Zillow (Z) 8-K Zillow Group Second Quarter 2018 Revenue Increased 22% Year-over-year

Exhibit 99.2

Reported Consolidated Results

ZILLOW GROUP, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

	June 30, 2018			December 31, 2017
Assets
Current assets:
Cash and cash equivalents	$	431,045		$	352,095
Short-term investments	468,541			410,444
Accounts receivable, net	64,083			54,396
Inventory	5,666			—
Prepaid expenses and other current assets	38,169			24,590
Total current assets	1,007,504			841,525
Contract cost assets	43,384			—
Property and equipment, net	118,242			112,271
Goodwill	1,931,076			1,931,076
Intangible assets, net	299,228			319,711
Other assets	26,739			25,934
Total assets	$	3,426,173		$	3,230,517
Liabilities and shareholders’ equity
Current liabilities:
Accounts payable	$	5,928		$	3,587
Accrued expenses and other current liabilities	55,360			61,373
Accrued compensation and benefits	23,418			19,109
Deferred revenue	35,920			31,918
Deferred rent, current portion	2,622			2,400
Total current liabilities	123,248			118,387
Deferred rent, net of current portion	18,263			21,330
Long-term debt	394,420			385,416
Deferred tax liabilities and other long-term liabilities	36,561			44,561
Total liabilities	572,492			569,694
Shareholders’ equity:
Class A common stock	6			6
Class B common stock	1			1
Class C capital stock	13			13
Additional paid-in capital	3,428,541			3,254,146
Accumulated other comprehensive loss	(1,275		)	(1,100		)
Accumulated deficit	(573,605		)	(592,243		)
Total shareholders’ equity	2,853,681			2,660,823
Total liabilities and shareholders’ equity	$	3,426,173		$	3,230,517

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ZILLOW GROUP, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
Revenue:
IMT	$	325,246		$	266,850		$	625,125		$	512,625
Homes	—			—			—			—
Total revenue	325,246			266,850			625,125			512,625
Cost of revenue (exclusive of amortization) (1)(2):
IMT	25,527			20,260			49,446			40,492
Homes	—			—			—			—
Total cost of revenue	25,527			20,260			49,446			40,492
Sales and marketing (2)	147,727			131,218			285,018			237,158
Technology and development (2)	100,376			78,541			194,309			151,409
General and administrative (2)	60,579			53,346			116,652			98,812
Acquisition-related costs	632			43			659			148
Total costs and expenses	334,841			283,408			646,084			528,019
Loss from operations	(9,595		)	(16,558		)	(20,959		)	(15,394		)
Other income	3,089			1,610			5,535			2,563
Interest expense	(7,187		)	(6,897		)	(14,260		)	(13,620		)
Loss before income taxes	(13,693		)	(21,845		)	(29,684		)	(26,451		)
Income tax benefit	10,600			—			8,000			—
Net loss	$	(3,093	)	$	(21,845	)	$	(21,684	)	$	(26,451	)
Net loss per share — basic and diluted	$	(0.02	)	$	(0.12	)	$	(0.11	)	$	(0.14	)
Weighted-average shares outstanding — basic and diluted	194,155			185,439			192,807			184,305
____________________ (1) Amortization of website development costs and intangible assets included in technology and development	$	21,020		$	23,159		$	43,569		$	46,420
(2) Includes share-based compensation expense as follows:
Cost of revenue	$	1,256		$	1,025		$	2,211		$	1,928
Sales and marketing	6,340			6,250			11,502			11,780
Technology and development	14,347			10,400			25,889			18,891
General and administrative	17,000			11,518			30,082			22,989
Total	$	38,943		$	29,193		$	69,684		$	55,588
Other Financial Data:
Adjusted EBITDA (3)	$	56,000		$	39,700		$	102,310		$	94,499
(3) See Exhibit 99.1 for more information regarding our presentation of Adjusted EBITDA and for a reconciliation of Adjusted EBITDA to net loss, the most directly comparable GAAP financial measure, for each of the periods presented.

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ZILLOW GROUP, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Six Months Ended June 30,
	2018			2017
Operating activities
Net loss	$	(21,684	)	$	(26,451	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	52,926			54,157
Share-based compensation expense	69,684			55,588
Amortization of contract cost assets	18,309			—
Amortization of discount and issuance costs on 2021 Notes	9,504			8,855
Deferred income taxes	(8,000		)	—
Loss on disposal of property and equipment	2,106			2,024
Bad debt expense	(352		)	3,960
Deferred rent	(2,845		)	1,750
Amortization (accretion) of bond premium (discount)	(504		)	376
Changes in operating assets and liabilities:
Accounts receivable	(9,335		)	(11,149		)
Inventory	(5,666		)	—
Prepaid expenses and other assets	(14,697		)	(5,845		)
Contract cost assets	(21,371		)	—
Accounts payable	1,855			(1,714		)
Accrued expenses and other current liabilities	(5,189		)	1,203
Accrued compensation and benefits	4,309			503
Deferred revenue	4,002			1,635
Net cash provided by operating activities	73,052			84,892
Investing activities
Proceeds from maturities of investments	172,573			133,432
Purchases of investments	(230,276		)	(193,604		)
Purchases of property and equipment	(31,212		)	(31,608		)
Purchases of intangible assets	(4,777		)	(6,784		)
Purchase of equity method investment	—			(10,000		)
Proceeds from divestiture of a business	—			579
Cash paid for acquisition, net	—			(6,002		)
Net cash used in investing activities	(93,692		)	(113,987		)
Financing activities
Proceeds from exercise of stock options	99,656			62,263
Value of equity awards withheld for tax liability	(66		)	(295		)
Net cash provided by financing activities	99,590			61,968
Net increase in cash and cash equivalents during period	78,950			32,873
Cash and cash equivalents at beginning of period	352,095			243,592
Cash and cash equivalents at end of period	$	431,045		$	276,465
Supplemental disclosures of cash flow information
Cash paid for interest	$	4,733		$	4,458
Noncash transactions:
Capitalized share-based compensation	$	4,623		$	5,289
Write-off of fully depreciated property and equipment	$	13,293		$	7,552
Write-off of fully amortized intangible assets	$	10,797		$	5,302

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Non-GAAP Net Income per Share

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

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

	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
Net loss, as reported	$	(3,093	)	$	(21,845	)	$	(21,684	)	$	(26,451	)
Share-based compensation expense	38,943			29,193			69,684			55,588
Acquisition-related costs	632			43			659			148
Income tax benefit	(10,600		)	—			(8,000		)	—
Net income, adjusted	$	25,882		$	7,391		$	40,659		$	29,285
Non-GAAP net income per share — basic	$	0.13		$	0.04		$	0.21		$	0.16
Non-GAAP net income per share — diluted	$	0.13		$	0.04		$	0.20		$	0.15
Weighted-average shares outstanding — basic	194,155			185,439			192,807			184,305
Weighted-average shares outstanding — diluted	205,830			195,021			203,923			193,119

Segment Results of Operations

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

	Three Months Ended June 30, 2018									Three Months Ended June 30, 2017
	IMT			Homes			Consolidated			IMT			Homes		Consolidated
Revenue	$	325,246		$	—		$	325,246		$	266,850		$	—	$	266,850
Costs and expenses:
Cost of revenue	25,527			—			25,527			20,260			—		20,260
Sales and marketing	145,177			2,550			147,727			131,218			—		131,218
Technology and development	95,967			4,409			100,376			78,541			—		78,541
General and administrative	55,384			5,195			60,579			53,346			—		53,346
Acquisition-related costs	632			—			632			43			—		43
Total costs and expenses	322,687			12,154			334,841			283,408			—		283,408
Income (loss) from operations	2,559			(12,154		)	(9,595		)	(16,558		)	—		(16,558		)
Other income	3,089			—			3,089			1,610			—		1,610
Interest expense	(7,187		)	—			(7,187		)	(6,897		)	—		(6,897		)
Loss before income taxes	$	(1,539	)	$	(12,154	)	$	(13,693	)	$	(21,845	)	$	—	$	(21,845	)

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	Six Months Ended June 30, 2018									Six Months Ended June 30, 2017
	IMT			Homes			Consolidated			IMT			Homes		Consolidated
Revenue	$	625,125		$	—		$	625,125		$	512,625		$	—	$	512,625
Costs and expenses:
Cost of revenue	49,446			—			49,446			40,492			—		40,492
Sales and marketing	281,770			3,248			285,018			237,158			—		237,158
Technology and development	187,412			6,897			194,309			151,409			—		151,409
General and administrative	107,601			9,051			116,652			98,812			—		98,812
Acquisition-related costs	659			—			659			148			—		148
Total costs and expenses	626,888			19,196			646,084			528,019			—		528,019
Loss from operations	(1,763		)	(19,196		)	(20,959		)	(15,394		)	—		(15,394		)
Other income	5,535			—			5,535			2,563			—		2,563
Interest expense	(14,260		)	—			(14,260		)	(13,620		)	—		(13,620		)
Loss before income taxes	$	(10,488	)	$	(19,196	)	$	(29,684	)	$	(26,451	)	$	—	$	(26,451	)

Key Metrics

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

	Three Months Ended June 30,		2017 to 2018 % Change
	2018	2017
	(in millions)
Average Monthly Unique Users (1)	186.1	178.1	4	%
Visits (2)	1,920.6	1,678.7	14	%

(1) Zillow, StreetEasy, HotPads, Naked Apartments and RealEstate.com (as of June 2017) measure unique users with Google Analytics, and Trulia measures unique users with Adobe Analytics.

(2) Visits includes visits to the Zillow, Trulia, StreetEasy and RealEstate.com (as of June 2017) mobile apps and websites. We measure Zillow, StreetEasy and RealEstate.com visits with Google Analytics and Trulia visits with Adobe Analytics.

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