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 ~~September 30, 2023~~March 31, 2024


☐			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 36,

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 ~~October 25, 2023, 55,719,542~~April 24, 2024, 55,205,739 shares of Class A common stock, 6,217,447 shares of Class B common stock and ~~171,666,169~~174,762,944 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 ~~September 30, 2023~~March 31, 2024

TABLE OF CONTENTS

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GLOSSARY OF TERMS

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.,~~identified below have the meanings specified below unless otherwise noted or the context indicates ~~otherwise.~~otherwise:


Abbreviation or Acronym						Definition
Zillow Group, “the Company,” “we,” “us” and “our”						Refers to Zillow Group, Inc., unless the context indicates otherwise as used in this Quarterly Report on Form 10-Q
2020 Plan						Zillow Group, Inc. 2020 Incentive Plan
2024 Notes						0.75% Convertible Senior Notes due September 1, 2024
2025 Notes						2.75% Convertible Senior Notes due May 15, 2025
2026 Notes						1.375% Convertible Senior Notes due September 1, 2026
Aryeo						Aryeo, Inc., a wholly owned subsidiary acquired on July 31, 2023
Board						The Board of Directors of Zillow Group, Inc.
FASB						Financial Accounting Standards Board
Follow Up Boss						Enchant, LLC, d/b/a Follow Up Boss, a wholly owned subsidiary acquired on December 8, 2023
GAAP						Generally accepted accounting principles
IRLC						Interest rate lock commitment
Lenders						UBS AG, JPMorgan Chase Bank, N.A., and prior to the master repurchase agreement expiration in March 2024, Atlas Securitized Products, L.P
MBS						Mortgage-backed security
Notes						2024 Notes, 2025 Notes and 2026 Notes in aggregate
OECD						Organization for Economic Co-operation and Development
Pillar Two						Pillar Two Global Anti-Base Erosion
Repurchase Authorizations						A series of authorizations from the Board to repurchase Class A common stock, Class C capital stock, outstanding convertible senior notes, or a combination thereof
SEC						Securities and Exchange Commission
SOFR						Secured Overnight Financing Rate
Spruce						Refers to substantially all assets and liabilities of Spruce Holdings, Inc. and certain affiliated entities, which assets and liabilities were acquired on September 11, 2023

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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”~~“expect,” “potential,” “might” 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, ~~2022,~~2023, including, but not limited to risks related to:

•the current and future health and stability of the economy and United States residential real estate industry, including changes in inflationary conditions, interest rates, housing availability and affordability, labor shortages and supply chain issues;

•our ability to manage advertising and product inventory and pricing and maintain relationships with our real estate partners;

•our ability to establish or maintain relationships with listing and data providers, which affects traffic to our mobile applications and websites;

•our ability to comply with current and future rules and requirements promulgated by the National Association of REALTORS®, multiple listing ~~service (“MLS”) rules and requirements;~~services, or other real estate industry groups or governing bodies;

•our ability to navigate industry changes, including as a result of certain or future class action lawsuits or government investigations, which may include lawsuits or investigations in which we are not a named party;

•our ability to continue to innovate and compete ~~successfully~~ to attract customers and real estate partners;

•our ability to effectively invest resources to pursue new strategies, develop new products and services and expand existing products and services into new markets;

•our ability to operate and grow Zillow Home Loans, our mortgage origination business, including the ability to obtain or maintain sufficient financing to fund its origination of mortgages, meet customers’ financing needs with its product offerings, continue to grow the origination business and resell originated mortgages on the secondary market;

•the duration and impact of natural disasters, geopolitical events, and other catastrophic events (including public health crises) on our ability to operate, demand for our products or services, or general economic conditions;

•our ability to maintain adequate security measures or technology systems, or those of third parties on which we rely, to protect data integrity and the information and privacy of our customers and other third parties;

•the impact of pending or future litigation and other disputes or enforcement ~~actions;~~actions, which may include lawsuits or investigations to which we are not a party;

•our ability to attract, engage, and retain a highly skilled, remote workforce;

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

•our ability to continue relying on third-party services to support critical functions of our business;

•our ability to protect and continue using our intellectual property and prevent others from copying, infringing upon, or developing similar intellectual ~~property;~~property, including as a result of generative artificial intelligence;

•our ability to comply with domestic and international laws, regulations, rules, contractual obligations, policies and other obligations, or to obtain or maintain required licenses to support our business and operations;

•our ability to pay debt, settle conversions of our ~~convertible senior notes,~~Notes, or repurchase our ~~convertible senior notes~~Notes upon a fundamental change;

•our ability to raise additional capital or refinance on acceptable terms, or at all;

•actual or anticipated fluctuations in quarterly and annual results of operations and financial position;

•the assumptions, estimates and internal or third-party data that we use to calculate business, performance and operating metrics; and

•volatility of our Class A common stock and Class C capital stock prices.

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.

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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.

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.

NOTE REGARDING INDUSTRY AND MARKET DATA

2This Quarterly Report on Form 10-Q contains market and industry data that are based on our own internal estimates and research, as well as independent industry publications, trade or business organizations and other statistical information from third parties. Third-party information generally states that the information contained therein has been obtained from sources believed to be reliable. We have not independently verified any of the data from third-party sources nor have we validated the underlying economic assumptions relied on therein. The content of, or accessibility through, these market and industry data sources, except to the extent specifically set forth in this Quarterly Report on Form 10-Q, does not constitute a portion of this report and are not incorporated herein, and any sources are an inactive textual reference only.

~~Table of~~ ~~Contents~~

WHERE YOU CAN FIND MORE INFORMATION

Our filings with the ~~Securities and Exchange Commission (“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~~Site (https://investors.zillowgroup.com)

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

•Zillow Group’s X Account, formerly known as Twitter (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 X 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)


		September 30, 2023		December 31, 2022
	March 31, 2024						March 31, 2024	December 31, 2023
Assets	Assets
Current assets:	Current assets:
Current assets:
Current assets:
Cash and cash equivalents
Cash and cash equivalents
Cash and cash equivalents	Cash and cash equivalents	$	1,846	$	1,466
Short-term investments	Short-term investments	1,421		1,896
Accounts receivable, net	Accounts receivable, net	97		72
Mortgage loans held for sale	Mortgage loans held for sale	96		41
Prepaid expenses and other current assets	Prepaid expenses and other current assets	149		126
Restricted cash	Restricted cash	3		2
Total current assets	Total current assets	3,612		3,603
Contract cost assets	Contract cost assets	23		23
Property and equipment, net	Property and equipment, net	324		271
Right of use assets	Right of use assets	103		126
Goodwill	Goodwill	2,416		2,374
Intangible assets, net	Intangible assets, net	162		154
Other assets	Other assets	16		12
Total assets	Total assets	$	6,656	$	6,563
Liabilities and shareholders’ equity	Liabilities and shareholders’ equity
Current liabilities:	Current liabilities:
Current liabilities:
Current liabilities:
Accounts payable
Accounts payable
Accounts payable	Accounts payable	$	28	$	20
Accrued expenses and other current liabilities	Accrued expenses and other current liabilities	87		90
Accrued compensation and benefits	Accrued compensation and benefits	52		48
Borrowings under credit facilities	Borrowings under credit facilities	91		37
Deferred revenue	Deferred revenue	48		44
Lease liabilities, current portion	Lease liabilities, current portion	28		31
Convertible senior notes, current portion	Convertible senior notes, current portion	607		—
Total current liabilities	Total current liabilities	941		270
Lease liabilities, net of current portion	Lease liabilities, net of current portion	119		139
Convertible senior notes, net of current portion	Convertible senior notes, net of current portion	1,057		1,660
Other long-term liabilities	Other long-term liabilities	10		12
Total liabilities	Total liabilities	2,127		2,081
Commitments and contingencies (Note 14)
Commitments and contingencies (Note 12)						Commitments and contingencies (Note 12)
Shareholders’ equity:	Shareholders’ equity:
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 — 55,719,542 and 57,494,698 shares as of September 30, 2023 and December 31, 2022, 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 — 55,205,739 and 55,282,702 shares as of March 31, 2024 and December 31, 2023, respectively
Class B common stock, $0.0001 par value; authorized — 15,000,000 shares; issued and outstanding — 6,217,447 shares	Class B common stock, $0.0001 par value; authorized — 15,000,000 shares; issued and outstanding — 6,217,447 shares	—		—
Class C capital stock, $0.0001 par value; authorized — 600,000,000 shares; issued and outstanding — 171,654,263 and 170,555,565 shares as of September 30, 2023 and December 31, 2022, respectively		—		—
Class C capital stock, $0.0001 par value; authorized — 600,000,000 shares; issued and outstanding — 174,752,848 and 171,853,566 shares as of March 31, 2024 and December 31, 2023, respectively
Additional paid-in capital	Additional paid-in capital	6,247		6,109
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(21)		(15)
Accumulated deficit	Accumulated deficit	(1,697)		(1,612)
Total shareholders’ equity	Total shareholders’ equity	4,529		4,482
Total liabilities and shareholders’ equity	Total liabilities and shareholders’ equity	$	6,656	$	6,563

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 September 30,				Nine Months Ended September 30,
		2023		2022		2023		2022
Revenue	Revenue	$	496	$	483	$	1,471	$	1,523
Revenue
Revenue
Cost of revenue
Cost of revenue
Cost of revenue	Cost of revenue	110		89		306		278
Gross profit	Gross profit	386		394		1,165		1,245
Gross profit
Gross profit
Operating expenses:
Operating expenses:
Operating expenses:	Operating expenses:
Sales and marketing	Sales and marketing	164		165		493		502
Sales and marketing
Sales and marketing
Technology and development
Technology and development
Technology and development	Technology and development	142		142		419		369
General and administrative	General and administrative	131		138		407		370
Impairment and restructuring costs		1		—		9		14
Acquisition-related costs		1		—		2		—
General and administrative
General and administrative
Impairment costs
Impairment costs
Impairment costs

Total operating expenses	Total operating expenses	439		445		1,330		1,255
Loss from continuing operations		(53)		(51)		(165)		(10)

Total operating expenses

Total operating expenses
Loss from operations
Loss from operations
Loss from operations
Other income, net
Other income, net
Other income, net	Other income, net	34		12		108		19
Interest expense	Interest expense	(9)		(9)		(27)		(26)
Loss from continuing operations before income taxes		(28)		(48)		(84)		(17)
Income tax benefit (expense)		—		(3)		(1)		1
Net loss from continuing operations		(28)		(51)		(85)		(16)
Net loss from discontinued operations, net of income taxes		—		(2)		—		(13)
Interest expense
Interest expense
Loss before income taxes
Loss before income taxes
Loss before income taxes
Income tax expense
Income tax expense
Income tax expense
Net loss
Net loss
Net loss	Net loss	$	(28)	$	(53)	$	(85)	$	(29)

Net loss from continuing operations per share - basic and diluted		$	(0.12)	$	(0.21)	$	(0.36)	$	(0.07)
Net loss per share - basic and diluted

Net loss per share - basic and diluted

Net loss per share - basic and diluted	Net loss per share - basic and diluted	$	(0.12)	$	(0.22)	$	(0.36)	$	(0.12)

Weighted-average shares outstanding - basic and diluted	Weighted-average shares outstanding - basic and diluted	233,295		240,080		235,560		244,157

Weighted-average shares outstanding - basic and diluted

Weighted-average shares outstanding - basic and diluted

See accompanying notes to the condensed consolidated financial statements.

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ZILLOW GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(in millions, unaudited)

Three Months Ended
September 30, Nine Months Ended
September 30,
2023 2022 2023 2022
Net loss $ (28) $ (53) $ (85) $ (29)
Other comprehensive loss:
Net unrealized losses on investments (2) (6) (6) (26)
Total other comprehensive loss (2) (6) (6) (26)
Comprehensive loss $ (30) $ (59) $ (91) $ (55)


	Three Months Ended March 31,
	2024		2023
Net loss	$	(23)	$	(22)
Other comprehensive income (loss):
Net unrealized gains (losses) on investments	(6)		12
Total other comprehensive income (loss)	(6)		12
Comprehensive loss	$	(29)	$	(10)

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																										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
	Balance at July 1, 2023	232,723		$		—			$	6,174			$		(1,669)				$	(19)				$	4,486
	Issuance of capital stock upon exercise of stock options	631		—			26				—					—					26
	Class A Common Stock, Class B Common Stock and Class C Capital Stock

	Shares
Shares
Shares
Shares
Shares
Shares
Shares
Shares
Shares
Shares
Shares
Shares
Shares
Shares
Shares
Shares
Shares
Shares
Shares
Shares
Shares
Shares
Shares
Shares
Shares
Shares
Shares
Shares
Shares
Shares
Shares
Shares
Shares
Balance at January 1, 2024
Balance at January 1, 2024
Balance at January 1, 2024
Issuance of Class C capital stock upon exercise of stock options
Vesting of restricted stock units	Vesting of restricted stock units	1,754		—			—				—					—					—
Share-based compensation expense	Share-based compensation expense	—		—			127				—					—					127
Repurchases of Class A common stock and Class C capital stock	Repurchases of Class A common stock and Class C capital stock	(1,897)		—			(100)				—					—					(100)
Issuance of capital stock in connection with an acquisition		380		—			20				—					—					20
Net loss	Net loss			—			—				(28)					—					(28)
Other comprehensive loss	Other comprehensive loss	—		—			—				—					(2)					(2)
Balance at September 30, 2023		233,591		$	—		$	6,247			$	(1,697)				$	(21)				$	4,529
Balance at March 31, 2024

Class A Common
Stock, Class B
Common Stock and
Class C Capital Stock Additional
Paid-In
Capital Accumulated
Deficit Accumulated
Other
Comprehensive
Loss Total
Shareholders’
Equity
Shares Amount
Balance at July 1, 2022 241,141 $ — $ 6,167 $ (1,487) $ (13) $ 4,667
Issuance of common and capital stock upon exercise of stock options 83 — 2 — — 2
Vesting of restricted stock units 1,467 — — — — —
Share-based compensation expense — — 161 — — 161
Repurchases of Class A common stock and Class C capital stock (4,997) — (176) — — (176)
Net loss — — — (53) — (53)
Other comprehensive loss — — — — (6) (6)
Balance at September 30, 2022 237,694 $ — $ 6,154 $ (1,540) $ (19) $ 4,595

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Class A Common
Stock, Class B
Common Stock and
Class C Capital Stock Additional
Paid-In
Capital Accumulated
Deficit Accumulated
Other
Comprehensive
Loss Total
Shareholders’
Equity
Shares Amount
Balance at January 1, 2023 234,268 $ — $ 6,109 $ (1,612) $ (15) $ 4,482
Issuance of capital stock upon exercise of stock options 1,454 — 56 — — 56
Vesting of restricted stock units 4,675 — — — — —
Share-based compensation expense — — 398 — — 398
Repurchases of Class A common stock and Class C capital stock (7,186) — (336) — — (336)
Issuance of capital stock in connection with an acquisition 380 — 20 — — 20
Net loss — — — (85) — (85)
Other comprehensive loss — — — — (6) (6)
Balance at September 30, 2023 233,591 $ — $ 6,247 $ (1,697) $ (21) $ 4,529

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

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

	Shares	Amount
Balance at January 1, 2023	234,268	$	—	$	6,109	$	(1,612)	$	(15)	$	4,482
Issuance of Class C capital stock upon exercise of stock options	373	—		13		—		—		13
Vesting of restricted stock units	1,365	—		—		—		—		—
Share-based compensation expense	—	—		121		—		—		121
Repurchases of Class A common stock and Class C capital stock	(2,012)	—		(86)		—		—		(86)
Net loss	—	—		—		(22)		—		(22)
Other comprehensive income	—	—		—		—		12		12
Balance at March 31, 2023	233,994	$	—	$	6,157	$	(1,634)	$	(3)	$	4,520

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,				Three Months Ended March 31,
		2023		2022		2024	2023
Operating activities	Operating activities
Net loss	Net loss	$	(85)	$	(29)
Net loss
Net loss
Adjustments to reconcile net loss to net cash provided by operating activities:	Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization
Depreciation and amortization
Depreciation and amortization	Depreciation and amortization	134		121
Share-based compensation	Share-based compensation	342		341
Amortization of right of use assets	Amortization of right of use assets	18		17
Amortization of contract cost assets	Amortization of contract cost assets	16		23
Amortization of debt discount and debt issuance costs		4		24
Loss on extinguishment of debt		—		21
Amortization of debt issuance costs
Impairment costs
Accretion of bond discount	Accretion of bond discount	(29)		(11)
Other adjustments to reconcile net loss to net cash provided by operating activities	Other adjustments to reconcile net loss to net cash provided by operating activities	3		11
Changes in operating assets and liabilities:	Changes in operating assets and liabilities:
Accounts receivable	Accounts receivable	(26)		76
Accounts receivable
Accounts receivable
Mortgage loans held for sale	Mortgage loans held for sale	(55)		58
Inventory		—		3,904
Prepaid expenses and other assets	Prepaid expenses and other assets	(22)		(13)
Contract cost assets	Contract cost assets	(16)		(13)
Lease liabilities	Lease liabilities	(24)		(15)
Accounts payable	Accounts payable	7		1
Accrued expenses and other current liabilities	Accrued expenses and other current liabilities	(3)		(49)
Accrued compensation and benefits	Accrued compensation and benefits	4		(52)
Deferred revenue	Deferred revenue	4		(1)
Other long-term liabilities	Other long-term liabilities	(4)		6
Net cash provided by operating activities	Net cash provided by operating activities	268		4,420
Investing activities	Investing activities
Proceeds from maturities of investments	Proceeds from maturities of investments	1,136		455
Proceeds from maturities of investments
Proceeds from maturities of investments
Purchases of investments	Purchases of investments	(638)		(1,474)
Purchases of property and equipment	Purchases of property and equipment	(101)		(87)
Purchases of intangible assets	Purchases of intangible assets	(24)		(17)
Cash paid for acquisitions, net		(34)		—
Net cash provided by (used in) investing activities		339		(1,123)
Net cash used in investing activities
Financing activities	Financing activities
Repayments of borrowings on credit facilities		—		(2,205)
Net borrowings (repayments) on warehouse line of credit and repurchase agreements		54		(68)
Net borrowings on warehouse line of credit and repurchase agreements
Net borrowings on warehouse line of credit and repurchase agreements
Net borrowings on warehouse line of credit and repurchase agreements
Repurchases of Class A common stock and Class C capital stock	Repurchases of Class A common stock and Class C capital stock	(336)		(773)
Settlement of long-term debt		—		(1,158)
Proceeds from exercise of stock options	Proceeds from exercise of stock options	56		44
Net cash used in financing activities		(226)		(4,160)
Net increase (decrease) in cash, cash equivalents and restricted cash during period		381		(863)
Net cash provided by (used in) financing activities
Net decrease in cash, cash equivalents and restricted cash during period
Cash, cash equivalents and restricted cash at beginning of period	Cash, cash equivalents and restricted cash at beginning of period	1,468		2,838
Cash, cash equivalents and restricted cash at end of period	Cash, cash equivalents and restricted cash at end of period	$	1,849	$	1,975
Supplemental disclosures of cash flow information	Supplemental disclosures of cash flow information
Noncash transactions:	Noncash transactions:
Noncash transactions:
Noncash transactions:
Capitalized share-based compensation
Capitalized share-based compensation
Capitalized share-based compensation	Capitalized share-based compensation	$	56	$	33
Write-off of fully depreciated property and equipment	Write-off of fully depreciated property and equipment	29		48
Value of Class C capital stock issued in connection with an acquisition		20		—
Write-off of fully amortized intangible assets		4		200
Recognition of operating right of use assets and lease liabilities		1		14
Settlement of beneficial interests in securitizations		—		(79)

See accompanying notes to the condensed consolidated financial statements.

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ZILLOW GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Index to Notes to Condensed Consolidated Financial Statements


		Page
Note 1.	Organization and Description of Business	119
Note 2.	Summary of Significant Accounting Policies	1210
Note 3.	~~Discontinued Operations~~Financial Instruments	1511
Note 4.	~~Fair Value Measurements~~	16
~~Note 5.~~	~~Cash and Cash Equivalents, Investments and Restricted Cash~~	18
~~Note 6.~~	Property and Equipment, net	1914
Note 5.	Acquisitions	14
Note 6.	Intangible Assets, net	17
Note 7.	ADebt	~~cqu~~17
Note 8.	~~isit~~i ~~ons~~Income Taxes	19
Note 8.9.	~~Intangible Assets, net~~Share Repurchase Authorizations	19
Note 10.	Share-Based Awards	20
Note 9.11.	~~Debt~~Net Loss Per Share	21
Note ~~10.~~	~~Income Taxes~~	23
~~Note 11.~~	~~Share Repurchase Authorizations~~	23
~~Note~~ 12.	~~Share-Based Awards~~	25
~~Note 13.~~	~~Net~~ ~~Loss~~ ~~Per Share~~	26
~~Note 14.~~	Commitments and Contingencies	2722
Note ~~15.~~13.	Revenue and Contract Balances	30
~~Note 16.~~	~~Subsequent Events~~	3124

Note 1. Organization and Description of Business

Zillow Group is reimagining real estate to make home a reality for more and more people. As the most visited real estate website in the United States, Zillow and its affiliates help people find and get the home they want by connecting them with digital solutions, ~~great~~dedicated partners and agents, and easier buying, selling, financing and renting experiences.

Our portfolio of affiliates, subsidiaries and brands includes Zillow Premier Agent, Zillow Home Loans, our mortgage originations business and affiliate lender, Zillow Rentals, Trulia, StreetEasy, HotPads and Out East. In addition, Zillow Group provides a comprehensive suite of marketing software and technology solutions for the real estate industry, including ShowingTime+, Spruce ~~Mortech, New Home Feed~~ and ~~ShowingTime+.~~

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 completed in the third quarter of 2022, and we have presented the financial results of Zillow Offers as discontinued operations in our condensed consolidated statements of operations for the three and nine months ended September 30, 2022. No assets or liabilities were classified as discontinued operations as of December 31, 2022. See Note 3 for additional information.Follow Up Boss.

Certain Significant Risks and Uncertainties

We operate in a dynamic industry and, accordingly, can be affected by a variety of ~~factors.~~factors, which are uncertain and difficult to predict. 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 and United States residential real estate industry, including changes in inflationary conditions, interest rates, housing availability and affordability, labor shortages and supply chain issues; our ability to manage industry changes, including as a result of certain or future class action lawsuits or government investigations; our ability to manage advertising and product inventory and pricing and maintain relationships with our real estate partners; our ~~compliance~~ability to comply with ~~multiple listing service~~current and future rules and requirements ~~to access and use~~promulgated by the National Association of REALTORS®, multiple listing ~~data,~~services, or other real estate industry groups or governing bodies, and to maintain or establish relationships with ~~listings~~listing and data providers; our investment of 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 or that do not allow us to compete successfully; our ability to operate and grow Zillow Home Loans, our mortgage origination business and affiliate lender, including the ability to obtain or maintain sufficient financing and resell originated mortgages on the secondary market; the duration and impact of natural disasters and other catastrophic events (including public health crises) on

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our ability to operate, demand for our products or services or general economic conditions; outcomes of legal proceedings; our ability to attract, engage, and retain a highly skilled, remote workforce; protection of ~~Zillow’s~~Zillow Group’s information and systems against security breaches or disruptions in operations; reliance on third-party services to support critical functions of our business; protection of our brand and intellectual property; and changes in laws or government regulation affecting our business, among other things.

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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 United States ~~generally accepted accounting principles (“GAAP”)~~GAAP and applicable rules and regulations of the ~~Securities and Exchange Commission (“SEC”)~~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, ~~2022, which was filed with the SEC on February 15,~~ 2023. The condensed consolidated balance sheet as of December 31, ~~2022,~~2023, included herein, was derived from the audited financial statements of Zillow Group, Inc. as of that date. Certain reclassifications of prior period amounts have been made to conform to the current period presentation.

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 ~~September 30, 2023~~March 31, 2024 and our results of operations, comprehensive loss, ~~and~~ shareholders’ equity, ~~for the three and nine month periods ended September 30, 2023 and 2022,~~ and cash flows for the ~~nine~~three month periods ended ~~September 30, 2023~~March 31, 2024 and ~~2022.~~2023. The results for the three ~~and nine~~ months ended ~~September 30, 2023~~March 31, 2024 are not necessarily indicative of the results to be expected for the year ending December 31, ~~2023,~~2024, for any interim period, or for any other future year. Certain reclassifications of prior period amounts have been made to conform to the current period presentation. Unless indicated otherwise, the information in the Notes to Condensed Consolidated Financial Statements relates to our continuing operations and does not include the results of discontinued operations.

There were no significant changes to the significant accounting policies disclosed in Note 2 in the Notes to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, except for the updates noted below. Such updates were made due to our determination that we have a single operating and reportable segment, as well as certain changes to how we disaggregate our revenue into categories, beginning in the first quarter of 2023.

~~Recoverability of Goodwill~~

Goodwill is measured as the excess of consideration transferred for an acquired business over the net of the acquisition date fair values of the assets acquired and the liabilities assumed, and is not amortized. We assess the impairment of goodwill at the reporting unit level on an annual basis, in our fourth quarter, or whenever events or changes in circumstances indicate that goodwill may be impaired. In our evaluation of goodwill, we initially perform a qualitative assessment to determine whether the existence of events or circumstances indicates that it is more likely than not that the carrying value of each reporting unit is greater than its fair value. If it is more likely than not that the carrying value of a reporting unit is greater than its fair value, we perform a quantitative assessment and an impairment charge is recorded in our statements of operations if the carrying value of the reporting unit exceeds its fair value.

Beginning in 2023, our chief operating decision maker, who is our chief executive officer, manages our business, makes operating decisions and evaluates operating performance on the basis of the company as a whole, instead of on a segment basis as he did prior to 2023. This aligns to our ongoing growth strategy and our intent to provide integrated customer solutions for all tasks and services related to facilitating real estate transactions. This resulted in revisions to the nature and substance of information regularly provided to and used by the chief operating decision maker. Accordingly, we have realigned our operating structure, resulting in a single operating and reportable segment. In line with this, the nature and substance of the information regularly provided to our segment manager similarly changed, and we determined that we have only one reporting unit. Because the segment change impacted the structure of our reporting units, we performed a qualitative goodwill impairment assessment immediately before and immediately after the change in reporting units. Based on those assessments, we determined it was more likely than not that the fair value of our current and legacy reporting units exceeded their respective carrying values. Therefore, we concluded that it was not necessary to perform a quantitative impairment test.

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~~Revenue Recognition~~

We recognize revenue when or as we satisfy our performance obligations by transferring control of the promised products or services to our customers in an amount that reflects the consideration to which we expect to be entitled in exchange for those products or services.

As a practical expedient, we do not adjust the promised amount of consideration for the effects of a significant financing component as the period between our transfer of a promised product or service to a customer and when the customer pays for that product or service is generally one year or less.

We do not disclose the transaction price related to remaining performance obligations for (i) contracts with an original expected duration of one year or less or (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for performance completed to date. The remaining duration over which we satisfy our performance obligations is generally less than one year.

~~We disaggregate our revenue into the following categories: Residential, Rentals, Mortgages and Other, described below.~~

~~Residential.~~ Residential revenue includes revenue generated by our Premier Agent and new construction marketplaces, as well as revenue from the sale of advertising and business technology solutions for real estate professionals through StreetEasy for-sale product offerings and ShowingTime+.

Our Premier Agent program offers a suite of marketing and technology products and services to help real estate agents and brokers achieve their advertising goals while growing and managing their businesses and brands. All Premier Agent partners receive access to a dashboard portal on our mobile application and website that provides individualized program performance analytics, our customer relationship management tool that captures detailed information about each contact made with a Premier Agent partner through our mobile and web platforms and our account management tools. The marketing and business technology products and services promised to Premier Agent partners are delivered over time, as the customer simultaneously receives and consumes the benefit of the performance obligations.

Premier Agent advertising products, which include the delivery of validated customer connections, or leads, are primarily offered on a share of voice basis. Payment is received prior to the delivery of connections. Connections are delivered when consumer contact information is provided to Premier Agent partners. We do not promise any minimum or maximum number of connections to customers, but instead control when and how many connections to deliver based on a customer’s share of voice. We determine the number of connections to deliver to Premier Agent partners in each zip code using a market-based pricing method in consideration of the total amount spent by Premier Agent partners to purchase connections in the zip code during the month. This results in the delivery of connections over time in proportion to each Premier Agent partners’ share of voice. A Premier Agent partners’ share of voice in a zip code is determined by their proportional monthly prepaid spend in that zip code as a percentage of the total monthly prepaid spend of all Premier Agent partners in that zip code, and determines the proportion of consumer connections a Premier Agent partner receives. The number of connections delivered for a given spend level is dynamic; as demand for advertising in a zip code increases or decreases, the number of connections delivered to a Premier Agent partner in that zip code decreases or increases accordingly.

We primarily recognize revenue related to the Premier Agent products and services based on the monthly prepaid spend recognized on a straight-line basis during the monthly billing period over which the products and services are provided. This methodology best depicts how we satisfy our performance obligations to customers, as we continuously transfer control of the performance obligations to the customer over time. Given a Premier Agent partner typically prepays their monthly spend and the monthly spend is refunded on a pro-rata basis upon cancellation of the contract by a customer, we have determined that Premier Agent partner contracts are effectively daily contracts, and each performance obligation is satisfied over time as each day lapses. We have not allocated the transaction price to each performance obligation within our Premier Agent partner arrangements, as the amounts recognized would be the same irrespective of any allocation.

We also offer a pay for performance pricing model called “Flex” for Premier Agent advertising services in certain markets. Flex is available to select partners alongside our legacy market-based pricing model. With the Flex model, Premier Agent partners are provided with validated leads at no initial cost and pay a performance advertising fee only when a real estate transaction is closed with one of the leads, generally within two years. With this pricing model, the transaction price represents variable consideration, as the amount to which we expect to be entitled varies based on the number of validated leads that convert into real estate transactions and the value of those transactions. We estimate variable consideration and record revenue as performance obligations, or validated leads, are transferred. We do not believe that a significant reversal in the amount of cumulative revenue recognized will occur once the uncertainty related to the number of transactions closed is subsequently resolved. We record a contract asset for our estimate of the consideration to which we will be entitled when the right to the consideration is conditional. When the right to consideration becomes unconditional, upon the close of a real estate transaction, we reclassify amounts to accounts receivable.

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Our new construction marketing solutions allow home builders to showcase their available inventory to home shoppers. New construction revenue primarily includes revenue generated by advertising sold to builders on a cost per residential community basis whereby we recognize revenue on a straight-line basis during the contractual period over which the communities are advertised on our mobile applications and websites. New construction revenue also includes revenue generated on a cost per impression basis whereby we recognize revenue as impressions are delivered to users interacting with our mobile applications and websites, which is the amount for which we have the right to invoice. Consideration for new construction products is billed in arrears.

StreetEasy for-sale revenue primarily consists of 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 referral fee only when a real estate purchase transaction is closed with one of the leads. Under the StreetEasy 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 estimate variable consideration based on the expected number of closed transactions during the period. We do not believe that a significant reversal in the amount of cumulative revenue recognized will occur once the uncertainty related to the number of transactions closed is subsequently resolved. 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 upon the close of a real estate transaction, we reclassify amounts to accounts receivable.

Our dotloop real estate transaction management software-as-a-service solution is primarily billed in advance on a monthly basis and revenue is recognized ratably over the contract period which aligns to our satisfaction of performance obligations.

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 revenue is primarily billed in advance on a monthly basis and recognized ratably over the contract period which aligns to our satisfaction of performance obligations.

~~Rentals.~~ Rentals revenue includes the sale of advertising and a suite of tools to rental professionals, landlords and other market participants under the Zillow and StreetEasy brands. Rentals revenue includes revenue generated by advertising sold to property managers, landlords and other rental professionals on a cost per lead, lease, listing or impression basis or for a fixed fee for certain advertising packages. We recognize revenue as leads, clicks and impressions are provided to rental professionals, or as rental listings are published on our mobile applications and websites, which is the amount for which we have the right to invoice. We recognize revenue related to our fixed fee rentals product on a straight-line basis over the contract term as the performance obligations, rental listings on our mobile applications and websites, are satisfied over time based on time elapsed. The number of leases generated through our rentals pay per lease product, Zillow Lease Connect, during the period is accounted for as variable consideration, and we estimate the amount of variable consideration based on the expected number of qualified leases secured during the period. We do not believe that a significant reversal in the amount of cumulative revenue recognized will occur once the uncertainty related to the number of leases secured is subsequently resolved. We record a corresponding contract asset for the estimate of variable consideration for Zillow Lease Connect when the right to the consideration is conditional. When the right to consideration becomes unconditional upon the execution of a lease, we reclassify amounts to accounts receivable. 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. We recognize revenue for the rental applications product on a straight-line basis during the contractual period over which the customer has the right to access and submit the rental application.

~~Mortgages.~~ Mortgages revenue primarily includes revenue generated by Zillow Home Loans, our affiliated mortgage lender, and marketing products sold to mortgage professionals on a cost per lead basis, including our Custom Quote and Connect services.

Mortgage origination revenue reflects origination fees on purchase or refinance mortgages and the corresponding sale, or expected future sale, of a loan. When an interest rate lock commitment (“IRLC”) is made to a customer, we record the expected gain on sale of the mortgage, plus the estimated earnings from the expected sale of the associated servicing rights, adjusted for a pull-through percentage (which is defined as the likelihood that an interest rate lock commitment will be originated), as revenue. Revenue from loan origination fees is recognized at the time the related purchase or refinance transactions are completed, usually upon the close of escrow and when we fund the purchase or refinance mortgage loans. Once funded, mortgage loans held for sale are recorded at fair value based on either sale commitments or current market quotes and are adjusted for subsequent changes in fair value until the loan is sold. Origination costs associated with originating mortgage loans are recognized as incurred. We sell substantially all of the mortgages we originate and the related servicing rights to third-party purchasers.

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Mortgage loans are sold with limited recourse provisions, which can result in repurchases of loans previously sold to investors or payments to reimburse investors for loan losses. Based on historical experience, discussions with our mortgage purchasers, analysis of the volume of mortgages we originated and current housing and credit market conditions, we estimate and record a loss reserve for mortgage loans held in our portfolio and mortgage loans held for sale, as well as known and projected mortgage loan repurchase requests. These have historically not been significant to our financial statements.

Zillow Group operates Custom Quote and Connect through its wholly owned subsidiary, Zillow Group Marketplace, Inc., a licensed mortgage broker. For our Connect and Custom Quote cost per lead marketing products, participating qualified mortgage professionals typically make a prepayment to gain access to consumers interested in connecting with mortgage professionals. Mortgage professionals who exhaust their initial prepayment prepay additional funds to continue to participate in the marketplace. In Zillow Group’s Connect platform, consumers answer a series of questions to find a local lender, and mortgage professionals receive consumer contact information, or leads, when the consumer chooses to share their information with a lender. Consumers who request rates for mortgage loans in Custom Quotes are presented with customized quotes from participating mortgage professionals. For our cost per lead mortgages products, we recognize revenue when a user contacts a mortgage professional through our mortgages platform, which is the amount for which we have the right to invoice.

~~Other.~~ Other revenue primarily includes revenue generated from display products, which consist of graphical mobile and web advertising sold on a cost per thousand impressions or cost per click basis to advertisers promoting their brands on our mobile applications and websites. We recognize display revenue as clicks occur or as impressions are delivered to users interacting with our mobile applications or websites, which is the amount for which we have the right to invoice.

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, ~~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, including the initial and subsequent fair value measurements of assets (primarily intangible assets), liabilities and contingent consideration, 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 and ~~interest rate environment~~broader economy have introduced significant additional uncertainty with respect to estimates, judgments and assumptions, which may materially impact the estimates previously listed, among others.

Recently ~~Issued~~Adopted Accounting Standards ~~Not Yet Adopted~~

In June 2022, the ~~Financial Accounting Standards Board~~FASB issued guidance to improve existing measurement and disclosure requirements for equity securities that are subject to a contractual sale restriction. This guidance is effective for interim and annual periods beginning after December 15, 2023 on a prospective basis, with early adoption permitted. We ~~expect to adopt~~adopted this guidance ~~prospectively~~ on January 1, 2024, ~~and we do~~which did not ~~expect the adoption of this guidance to~~ have a material impact on our financial position, results of operations or cash flows.

~~Note 3. Discontinued Operations~~

~~Zillow Offers Wind Down~~Recently Issued Accounting Standards Not Yet Adopted

In November ~~2021,~~2023, the ~~Board of Directors of Zillow Group (the “Board”) made the determination~~FASB issued guidance to ~~wind down Zillow Offers operations.~~improve existing disclosure requirements for segment reporting, primarily through enhanced disclosures about significant segment expenses and new disclosures requirements applicable to entities with a single reportable segment. This ~~decision was made in light of home pricing unpredictability, capacity constraints~~guidance is effective for annual periods beginning after December 15, 2023 and ~~other operational challenges faced by Zillow Offers that were exacerbated by an unprecedented housing market,~~interim periods beginning after December 15, 2024, on a ~~global pandemic and a difficult labor and supply chain environment, all of which led us~~retrospective basis. We expect 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 completed in the third quarter of 2022, at which time Zillow Offers met the criteria for discontinued operations. Accordingly, we have presented the results of operations, excluding allocation of any general corporate expenses, of Zillow Offers as discontinued operations in our condensed consolidated statements of operationsadopt this guidance for the ~~three and nine months ended September 30, 2022. No assets or liabilities were classified as discontinued operations as of~~annual period ending December 31, ~~2022.~~2024 and have not yet determined the impact the adoption of this guidance will have on our consolidated financial statements.

In December 2023, the FASB issued guidance to enhance the income tax rate reconciliation disclosure requirements and to provide clarity on disclosure requirements for income taxes. This guidance is effective for annual periods beginning after December 15, 2024, and can be applied on a prospective or retrospective basis, with early adoption permitted. We expect to adopt this guidance for the annual period ending December 31, 2025 using the retrospective approach and have not yet determined the impact the adoption of this guidance will have on our consolidated financial statements.

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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, 2022 Nine Months Ended
September 30, 2022
Revenue $ 23 $ 4,249
Cost of revenue 24 4,023
Gross profit (loss) (1) 226
Operating expenses:
Sales and marketing 1 153
Technology and development — 6
General and administrative — 10
Restructuring costs — 25
Total operating expenses 1 194
Income (loss) from discontinued operations (2) 32
Loss on extinguishment of debt — (21)
Other income — 13
Interest expense — (36)
Loss from discontinued operations before income taxes (2) (12)
Income tax expense — (1)
Net loss from discontinued operations $ (2) $ (13)
Net loss from discontinued operations per share:
Basic $ (0.01) $ (0.05)
Diluted $ (0.01) $ (0.05)

~~The following table presents significant non-cash items and capital expenditures of the discontinued operations for the nine months ended September 30, 2022 (in millions):~~


~~Amortization of debt discount and debt issuance costs~~	$	21
~~Loss on debt extinguishment~~	21
~~Share-based compensation~~	16
~~Inventory valuation adjustment~~	9
~~Depreciation and amortization~~	7
~~Settlement of beneficial interests in securitizations~~	~~(79)~~

~~Restructuring~~

Restructuring costs totaled $14 million for the nine months ended September 30, 2022, and were related to the Zillow Offers wind down. Cumulative restructuring charges attributable to continuing operations related to the Zillow Offers wind down as of September 30, 2022 totaled $23 million.

Note ~~4. Fair Value Measurements~~3. Financial Instruments

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).

~~Table~~Restricted cash — The carrying value of ~~Contents~~restricted cash approximates fair value due to the short period of time that 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).

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).

Contingent consideration — In December 2023, Zillow Group acquired Follow Up Boss, a customer relationship management system for real estate professionals, for $399 million in cash, net of cash acquired, and contingent consideration of up to $100 million, payable over a three-year period upon achievement of certain performance metrics. The fair value of the contingent consideration is estimated using a Monte Carlo simulation which considers the probabilities of the achievement of certain performance metrics (Level 3).

The discount rates used in our valuation of contingent consideration are based on our estimated cost of debt and are directly related to the fair value of contingent consideration. An increase in the discount rate, in isolation, would result in a decrease in the fair value measurement. Conversely, a decrease in the discount rate, in isolation, would result in an increase in the fair value measurement. The probabilities of achieving the relevant performance metrics used in our valuation of contingent consideration are directly related to the fair value of contingent consideration, as an increase in the probability, in isolation, would result in an increase in the fair value measurement. Conversely, a decrease in the probability, in isolation, would result in a decrease in the fair value measurement.

During the three months ended March 31, 2024, there were no material changes in the unobservable inputs used in determining the fair value of contingent consideration included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

Interest rate lock commitments — The fair value of 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 IRLC will ultimately result in a closed loan. For IRLCs that are ~~cancelled~~canceled or expire, any recorded gain or loss is reversed at the end of the commitment period (Level 3).

The pull-through rate is based on estimated changes in market conditions, loan stage and historical borrower behavior. Pull-through rates are directly related to the fair value of IRLCs as an increase in the pull-through rate, in isolation, would result in an increase in the fair value measurement. Conversely, a decrease in the pull-through rate, in isolation, would result in a decrease in the fair value measurement. Changes in the fair value of IRLCs are included within revenue in our condensed

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consolidated statements of operations. 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:


		September 30, 2023	December 31, 2022
	March 31, 2024					March 31, 2024		December 31, 2023
Range	Range	45% - 100%	47% - 100%	Range	61% - 100%		45% - 100%
Weighted-average	Weighted-average	88%	87%	Weighted-average	87%		85%

We manage our interest rate risk related to IRLCs and mortgage loans held for sale through the use of derivative instruments, generally forward contracts on MBSs, which are commitments to either purchase or sell a financial instrument at a future date for a specified price, and mandatory loan commitments, which are an obligation by an investor to buy loans at a specified price within a specified time period. We do not enter into or hold derivatives for trading or speculative purposes, and our derivatives are not designated as hedging instruments. Changes in the fair value of our derivative financial instruments are recognized in revenue in our condensed consolidated statements of operations.

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

September 30, 2023
Total Level 1 Level 2 Level 3
Cash equivalents:
Money market funds $ 1,736 $ 1,736 $ — $ —
Short-term investments:
U.S. government treasury securities 1,258 — 1,258 —
Corporate bonds 135 — 135 —
Commercial paper 14 — 14 —
U.S. government agency securities 14 — 14 —
Mortgage origination-related:
Mortgage loans held for sale 96 — 96 —
Forward contracts - other current assets 2 — 2 —
IRLCs - other current assets 1 — — 1
Total $ 3,256 $ 1,736 $ 1,519 $ 1

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December 31, 2022
Total Level 1 Level 2 Level 3
Cash equivalents:
Money market funds $ 1,338 $ 1,338 $ — $ —
Short-term investments:
U.S. government treasury securities 1,716 — 1,716 —
Corporate bonds 161 — 161 —
Commercial paper 10 — 10 —
U.S. government agency securities 9 — 9 —
Mortgage origination-related:
Mortgage loans held for sale 41 — 41 —
Forward contracts - other current assets 1 — 1 —
Total $ 3,276 $ 1,338 $ 1,938 $ —

~~At September 30, 2023,~~table presents the notional amounts of the economic hedging instruments related to our mortgage loans held for sale ~~were $189 million and $232 million for our IRLCs and forward contracts, respectively. At December 31, 2022, the notional amounts~~as of the ~~economic hedging instruments related to our mortgage loans held for sale were $62 million~~dates presented (in millions):


	March 31, 2024		December 31, 2023
IRLCs	$	247	$	167
Forward contracts(1)	$	309	$	218
(1) Represents net notional amounts. We do not have the right to offset our forward contract derivative positions.

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The following table presents the amortized cost, as applicable, and ~~$90 million for our IRLCs~~estimated fair market value of assets and ~~forward contracts, respectively. We do not have~~liabilities measured at fair value on a recurring basis and by category as of the ~~right to offset our forward contract derivative positions.~~dates presented (in millions):


	March 31, 2024				December 31, 2023
	Amortized Cost		Estimated Fair Market Value		Amortized Cost		Estimated Fair Market Value
Assets
Cash	$	52	$	52	$	50	$	50
Cash equivalents:
Money market funds	1,261		1,261		1,440		1,440
U.S. government treasury securities	124		124		2		2
Commercial paper	2		2		—		—
Short-term investments:
U.S. government treasury securities(1)	1,273		1,263		1,149		1,143
Corporate bonds	195		195		160		161
U.S. government agency securities	14		14		14		14
Commercial paper	6		6		—		—
Mortgage origination-related:
Mortgage loans held for sale	—		132		—		100
IRLCs - other current assets	—		5		—		3
Restricted cash	3		3		3		3
Total assets measured at fair value on a recurring basis	$	2,930	$	3,057	$	2,818	$	2,916
Liabilities
Mortgage origination-related:
Forward contracts - accrued expenses and other current liabilities	$	—	$	1	$	—	$	1
Contingent consideration:
Contingent consideration - accrued expenses and other current liabilities	—		30		—		30
Contingent consideration - other long-term liabilities	—		54		—		51
Total liabilities measured at fair value on a recurring basis	$	—	$	85	$	—	$	82

(1) The estimated fair market value includes $10 million and $6 million of gross unrealized losses as of March 31, 2024 and December 31, 2023, respectively.

The following table presents available-for-sale investments by contractual maturity date as of March 31, 2024 (in millions):


	Amortized Cost		Estimated Fair Market Value
Due in one year or less	$	732	$	730
Due after one year	756		748
Total	$	1,488	$	1,478

See Note 97 for the carrying amounts and estimated fair values of our convertible senior notes.

~~Note 5. Cash and Cash Equivalents, Investments and Restricted Cash~~

~~The following table presents the amortized cost and estimated fair market value of our cash and cash equivalents, investments, and restricted cash as of the dates presented (in millions):~~

September 30, 2023 December 31, 2022
Amortized
Cost Estimated
Fair Market
Value Amortized
Cost Estimated
Fair Market
Value
Cash $ 110 $ 110 $ 128 $ 128
Cash equivalents:
Money market funds 1,736 1,736 1,338 1,338
Short-term investments:
U.S. government treasury securities(1)
1,278 1,258 1,731 1,716
Corporate bonds 136 135 162 161
Commercial paper 14 14 10 10
U.S. government agency securities 14 14 9 9
Restricted cash 3 3 2 2
Total $ 3,291 $ 3,270 $ 3,380 $ 3,364
(1)The estimated fair market value includes $20 million and $15 million of gross unrealized losses as of September 30, 2023 and December 31, 2022, respectively.

~~The following table presents available-for-sale investments by contractual maturity date as of September 30, 2023 (in millions):~~
Amortized Cost Estimated Fair
Market Value
Due in one year or less $ 513 $ 509
Due after one year 929 912
Total $ 1,442 $ 1,421

1813

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Note 6.4. Property and Equipment, net

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


		September 30, 2023		December 31, 2022
	March 31, 2024					March 31, 2024	December 31, 2023
Website development costs	Website development costs	$	415	$	291
Leasehold improvements	Leasehold improvements	89		90
Computer equipment
Office equipment, furniture and fixtures	Office equipment, furniture and fixtures	22		24
Computer equipment		19		18
Construction-in-progress		—		7

Property and equipment
Property and equipment
Property and equipment	Property and equipment	545		430
Less: accumulated amortization and depreciation	Less: accumulated amortization and depreciation	(221)		(159)
Property and equipment, net	Property and equipment, net	$	324	$	271

We recorded depreciation expense related to property and equipment (other than website development costs) of $4 million and $6 million for ~~each of~~ the three months ended ~~September 30,~~March 31, 2024 and 2023, ~~and 2022, and $18 million and $19 million for the nine months ended September 30, 2023 and 2022,~~ respectively.

We capitalized website development costs of ~~$49~~$52 million and ~~$37~~$45 million for the three months ended ~~September 30,~~March 31, 2024 and 2023, ~~and 2022, respectively, and $144 million and $104 million for the nine months ended September 30, 2023 and 2022,~~ respectively. Amortization expense for website development costs included in cost of revenue was ~~$30~~$33 million and ~~$17~~$22 million for the three months ended ~~September 30,~~March 31, 2024 and 2023, ~~and 2022, respectively, and $79 million and $48 million for the nine months ended September 30, 2023 and 2022,~~ respectively.

Note 7.5. Acquisitions

Acquisition of Follow Up Boss

On December 8, 2023, Zillow Group acquired Follow Up Boss, a customer relationship management system for real estate professionals, for $399 million in cash, net of cash acquired, and contingent consideration of up to $100 million in cash, payable over a three-year period upon achievement of certain performance metrics. See Note 3 for additional information regarding the preliminary fair value of contingent consideration. The acquisition is consistent with our strategy to invest in a more integrated software experience for our customers. The acquisition of Follow Up Boss has been accounted for as a business combination, and assets acquired and liabilities assumed were generally recorded at their preliminary estimated fair values, in accordance with the applicable accounting guidance. Goodwill 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. Goodwill recorded in connection with the acquisition is deductible for tax purposes.

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


Preliminary purchase price:
Cash	$	403
Contingent consideration	81
Total preliminary purchase price	$	484

Identifiable assets acquired and liabilities assumed:
Cash and cash equivalents	$	4
Goodwill	401
Intangible assets	86
Other assets	1
Deferred revenue	(7)
Other liabilities	(1)
Total preliminary purchase price	$	484

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

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	Preliminary Estimated Fair Value		Estimated Weighted-Average Useful Life (in years)
Developed technology	$	50	4
Customer relationships	34		7
Trade names and trademarks	2		7
Total	$	86

Estimated fair values of the identifiable intangible assets acquired were determined by management, based in part on a preliminary valuation performed by an independent third-party valuation specialist. We used an income approach to measure the fair value of the customer relationships intangible asset acquired 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 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.

The purchase price allocation for the Follow Up Boss acquisition is preliminary and subject to change during the measurement period up to one year from the acquisition date. We made an initial allocation of the purchase price at the date of the acquisition based upon information available and our understanding of the estimates used to determine the preliminary fair value of acquired assets, assumed liabilities and contingent consideration. We are in the process of specifically identifying the amounts assigned to certain tangible assets acquired and liabilities assumed and contingent consideration. As of March 31, 2024, the measurement period (not to extend beyond one year) is open for the Follow Up Boss acquisition; therefore, assets acquired, liabilities assumed, and contingent consideration are subject to adjustment until the end of the measurement period.

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 consolidated statements of operations and were expensed as incurred.

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

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Acquisitions of Aryeo and Spruce

On July 31, 2023, Zillow Group acquired Aryeo, ~~Inc. (“Aryeo”),~~ a software company that serves real estate photographers, in exchange for approximately $15 million in cash, net of cash acquired, and 380,259 shares of our Class C capital stock with a value of $20 million, for total consideration of $35 million, net of cash acquired. On September 11, 2023, Zillow Group acquired substantially all of the assets and liabilities of Spruce, ~~Holdings, Inc. and certain affiliated entities (collectively referred to as “Spruce”),~~ a tech-enabled title and escrow platform, in exchange for approximately $19 million in cash, net of cash acquired.

The acquisitions of Aryeo and Spruce have been accounted for as business combinations, and assets acquired and liabilities assumed were recorded at their ~~preliminary~~ estimated fair values. Goodwill 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. Goodwill ~~is measured as the excess of consideration transferred over the net of the fair values of the assets acquired and the liabilities assumed. Goodwill~~ recorded in connection with the acquisition of Aryeo is not deductible for tax purposes, and goodwill recorded in connection with the acquisition of Spruce is deductible for tax purposes.

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


		Aryeo		Spruce
	Aryeo					Aryeo	Spruce
Cash and cash equivalents	Cash and cash equivalents	$	3	$	5
Goodwill	Goodwill	26		16
Intangible assets	Intangible assets	11		2
Other assets	Other assets	—		2
Liabilities	Liabilities	(2)		(1)
Total preliminary purchase price		$	38	$	24
Total purchase price

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

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		Aryeo			Spruce
		Preliminary Estimated Fair Value		Estimated Useful Life (in years)	Preliminary Estimated Fair Value		Estimated Useful Life (in years)
	Aryeo												Aryeo						Spruce
	Estimated Fair Value											Estimated Fair Value		Estimated Useful Life (in years)			Estimated Fair Value				Estimated Useful Life (in years)
Customer relationships	Customer relationships	$	5	5	$	—	—	Customer relationships	$	5	5		5		$	—		—		—
Purchased content	Purchased content	4		3	—		—	Purchased content	4		3		3		—			—		—
Developed technology	Developed technology	2		3	2		3	Developed technology	2		3		3		2			3		3
Total	Total	$	11		$	2

We used an income approach to measure the fair value of the customer relationships intangible asset acquired from Aryeo 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 a cost approach to measure the fair value of purchased content acquired from Aryeo. We used an income approach to measure the fair value of the developed technology acquired from Aryeo and Spruce based on the relief-from-royalty method. These fair value measurements were based on Level 3 inputs under the fair value hierarchy.

~~Acquisition-related costs incurred, which primarily included legal, accounting and other external costs directly related to the acquisition, are included within~~Aggregate acquisition-related costs infor the acquisitions of Follow Up Boss, Aryeo, and Spruce were not material to our ~~condensed consolidated statements of operations and were expensed as incurred.~~financial statements.

Unaudited pro forma revenue and earnings information related to the acquisitions has not been presented as the aggregate effects of the acquisitions of Follow Up Boss, Aryeo and Spruce were not material to our condensed consolidated financial statements.

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Note 8.6. Intangible Assets, net

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


		September 30, 2023						March 31, 2024
		Cost		Accumulated Amortization		Net		Cost	Accumulated Amortization	Net
Software		$	78	$	(25)	$	53
Customer relationships	Customer relationships	63		(16)		47
Developed technology	Developed technology	53		(25)		28
Software
Trade names and trademarks	Trade names and trademarks	45		(18)		27
Purchased content	Purchased content	16		(9)		7
Total	Total	$	255	$	(93)	$	162


		December 31, 2022						December 31, 2023
		Cost		Accumulated Amortization		Net		Cost	Accumulated Amortization	Net
Customer relationships	Customer relationships	$	59	$	(10)	$	49
Developed technology
Software	Software	54		(15)		39
Developed technology		49		(15)		34
Trade names and trademarks	Trade names and trademarks	45		(15)		30
Purchased content	Purchased content	8		(6)		2
Total	Total	$	215	$	(61)	$	154

Amortization expense recorded for intangible assets was ~~$13~~$19 million and ~~$11~~$12 million for the three months ended ~~September 30,~~March 31, 2024 and 2023, ~~and 2022, respectively, and $37 million and $47 million for the nine months ended September 30, 2023 and 2022,~~ 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 ~~September 30, 2023~~March 31, 2024 or ~~2022.~~2023.

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Note 9.7. Debt

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

September 30, 2023 December 31, 2022
Credit facilities
Master repurchase agreements:
JPMorgan Chase Bank, N.A.(1)
$ 68 $ —
Atlas Securitized Products, L.P.(2)
22 23
Citibank, N.A.(3)
— 3
Warehouse line of credit:
Comerica Bank 1 11
Total credit facilities 91 37
Convertible senior notes
1.375% convertible senior notes due 2026 496 495
2.75% convertible senior notes due 2025 561 560
0.75% convertible senior notes due 2024 607 605
Total convertible senior notes 1,664 1,660
Total debt $ 1,755 $ 1,697
(1)Agreement commenced on June 1, 2023 and provides for a total maximum borrowing capacity of $100 million, $25 million of which is committed, until May 30, 2024.
(2)Agreement was reassigned from Credit Suisse AG, Cayman Islands (“Credit Suisse”) on May 25, 2023.
(3)Agreement expired on June 9, 2023 and was not renewed.


	March 31, 2024		December 31, 2023
Master repurchase agreements:
JPMorgan Chase Bank, N.A.	$	65	$	40
UBS AG	58		45
Atlas Securitized Products, L.P.(1)	—		8
Total master repurchase agreements	123		93
Convertible senior notes
1.375% convertible senior notes due 2026	496		496
2.75% convertible senior notes due 2025	505		504
0.75% convertible senior notes due 2024	608		607
Total convertible senior notes	1,609		1,607
Total debt	$	1,732	$	1,700

(1)Agreement expired on March 11, 2024 and was not renewed.

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Credit Facilities

ToWe utilize master repurchase agreements to provide capital for Zillow Home ~~Loans, we utilize master repurchase agreements and a warehouse line of credit.~~Loans. The following table summarizes certain details related to our outstanding master repurchase agreements ~~and warehouse line of credit~~ as of ~~September 30, 2023~~March 31, 2024 (in millions, except interest rates):

Lender Maturity Date Maximum Borrowing Capacity Weighted-Average Interest Rate
JPMorgan Chase Bank, N.A. May 30, 2024 $ 100 7.03 %
Atlas Securitized Products, L.P. March 11, 2024 50 7.32 %
Comerica Bank December 29, 2023 50 7.45 %
Total $ 200

On August 17, 2023, Zillow Home Loans amended its warehouse line of credit with Comerica Bank to extend the date after which Zillow Home Loans is no longer permitted to draw additional amounts on the warehouse line of credit from September 30, 2023 to November 1, 2023.


Lender	Maturity Date	Maximum Borrowing Capacity		Borrowings Outstanding		Available Borrowing Capacity		Weighted-Average Interest Rate
JPMorgan Chase Bank, N.A.	May 30, 2024	$	100	$	65	$	35	7.03	%
UBS AG	October 9, 2024	100		58		42		7.05	%
	Total	$	200	$	123	$	77

In accordance with the master repurchase agreements, ~~Atlas Securitized Products, L.P., JPMorgan Chase Bank, N.A and prior to its expiration in June 2023, Citibank, N.A., (together,~~ the ~~“Lenders”)~~Lenders agreed to pay Zillow Home Loans a negotiated purchase price for eligible loans, and Zillow Home Loans 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 ~~September 30, 2023~~March 31, 2024 and December 31, ~~2022, $93~~2023, $128 million and ~~$28~~$99 million, respectively, in mortgage loans held for sale were pledged as collateral under the master repurchase agreements.

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Borrowings on the master repurchase agreements ~~and warehouse line of credit~~ bear interest ~~either~~ at a floating rate based on ~~Secured Overnight Financing Rate plus an applicable margin, as defined by the governing agreements, or Bloomberg Short-Term Bank Yield Index Rate~~SOFR plus an applicable margin, as defined by the governing agreements. The master repurchase agreements ~~and warehouse line of credit~~ include customary representations and warranties, covenants and provisions regarding events of default. As of ~~September 30, 2023,~~March 31, 2024, Zillow Home Loans was in compliance with all financial covenants and no event of default had occurred. The master 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 repurchase agreements, ~~and warehouse line of credit,~~ see Note 1311 in the Notes to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2022.~~2023.

Convertible Senior Notes

Effective 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. Refer to Note 2in the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 for additional information regarding the adoption of this guidance.

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


										September 30, 2023				December 31, 2022
									March 31, 2024																		March 31, 2024	December 31, 2023
Maturity Date	Maturity Date	Aggregate Principal Amount		Stated Interest Rate		Effective Interest Rate		Semi-Annual Interest Payment Dates		Unamortized Debt Issuance Costs		Fair Value		Unamortized Debt Issuance Costs		Fair Value		Maturity Date	Aggregate Principal Amount	Stated Interest Rate	Effective Interest Rate	Semi-Annual Interest Payment Dates	Unamortized Debt Issuance Costs	Fair Value	Unamortized Debt Issuance Costs	Fair Value
September 1, 2026	September 1, 2026	$	499	1.375	%	1.57	%	March 1; September 1		$	3	$	598	$	4	$	504
May 15, 2025	May 15, 2025	565		2.75	%	3.20	%	May 15; November 15		4		571		5		531
September 1, 2024	September 1, 2024	608		0.75	%	1.02	%	March 1; September 1		1		706		3		629
Total	Total	$	1,672							$	8	$	1,875	$	12	$	1,664


			Three Months Ended September 30, 2023						Three Months Ended September 30, 2022
		Three Months Ended March 31, 2024																	Three Months Ended March 31, 2024			Three Months Ended March 31, 2023
Maturity Date	Maturity Date		Contractual Coupon Interest		Amortization of Debt Issuance Costs		Interest Expense		Contractual Coupon Interest		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 Issuance Costs		Interest Expense
September 1, 2026	September 1, 2026		$	2	$	—	$	2	$	2	$	—	$	2
May 15, 2025	May 15, 2025		4		—		4		4		1		5
September 1, 2024	September 1, 2024		1		1		2		1		1		2
Total	Total		$	7	$	1	$	8	$	7	$	2	$	9

Nine Months Ended
September 30, 2023 Nine Months Ended
September 30, 2022
Maturity Date Contractual Coupon Interest Amortization of Debt Issuance Costs Interest Expense Contractual Coupon Interest Amortization of Debt Issuance Costs Interest Expense
September 1, 2026 $ 6 $ 1 $ 7 $ 5 $ — $ 5
May 15, 2025 12 1 13 12 2 14
September 1, 2024 3 2 5 4 1 5
Total $ 21 $ 4 $ 25 $ 21 $ 3 $ 24

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The ~~convertible notes maturing in 2026 (“2026 Notes”), 2025 (“2025 Notes”) and 2024 (“2024 Notes”) (together, the “Notes”)~~Notes are senior unsecured obligations. The 2026 Notes and 2025 Notes are classified as long-term debt and the 2024 Notes are classified as current liabilities in our condensed consolidated balance sheets based on their contractual maturity dates. Interest on the convertible notes is paid semi-annually in arrears. The estimated fair value of the ~~convertible senior notes~~Notes is classified as Level 2 and was determined through consideration of quoted market prices in markets that are not active.

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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 dates, 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 the convertible senior notes:


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

There were no conversions of the Notes during the three ~~and nine~~ months ended ~~September 30, 2023~~March 31, 2024 or ~~2022.~~2023.

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 ~~September 30, 2023.~~March 31, 2024. Accordingly, each series of the Notes is not redeemable or convertible at the option of the holders during the three months ending ~~December 31, 2023.~~June 30, 2024.

For additional details related to our convertible senior notes, see Note 1311 in the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2022.~~2023.

Note ~~10.~~8. Income Taxes

We are ~~primarily~~ subject to income taxes in the United States (federal and state)~~, as well as~~ and certain foreign jurisdictions. As of ~~September 30, 2023~~March 31, 2024 and December 31, ~~2022,~~2023, 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. We have accumulated federal tax losses of approximately ~~$1.8~~$1.4 billion as of December 31, ~~2022,~~2023, which are available to reduce future taxable income. We have accumulated state tax losses of approximately ~~$63~~$56 million (tax effected) as of December 31, ~~2022.~~2023.

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. ~~Income~~Our income tax expense (benefit) ~~for the three and nine months ended September 30, 2023 and the nine months ended September 30, 2022~~ was not ~~material. We recorded income tax expense of $3 million~~material for the three months ended ~~September 30, 2022, primarily related to state income taxes.~~March 31, 2024 and 2023.

Note ~~11.~~9. Share Repurchase Authorizations

~~Prior to July 31, 2023, the~~The Board has authorized the repurchase of up to ~~$1.8~~$2.5 billion of our Class A common stock, Class C capital stock, outstanding convertible senior notes or a combination thereof. For additional information on these authorizations, 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, 2022. On July 31, 2023, the Board authorized the repurchase of up to an additional $750 million of our Class A common stock, Class C capital stock, outstanding convertible senior notes or a combination thereof. This additional authorization (together with the previous authorizations, the “Repurchase Authorizations”) increased our total cumulative Repurchase Authorizations to $2.5 billion.2023.

Repurchases of stock under the Repurchase 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,

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in each case as permitted by securities laws and other legal requirements. As of ~~September 30, 2023, $914~~March 31, 2024, $761 million remained available for future repurchases pursuant to the Repurchase Authorizations.

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The following table summarizes our Class A common stock and Class C capital stock repurchase activity under the Repurchase Authorizations for the periods presented (in millions, except share data, which are presented in thousands, and per share amounts):


		Three Months Ended September 30, 2023				Three Months Ended September 30, 2022				Three Months Ended March 31, 2024			Three Months Ended March 31, 2023
		Class A common stock		Class C capital stock		Class A common stock		Class C capital stock
	Class A common stock										Class A common stock	Class C capital stock		Class A common stock	Class C capital stock
Shares repurchased	Shares repurchased	965		932		772		4,225
Weighted-average price per share	Weighted-average price per share	$	52.57	$	52.80	$	35.52	$	35.18
Total purchase price	Total purchase price	$	50	$	50	$	27	$	149

Nine Months Ended
September 30, 2023 Nine Months Ended
September 30, 2022
Class A common stock Class C capital stock Class A common stock Class C capital stock
Shares repurchased 1,775 5,411 3,349 13,943
Weighted-average price per share $ 48.71 $ 46.15 $ 46.13 $ 44.40
Total purchase price $ 86 $ 250 $ 154 $ 619

In April 2024, we repurchased 0.3 million shares of Class A common stock for $15 million at a weighted average price per share of $43.01 and 1.8 million shares of Class C capital stock for $76 million at a weighted average price per share of $43.34. As of May 1, 2024, $670 million remained available for future repurchases pursuant to the Repurchase Authorizations.

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Note ~~12.~~10. Share-Based Awards

In addition to the option awards and restricted stock units typically granted under the ~~Zillow Group, Inc.~~ 2020 ~~Incentive~~ Plan ~~(the “2020 Plan”)~~ which vest quarterly over four years, during the first quarter of 2023, the Compensation Committee of the Board approved option and restricted stock unit awards granted under the 2020 Plan in connection with the 2022 annual review cycle that vest quarterly over three years. The exercisability 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. For additional information regarding our share-based awards, see Note 1614 in the Notes to the Consolidated Financial Statements in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2022.~~

On August 3, 2022, upon the recommendation of the Compensation Committee, the 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. 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 was expected to result in incremental share-based compensation expense of $66 million in total over the remaining requisite service period of the original awards. The weighted-average total fair value of options repriced in August 2022 was $67.58.2023.

Option Awards

The following table summarizes option award activity for the ~~nine~~three months ended ~~September 30, 2023:~~March 31, 2024:

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, 2023 28,598 $ 44.90 7.1 $ 15
Granted 6,890 42.63
Exercised (1,454) 38.84
Forfeited or cancelled (892) 48.28
Outstanding at September 30, 2023 33,142 44.60 7.0 173
Vested and exercisable at September 30, 2023 19,802 44.96 5.8 113


	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, 2024	32,524	$	44.18	6.9	$	495
Granted	2,744	55.69
Exercised	(1,309)	38.24
Forfeited or canceled	(197)	42.87
Outstanding at March 31, 2024	33,762	45.35		6.8	210
Vested and exercisable at March 31, 2024	20,961	44.49		5.7	148

The following assumptions were used to determine the fair value of option awards granted for the periods presented:






		Three Months Ended September 30,		Nine Months Ended September 30,
		2023	2022	2023	2022
Expected volatility	Expected volatility	62%	61%	55% - 62%	55% - 61%
Expected volatility
Expected volatility
Risk-free interest rate
Risk-free interest rate
Risk-free interest rate	Risk-free interest rate	4.34%	3.38%	3.75% - 4.34%	1.94% - 3.38%
Weighted-average expected life	Weighted-average expected life	5.3 years	5.0 years	5.3 - 6.5 years	4.5 - 6.0 years
Weighted-average expected life
Weighted-average expected life
Weighted-average fair value of options granted	Weighted-average fair value of options granted	$27.26	$18.06	$24.06	$23.75
Weighted-average fair value of options granted
Weighted-average fair value of options granted

As of ~~September 30, 2023,~~March 31, 2024, there was a total of ~~$384~~$367 million in unrecognized compensation cost related to unvested option awards.

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Restricted Stock Units

The following table summarizes activity for restricted stock units for the ~~nine~~three months ended ~~September 30, 2023:~~March 31, 2024:


		Restricted Stock Units (in thousands)	Weighted-Average Grant Date Fair Value
Unvested outstanding at January 1, 2023		10,930	$	46.85
	Restricted Stock Units (in thousands)				Restricted Stock Units (in thousands)	Weighted-Average Grant Date Fair Value
Unvested outstanding at January 1, 2024
Granted	Granted	8,191	43.27
Vested	Vested	(4,675)	45.96
Forfeited	Forfeited	(841)	46.58
Unvested outstanding at September 30, 2023		13,605	45.01
Unvested outstanding at March 31, 2024

As of ~~September 30, 2023,~~March 31, 2024, there was a total of ~~$557~~$720 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 September 30,				Nine Months Ended September 30,
		2023		2022		2023		2022
Cost of revenue	Cost of revenue	$	4	$	5	$	12	$	12
Cost of revenue
Cost of revenue
Sales and marketing
Sales and marketing
Sales and marketing	Sales and marketing	18		21		53		46
Technology and development	Technology and development	42		57		123		123
Technology and development
Technology and development
General and administrative	General and administrative	45		64		154		142
Impairment and restructuring costs		—		—		—		2
Share-based compensation - continuing operations		109		147		342		325
Share-based compensation - discontinued operations		—		1		—		16
General and administrative
General and administrative
Total share-based compensation	Total share-based compensation	$	109	$	148	$	342	$	341
Total share-based compensation
Total share-based compensation

Note ~~13.~~11. Net Loss Per Share

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 loss from continuing operations~~ per share because their effect would have been antidilutive (in thousands):

Three Months Ended
September 30, Nine Months Ended
September 30,
2023 2022 2023 2022
Weighted-average Class A common stock and Class C capital stock option awards outstanding 30,063 2,417 20,924 15,942
Weighted-average Class A common stock and Class C capital stock restricted stock units outstanding 14,172 9,670 13,890 8,326
Class C capital stock issuable upon conversion of the Notes 33,855 33,855 33,855 33,855
Total Class A common stock and Class C capital stock equivalents 78,090 45,942 68,669 58,123


	Three Months Ended March 31,
	2024	2023
Weighted-average Class C capital stock option awards outstanding	30,710	18,046
Weighted-average Class C capital stock restricted stock units outstanding	12,668	12,108
Class C capital stock issuable upon conversion of the Notes	32,998	33,855
Total Class C capital stock equivalents	76,376	64,009

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Note ~~14.~~12. Commitments and Contingencies

Commitments

During the three ~~and nine~~ months ended ~~September 30, 2023,~~March 31, 2024, there were no material changes to the commitments disclosed in Note 1816 in the Notes to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2022.~~2023.

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:~~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 ~~September 30, 2023~~March 31, 2024 or December 31, ~~2022.~~

In August and September 2017, two 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. On 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 reached an agreement to settle this action. On March 31, 2023, the plaintiffs filed a motion seeking preliminary approval of the parties’ proposed settlement, which motion was granted by the court on April 3, 2023. The terms of the parties’ proposed settlement agreement are contained in the settlement documents filed with the court on March 31, 2023. The court approved the settlement terms on August 8, 2023 and the full amount was paid by our insurance carriers under the applicable insurance policy and pursuant to the terms of the settlement.

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In October and November 2017 and January and February 2018, four 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 two federal shareholder derivative lawsuits pending in that court (the “Federal Suit”). On February 16, 2018, the Superior Court of the State of Washington, King County, consolidated the two shareholder derivative lawsuits pending in that court (the “State Suit”). The Federal Suit and State Suit 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 Federal Suit filed a consolidated shareholder derivative complaint, which we moved to dismiss on August 22, 2019. On February 28, 2020, our motion to dismiss the Federal Suit was denied. On February 16, 2021, the court in the State Suit 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 Suit pending in that court on June 15, 2021. On November 14, 2022, the parties jointly filed a stipulation with the U.S. District Court for the Western District of Washington informing the court that, among other things, they have agreed in principle to all material terms of a settlement. On April 20, 2023, the plaintiffs filed a motion seeking preliminary approval of the parties’ proposed settlement, which motion was granted by the court on April 25, 2023. The terms of the parties’ settlement agreement are contained in the settlement documents filed with the court on April 20, 2023 and found on Zillow’s Investor Relations page at https://investors.zillowgroup.com/investors/resources/investor-faqs/default.aspx. The court issued final approval of the settlement on August 29, 2023. The full amount of plaintiffs’ attorneys’ fees and costs associated with the settlement has been paid by our insurance carriers under the applicable insurance policy and pursuant to the terms of the settlement.

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 seven 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. ~~Our~~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 four 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 three of the patents asserted by IBM in the lawsuit. On March 15, 2021, the PTAB instituted IPR proceedings with respect to two of the three 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 later reinstated by stipulation of the 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, which judgment was affirmed by the Federal Circuit on 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. On November 25, 2022, Zillow filed a motion to join an IPR petition within Ebates Performance Mktg., Inc. d/b/a Rakuten Rewards v. Int’l Bus. Machs. Corp. (“Rakuten IPR”), IPR2022-00646 concerning the final remaining patent in this action, which the court granted on April 20, 2023. On October ~~13,~~11, 2023, the PTAB ruled on the Rakuten IPR finding the claims of the patent asserted against Zillow unpatentable. IBM appealed the PTAB’s decision on November 21, 2023, and cross appeals were filed by Ebates Performance Marketing Inc. on November 21, 2023 and by us on December 15, 2023. On March 20, 2024, IBM voluntarily dismissed all claims filed in this action against Zillow with prejudice, with the exception of those pertaining to the patent asserted within the pending Rakuten IPR appeal. 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 five 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 one patent included in the second lawsuit. On October 6, 2021, the stay of this action was lifted, except for proceedings relating to the one 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 one patent for which an IPR was still pending. On March 10, 2022, the PTAB rendered its decision denying Zillow’s ~~IPR on the one remaining patent, for which this case continues to remain stayed.~~IPR. On August 1, 2022, IBM filed an appeal of the Court’s ruling with respect to two of the dismissed ~~patents. Zillow’s responsive brief~~patents, which ruling was affirmed by the appeals court on January 9, 2024. On March 20, 2024, IBM voluntarily dismissed all claims filed ~~on September 30, 2022,~~in this action against Zillow with prejudice and ~~IBM’s reply brief~~the Clerk of Court was ~~filed on November 4, 2022. We deny~~directed to close 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.case.

On November 16, 2021, November 19, 2021 and January 6, 2022, three 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 three 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. 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. On December 7, 2022, the court rendered its decision granting defendants’ motion to dismiss, in part, and denying the motion, in part. On January 23, 2023, the defendants filed their answer to the consolidated complaint. On March 14, 2024, plaintiffs filed a motion for class certification and we filed our opposition on April 26, 2024. We intend to deny the allegations of wrongdoing and intend to vigorously defend the claims in this consolidated lawsuit. We do not believe that a loss related to this consolidated lawsuit is probable.

On March 10, 2022, May 5, 2022 and July 20, 2022, shareholder derivative suits were filed in the U.S. District Court for the Western District of Washington (“Federal Court”) and on July 25, 2022, a shareholder derivative suit was filed in the Superior Court of the State of Washington, King County (the “2022 State Suit”), 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, which stay was further continued by the Federal Court on September 6, 2023. On September 15, 2022, the Superior Court of the State of Washington entered a temporary stay in the 2022 State Suit. Upon the filing of the defendants’ answer in the related securities class action lawsuit on January 23, 2023, the stay in the 2022 State Suit was lifted. A partial stay was then reentered in the 2022 State Suit, which expired on ~~June 26, 2023.~~February 1, 2024. On August 23, 2023 a second shareholder derivative suit was filed in the Superior Court of the State of Washington, King County. The defendants intend to deny the allegations of wrongdoing and vigorously defend the claims in these lawsuits. We do not believe that a loss related to these lawsuits is probable.

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.

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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 1816 in the Notes to the Consolidated Financial Statements in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2022.~~2023.

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Note ~~15.~~13. Revenue and Contract Balances

~~Beginning~~ See Note 2 in ~~2023, our chief executive officer, who acts as~~ the chief operating decision maker, manages our business, makes operating decisions and evaluates operating performance on the basis of the company as a whole, instead of on a segment basis as he did prior to 2023. Accordingly, this change resulted in revisionsNotes to the ~~nature and substance of~~Consolidated Financial Statements in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 for additional information ~~regularly provided to and used by the chief operating decision maker. This serves to align~~on our reported results with our ongoing growth strategy and our intent to provide integrated customer solutions for all tasks and services related to facilitating real estate transactions. As a result, we have determined that we have a single reportable segment. Our revenue is classified into four categories: Residential, Rentals, Mortgages and Other. Certain prior period amounts have been revised to reflect these changes.

~~The Residential revenue category primarily includes revenue for our Premier Agent and new construction marketplaces, as well as~~ revenue from ~~the sale of other advertising~~contracts with customers and business technology solutions for real estate professionals, including StreetEasy for-sale product offerings and ShowingTime+. Our Rentals and Mortgages revenue categories remain consistent with our historical presentation, and our Other revenue category primarily includes revenue generated from display advertising.contract balances.

Disaggregation of Revenue

The following table presents our revenue disaggregated by category for the periods presented (in millions):


		Three Months Ended September 30,				Nine Months Ended September 30,
		2023		2022		2023		2022
		Three Months Ended March 31,
		Three Months Ended March 31,
		Three Months Ended March 31,
		2024
		2024
		2024
Residential
Residential
Residential	Residential	$	362	$	372	$	1,103	$	1,182
Rentals	Rentals	99		74		264		206
Rentals
Rentals
Mortgages
Mortgages
Mortgages	Mortgages	24		26		74		101
Other	Other	11		11		30		34
Other
Other
Total revenue	Total revenue	$	496	$	483	$	1,471	$	1,523
Total revenue
Total revenue

Contract Balances

Contract assets ~~represent~~totaled $117 million and $90 million as of March 31, 2024 and December 31, 2023, respectively. As of March 31, 2024, the average remaining recognition period for our right to consideration in exchange for goods and services that we have transferred to the customer when that right is conditional on something other than the passage of time. Contract assets are primarilycontract asset related to our Premier Agent Flex 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 Zillow Lease Connect. The current portion of contract assetsoffering is recorded within prepaid expenses and other current assets and the long-term portion of contract assets is recorded within other assets in our condensed consolidated balance sheets and totaled $89 million and $71 million as of September 30, 2023 and December 31, 2022, respectively.

Contract liabilities consist of deferred revenue, which relates to payments received in advance of performance under a revenue contract. Deferred revenue is primarily related to prepaid advertising fees received or billed in advance of satisfying our performance obligations and prepaid but unrecognized subscription revenue. Deferred revenue is recognized when or as we satisfy our obligations under contracts with customers.four months.

For the three months ended ~~September 30, 2023,~~March 31, 2024, the opening balance of deferred revenue was ~~$49~~$52 million, of which ~~$46~~$44 million was recognized as revenue during the period. For the three months ended ~~September 30, 2022, the opening balance of deferred revenue was $52 million, of which $50 million was recognized as revenue during the period.~~

~~Table of~~ ~~Contents~~

~~For the nine months ended September 30,~~March 31, 2023, the opening balance of deferred revenue was $44 million, of which ~~$43~~$41 million was recognized as revenue during the period. For the nine months ended September 30, 2022, the opening balance of deferred revenue was $51 million, of which $51 million was recognized as revenue during the period. As of September 30, 2023 and 2022, deferred revenue was $48 million and $50 million, respectively.

~~Note 16. Subsequent Events~~

~~UBS AG Repurchase Agreement~~

On October 11, 2023, Zillow Home Loans entered into a master repurchase agreement with UBS AG. The master repurchase agreement provides a total maximum borrowing capacity of $100 million through October 9, 2024. Borrowings on the master repurchase agreement will be classified within current liabilities in our condensed consolidated balance sheets.

~~Acquisition of Follow Up Boss~~

On October 28, 2023, Zillow, Inc. and Enchant, LLC, d/b/a Follow Up Boss (“Follow Up Boss”), entered into a Membership Interest Purchase Agreement (the “Agreement”), pursuant to which Zillow, Inc. agreed to acquire Follow Up Boss for $400 million in cash, subject to certain adjustments, payable upon closing of the transaction, and up to $100 million in cash payable over a three-year period upon achievement of certain performance metrics contemplated by the Agreement. Follow Up Boss is a customer relationship management system for real estate professionals. The Agreement contains customary representations, warranties and covenants of the parties as well as conditions to closing, including, among other things, regulatory approval under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

~~Partial Repurchase of 2025 Notes~~

On October 31, 2023 and November 1, 2023, we repurchased a total of approximately $28 million aggregate principal amount of our 2025 Notes, plus accrued interest, using a 10b5-1 plan, in accordance with the Repurchase Authorizations. These repurchases will reduce our outstanding convertible senior notes, net of current portion in our condensed consolidated balance sheet.

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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 those factors discussed in Part I, Item 1A (Risk Factors) of our Annual Report on Form 10-K for the year ended December 31, ~~2022.~~2023.

Overview of our Business

As of ~~September 30, 2023,~~March 31, 2024, we had ~~6,148~~6,429 employees, compared to ~~5,724~~6,263 employees as of December 31, ~~2022.~~2023.

Health of Housing Market

Our financial performance is impacted by changes in the health of the housing market, which is impacted, in turn, by general economic conditions. Current market factors have been driven by low housing inventory, fewer new for-sale listings, increases and volatility in mortgage interest rates, as well as home price fluctuations and inflationary conditions. These factors may ~~have a negative~~ impact on the number of transactions consumers complete using our products and services and on demand for our advertising services. According to industry data from the National Association of REALTORS®, total ~~residential real estate~~ transaction ~~dollars declined 14%~~value increased 4% during the three months ended ~~September 30, 2023~~March 31, 2024 as compared to the three months ended ~~September 30, 2022 and more than 20% during the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022.~~March 31, 2023. Despite the ~~industry headwinds and total residential real estate transaction value declines,~~current market factors mentioned above, we continue to invest in ~~the execution of~~ our ~~strategy to increase customer transactions and revenue per transaction.~~growth pillars. We believe this continued investment ~~in our strategic priorities~~ has resulted in year over year ~~Residential~~total revenue results, described below, for the three ~~and nine~~ months ended ~~September 30, 2023~~March 31, 2024 as compared to the same ~~periods~~period in the prior year, that exceeded ~~residential real estate~~ industry performance for the same ~~periods.~~period. The extent to which market factors impact our results and financial position will depend on future developments, which are uncertain and difficult to predict.

~~Acquisitions~~

On July 31, 2023, we acquired Aryeo, Inc. (“Aryeo”), a software company that serves real estate photographers, in exchange for total consideration of $35 million, net of cash acquired. On September 11, 2023, we acquired substantially all of the assets and liabilities of Spruce Holdings, Inc. and certain affiliated entities (collectively referred to as “Spruce”), a tech-enabled title and escrow platform, in exchange for total consideration of $19 million, net of cash acquired. 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.

~~Discontinued Operations~~

In the fourth quarter of 2021, the Board of Directors of Zillow Group (the “Board”) made the determination to wind down the operations of Zillow Offers, our iBuying business which purchased and sold homes directly in certain markets across the United States. The wind down was completed in the third quarter of 2022 and resulted in approximately a 25% reduction of Zillow Group’s workforce. The financial results of Zillow Offers have been presented in the accompanying condensed

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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 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”) has and is expected to continue to result in incremental share-based compensation expense over the remaining requisite service period, which is largely through the third quarter of 2024. For additional information regarding the August 2022 Equity Award Actions, 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, 2022.

~~Change in Reportable Segments~~

Beginning in 2023, our chief operating decision maker manages our business, makes operating decisions, and evaluates operating performance on the basis of the company as a whole, instead of on a segment basis as he did prior to 2023. Accordingly, this change resulted in revisions to the nature and substance of information regularly provided to and used by the chief operating decision maker. This serves to align our reported results with our ongoing growth strategy and our intent to provide integrated customer solutions for all tasks and services related to facilitating real estate transactions. As a result, we have determined that we have a single operating and reportable segment.

Revenue Overview

Our revenue is classified into four categories: Residential, Rentals, Mortgages and Other. ~~Certain prior period amounts have been revised to reflect these changes.~~

Residential. Residential revenue includes revenue generated by our Premier Agent and new construction marketplaces, as well as revenue from the sale of advertising and business technology solutions for real estate professionals through StreetEasy for-sale product offerings, ShowingTime+, including Listing Showcase, and ~~ShowingTime+.~~upon acquisition on December 8, 2023, Follow Up Boss.

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.~~businesses and brands. We offer these products and services through our Premier Agent program. Premier Agent products, which include the delivery of validated customer connections, or leads, are ~~primarily~~ offered on a share of voice ~~basis. Connections~~(“market-based pricing”) and pay for performance basis (“Flex”). For our market-based pricing offering, connections are distributed to Premier Agent partners in proportion to their share of voice, or ~~an agent advertiser’s~~a Premier Agent partner’s share of total advertising purchased in a particular zip code. Connections are delivered when customer contact information is provided to Premier Agent partners. Connections are provided as part of our suite of advertising services for Premier Agent 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 advertising services in certain markets to select partners.~~ With the Flex model, Premier Agent partners are provided with validated leads at no initial cost and pay a performance advertising fee only when a real estate transaction is closed with one of the leads, generally within two years.

New construction revenue primarily includes advertising services sold to home builders on a cost per residential community or cost per impression basis. ~~StreetEasy for-sale~~

Revenue generated through ShowingTime+ includes ShowingTime revenue, ~~includes advertising services sold to real estate professionals serving the New York City for sale market primarily on a cost per listing or performance fee basis. ShowingTime revenue~~which 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

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include call center specialists who provide scheduling support to customers. ~~Appointment Center~~ShowingTime+ revenue ~~is primarily billed in advance on a monthly basis. Our~~also includes our dotloop real estate transaction management software-as-a-service ~~solution is a monthly subscription service allowing real estate partners to efficiently manage their transactions.~~

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solution.

Rentals. Rentals revenue includes advertising and a suite of tools sold to property managers ~~landlords and other rental professionals~~ on a cost per lead, lease, listing or impression basis or for a fixed fee for certain advertising packages through both the Zillow and StreetEasy brands. 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.

Mortgages. Mortgages revenue primarily includes revenue generated 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.

Other. Other revenue includes revenue generated primarily by display advertising. Display revenue consists of graphical mobile and web advertising sold on a cost per thousand impressions or cost per click basis to advertisers promoting their brands on our mobile applications and websites.

For additional information ~~regarding~~on our revenue ~~recognition policies,~~categories, see Note 2 ofin our Notes to ~~Condensed~~ Consolidated Financial Statements in ~~this Quarterly~~Part II, Item 8 in our Annual Report on Form ~~10-Q.~~10-K for the fiscal year ended December 31, 2023.

Financial Overview

For the three months ended ~~September 30,~~March 31, 2024 and 2023, ~~and 2022,~~ we generated total revenue of ~~$496~~$529 million and ~~$483~~$469 million, respectively, an increase of ~~3%. The increase~~13%, primarily due to increases in ~~total~~Residential, Rentals and Mortgages revenue.

•Residential revenue ~~was primarily attributable~~increased by $32 million, or 9%, to $393 million, due to increases in residential revenue per visit and the ~~following:~~number of visits.

•Rentals revenue increased by ~~$25~~$23 million, or 31%, to ~~$99~~$97 million, ~~for the three months ended September 30, 2023 compared to $74 million for the three months ended September 30, 2022. The increase in Rentals revenue was primarily~~ due to ~~a 20%~~an increase in quarterly revenue per average monthly rentals unique visitor to $3.30 for the three months ended September 30, 2023 as compared to $2.74 for the three months ended September 30, 2022, primarily driven by lower occupancy rates and the corresponding increase in advertising spend from multifamily property managers as well as growth in multifamily property listings. The increase in Rentals revenue was also driven by growth in average monthly rentals unique visitors which increased 11% to 30 million during the three months ended September 30, 2023 from 27 million during the three months ended September 30, 2022.

•Residential revenue decreased by $10 million to $362 million for the three months ended September 30, 2023 compared to $372 million for the three months ended September 30, 2022. The decrease in Residential revenue was primarily driven by a 5% decrease in the number of visits for the three months ended September 30, 2023 compared to the three months ended September 30, 2022, due to macro housing market factors including low housing inventory, fewer new for-sale listings, increases and volatility in mortgage interest rates, as well as home price fluctuations. The impact of the decrease in visits was partially offset by a 3% increase in Residential revenue per visit, driven by continued improvement in our ability to connect high-intent customers to agents.visitor.

•Mortgages revenue ~~decreased~~increased by $2$5 million, or 19%, to ~~$24~~$31 million, ~~for the three months ended September 30, 2023 compared to $26 million for the three months ended September 30, 2022,~~ driven by an ~~$8 million~~increase in mortgage originations revenue, partially offset by a decrease in ~~revenue from~~ Custom Quote and Connect advertising services due to a decrease in demand for mortgages attributable to the higher interest rate environment as compared to the prior year period. This resulted in a 40% decrease in leads generated from marketing products sold to mortgage professionals. The decrease in revenue from Custom Quote and Connect advertising services was offset by an $8 million increase in mortgage originations revenue, as total loan origination volume increased 69%, primarily driven by continued growth in Zillow Home Loans purchase loan originations.revenue.

During the three months ended ~~September 30,~~March 31, 2024 and 2023, ~~and 2022,~~ we generated gross profit of ~~$386~~$406 million and ~~$394~~$377 million, respectively, ~~a decrease~~an increase of 2%8%.

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.

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 use our 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 partners.

~~Table of~~ ~~Contents~~

We define a visit as a group of interactions by users with ~~the~~our 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.

~~Zillow and StreetEasy measure~~Prior to January 1, 2024, we measured 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~~using the Universal Analytics version of Google Analytics’ traffic measurement platform. Through Universal Analytics, visits to Zillow and StreetEasy ended 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~~arrived via one campaign or source (for example, via a search engine or referring link on a third-party website), ~~leaves~~left the mobile application or website, and then ~~returns~~returned via another campaign or source.

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Universal Analytics will no longer be offered by Google as of July 1, 2024 and will be replaced by Google Analytics 4. As a result of this change, beginning on January 1, 2024, we measure visits to Zillow using an internal measurement tool, but continue to use Universal Analytics to measure visits to StreetEasy. Trulia continues to measure visits with Adobe Analytics. Visits to Zillow now end after thirty minutes of user inactivity or at midnight. Visits to Trulia end after thirty minutes of user inactivity. Visits to StreetEasy end either: (i) after thirty minutes of user inactivity or at midnight; or (ii) through a campaign change.

We believe the use of an internal measurement tool to measure visits to Zillow will allow us to maintain control over and provide greater insight into our end-to-end data as we enhance our broader long-term analytics strategy, while also becoming less reliant on third-party providers. We have recast prior period visits to conform with the current period measurement methodology. The change in our measurement platform for visits resulted in an approximately 10% decrease in reported visits for the three-month period ended March 31, 2023, primarily driven by the methodology for campaign changes.

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

Three Months Ended
September 30, 2022 to 2023
% Change Nine Months Ended
September 30, 2022 to 2023
% Change
2023 2022 2023 2022
Visits 2,626 2,767 (5) % 7,766 8,291 (6) %

During the three and nine month periods ended September 30, 2023, visits to our mobile applications and websites decreased by 5% and 6%, respectively, compared to the three and nine month periods ended September 30, 2022. These decreases were primarily driven by macro housing market factors including low housing inventory, fewer new for-sale listings, increases and volatility in mortgage interest rates as well as home price fluctuations.


	Three Months Ended March 31,		2023 to 2024 % Change
	2024	2023
Visits	2,316	2,238	3	%

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 revenue depends in part, on users accessing our mobile applications and websites to engage in the sale, purchase, renting and financing of homes, including with Zillow Home Loans, and a significant portion of our Residential revenue, Rentals revenue and Other 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.

Prior to January 1, 2024, we measured unique users for Zillow, StreetEasy and HotPads using Universal Analytics. As discussed above, Universal Analytics will no longer be offered as of July 1, 2024 and will be replaced by Google Analytics 4. As a result of this change, beginning on January 1, 2024, we measure unique users ~~with Google~~for Zillow using an internal measurement tool, but continue to use Universal Analytics to measure unique users for StreetEasy and HotPads. Trulia ~~measures~~continues to measure unique users with Adobe Analytics.

Due to ~~third-party~~ technological limitations, user software settings, or user behavior, ~~Google~~our internal measurement tool and Universal 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~~although these tools capture the number of unique users ~~counted by Google Analytics may overstate~~in accordance with the ~~actual~~defined methodology, there are inherent limitations in measuring the number of unique ~~users who access~~individuals accessing our mobile applications and ~~websites during~~websites.

We believe the ~~period.~~use of an internal measurement tool to measure unique users for Zillow will allow us to maintain control over and provide greater insight into our end-to-end data as we enhance our broader long-term analytics strategy, while also becoming less reliant on third-party providers. We have recast prior period unique users to conform to the current period measurement methodology. The change in our measurement platform for unique users resulted in an approximately 3% increase in reported unique users for the three-month period ended March 31, 2023.

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

Three Months Ended
September 30, 2022 to 2023
% Change Nine Months Ended
September 30, 2022 to 2023
% Change
2023 2022 2023 2022
Average monthly unique users 224 236 (5) % 221 227 (3) %

During the three and nine month periods ended September 30, 2023, average monthly unique users decreased by 5% and 3%, respectively, compared to each of the three and nine month periods ended September 30, 2022. These decreases were primarily driven by macro housing market factors including low housing inventory, fewer new for-sale listings, increases and volatility in mortgage interest rates as well as home price fluctuations.


	Three Months Ended March 31,		2023 to 2024 % Change
	2024	2023
Average monthly unique users	217	217	—	%

Loan Origination Volume

Loan origination volume is an important metric as it is a measure of how successful we are at the origination of mortgage loan products through our mortgage origination business, Zillow Home Loans, which directly impacts our Mortgages 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, except percentages):


		Three Months Ended September 30,				2022 to 2023 % Change				Nine Months Ended September 30,								2022 to 2023 % Change
		2023		2022				2023				2022
		Three Months Ended March 31,
		Three Months Ended March 31,
		Three Months Ended March 31,
		2024
		2024
		2024
Purchase loan origination volume
Purchase loan origination volume
Purchase loan origination volume	Purchase loan origination volume	$	452	$	240			88	%			$	1,047			$	557			88	%
Refinance loan origination volume	Refinance loan origination volume	5		31		(84)	%			12				745				(98)	%
Refinance loan origination volume
Refinance loan origination volume
Total loan origination volume	Total loan origination volume	$	457	$	271	69	%			$	1,059			$	1,302			(19)	%
Total loan origination volume
Total loan origination volume

During the three months ended ~~September 30, 2023,~~March 31, 2024, total loan origination volume increased ~~69%~~131%, compared to the three months ended ~~September 30, 2022.~~March 31, 2023. This increase in total loan origination volume was primarily driven by the continued growth in Zillow Home Loans purchase loan originations partially offset by a decrease in refinance loan origination volume, which was impacted by interest rate increases. During the nine months ended September 30, 2023, total loan origination volume decreased 19% compared to the nine months ended September 30, 2022. This decrease was primarily driven by a decrease in refinance loan origination volume which was impacted by interest rate increases, partially offset by the continuedas we prioritize growth in Zillow Home Loans purchase ~~loan~~ originations.

Results of Operations

Given continued uncertainty surrounding the health of the housing market, interest rate environment and inflationary conditions, financial performance for current and prior periods may not be indicative of future performance.

Revenue


									% of Total Revenue
	Three Months Ended March 31,				2023 to 2024				Three Months Ended March 31,
	2024		2023		$ Change		% Change		2024		2023

	(in millions, except percentages, unaudited)
Residential	$	393	$	361	$	32	9	%	74	%	77	%
Rentals	97		74		23		31		18		16
Mortgages	31		26		5		19		6		6
Other	8		8		—		—		2		2
Total revenue	$	529	$	469	$	60	13	%	100	%	100	%

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~~Revenue~~
% of Total Revenue
Three Months Ended
September 30, 2022 to 2023 Three Months Ended
September 30,
2023 2022 $ Change % Change 2023 2022
(in millions, except percentages, unaudited)
Residential $ 362 $ 372 $ (10) (3) % 73 % 77 %
Rentals 99 74 25 34 20 15
Mortgages 24 26 (2) (8) 5 5
Other 11 11 — — 2 2
Total revenue $ 496 $ 483 $ 13 3 % 100 % 100 %

% of Total Revenue
Nine Months Ended
September 30, 2022 to 2023 Nine Months Ended
September 30,
2023 2022 $ Change % Change 2023 2022
(in millions, except percentages, unaudited)
Residential $ 1,103 $ 1,182 $ (79) (7) % 75 % 78 %
Rentals 264 206 58 28 18 14
Mortgages 74 101 (27) (27) 5 7
Other 30 34 (4) (12) 2 2
Total revenue $ 1,471 $ 1,523 $ (52) (3) % 100 % 100 %

Three months ended ~~September 30, 2023~~March 31, 2024 compared to three months ended ~~September 30, 2022~~March 31, 2023

Total revenue increased ~~$13~~$60 million, or 3%13%, to ~~$496~~$529 million:

•Residential revenue increased $32 million, or 9%. The increase was driven by a 5% increase in Residential revenue per visit to $0.170 for the three months ended March 31, 2024 from $0.161 for the three months ended March 31, 2023, primarily due to the inclusion of revenue from Follow Up Boss, which we acquired in December 2023, in our results for the three months ended March 31, 2024, and continued improvement in our ability to connect high-intent customers to agents. We calculate Residential revenue per visit by dividing the revenue generated by our Residential offerings by the number of visits in the period. Residential revenue was also positively impacted by a 3% increase in the number of visits for the three months ended March 31, 2024, compared to the three months ended March 31, 2023.

•Rentals revenue increased ~~$25~~$23 million, or ~~34%~~31%. The increase in Rentals revenue was primarily due to a ~~20%~~41% increase in quarterly revenue per average monthly rentals unique visitor to ~~$3.30~~$3.59 for the three months ended ~~September 30, 2023~~March 31, 2024 as compared to ~~$2.74~~$2.55 for the three months ended ~~September 30, 2022,~~March 31, 2023, primarily driven by lower occupancy rates and the corresponding increase in advertising spend from multifamily property managers as well as growth in multifamily property listings, which drove a ~~42%~~46% increase in multifamily rentals revenue. We calculate quarterly revenue per average monthly rentals unique visitor by dividing total Rentals revenue for the period by the average monthly rentals unique visitors for the period and then dividing by the number of quarters in the period. ~~The increase in Rentals revenue was also driven by growth in average~~Average monthly rentals unique visitors ~~which increased 11% to 30 million during the three months ended September 30, 2023 from~~was 27 million during the three months ended ~~September 30, 2022. Average~~March 31, 2024 and 29 million during the three months ended March 31, 2023. We have estimated average monthly rentals unique visitors ~~are measured with~~using Comscore data, which ~~includes~~measures average monthly unique visitors on rental listings on Zillow, Trulia and HotPads mobile apps and websites. We expect Rentals revenue to ~~decrease~~increase in absolute dollars during the three months ending ~~December 31, 2023, primarily due to the impact of seasonality on rental property listings and landlord advertising spend.~~

•~~Residential revenue decreased $10 million, or 3%. The decrease in Residential revenue was primarily~~June 30, 2024, driven by ~~a 5% decrease in the number of visits for the three months ended September 30, 2023 compared to the three months ended September 30, 2022 due to macro housing market~~macroeconomic factors, including ~~low~~ housing ~~inventory, fewer new for-sale listings, increases~~availability and ~~volatility in mortgage interest~~affordability, and decreased rental occupancy rates, as well as ~~home price fluctuations. The impact of the decrease~~continued investment in visits was partially offset by a 3% increase in Residential revenue per visit to $0.138 for the three months ended September 30, 2023 from $0.134 for the three months ended September 30, 2022, primarily driven by continued improvement ingrowing our ability to connect high-intent customers to agents. We calculate Residential revenue per visit by dividing the revenue generated by our Residential offerings by the number of visits in the period. As a result of the housing market factors described above, Premier Agent revenue decreased 3% during the three months ended September 30, 2023 compared to the three months ended September 30, 2022. We expect Residential revenue to decrease in absolute dollars during the three months ending December 31, 2023, primarily due to continued pressure from the macro housing market factors described above and the impact of seasonality on real estate transaction volumes.Rentals business.

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•Mortgages revenue ~~decreased $2~~increased $5 million, or ~~8%,~~19%. This increase was driven by ~~an $8 million decrease in our Custom Quote and Connect advertising services revenue, offset by an $8~~a $13 million increase in mortgage originations ~~revenue. The decrease in our Custom Quote and Connect advertising~~ revenue, ~~was primarily due to a 40% decrease in leads generated from marketing products sold to mortgage professionals. This decrease in leads was driven~~partially offset by a ~~decrease in demand for mortgages attributable to the higher interest rate environment as compared to the prior year period. The~~$7 million decrease in Custom Quote and Connect advertising services ~~revenue was offset by an $8 million~~revenue. The increase in mortgage originations revenue aswas due to a 131% increase in total ~~loan origination~~originations volume ~~increased 69%~~ from ~~$271~~$262 million for the three months ended ~~September 30, 2022~~March 31, 2023 to ~~$457~~$605 million for the three months ended ~~September 30, 2023,~~March 31, 2024, primarily driven by continued growth in Zillow Home Loans purchase loan origination ~~volume, partially offset by a decrease in refinance loan origination volume due to the impact of interest rate increases.~~volume. The increase in mortgage originations revenue was also attributable to a ~~40%~~17% increase in gain on sale margin. 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~~IRLCs 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.

~~Nine months ended September 30, 2023 compared to nine months ended September 30, 2022~~

~~Total~~ The increase in mortgage originations revenue ~~decreased $52 million, or 3%, to $1,471 million:~~

•~~Residential revenue decreased $79 million, or 7%. This decrease~~ was ~~driven~~partially offset by a 6%$7 million decrease in the number of visits for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 due to macro housing market factors including low housing inventory, fewer new for-sale listings, increases and volatility in mortgage interest rates as well as home price fluctuations. These factors also resulted in an 8% decrease in Premier Agent revenue during the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022.

•~~Mortgages revenue decreased $27 million, or 27%. This decrease was driven by a decline in our~~ Custom Quote and Connect advertising services ~~revenue. The~~revenue, which decrease ~~in our Custom Quote and Connect advertising revenue~~ was primarily due to a ~~35%~~32% decrease in leads generated from marketing products sold to mortgage professionals. This decrease in leads was primarily driven by a ~~decrease~~shift in ~~demand for mortgages attributable to the higher interest rate environment~~strategic priority as ~~compared to the prior year period.~~

•~~Rentals revenue increased $58 million, or 28%. The increase in Rentals revenue was primarily due to~~we focus on organic growth in average monthly rentals unique visitors which increased 15% to 30 million during the nine months ended September 30, 2023 from 26 million during the nine months ended September 30, 2022. The increase in Rentals revenue was also driven by an 11% increase in quarterly revenue per average monthly rentals unique visitor to $2.93 for the nine months ended September 30, 2023 as compared to $2.64 for the nine months ended September 30, 2022, primarily driven by lower occupancy rates and the corresponding increase in advertising spend from multifamily property managers as well as growth in multifamily property listings.of our mortgage origination business.

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Adjusted EBITDA

The following table summarizes net loss ~~which includes the impact of discontinued operations,~~ and Adjusted EBITDA ~~which excludes the impact of discontinued operations~~ (in millions, except percentages):


											% of Revenue
										% of Revenue																									% of Revenue
		Three Months Ended September 30,				2022 to 2023					Three Months Ended September 30,					Three Months Ended March 31,						2023 to 2024						Three Months Ended March 31,
		2023		2022		$ Change		% Change			2023		2022			2024			2023				$ Change			% Change			2024			2023
Net loss	Net loss	$	(28)	$	(53)	$	25	47	%		(6)	%	(11)	%	Net loss	$	(23)	$	$	(22)	$		$	(1)	(5)		(5)	%		(4)	%		(5)	%
Adjusted EBITDA	Adjusted EBITDA	$	107	$	130	$	(23)	(18)	%		22	%	27	%	Adjusted EBITDA	$	125	$	$	104	$		$	21	20		20	%		24	%		22	%

% of Revenue
Nine Months Ended
September 30, 2022 to 2023 Nine Months Ended
September 30,
2023 2022 $ Change % Change 2023 2022
Net loss $ (85) $ (29) $ (56) (193) % (6) % (2) %
Adjusted EBITDA $ 322 $ 441 $ (119) (27) % 22 % 29 %

To provide investors with additional information regarding our financial results, we have disclosed Adjusted EBITDA, a non-GAAP financial measure, within this Quarterly Report on Form 10-Q. We have provided a reconciliation below of Adjusted EBITDA to net loss, the most directly comparable U.S. ~~generally accepted accounting principle (“GAAP”)~~GAAP financial measure.

We have included Adjusted EBITDA in this Quarterly Report on Form 10-Q as it is a key metric used by our management and Board 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 has limitations as an analytical tool, and you should not consider this measure 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 impairment ~~and restructuring costs;~~

•~~Adjusted EBITDA does not reflect acquisition-related~~ costs;

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

•Adjusted EBITDA does not reflect income taxes; and

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

Because of these limitations, you should consider Adjusted EBITDA alongside other financial performance measures, including various cash-flow metrics, net loss and our other GAAP results.

~~Table of~~ ~~Contents~~

The following table presents a reconciliation of Adjusted EBITDA to the most directly comparable GAAP financial measure, which is net loss, for each of the periods presented (in millions, unaudited):


		Three Months Ended September 30,				Nine Months Ended September 30,
		2023		2022		2023		2022

		2024
		2024
		2024
Reconciliation of Adjusted EBITDA to Net Loss:
Reconciliation of Adjusted EBITDA to Net Loss:
Reconciliation of Adjusted EBITDA to Net Loss:	Reconciliation of Adjusted EBITDA to Net Loss:
Net loss	Net loss	$	(28)	$	(53)	$	(85)	$	(29)
Loss from discontinued operations, net of income taxes		—		2		—		13
Net loss
Net loss
Income taxes
Income taxes
Income taxes	Income taxes	—		3		1		(1)
Other income, net	Other income, net	(34)		(12)		(108)		(19)
Other income, net
Other income, net
Depreciation and amortization
Depreciation and amortization
Depreciation and amortization	Depreciation and amortization	49		34		134		114
Share-based compensation	Share-based compensation	109		147		342		323
Impairment and restructuring costs		1		—		9		14
Acquisition-related costs		1		—		2		—
Share-based compensation
Share-based compensation
Impairment costs
Impairment costs
Impairment costs
Interest expense
Interest expense
Interest expense	Interest expense	9		9		27		26
Adjusted EBITDA	Adjusted EBITDA	$	107	$	130	$	322	$	441
Adjusted EBITDA
Adjusted EBITDA

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Costs and Expenses, Gross Profit and Other Items


										% of Total Revenue																									% of Total Revenue
																Three Months Ended March 31,						2023 to 2024						Three Months Ended March 31,
											% of Total Revenue					2024			2023				$ Change			% Change			2024			2023
		Three Months Ended September 30,				2022 to 2023					Three Months Ended September 30,
		2023		2022		$ Change		% Change			2023		2022

		(in millions, except percentages, unaudited)
		(in millions, except percentages, unaudited)
		(in millions, except percentages, unaudited)
		(in millions, except percentages, unaudited)
Cost of revenue	Cost of revenue	$	110	$	89	$	21	24	%		22	%	18	%	Cost of revenue	$	123	$	$	92	$		$	31	34		34	%		23	%		20	%
Gross profit	Gross profit	386		394		(8)		(2)			78		82
Operating expenses:	Operating expenses:
Sales and marketing	Sales and marketing	164		165		(1)		(1)			33		34
Sales and marketing
Sales and marketing
Technology and development	Technology and development	142		142		—		—			29		29
General and administrative	General and administrative	131		138		(7)		(5)			26		29
Impairment and restructuring costs		1		—		1		—			—		—
Acquisition-related costs		1		—		1		—			—		—
Impairment costs

Total operating expenses
Total operating expenses
Total operating expenses	Total operating expenses	439		445		(6)		(1)			89		92
Other income, net	Other income, net	34		12		22		183			7		2
Interest expense	Interest expense	(9)		(9)		—		—			(2)		(2)
Income tax expense	Income tax expense	—		(3)		3		100			—		(1)

~~Table of~~ ~~Contents~~

% of Total Revenue
Nine Months Ended
September 30, 2022 to 2023 Nine Months Ended
September 30,
2023 2022 $ Change % Change 2023 2022
(in millions, except percentages, unaudited)
Cost of revenue $ 306 $ 278 $ 28 10 % 21 % 18 %
Gross profit 1,165 1,245 (80) (6) 79 82
Operating expenses:
Sales and marketing 493 502 (9) (2) 34 33
Technology and development 419 369 50 14 28 24
General and administrative 407 370 37 10 28 24
Impairment and restructuring costs 9 14 (5) (36) 1 1
Acquisition-related costs 2 — 2 — — —
Total operating expenses 1,330 1,255 75 6 90 82
Other income, net 108 19 89 468 7 1
Interest expense (27) (26) (1) (4) (2) (2)
Income tax benefit (expense) (1) 1 (2) (200) — —

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. Cost of revenue also includes credit card fees and ad serving costs paid to third parties, direct costs to provide our rental applications product, and direct costs to originate mortgage loans, including underwriting and processing costs.

Three months ended ~~September 30, 2023~~March 31, 2024 compared to three months ended ~~September 30, 2022~~March 31, 2023

Cost of revenue increased ~~$21~~$31 million, or ~~24%~~34%, ~~primarily~~ driven by increases of ~~$15~~$17 million in depreciation and amortization expense primarily due to an increase in website development costs, ~~$3 million in ad serving costs and $3 million in software and hardware costs.~~

~~Nine months ended September 30, 2023 compared to nine months ended September 30, 2022~~

Cost of revenue increased $28 million, or 10%, primarily driven by increases of $22 million in depreciation and amortization expense due to an increase in website development costs, $6 million in ad serving costs, $6 million in software and hardware costs and $4 million in mortgage loan processing costs due to increased purchase loan origination ~~volume. These increases were partially offset~~volume, $3 million in ad serving costs driven by ~~a $7 million decrease~~an increase in ~~lead acquisition costs as we focus on organic growth of our mortgage origination business~~revenue, and a $2 million ~~decrease~~ in ~~credit card processing fees attributable to the previously mentioned decrease in revenue.~~headcount-related expenses, including share-based compensation expense.

~~Table of~~ ~~Contents~~

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 various product offerings.

Three months ended ~~September 30, 2023~~March 31, 2024 compared to three months ended ~~September 30, 2022~~March 31, 2023

Gross profit ~~decreased~~increased by $8$29 million, or 2%, due to increases in cost of revenue, primarily associated with additional depreciation and amortization expenses, which outpaced the growth of revenue. Total gross margin decreased from 82% to 78%.

~~Nine months ended September 30, 2023 compared to nine months ended September 30, 2022~~

~~Gross profit decreased by $80 million, or 6%~~8%, primarily due to ~~a decrease~~an increase in revenue, discussed above. Total gross margin decreased from ~~82%~~80% to ~~79%~~77%.

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 and mortgage loan officers and specialists, 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.

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Three months ended ~~September 30, 2023~~March 31, 2024 compared to three months ended ~~September 30, 2022~~March 31, 2023

Sales and marketing expenses ~~decreased $1~~increased $10 million, or 1%6%, due to ~~a decrease~~an increase of $5$12 million in headcount-related expenses, including share-based compensation expense, ~~primarily driven by the recognition of incremental share-based compensation expense~~as we continue to invest in ~~the three months ended September 30, 2022 in connection with the repricing of eligible option awards in connection with the August 2022 Equity Award Actions,~~human capital to grow our businesses, partially offset by a $2$3 million ~~increase in marketing and advertising costs.~~

~~Nine months ended September 30, 2023 compared to nine months ended September 30, 2022~~

~~Sales and marketing expenses decreased $9 million, or 2%, due to decreases of $6 million~~decrease in marketing and advertising costs ~~and $4 million in third-party professional service fees both~~ driven by active cost ~~management, a $3 million decrease~~management. We expect sales and marketing expenses to increase in depreciation and amortization expense, and a $3 million decrease in headcount-related expenses, including share-based compensation expense primarily driven by the recognition of incremental share-based compensation expense inabsolute dollars during the three months ~~ended September~~ending June 30, ~~2022~~2024 as we increase our marketing activities and headcount to support the continued expected growth in connection with the repricing of eligible option awards in connection with the August 2022 Equity Award Actions. The decreases were partially offset by a $6 million increase in travel expenses and a $2 million increase in software and hardware costs.our Rentals revenue.

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.

Three months ended ~~September 30, 2023~~March 31, 2024 compared to three months ended ~~September 30, 2022~~

Technology and development expenses remained flat, primarily due to a decrease of $3 million in third-party professional service fees, partially offset by a $2 million increase in travel expenses and a $2 million increase in software and hardware costs.

~~Nine months ended September 30,~~March 31, 2023 ~~compared to nine months ended September 30, 2022~~

Technology and development expenses increased ~~$50~~$10 million, or ~~14%~~7%, ~~primarily~~ due to increases of ~~$41~~$12 million in headcount-related expenses, including share-based compensation expense, ~~primarily driven by the August 2022 Equity Award Actions, $5 million~~as we continue to invest in ~~travel expenses~~human capital to grow our businesses, and $4$2 million in software and hardware costs. These increases were partially offset by a $4 million decrease in third-party professional service fees driven by active cost management.

~~Table of~~ ~~Contents~~

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, 2023~~March 31, 2024 compared to three months ended ~~September 30, 2022~~March 31, 2023

General and administrative expenses ~~decreased $7~~increased $9 million, or 5%7%, primarily due to ~~a decrease~~increases of ~~$10~~$4 million in third-party professional service fees, $3 million in headcount-related expenses, including share-based compensation expense, ~~primarily driven by~~and $3 million due to the ~~recognition~~change in fair value of ~~incremental share-based compensation expense in the three months ended September 30, 2022 in connection~~contingent consideration associated with ~~the repricing~~our acquisition of ~~eligible option awards in connection with the August 2022 Equity Award Actions,~~Follow Up Boss. These increases were partially offset by ~~an increase~~a decrease of $2$3 million in ~~third-party professional service fees.~~

~~Nine months ended September 30, 2023 compared to nine months ended September 30, 2022~~

~~General and administrative expenses increased $37 million, or 10%, primarily due to increases of $34 million in headcount-related expenses, including share-based compensation~~rent expense primarily driven by an $18 million increase in share-based compensation expense associated with the departures of certain personnel, as well as the impact of the August 2022 Equity Award Actions. The increase in general and administrative expenses was also driven by increases of $3 million in third-party professional service fees and $3 million in software and hardware costs.

~~Impairment and Restructuring Costs~~

Impairment and restructuring costs were $1 million and $9 million for the three and nine month periods ended September 30, 2023, respectively. The nine months ended September 30, 2023 include impairment costs of $6 million related to reductions in our right of use assetscost savings associated with changes in the use of certain office space in our lease ~~portfolio~~ ~~and employee termination~~portfolio.

Impairment Costs

Impairment costs ~~of $3 million.~~

~~There~~ were no impairment and restructuring costs incurred during the three months ended September 30, 2022. Impairment and restructuring costs totaled $14 million for the nine months ended September 30, 2022. These costs do not qualify as discontinued operations and were primarily attributable to employee termination costs associated with the wind down of Zillow Offers operations. For additional information regarding these costs, see Note 3 of our Notes to Condensed Consolidated Financial Statements in 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, and fair value adjustments on an outstanding warrant.~~

~~Other income, net increased $22 million and $89~~$6 million for the three ~~and nine~~ month periods ended ~~September 30,~~March 31, 2024 and 2023 ~~respectively~~. ~~The increase~~and were associated with changes in ~~other income, net was primarily driven by increases~~the use of certain office space in ~~returns on investments due to the higher interest rate environment as compared to the prior year period.~~our lease portfolio.

Income Taxes

We are ~~primarily~~ subject to income taxes in the United States (federal and state)~~, as well as~~ and certain foreign jurisdictions. As of ~~September 30, 2023~~March 31, 2024 and December 31, ~~2022,~~2023, 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 years, 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 ~~$1.8~~$1.4 billion as of December 31, ~~2022,~~2023, which are available to reduce future taxable income. We have accumulated state tax losses of approximately ~~$63~~$56 million (tax effected) as of December 31, ~~2022.~~2023.

Income tax expense ~~(benefit) for the three and nine months ended September 30, 2023 and the nine months ended September 30, 2022~~ was not ~~material. We recorded income tax expense of $3 million~~material for the three months ended ~~September 30, 2022, primarily related to state income taxes.~~March 31, 2024 and 2023.

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In 2021, the OECD, a global policy forum, released Pillar Two, designed to ensure that multinational groups with consolidated financial statement revenue in excess of €750 million annually pay a minimum 15% tax in each jurisdiction in which they operate. The OECD continues to release guidance and countries are implementing legislation to adopt these rules, which are expected to be effective for accounting periods beginning on or after December 31, 2023. The United States has not yet enacted legislation implementing Pillar Two. We have evaluated the impact of these rules and currently believe they will not have a material impact on our financial position, results of operations or cash flows due to certain transitional safe harbors. We will continue to monitor and refine our assessment as further guidance is made available.

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 ~~generally reinvest~~continue to invest in the development and expansion of our operations using available cash flows from ~~operations into~~operations. Ongoing investments include, but are not limited to, improvements in our ~~business~~technology platforms, investments in new products and services, and continued investments in sales and marketing. We also use cash flows from operations to service our debt ~~obligations.~~obligations and to repurchase Class A common stock, Class C capital stock, outstanding convertible senior notes or a combination thereof through our Repurchase Authorizations or otherwise.

Sources of Liquidity

As of ~~September 30, 2023~~March 31, 2024 and December 31, ~~2022,~~2023, we had cash and cash equivalents, investments and restricted cash of ~~$3.3~~$2.9 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. Investments consist of fixed income securities, which include U.S. government treasury securities, U.S. government agency securities, investment grade corporate securities, and commercial paper. Restricted cash primarily consists of amounts ~~held in escrow related~~used to ~~funding~~fund customer home purchases in our mortgage origination business. Amounts on deposit with third-party financial institutions exceed the Federal Deposit Insurance Corporation ~~(“FDIC”)~~ and the Securities Investor Protection Corporation insurance limits, as applicable. As of ~~September 30, 2023,~~March 31, 2024, 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, strategic acquisitions and investments 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.

Summarized Cash Flow Information

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 for the nine months ended September 30, 2022. There were no cash flows related to discontinued operations for the nine months ended September 30, 2023. 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):


		Nine Months Ended September 30,				Three Months Ended March 31,
		2023		2022		2024	2023
Cash Flow Data:	Cash Flow Data:
Net cash provided by operating activities	Net cash provided by operating activities	$	268	$	4,420
Net cash provided by (used in) investing activities		339		(1,123)
Net cash used in financing activities		(226)		(4,160)
Net cash provided by operating activities
Net cash provided by operating activities
Net cash used in investing activities
Net cash provided by (used in) financing activities

Cash Flows Provided By 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.~~Loans. Our primary uses of cash from operating activities include 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.~~

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For the ~~nine~~three months ended ~~September 30, 2023,~~March 31, 2024, net cash provided by operating activities was ~~$268~~$80 million. This was driven by a net loss of ~~$85~~$23 million, adjusted by share-based compensation of ~~$342~~$108 million, depreciation and amortization of ~~$134~~$56 million, accretion of bond discount of ~~$29~~$8 million, impairment costs of $6 million, amortization of contract cost assets of $5 million, amortization of right of use assets of ~~$18 million, amortization of contract cost assets of $16~~$3 million, and amortization of debt issuance costs of $4$2 million. Changes in operating assets and liabilities decreased cash provided by operating activities by ~~$135~~$70 million. The changes in operating assets and liabilities are primarily related to a ~~$55~~$32 million increase in mortgage loans held for sale due to an increase in purchase loan origination volume, a $26 million increase in accounts receivable primarily due to an increase in revenue from products and services billed in arrears, a $24 million decrease in lease liabilities due to contractual lease payments, a $22$30 million increase in prepaid expenses and other current assets primarily due to an increase in revenue from products and services billed in arrears, a ~~$16~~$13 million decrease in lease liabilities due to contractual lease payments, a $5 million increase in contract cost assets primarily due to capitalized sales commissions, and a $4 million ~~decrease~~increase in ~~other long term liabilities,~~accounts receivable primarily due to an increase in revenue from products and ~~a $3 million decrease~~services billed in ~~accrued expenses and other current liabilities.~~arrears. These changes were partially offset by a $7$6 million increase in accounts payable ~~and a $4 million increase in accrued compensation and benefits both~~ driven by the timing of payments, ~~and~~ a $4$6 million increase in deferred ~~revenue.~~revenue and a $2 million increase in other long-term liabilities.

For the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, net cash provided by operating activities was ~~$4.4 billion.~~$93 million. This was driven by a net loss of ~~$29~~$22 million, adjusted by share-based compensation of ~~$341~~$103 million, depreciation and amortization of ~~$121~~$40 million, ~~amortization~~accretion of ~~debt~~bond discount ~~and debt issuance~~of $10 million, impairment costs of ~~$24~~$6 million, amortization of contract cost assets of ~~$23 million, a loss on extinguishment of debt of $21~~$6 million, amortization of right of use assets of ~~$17 million, accretion of bond discount of $11~~$6 million, and other adjustments to reconcile net loss to net cash provided by operating activities of ~~$11~~$2 million. Changes in operating assets and liabilities ~~increased~~decreased cash provided by operating activities by ~~$3.9 billion.~~$39 million. The changes in operating assets and liabilities are primarily related to a $3.9 billion decrease in inventory and a $76 million decrease in accounts receivable as we wound down Zillow Offers operations, a $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 other long-term liabilities primarily due to our outstanding warrant agreement. These changes were partially offset by a $52 million

decrease in accrued compensation and benefits and a $49 million decrease in accrued expenses and other current liabilities driven primarily by the wind down of Zillow Offers operations, a $15 million decrease in lease liabilities primarily due to lease payments, a $13$27 million increase in prepaid expenses and other current assets due primarily to an increase in revenue from products and services billed in arrears, an $8 million decrease in lease liabilities due to contractual lease payments, a ~~$13~~$7 million increase in mortgage loans held for sale due to an increase in loan origination volume, a $6 million increase in contract cost ~~assets.~~

assets, a $3 million increase in accounts receivable and a $3 million decrease in accrued compensation and benefits. These changes were partially offset by a $10 million increase in accrued expenses and other current liabilities primarily driven by the timing of billings and a $5 million increase in deferred revenue.

Cash Flows ~~Provided By (Used In)~~Used In Investing Activities

Our primary investing activities include the purchase and sale or maturity of investments ~~cash outflows for purchases~~and the purchase of property and equipment and intangible ~~assets, including capitalized website development costs and internal-use software, and cash paid in connection with acquisitions.~~assets.

For the ~~nine~~three months ended ~~September 30, 2023,~~March 31, 2024, net cash ~~provided by~~used in investing activities was ~~$339~~$204 million. This was the result of ~~$498~~$158 million of net ~~proceeds from the maturity~~purchases of investments ~~$125~~and $46 million of purchases of property and equipment and intangible ~~assets, and $34 million of cash paid for acquisitions, net of cash acquired.~~assets.

For the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, net cash used in investing activities was ~~$1.1 billion.~~$97 million. This was the result of ~~$1.0 billion~~$57 million of net purchases of investments and ~~$104~~$40 million of purchases of property and equipment and intangible assets.

Cash Flows ~~Used In~~Provided By (Used In) Financing Activities

~~Net cash used in~~Our primary financing activities ~~has primarily resulted from~~include repurchases of Class A common stock and Class C capital stock, the exercise of employee option awards and repayments of borrowings on the warehouse line of credit and master repurchase agreements related to Zillow Home Loans, and, prior to September 30, 2022, settlement of long term debt including our Zillow Offers securitization term loans, proceeds from our Zillow Offers securitization transaction, and proceeds from and repayments of borrowings on our credit facilities related to Zillow Offers.Loans.

For the ~~nine~~three months ended ~~September 30, 2023,~~March 31, 2024, net cash ~~used in~~provided by financing activities was ~~$226~~$71 million, which primarily related to ~~$336 million of cash paid for share repurchases, partially offset by $56~~$50 million of proceeds from the exercise of option awards and ~~$54~~$30 million of net borrowings on our master repurchase agreements related to Zillow Home Loans, partially offset by $9 million of cash paid for share repurchases.

For the three months ended March 31, 2023, net cash used in financing activities was $68 million, which was primarily related to $86 million of cash paid for share repurchases. The cash outflows were partially offset by $13 million of proceeds from the exercise of option awards and $5 million of net borrowings on our warehouse line of credit and master repurchase agreements related to Zillow Home Loans.

For the nine months ended September 30, 2022, net cash used in financing activities was $4.2 billion, which was primarily related to $2.2 billion of repayments on borrowings of our credit facilities and $1.2 billion for the repayment of the term loans associated with the wind down of Zillow Offers operations, $773 million of cash paid for share repurchases and $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 $44 million of proceeds from the exercise of option awards.

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Capital Resources

~~We continue to invest in the development and expansion~~Notes

As of our 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,March 31, 2024, we have ~~issued convertible senior notes. As~~a total of ~~September 30, 2023, we have $1.7~~$1.6 billion aggregate principal amount of ~~convertible senior notes~~Notes outstanding. The ~~convertible notes~~Notes are senior unsecured obligations, and interest on the convertible notes is paid semi-annually. The following table summarizes our ~~convertible senior notes~~Notes as of the periods presented (in millions, except interest rates):


							September 30, 2023		December 31, 2022
						March 31, 2024									March 31, 2024	December 31, 2023
Maturity Date	Maturity Date	Aggregate Principal Amount		Stated Interest Rate			Carrying Value		Carrying Value		Maturity Date	Aggregate Principal Amount	Stated Interest Rate	Carrying Value
September 1, 2026	September 1, 2026	$	499	1.375	%		$	496	$	495
May 15, 2025	May 15, 2025	565		2.75	%		561		560
September 1, 2024	September 1, 2024	608		0.75	%		607		605
Total	Total	$	1,672				$	1,664	$	1,660

We may from time to time seek to redeem, retire or purchase outstanding debt through cash purchases and/or exchanges for cash, shares of stock or a combination of cash and stock, pursuant to the redemption terms of such debt securities, in open market purchases, privately negotiated transactions or otherwise. In particular, the 2024 Notes and 2026 Notes may be redeemed if the last reported sale price of our Class C capital stock exceeds $56.56 per share for a specified period of trading days. To the extent our Class C capital stock price rises above those levels, we may redeem the 2024 Notes and/or 2026 Notes, in which case, we would expect to settle any conversions in cash up to the principal amount and shares of Class C capital stock for any conversion obligation in excess of the principal amount. Such redemptions, repurchases or exchanges, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved in any such transactions, individually or in the aggregate, may be material. Refer to Note 97 of our Notes to Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q for additional information regarding our ~~convertible senior notes,~~Notes, including conversion rates, conversion and redemption dates and the related capped call transactions.

On July 31, 2023, we acquired Aryeo, a software company which serves real estate photographers, for approximately $20 million of our Class C capital stock and $15 million in cash, net of cash acquired, subject to certain adjustments. Additionally, on September 11, 2023, we acquired substantially all of the assets and liabilities of Spruce, a tech-enabled title and escrow platform, for approximately $19 million in cash, net of cash acquired, subject to certain adjustments.Share Repurchases

On October 28, 2023, Zillow, Inc. and Follow Up Boss entered into an Agreement pursuant to which Zillow, Inc. agreed to acquire Follow Up Boss for $400 million in cash, subject to certain adjustments, payable upon closing of the transaction, and up to $100 million in cash payable over a three-year period upon achievement of certain performance metrics contemplated by the Agreement. Follow Up Boss is a customer relationship management system for real estate professionals. The Agreement contains customary representations, warranties and covenants of the parties as well as conditions to closing, including, among other things, regulatory approval under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

~~Prior to July 31, 2023, the~~ Board has authorized the repurchase of up to ~~$1.8~~$2.5 billion of our Class A common stock, Class C capital stock, outstanding ~~convertible senior notes~~Notes or a combination thereof. During the three months ended March 31, 2024, we repurchased 0.1 million shares of Class A common stock and 0.1 million shares of Class C capital stock at an average price of $45.02 and $45.42 per share, respectively, for an aggregate purchase price of $5 million and $4 million, respectively. As of March 31, 2024, $761 million remained available for future repurchases pursuant to the Repurchase Authorizations, which repurchases decrease our liquidity and capital resources when effected. For additional information on these authorizations, see Notes 11 and 13 ~~and 15 to~~of 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, 2022. On July 31, 2023, the Board authorized the repurchase of up to an additional $750 million of Class A common stock, Class C capital stock, convertible senior notes or a combination thereof. This additional authorization (together with the previous authorizations, the “Repurchase Authorizations”) increased our total cumulative Repurchase Authorizations to $2.5 billion. During the nine months ended September 30, 2023, we repurchased 1.8 million shares of Class A common stock and 5.4 million shares of Class C capital stock at an average price of $48.71 and $46.15 per share, respectively, for an aggregate purchase price of $86 million and $250 million, respectively. As of September 30, 2023, $914 million remained available for future repurchases pursuant to the Repurchase Authorizations, which repurchases decrease our liquidity and capital resources when effected.2023.

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Credit Facilities

Zillow Home Loans operations impact 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 Maturity Date Maximum Borrowing Capacity Outstanding Borrowings at September 30, 2023
Outstanding Borrowings at
December 31, 2022
Weighted Average Interest Rate
JPMorgan Chase Bank, N.A.(1)
May 30, 2024 $ 100 $ 68 $ — 7.03 %
Atlas Securitized Products, L.P.(2)
March 11, 2024 50 22 23 7.32 %
Comerica Bank December 29, 2023 50 1 11 7.45 %
Citibank, N.A.(3)
June 9, 2023 — — 3 — %
Total $ 200 $ 91 $ 37


Lender	Maturity Date	Maximum Borrowing Capacity		Outstanding Borrowings at March 31, 2024		Outstanding Borrowings at December 31, 2023		Weighted Average Interest Rate at March 31, 2024
JPMorgan Chase Bank, N.A.	May 30, 2024	100		65		40		7.03	%
UBS AG	October 9, 2024	100		58		45		7.05	%
Atlas Securitized Products, L.P.(1)	March 11, 2024	—		—		8		—	%
	Total	$	200	$	123	$	93

(1)~~Agreement commenced on June 1, 2023 and provides for a total maximum borrowing capacity of $100 million, $25 million of which is committed, until May 30, 2024.~~

~~(2)Agreement was reassigned from Credit Suisse AG, Cayman Islands on May 25, 2023. No other material changes were made to the agreement in connection with the reassignment.~~

~~(3)~~Agreement expired on ~~June 9, 2023~~March 11, 2024 and was not renewed.

~~On October 11, 2023, Zillow Home Loans entered into a repurchase agreement with UBS AG. The repurchase agreement provides a total maximum borrowing capacity of $100 million until October 9, 2024.~~

Refer to Note 97 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.

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 ~~September 30, 2023,~~March 31, 2024, we have an outstanding aggregate principal amount of ~~convertible senior notes of $1.7~~$1.6 billion, $608 million of which is payable within 12 months. Future interest payments associated with the ~~convertible senior notes~~Notes total ~~$55~~$40 million, with ~~$27~~$23 million payable within 12 months. Refer to Note 97 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.~~Notes.

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. Principal amounts under the master repurchase agreements are due when the related mortgage loan is sold to an investor or directly to an agency. As of ~~September 30, 2023,~~March 31, 2024, we have outstanding principal amounts of ~~$91~~$123 million. Amounts exclude an immaterial amount of estimated interest payments.

Operating Lease Obligations - Our lease portfolio primarily comprises operating leases for our office space. During the ~~nine~~three months ended ~~September 30, 2023,~~March 31, 2024, there were no material changes to our operating lease obligations disclosed in Note 1210 of the Notes to the Consolidated Financial Statements in Part II, Item 8 of our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2022.~~2023. Additionally, as of ~~September 30, 2023,~~March 31, 2024, we had outstanding letters of credit of approximately ~~$12~~$11 million, which secure our lease obligations in connection with certain of the operating leases of our office spaces.

Contingent Consideration - In connection with the acquisition of Follow Up Boss, we are obligated to pay contingent consideration upon the achievement of certain performance metrics over a three-year period. For additional information regarding this contingent consideration, seeNote 3 and Note 5 of our Notes to Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q.

Purchase Obligations - We have ~~non-cancellable~~non-cancelable purchase obligations for content related to our mobile applications and websites and certain cloud computing costs. During the ~~nine~~three months ended ~~September 30, 2023,~~March 31, 2024, there were no material changes to the purchase commitments disclosed in Note 1816 of the Notes to the Consolidated Financial Statements in Part II, Item 8 of our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2022.~~2023.

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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~~housing market and the broader economy 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, ~~2022.~~2023. 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, ~~2022.~~2023.

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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 treasury securities, U.S. government agency securities, investment grade corporate securities and commercial paper. Our current investment policy seeks first to preserve capital, second to provide sufficient 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. 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.

As of ~~September 30, 2023,~~March 31, 2024, we had approximately ~~$1.7~~$1.6 billion aggregate principal amount of ~~convertible senior notes~~Notes outstanding with maturities ranging from September 2024 through September 2026. All outstanding ~~convertible senior notes~~Notes bear fixed rates of interest and, therefore, do not expose us to financial statement risk associated with changes in interest rates. The fair values of the ~~convertible senior notes~~Notes change primarily when the market price of our stock fluctuates or interest rates change.

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 results of operations. This risk is primarily mitigated through the expedited sale of our loans. As of ~~September 30, 2023~~March 31, 2024 and December 31, ~~2022,~~2023, we had ~~$91~~$123 million and ~~$37~~$93 million, respectively, of outstanding borrowings on our ~~warehouse line of credit and~~ master repurchase agreements which 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”)~~SOFR plus an 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 SOFR ~~or BSBY, as applicable,~~ would not have a material effect on our annual interest expense associated with the ~~warehouse line of credit and~~ master repurchase agreements as of ~~September 30, 2023~~March 31, 2024 and December 31, ~~2022.~~2023.

For additional details related to our credit facilities and convertible senior notes, see Note 97 to our Notes to Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q.

Inflation Risk

The macroeconomic environment in the United States has experienced, and continues to experience, inflationary pressures. While it is difficult to accurately measure the impact of these inflationary pressures on our business, we believe these effects have been pervasive throughout our business during the past several quarters. In response to ongoing inflationary pressures in the United States, the Federal Reserve has implemented a number of increases to the federal funds rate in recent quarters. ~~These~~Despite inflation stabilizing beginning in the second half of 2023, these federal funds rate increases have impacted other market rates derived from this benchmark rate, including mortgage interest rates. The ~~increase in~~persistently high mortgage interest rates across the industry relative to recent years has ~~decreased~~impacted the number of transactions consumers complete using our products and services and the demand for ~~mortgages overall~~our advertising services and mortgage origination offerings and, in turn, had an adverse impact on our ~~Mortgages~~ revenue.

If inflationary pressures persist, our costs, in particular labor, marketing and hosting costs, may increase 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 continue to 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. We cannot predict the duration or magnitude of these inflationary pressures, or how they may change over time, but we expect to see continued impacts on the residential real estate industry, our customers and our company. Despite these near-term effects, we do not expect these inflationary pressures to have a material impact on our ability to execute our long-term business strategy.

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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 ~~September 30, 2023.~~March 31, 2024. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that these disclosure controls and procedures were effective as of ~~September 30, 2023.~~March 31, 2024.

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 Securities Exchange Act of 1934, as amended, that occurred during the three months ended ~~September 30, 2023~~March 31, 2024 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 1412 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, ~~2022.~~2023. 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

On July 31, 2023, pursuant to an exemption from registration under Section 4(a)(2) of the Securities Act and Regulation D thereunder, we issued 380,259 shares of Class C capital stock to the stockholders of Aryeo as partial payment for acquisition of the entity by Zillow Group.

There were no ~~other~~ unregistered sales of equity securities during the three months ended ~~September 30, 2023.~~March 31, 2024.

Purchase of Equity Securities by the Issuer

The following table summarizes our stock repurchases during the three months ended ~~September 30, 2023~~March 31, 2024 (in millions, except share data which are presented in thousands, and per share amounts):

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, 2023 — — $ — $ — — $ 1,014
August 1 - August 31, 2023 965 932 52.57 52.80 1,897 914
September 1 - September 30, 2023 — — — — — 914
Total 965 932 1,897
(1) On December 2, 2021, the Board authorized a stock repurchase program granting the authority to repurchase up to $750 million of Class A common stock, Class C capital stock or a combination of both. On May 4, 2022, the Board authorized the repurchase of up to an additional $1 billion of Class A common stock, Class C capital stock or a combination thereof. On November 1, 2022, the Board further expanded these authorizations to allow for the repurchase of a portion of our outstanding convertible senior notes. On July 31, 2023, the Board authorized the repurchase of up to an additional $750 million of Class A common stock, Class C capital stock, outstanding convertible senior notes or a combination thereof (together with the previous authorizations, “Repurchase Authorizations”). The Repurchase Authorizations do not have an expiration date. There were no repurchases of convertible senior notes during the three months ended September 30, 2023.


	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
January 1 - January 31, 2024	—	—	$	—	$	—	—	$	770
February 1 - February 29, 2024	—	—	—		—		—	770
March 1 - March 31, 2024	119	92	45.02		45.42		211	761
Total	119	92					211

(1) On December 2, 2021, the Board authorized a stock repurchase program granting the authority to repurchase up to $750 million of Class A common stock, Class C capital stock or a combination of both. On May 4, 2022, the Board authorized the repurchase of up to an additional $1 billion of Class A common stock, Class C capital stock or a combination thereof. On November 1, 2022, the Board further expanded these authorizations to allow for the repurchase of a portion of our outstanding convertible senior notes. On July 31, 2023, the Board authorized the repurchase of up to an additional $750 million of Class A common stock, Class C capital stock, outstanding convertible senior notes or a combination thereof. The Repurchase Authorizations do not have an expiration date. There were no repurchases of convertible senior notes during the three months ended March 31, 2024.

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Item 5. Other Information

Trading Plans

On ~~August 21, 2023, Brad Owens, General Counsel,~~March 12, 2024, Erik Blachford, member of the Board of Zillow Group, Inc., entered into a 10b5-1 sales plan ~~(the “10b5-1 Sales Plan”)~~ intended to satisfy the affirmative defense of Rule 10b5-1(c) under the Exchange Act. ~~The~~This 10b5-1 ~~Sales Plan~~sales plan provides for ~~the exercise of option awards and sale of up to 127,625 shares of Class C capital stock and~~ the sale of an indeterminate number of shares of Class C capital stock related to future vesting of restricted stock units. ~~The~~This 10b5-1 ~~Sales Plan~~sales plan will become effective on ~~November 20, 2023~~June 11, 2024 and will terminate on ~~August 18,~~March 3, 2025, subject to earlier termination ~~upon the exercise of option awards and sale of all shares of Class C capital stock subject to the 10b5-1 Sales Plan or~~ as ~~otherwise~~ provided in the 10b5-1 ~~Sales Plan.~~sales plan.

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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 Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on June 5, 2020, and incorporated herein by reference).

~~10.1~~						~~Optional Partial Termination to Lease by and between FSP-RIC, LLC and Zillow, Inc. dated as of August 15, 2023.~~

10.2*						~~Amended Zillow Group, Inc. Executive Severance Plan and Summary Plan Description.~~

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).

*						~~Indicates a management contract or compensatory plan or arrangement.~~
^						The certifications attached as Exhibits 32.1 and 32.2 that accompany this Quarterly Report on Form 10-Q are not deemed filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of this Quarterly Report on Form 10-Q), irrespective of any general incorporation language contained in such filing.

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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: ~~November~~May 1, ~~2023~~2024	ZILLOW GROUP, INC.

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

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	Three Months Ended September 30, 2022		Nine Months Ended September 30, 2022
Revenue	$	23	$	4,249
Cost of revenue	24		4,023
Gross profit (loss)	(1)		226
Operating expenses:
Sales and marketing	1		153
Technology and development	—		6
General and administrative	—		10
Restructuring costs	—		25
Total operating expenses	1		194
Income (loss) from discontinued operations	(2)		32
Loss on extinguishment of debt	—		(21)
Other income	—		13
Interest expense	—		(36)
Loss from discontinued operations before income taxes	(2)		(12)
Income tax expense	—		(1)
Net loss from discontinued operations	$	(2)	$	(13)
Net loss from discontinued operations per share:
Basic	$	(0.01)	$	(0.05)
Diluted	$	(0.01)	$	(0.05)


	September 30, 2023
	Total		Level 1		Level 2		Level 3
Cash equivalents:
Money market funds	$	1,736	$	1,736	$	—	$	—

Short-term investments:
U.S. government treasury securities	1,258		—		1,258		—
Corporate bonds	135		—		135		—
Commercial paper	14		—		14		—
U.S. government agency securities	14		—		14		—
Mortgage origination-related:
Mortgage loans held for sale	96		—		96		—
Forward contracts - other current assets	2		—		2		—
IRLCs - other current assets	1		—		—		1
Total	$	3,256	$	1,736	$	1,519	$	1


	Nine Months Ended September 30, 2023						Nine Months Ended September 30, 2022
Maturity Date	Contractual Coupon Interest		Amortization of Debt Issuance Costs		Interest Expense		Contractual Coupon Interest		Amortization of Debt Issuance Costs		Interest Expense
September 1, 2026	$	6	$	1	$	7	$	5	$	—	$	5
May 15, 2025	12		1		13		12		2		14
September 1, 2024	3		2		5		4		1		5
Total	$	21	$	4	$	25	$	21	$	3	$	24