear interest at ~~one-month LIBOR~~Bloomberg Short-Term Bank Yield Index Rate (“BSBY”) plus an applicable margin, ~~and in certain cases include a LIBOR floor,~~ as defined in the governing agreements.

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Three months ended September 30, 2022 compared to three months ended September 30, 2021

Interest expense ~~increased $4~~decreased $20 million, or ~~10%~~69%, primarily due to a ~~$32 million increase in interest expense related to our Homes segment and partially offset by a $27~~$19 million decrease in corporate interest expense not attributable to any of our segments.

The increase in Homes segment interest expense was driven by the accelerated recognition of debt discount and issuance costs and prepayment fees, as applicable, due to the repayment of our credit facilities and variable funding lines and the partial repayment of the term loans associated with our securitization transactions. The increase in interest expense is also due to the increased number of homes financed on our credit facilities and through our securitization transactions, as described above. We expect interest expense for the Homes segment to decrease during the three months ending June 30, 2022 and thereafter, as we have ceased home buying activities and expect to repay our outstanding securitization term loans during the second quarter of 2022.

The decrease in corporate interest expense not attributable to any of our segments was primarily due to the adoption of guidance which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, which, as discussed above, eliminated the debt discounts on the convertible senior notes that were previously amortized to interest expense prior to adoption. Additionally, the settlement of conversions and redemptions of ~~convertible senior notes maturing in~~the 2023 Notes, 2024 Notes and 2026 Notes during the year ended December 31, 2021 decreased the outstanding principal balances of our convertible senior notes upon which interest was incurred.

Nine months ended September 30, 2022 compared to the nine months ended September 30, 2021

Interest expense decreased $73 million, or 74%, primarily due to a $71 million decrease in corporate interest expense not attributable to any of our segments. The decrease in corporate interest expense not attributable to any of our segments was due to the same drivers as for the three months ended September 30, 2022, discussed above.

Income Taxes

We are subject to income taxes in the United States (federal and state), Canada and Serbia. As of ~~March 31,~~September 30, 2022 and December 31, 2021, we have provided a valuation allowance against our net deferred tax assets that we believe, based on the weight of available evidence, are not more likely than not to be realized. There is a reasonable possibility that within the next several quarters, sufficient positive evidence will become available to demonstrate that a significant portion of the valuation allowance against our U.S. net deferred tax assets will no longer be required. We have accumulated federal tax losses of approximately $2.1 billion as of December 31, 2021, which are available to reduce future taxable income. We have accumulated state tax losses of approximately $73 million (tax effected) as of December 31, 2021.

Liquidity and Capital Resources

Our primary sources of liquidity and capital resources are cash flows from operations, debt financing and equity offerings. Our cash requirements consist principally of working capital, general corporate needs and mortgage loan originations. We ~~previously used capital resources for the purchase of homes through Zillow Offers, all of which home purchases closed by January 31, 2022.~~We generally reinvest available cash flows from operations into our business and to service our debt obligations.

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Sources of Liquidity

As of ~~March 31,~~September 30, 2022 and December 31, 2021, we had cash and cash equivalents, investments and restricted cash of ~~$3.8~~$3.5 billion and ~~$3.4~~$2.8 billion, respectively. Cash and cash equivalents balances consist of operating cash on deposit with financial institutions and money market ~~funds and treasury bills.~~funds. Investments consist of fixed income securities, which include U.S. government agency securities, ~~commercial paper, treasury bills and~~ investment grade corporate securities, treasury bills and ~~the beneficial interests in our Homes segment securitization transactions.~~commercial paper. Restricted cash consists of ~~amounts funded to the reserve and collection accounts related to our credit facilities, home sales proceeds held in restricted accounts associated with our credit facilities and securitizations and~~ amounts held in escrow related to funding home purchases in our mortgage origination business. Amounts on deposit with third-party financial institutions exceed the Federal Deposit Insurance Corporation and the Securities Investor Protection Corporation insurance limits, as applicable. As of ~~March 31,~~September 30, 2022, Zillow Group and its subsidiaries were in compliance with all debt covenants specified in the facilities described below.

We believe that cash from operations and cash and cash equivalents and investment balances will be sufficient to meet our ongoing operating activities, working capital, capital expenditures and other capital requirements for at least the next 12 months. We believe we will meet longer-term expected future cash requirements and obligations through a combination of cash flows from operations, debt financing and equity offerings, as applicable.

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The cash flows related to discontinued operations have not been separated. Accordingly, the condensed consolidated statements of cash flows and the following discussions include the results of continuing and discontinued operations. See Note 3 in our Notes to Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q for additional information on discontinued operations, including supplemental cash flow information. The following table presents selected cash flow data for the periods presented (in millions, unaudited):


		Three Months Ended March 31,					Nine Months Ended September 30,
		2022		2021			2022		2021
Cash Flow Data:	Cash Flow Data:					Cash Flow Data:
Net cash provided by operating activities		$	3,392	$	241
Net cash provided by (used in) operating activities						Net cash provided by (used in) operating activities	$	4,420	$	(2,962)
Net cash provided by (used in) investing activities	Net cash provided by (used in) investing activities	(563)		904		Net cash provided by (used in) investing activities	(1,123)		621
Net cash provided by (used in) financing activities	Net cash provided by (used in) financing activities	(2,981)		598		Net cash provided by (used in) financing activities	(4,160)		3,088

Cash Flows Provided By (Used In) Operating Activities

Our operating cash flows result primarily from cash received from real estate professionals, rental professionals, mortgage professionals, builders and brand advertisers, as well as cash received from sales of mortgages originated by Zillow Home Loans and, prior to September 30, 2022, from customers for sales of homes through Zillow ~~Offers and sales of mortgages originated by Zillow Home Loans.~~Offers. Our primary uses of cash from operating activities include ~~payments for homes purchased through Zillow Offers,~~ marketing and advertising activities, mortgages funded through Zillow Home Loans and employee compensation and benefits. Additionally, uses of cash from operating activities include costs associated with operating our mobile applications and websites and other general corporate expenditures. Prior to the wind down of Zillow Offers operations, our primary uses of cash from operating activities also included payments for homes purchased through Zillow Offers.

For the ~~three~~nine months ended ~~March 31,~~September 30, 2022, net cash provided by operating activities was ~~$3.4~~$4.4 billion. This was driven by a net ~~income~~loss of ~~$16~~$29 million, adjusted by share-based compensation ~~expense~~ of ~~$91~~$341 million, depreciation and amortization of ~~$43~~$121 million, amortization of debt discount and debt issuance costs of $24 million, amortization of contract cost assets of $23 million, a loss on extinguishment of debt of ~~$14 million, amortization of contract cost assets of $8~~$21 million, amortization of right of use assets of $6$17 million and an inventory valuation adjustment of $5$9 million. This was partially offset by $3$9 million in other adjustments to reconcile net ~~income~~loss to net cash provided by operating activities. Changes in operating assets and liabilities increased cash provided by operating activities by ~~$3.2~~$3.9 billion. The changes in operating assets and liabilities are primarily related to a ~~$3.4~~$3.9 billion decrease in inventory and a ~~$56~~$76 million decrease in accounts receivable ~~primarily associated with Zillow Offers,~~ as we ~~wind~~wound down Zillow Offers operations, a ~~$14~~$58 million decrease in mortgage loans held for sale driven by increased interest rates which decreased demand for mortgages, and a $6 million increase in ~~accounts payable driven by the timing of payments, a $5 million increase in deferred revenue and a $3 million increase in~~ other ~~long term liabilities.~~long-term liabilities primarily due to our outstanding warrant agreement. These changes were partially offset by a ~~$247~~$52 million ~~increase~~decrease in ~~prepaid expenses~~accrued compensation and ~~other current assets related to the partial repayment of the term loans associated with our Zillow Offers securitization transactions,~~benefits and a ~~$43~~$49 million decrease in accrued expenses and other current liabilities driven primarily by the wind down of Zillow Offers operations, a $9$15 million decrease in lease liabilities primarily due to lease payments, a $6$13 million ~~decrease~~increase in ~~accrued compensation~~prepaid expenses and ~~benefits,~~other current assets and a $4$13 million increase in contract cost assets.

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For the ~~three~~nine months ended ~~March 31,~~September 30, 2021, net cash ~~provided by~~used in operating activities was ~~$242 million.~~$3.0 billion. This was primarily driven by net ~~income~~loss of ~~$52~~$267 million, adjusted by an inventory valuation adjustment of $304 million, share-based compensation of ~~$64~~$231 million, depreciation and amortization of ~~$29~~$88 million, amortization of debt discount and debt issuance costs of ~~$25~~$72 million, amortization of contract cost assets of ~~$10~~$32 million, $9amortization of right of use assets of $18 million, a loss on extinguishment of debt of $17 million, and $10 million in other adjustments to reconcile net ~~income~~loss to net cash ~~provided by~~used in operating ~~activities, amortization of right of use assets of $7 million, and a loss on extinguishment of debt of $1 million. This was partially offset by a $3 million change in deferred income taxes.~~activities. Changes in operating assets and liabilities ~~increased cash provided~~offset these adjustments by ~~operating activities by $47 million.~~$3.5 billion. The changes in operating assets and liabilities are primarily related to a ~~$57~~$3.6 billion increase in inventory due to home purchases outpacing the sale of homes through Zillow Offers for the nine months ended September 30, 2021, an $89 million increase in accounts receivable due primarily to an increase in revenue from products and services billed in arrears, a $70 million increase in prepaid expenses and other current assets due to an increase in contract assets driven by increased revenue from the Premier Agent Flex pricing model and the timing of payments, a $22 million increase in contract cost assets primarily due to capitalized sales commissions, and a $21 million decrease in ~~mortgage loans held for sale,~~lease liabilities. These changes were partially offset by a ~~$25~~$163 million increase in accrued expenses and other liabilities driven by the timing of payments, a ~~$19~~$110 million decreasein ~~inventory due to the~~mortgage loans held for sale, ~~of homes through Zillow Offers outpacing home purchases for the three months ended March 31, 2021,~~ a $5$17 million increase in ~~deferred revenue, and a $2~~accounts payable driven by the timing of payments, an $11 million increase in accrued compensation and ~~benefits. These changes were partially offset by~~benefits, and a ~~$29~~$4 million increase in prepaid expenses and other current assets due to timing of payments and an increase in our contract assets. The increase in contract assets was primarily associated with increased revenue from our Premier Agent Flex pricing model. The changes were further offset by a $13 million increase in accounts receivable due to an increase in revenue from products and services billed in arrears, a $10 million increase in contract cost assets primarily due to capitalized sales commissions, a $7 million decrease in lease liabilities and a $2 million decrease in accounts payable.deferred revenue.

Cash Flows Provided By (Used In) Investing Activities

Our primary investing activities include the purchase and sale or maturity of investments, the purchase of property and equipment and intangible assets and cash paid in connection with acquisitions.

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For the ~~three~~nine months ended ~~March 31,~~September 30, 2022, net cash used in investing activities was ~~$563 million.~~$1.1 billion. This was the result of ~~$525 million~~$1.0 billion of net purchases of investments and ~~$38~~$104 million of purchases of property and equipment and intangible assets.

For the ~~three~~nine months ended ~~March 31,~~September 30, 2021, net cash provided by investing activities was ~~$904~~$621 million. This was the result of ~~$920 million~~$1.2 billion of net proceeds from the maturity of investments, partially offset by $497 million of net cash paid for our September 2021 acquisition of ShowingTime, and ~~$16~~$69 million of purchases of property and equipment and intangible assets.

Cash Flows Provided By (Used in) Financing Activities

Net cash provided by (used in) financing activities has primarily resulted from ~~net proceeds from the issuance~~repurchases of ~~convertible notes,~~Class A common stock and Class C capital stock, settlement of long term debt including our securitization term loans, net proceeds from equity offerings, the exercise of employee option awards, ~~and equity awards withheld for tax liabilities,~~proceeds from our securitization transaction, proceeds from and repayments of borrowings on our credit facilities related to Zillow Offers and ~~proceeds from~~repayments of borrowings on the warehouse lines of credit and master repurchase agreements related to Zillow Home Loans.

For the ~~three~~nine months ended ~~March 31,~~September 30, 2022, net cash used in financing activities was ~~$3.0~~$4.2 billion, which was primarily related to $2.2 billion of repayments on borrowings of our credit facilities ~~related to Zillow Offers, $439 million~~and $1.2 billion for the ~~partial~~ repayment of the term loans associated with the wind down of Zillow Offers ~~securitization transactions, $348~~operations, $773 million of cash paid for share repurchases ~~pursuant to our stock repurchase program~~ and ~~$25~~$68 million of net repayments on our warehouse line of credit and master repurchase agreements related to Zillow Home Loans. The cash outflows were partially offset by ~~$36~~$44 million of proceeds from the exercise of option awards.

For the ~~three~~nine months ended ~~March 31,~~September 30, 2021, ~~net~~ cash provided by financing activities was ~~$598 million,~~$3.1 billion, which was primarily related to ~~the~~$2.1 billion of net borrowings on our credit facilities related to Zillow Offers, $545 million in proceeds from the sale of ~~3,163,502~~3 million shares of Class C capital stock under our equity distribution agreement, ~~$61~~$443 million in proceeds from the issuance of the 2021-1 term loan, net of issuance costs, and $98 million of proceeds from the exercise of option ~~awards, and $38 million of net borrowings on our credit facilities related to Zillow Offers.~~awards. These cash inflows were partially offset by ~~$46~~$101 million of net repayments on our warehouse line of credit and master repurchase agreements related to Zillow Home Loans.

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Capital Resources

We continue to invest in the development and expansion of our continuing operations. Ongoing investments include, but are not limited to, improvements in our technology platforms, infrastructure and continued investments in sales and marketing. To finance these investments and ongoing operations, and in the event that we require additional funding to support strategic business opportunities, we have issued convertible senior notes. As of ~~March 31,~~September 30, 2022, we have outstanding a total of $1.7 billion aggregate principal of convertible senior notes. The convertible notes are senior unsecured obligations, and interest on the convertible notes is paid semi-annually. The following table summarizes our convertible senior notes as of the periods presented (in millions, except interest rates):


						March 31, 2022		December 31, 2021							September 30, 2022		December 31, 2021
Maturity Date	Maturity Date	Aggregate Principal Amount		Stated Interest Rate		Carrying Value		Carrying Value		Maturity Date	Aggregate Principal Amount		Stated Interest Rate		Carrying Value		Carrying Value
September 1, 2026	September 1, 2026	$	499	1.375	%	$	495	$	369	September 1, 2026	$	499	1.375	%	$	495	$	369
May 15, 2025	May 15, 2025	565		2.75	%	557		443		May 15, 2025	565		2.75	%	559		443
September 1, 2024	September 1, 2024	608		0.75	%	604		507		September 1, 2024	608		0.75	%	605		507
Total	Total	$	1,672			$	1,656	$	1,319	Total	$	1,672			$	1,659	$	1,319

Refer to Note 11 of our Notes to Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q for additional information regarding our convertible senior notes, including conversion rates, conversion and redemption dates and the related capped call transactions.

On February 17, 2021, we entered into an equity distribution agreement with certain sales agents and/or principals (the “Managers”), pursuant to which we may offer and sell from time to time, through the Managers, shares of our Class C capital stock, having an aggregate gross sales price of up to $1.0 billion, in such share amounts as we may specify by notice to the Managers, in accordance with the terms and conditions set forth in the equity distribution agreement. During the ~~three~~nine months ended ~~March 31,~~September 30, 2022, we did not sell any shares under the equity distribution agreement. During the ~~three~~nine months ended ~~March 31,~~September 30, 2021, we issued and sold ~~3,164~~3 million shares of our Class C capital stock under the equity distribution agreement for total proceeds of $551 million and net proceeds of $545 million, after deducting $6 million of commissions and other offering expenses incurred. For additional information regarding the equity distribution agreement, see Note 13 in our Notes to Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q.

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On December 2, 2021, Zillow Group’s Board of Directors authorized the repurchase of up to $750 million of ~~its~~our Class A common stock, Class C capital stock or a combination thereof (the “Stock Repurchase Program”). During the three months ended March 31, 2022, we repurchased 1,412 of Class A common stock and 4,446 of Class C capital stock at an average price of $58.38 and $59.66 per share, respectively, for an aggregate purchase price of $83 million and $265 million, respectively. As of March 31, 2022, $100 million remained available for future repurchases pursuant to the Stock Repurchase Program, which repurchases decrease our liquidity and capital resources, when effected.thereof. On May 4, 2022, the Board of Directors authorized the repurchase of up to an additional $1 billion (together the “Repurchase Authorizations”) of our Class A common stock, Class C capital stock or a combination thereof. ~~This authorization is in addition~~During the nine months ended September 30, 2022, we repurchased 3 million shares of Class A common stock and 14 million shares of Class C capital stock at an average price of $46.13 and $44.40 per share, respectively, for an aggregate purchase price of $154 million and $619 million, respectively. As of September 30, 2022, $674 million remained available for future repurchases pursuant to the ~~$750 million~~Repurchase Authorizations, which repurchases decrease our liquidity and capital resources when effected. On November 1, 2022, the Board of Directors further expanded the Repurchase Authorizations to allow for the repurchase ~~authorization previously announced on December 2, 2021.~~of a portion of our outstanding convertible senior notes. For additional information on our ~~Stock~~ Repurchase ~~Program,~~Authorizations, see Note 1311 and Note 1913 in our Notes to Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q.

~~Homes~~

Zillow Group’s purchase of homes through the Zillow Offers program and sale of homes has had a significant impact on our liquidity and capital resources as a cash and inventory intensive business. We have used credit facilities, and beginning in the third quarter of 2021, asset-backed securitizations, to fund a portion of the purchase price of homes and certain related costs. During the three months ended March 31, 2022, certain wholly owned subsidiaries of Zillow Group repaid all amounts drawn on the Zillow Offers credit facilities. On November 2, 2021, the Board of Directors of Zillow Group made the determination to wind down Zillow Offers operations. As a result, we expect home financing to decrease during the three months ending June 30, 2022 and thereafter as we have ceased home buying activities and expect to repay our outstanding securitization term loans during the second quarter of 2022.

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~~Refer to Note 11 of our Notes to Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q for additional information on Zillow Group’s credit facilities.~~

IMT

Our principal sources of liquidity for the IMT segment are cash flows from operations within the segment.

Mortgages

Zillow Home Loans ~~continues to impact~~impacts our liquidity and capital resources as a cash intensive business that funds mortgage loans originated for resale in the secondary market. We primarily use debt financing to fund mortgage loan originations. The following table summarizes our warehouse line of credit and master repurchase agreements as of the periods presented (in millions, except interest rates):


Lender	Lender	Maturity Date	Maximum Borrowing Capacity		Outstanding Borrowings at March 31, 2022		Outstanding Borrowings at December 31, 2021		Weighted Average Interest Rate		Lender	Maturity Date	Maximum Borrowing Capacity		Outstanding Borrowings at September 30, 2022		Outstanding Borrowings at December 31, 2021		Weighted Average Interest Rate
Credit Suisse AG, Cayman Islands	Credit Suisse AG, Cayman Islands	March 17, 2023	$	100	$	64	$	77	2.00	%	Credit Suisse AG, Cayman Islands	March 17, 2023	$	100	$	22	$	77	4.73	%
Citibank, N.A.	Citibank, N.A.	June 10, 2022	100		13		17		2.20	%	Citibank, N.A.	June 9, 2023	100		2		17		4.89	%
Comerica Bank	Comerica Bank	June 25, 2022	60		11		19		2.51	%	Comerica Bank	June 24, 2023	50		21		19		4.95	%
		Total	$	260	$	88	$	113				Total	$	250	$	45	$	113

Refer to Note 11 of our Notes to Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q for additional information on Zillow Group’s warehouse line of credit and master repurchase agreements.

Homes

Prior to its wind down, Zillow Group’s purchase of homes through the Zillow Offers program had a significant impact on our liquidity and capital resources as a cash and inventory intensive business. We previously used credit facilities, and beginning in the third quarter of 2021, asset-backed securitizations, to fund a portion of the purchase price of homes and certain related costs. On November 2, 2021, the Board of Directors of Zillow Group made the determination to wind down Zillow Offers operations and as of September 30, 2022, the wind down was complete. As a result of the wind down, during the first half of 2022, certain wholly owned subsidiaries of Zillow Group repaid all amounts drawn on the Zillow Offers credit facilities and all principal on the securitization term loans. We incurred prepayment penalties of $6 million associated with the pay-down of our credit facilities and $8 million in connection with the pay-down of the securitizations. Refer to Note 3 of our Notes to Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q for additional information on the Zillow Offers wind down.

Contractual Obligations and Other Commitments

Convertible Senior Notes - Includes the aggregate principal amounts of the 2024 Notes, 2025 Notes and 2026 Notes due on their contractual maturity dates, as well as the associated coupon interest. As of ~~March 31,~~September 30, 2022, we have an outstanding aggregate principal amount of convertible senior notes of $1.7 billion, none of which is payable within 12 months. Future interest payments associated with the convertible senior notes total ~~$90~~$83 million, with $27 million payable within 12 months. Refer to Note 11 of our Notes to Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q for maturity dates, stated interest rates and additional information on our convertible senior notes.

~~Homes Segment Credit Facilities~~ - During the three months ended March 31, 2022, certain wholly owned subsidiaries of Zillow Group repaid all amounts drawn on the Zillow Offers credit facilities given the wind down of Zillow Offers operations. Given the wind down of Zillow Offers operations, we incurred prepayment penalties of $6 million associated with the pay-down of our credit facilities. No additional amounts may be drawn on these facilities.

~~Homes Segment Securitizations~~ - Includes the remaining principal amounts of the 2021-1 and 2021-2 term loans due on their contractual maturity dates as well as the associated coupon interest. As of March 31, 2022, we have outstanding principal amounts of term loans of $793 million associated with our Homes segment securitizations. Contractual future interest payments associated with the 2021-1 and 2021-2 term loans, if held to maturity, total $68 million, with $30 million payable within 12 months. However, given the wind down of Zillow Offers operations, we expect to settle the remaining principal amounts associated with the securitization term loans within the next 12 months, including contractual interest due and related prepayment penalties associated with the term loans. We estimate the related prepayment penalties will be approximately $8 million, $3 million of which was paid during the three months ended March 31, 2022. Refer to Note 11 of our Notes to Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q for additional information on our securitizations.

Mortgages Segment Credit Facilities - Includes principal amounts due for amounts borrowed under the warehouse line of credit and master repurchase agreements to finance mortgages originated through Zillow Home Loans. As of ~~March 31,~~ September 30,

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2022, we have outstanding principal amounts of ~~$88~~$45 million. Amounts exclude an immaterial amount of estimated interest payments.

Operating Lease Obligations - Our lease portfolio primarily comprises operating leases for our office space. For additional information regarding our operating leases, see Note 12 to our Notes to Consolidated Financial Statements in Part II, Item 8 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021. Additionally, as of ~~March 31,~~September 30, 2022,

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we had outstanding letters of credit of approximately $16 million, which secure our lease obligations in connection with certain of the operating leases of our office spaces.

Purchase Obligations - We have non-cancellable purchase obligations for content related to our mobile applications and websites and certain cloud computing costs. ~~For additional information regarding our purchase obligations, see~~Refer to Note ~~18 to our Notes to Consolidated Financial Statements in Part II, Item 8~~16 of ~~our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.~~

~~Restructuring Payments~~ - We expect to make future cash payments of approximately $50 million to $62 million, excluding prepayment penalties associated with financing facilities, related to the wind down of Zillow Offers operations. We expect these additional cash payments to be made during 2022 and to primarily relate to employee termination costs and contract termination costs. For additional information regarding our restructuring costs, see Note 18 to our Notes to Condensed Consolidated Financial Statements ofin this Quarterly Report on Form ~~10-Q.~~10-Q for additional information on our purchase obligations.

Other Commitments -We deferred a total of $24 million of certain employer payroll tax payments under the Coronavirus Aid, Relief, and Economic Security Act that was signed into law on March 27, 2020 and provides tax provisions and other stimulus measures to affected companies. We expect to make a payment of $13 million for the remaining deferred payroll taxes in the fourth quarter of 2022.

Critical Accounting Policies and Estimates

Our condensed consolidated financial statements are prepared in accordance with GAAP. The preparation of these condensed consolidated financial statements requires us to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses and related disclosures. We evaluate our estimates, judgments and assumptions on an ongoing basis. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Our actual results could differ from these estimates, and the health of the real estate market, the broader economy and the COVID-19 pandemic ~~and our decision to wind down Zillow Offers operations~~ have introduced significant additional uncertainty with respect to estimates, judgments and assumptions, which may materially impact our estimates. For information on our critical accounting policies and estimates, see Part II Item 7 (Management’s Discussion and Analysis of Financial Condition and Results of Operations) of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021. There have been no material changes to our critical accounting policies and estimates as previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to market risks in the ordinary course of our business. These risks primarily consist of fluctuations in interest rates.

Interest Rate Risk

Under our current investment policy, we invest our excess cash in money market funds, U.S. government agency securities, ~~and~~treasury bills, investment grade corporate ~~securities.~~securities and commercial paper. Our current investment policy seeks first to preserve principal, second to provide liquidity for our operating and capital needs and third to maximize yield without putting our principal at risk.

Our short-term investments are exposed to market risk due to the fluctuation of prevailing interest rates that may reduce the yield on our investments or their fair value. ~~The fair value of our beneficial interests in securitizations are subject to changes in market value through the impact of interest rates on the effective yield of the investment.~~ For our investment portfolio, we do not believe an immediate 10% increase in interest rates would have a material effect on the fair market value of our portfolio.

Our convertible senior notes and term loans associated with our Homes segment securitizations bear interest at fixed rates. Thus, we have no related direct financial statement risk associated with changes in interest rates. However, theThe fair values of the convertible senior notes change primarily when the market price of our stock fluctuates or interest rates change. The following table summarizes our outstanding convertible senior notes as of ~~March 31,~~September 30, 2022 (in millions, except interest rates):


Maturity Date	Aggregate Principal Amount		Stated Interest Rate
September 1, 2026	$	499	1.375	%
May 15, 2025	565		2.75	%
September 1, 2024	608		0.75	%
	$	1,672

During the three months ended March 31, 2022, certain wholly owned subsidiaries of Zillow Group repaid all amounts drawn on the Zillow Offers credit facilities. No additional amounts may be drawn on these facilities. For additional details related to our credit facilities, see Note 11 to our Notes to Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q.

We are also subject to market risk which may impact our mortgage loan origination volume and associated revenue and the net interest margin derived from borrowings under our warehouse line of credit and master repurchase agreements that provide capital for Zillow Home Loans. Market risk occurs in periods where changes in short-term interest rates result in mortgage loans being originated with terms that provide a smaller interest rate spread above the financing terms of our warehouse line of credit and master repurchase agreements, which can negatively impact our net income. This risk is primarily mitigated through expedited sale of our loans. As of ~~March 31,~~September 30, 2022 and December 31, 2021, we had outstanding ~~$88~~$45 million and ~~$112~~$113 million, respectively, of borrowings on our warehouse line of credit and master repurchase agreements which bear interest either at a floating rate based on ~~LIBOR plus an applicable margin, and in certain cases include a LIBOR floor or at Adjusted Daily Simple~~ Secured Overnight Financing Rate (“~~Adjusted Daily Simple~~ SOFR”) plus an applicable margin, ~~and in certain cases include~~as defined by the governing agreements, or Bloomberg Short-Term Bank Yield Index Rate (“BSBY”) plus an ~~Adjusted Daily Simple SOFR floor.~~applicable margin, as defined by the governing agreements. We manage the interest rate risk associated with our mortgage loan origination services through the use of forward sales of mortgage-backed securities. Assuming no change in the outstanding borrowings on the warehouse line of credit and master repurchase agreements, we estimate that a one percentage point increase in ~~LIBOR~~SOFR or ~~Adjusted Daily Simple SOFR,~~BSBY, as applicable, would increase our annual interest expense associated with the warehouse line of credit and master repurchase agreements by an immaterial amount as of ~~March 31,~~September 30, 2022 and ~~$1 million as of~~ December 31, 2021.

As described above, we utilize debt facilities that bear interest at a floating rate based on LIBOR, which is expected to be phased out as a reference rate in future periods. We do not expect the eventual transition away from LIBOR to have a material impact on our financial position, results of operations or cash flows.

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Inflation Risk

We do not believe that inflation has a material effect on our business, results of operations or financial condition, particularly given we are winding down Zillow Offers operations. However, the United States is experiencing the highest levels of inflation in nearly four decades. If the inflation rate continues to increase, our costs, ~~were to~~in particular labor, marketing and hosting costs, may become subject to significant inflationary pressures and we may not be able to fully offset such higher costs through price increases. In addition, uncertain or changing economic and market conditions, including inflation or deflation, may affect demand for our products and services and the housing markets in which we operate. Our inability or failure to quickly respond to inflation could harm our business, results of operations and financial condition.

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Foreign Currency Exchange Risk

We do not believe that foreign currency exchange risk has had a material effect on our business, results of operations or financial condition. As we do not maintain a significant balance of foreign currency, we do not believe an immediate 10% increase or decrease in foreign currency exchange rates relative to the U.S. dollar would have a material effect on our business, results of operations or financial condition.

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Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures (as defined under Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended). Management, under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of the Company’s disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(b) as of ~~March 31,~~September 30, 2022. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that these disclosure controls and procedures were effective as of ~~March 31,~~September 30, 2022.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the three months ended ~~March 31,~~September 30, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II – OTHER INFORMATION

Item 1. Legal Proceedings

For information regarding legal proceedings in which we are involved, see Note 16 under the subsection titled “Legal Proceedings” in our Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.

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Item 1A. Risk Factors

There have not been any material changes to the risk factors affecting our business, financial condition or future results from those set forth in Part I, Item 1A (Risk Factors) in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021. However, you should carefully consider the factors discussed in our Annual Report on Form 10-K, which could materially affect our business, financial condition or future results. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Unregistered Sales of Equity Securities

There were no unregistered sales of equity securities during the three months ended ~~March 31,~~September 30, 2022.

Purchase of Equity Securities by the Issuer

The following table summarizes ~~the~~ our stock repurchases during the three months ended ~~March 31,~~September 30, 2022 (in millions, except share data which are presented in thousands, and per share amounts):

Period Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (1)
Class A common stock Class C capital stock Class A common stock Class C capital stock
January 1 - January 31, 2022 — — $ — $ — — $ 448
February 1 - February 28, 2022 1,324 4,446 58.48 59.66 5,770 105
March 1 - March 31, 2022 88 — 56.87 — 88 100
Total 1,412 4,446 5,858
(1) On December 2, 2021, the Board of Directors authorized a stock repurchase program (the “Stock Repurchase Program”) granting the authority to repurchase up to $750 million of its Class A common stock, Class C capital stock or a combination of both. On May 4, 2022, we announced that the Board of Directors authorized the repurchase of up to an additional $1 billion of its Class A common stock, Class C capital stock or a combination thereof, which is in addition to the prior $750 million authorized under the Stock Repurchase Program. The Stock Repurchase Program does not have an expiration date.


	Total Number of Shares Purchased		Average Price Paid Per Share				Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)	Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (1)
Period	Class A common stock	Class C capital stock	Class A common stock		Class C capital stock
July 1 - July 31, 2022	—	—	$	—	$	—	—	$	850
August 1 -August 31, 2022	508	2,964	36.04		35.51		3,472	727
September 1 - September 30, 2022	264	1,261	34.51		34.42		1,525	674
Total	772	4,225					4,997

(1) On December 2, 2021, the Board of Directors authorized a stock repurchase program granting the authority to repurchase up to $750 million of its Class A common stock, Class C capital stock or a combination of both. On May 4, 2022, the Board of Directors authorized the repurchase of up to an additional $1 billion (together the “Repurchase Authorizations”) of its Class A common stock, Class C capital stock or a combination thereof. On November 1, 2022, the Board of Directors further expanded the Repurchase Authorizations to allow for the repurchase of a portion of our outstanding convertible senior notes. The Repurchase Authorizations do not have an expiration date.

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Item 5. Other Information

Our proxy statement for the 2022 Annual Meeting of Shareholders, which was filed with the Securities and Exchange Commission on April 28, 2022, contained a typographical error in the section entitled “Submission of Shareholder Proposals for Inclusion in Next Year’s Proxy Statement or Presentation at Next Year’s Annual Meeting” solely related to the date by which a shareholder proposal satisfying the conditions of Rule 14a-8 must be received at our principal executive offices in order to be considered for inclusion in next year’s proxy statement. The corrected information is set forth below:

Submission of Shareholder Proposals for Inclusion in Next Year’s Proxy Statement or Presentation at Next Year’s Annual Meeting

To be considered for inclusion in next year’s proxy statement and form of proxy pursuant to Rule 14a-8 under the Exchange Act, shareholder proposals for the 2023 Annual Meeting of Shareholders satisfying the conditions of Rule 14a-8 must be received at our principal executive offices no later than the close of business on December 29, 2022.

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Item 6. Exhibits

The exhibits listed below are filed as part of this Quarterly Report on Form 10-Q.


Exhibit Number						Description

3.1						Amended and Restated Articles of Incorporation of Zillow Group, Inc. (Filed as Exhibit 3.1 to Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on February 17, 2015, and incorporated herein by reference).

3.2						Amended and Restated Bylaws of Zillow Group, Inc. (Filed as Exhibit 3.1 to Zillow Group, Inc.’s Current Report on Form 8-K filed with the Securities and Exchange Commission on June 5, 2020, and incorporated herein by reference).

31.1						Certification of Chief Executive Officer pursuant to Rule 13-14(a) of the Securities Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2						Certification of Chief Financial Officer pursuant to Rule 13-14(a) of the Securities Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1						Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2						Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS						Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the inline XBRL document).

101.SCH						Inline XBRL Taxonomy Extension Schema Document.

101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB						Inline XBRL Taxonomy Extension Label Linkbase Document.

101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document.

104						Cover Page Interactive Data File (embedded within the inline XBRL document).

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


Dated: ~~May 5,~~November 2, 2022	ZILLOW GROUP, INC.

	By:	/s/ JENNIFER ROCK
	Name:	Jennifer Rock
	Title:	Chief Accounting Officer

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PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements (unaudited)	4
	Condensed Consolidated Balance Sheets	4
	Condensed Consolidated Statements of Operations	5
	Condensed Consolidated Statements of Comprehensive ~~Income~~Loss	6
	Condensed Consolidated Statements of Shareholders’ Equity	7
	Condensed Consolidated Statements of Cash Flows	89
	Notes to Condensed Consolidated Financial Statements	910
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	35
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	5255
Item 4.	Controls and Procedures	5457

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	5558
Item 1A.	Risk Factors	5659
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5760
Item 5.	Other Information	61
Item 6.	Exhibits	5862

	Signatures	5963


	Three Months Ended March 31, 2021
	As Reported		As Revised		Effect of Change
Cost of revenue:
Homes	$	641	$	645	$	4
IMT	28		47		19
Mortgages	18		19		1
Total cost of revenue	687		711		24
Operating expenses:
Sales and marketing	193		197		4
Technology and development	149		120		(29)
General and administrative	100		101		1


	March 31, 2022		December 31, 2021
Finished goods	$	484	$	2,728
Work-in-process	10		1,185
Inventory	$	494	$	3,913


								March 31, 2022				December 31, 2021
Securitization	Maturity Date	Aggregate Principal Amount		Weighted Average Effective Interest Rate (1)		First Interest Payment Date	Reinvestment Period	Unamortized Debt Discount and Debt Issuance Costs		Fair Value (2)		Unamortized Debt Discount and Debt Issuance Costs		Fair Value (2)
2021-1 term loan	February 9, 2024	$	320	4.14	%	September 9, 2021	24 months	$	—	$	320	$	8	$	480
2021-2 term loan	October 9, 2024	473		11.29	%	November 9, 2021	30 months	3		473		12		747
	Total	$	793					$	3	$	793	$	20	$	1,227

(1) The weighted average effective interest rate is calculated using the outstanding principal amounts and effective interest rates for the two fixed rate components and the single principal-only component of each of the term loans. Debt discount and debt issuance costs have been allocated to the components of each term loan and will be amortized using the effective interest method with the amortization classified as a component of interest expense.

(2) The estimated fair value of each of the term loans was calculated using a discounted cash flow methodology. The fair value is classified as Level 3 due to reliance on significant unobservable valuation inputs.


Maturity Date	Shares	Conversion Price per Share
September 1, 2026	11,464	$	43.51
May 15, 2025	8,408	67.20
September 1, 2024	13,983	43.51


		Three Months Ended March 31, 2022
	Statement of Operations Classification	Homes Segment		IMT Segment		Mortgages Segment		Total Recognized		Cumulative Amount Recognized		Total Expected
Inventory write-down	Cost of revenue	$	5	$	—	$	—	$	5	N/A		N/A
Other charges:
Employee termination costs	Restructuring costs	$	25	$	6	$	2	$	33	$	94	$95 - $106
Financing-related charges	Interest expense and Loss on debt extinguishment	30		—		—		30		36		$40
Contract termination costs	Restructuring costs	4		—		—		4		14		$16 - $19
Accelerated depreciation and amortization	Cost of revenue	6		—		—		6		11		$17
Asset write-offs	Restructuring costs	—		—		—		—		1		$1
Other	Restructuring costs	1		—		—		1		1		$1 - $2
Total other charges		66		6		2		74		157		$170 - $185
Total		$	71	$	6	$	2	$	79	$	157


	Three Months Ended March 31, 2022
	Employee Termination Costs		Contract Termination Costs (1)		Other		Total
Balance, beginning of period	$	45	$	4	$	—	$	49
Additions charged to expense	25		14		1		40
Cash payments	(27)		(12)		—		(39)
Adjustments	(1)		(2)		—		(3)
Balance, end of period	$	42	$	4	$	1	$	47

(1) Contract termination costs for exit and disposal activities include the contractual prepayment penalties associated with our Zillow Offers financing facilities further described below under the subheading “Financing-Related Charges.”