Exhibit 99.2
Reported Consolidated Results
ZILLOW GROUP, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
|
| | | | | | | |
| | September 30,
2018 | | December 31,
2017 |
| Assets | | | |
| Current assets: | | | |
| Cash and cash equivalents | $ | 643,792 |
| | $ | 352,095 |
|
| Short-term investments | 999,241 |
| | 410,444 |
|
| Accounts receivable, net | 66,337 |
| | 54,396 |
|
| Inventory | 43,257 |
| | — |
|
| Prepaid expenses and other current assets | 38,904 |
| | 24,590 |
|
| Restricted cash | 3,203 |
| | — |
|
| Total current assets | 1,794,734 |
| | 841,525 |
|
| Contract cost assets | 45,238 |
| | — |
|
| Property and equipment, net | 124,281 |
| | 112,271 |
|
| Goodwill | 1,931,076 |
| | 1,931,076 |
|
| Intangible assets, net | 290,887 |
| | 319,711 |
|
| Other assets | 16,241 |
| | 25,934 |
|
| Total assets | $ | 4,202,457 |
| | $ | 3,230,517 |
|
| Liabilities and shareholders’ equity | | | |
| Current liabilities: | | | |
| Accounts payable | $ | 5,846 |
| | $ | 3,587 |
|
| Accrued expenses and other current liabilities | 58,533 |
| | 61,373 |
|
| Accrued compensation and benefits | 25,612 |
| | 19,109 |
|
| Revolving credit facility | 24,674 |
| | — |
|
| Deferred revenue | 35,959 |
| | 31,918 |
|
| Deferred rent, current portion | 2,566 |
| | 2,400 |
|
| Total current liabilities | 153,190 |
| | 118,387 |
|
| Deferred rent, net of current portion | 18,049 |
| | 21,330 |
|
| Long-term debt | 690,338 |
| | 385,416 |
|
| Deferred tax liabilities and other long-term liabilities | 21,861 |
| | 44,561 |
|
| Total liabilities | 883,438 |
| | 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 | 3,894,757 |
| | 3,254,146 |
|
| Accumulated other comprehensive loss | (1,661 | ) | | (1,100 | ) |
| Accumulated deficit | (574,097 | ) | | (592,243 | ) |
| Total shareholders’ equity | 3,319,019 |
| | 2,660,823 |
|
| Total liabilities and shareholders’ equity | $ | 4,202,457 |
| | $ | 3,230,517 |
|
ZILLOW GROUP, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
|
| | | | | | | | | | | | | | | |
| | Three Months Ended
September 30, | | Nine Months Ended
September 30, |
| | 2018 | | 2017 | | 2018 | | 2017 |
| Revenue: | | | | | | | |
| IMT | $ | 332,076 |
| | $ | 281,839 |
| | $ | 957,201 |
| | $ | 794,464 |
|
| Homes | 11,018 |
| | — |
| | 11,018 |
| | — |
|
| Total revenue | 343,094 |
| | 281,839 |
| | 968,219 |
| | 794,464 |
|
| Cost of revenue (exclusive of amortization) (1): | | | | | | | |
| IMT | 26,386 |
| | 22,152 |
| | 75,832 |
| | 62,644 |
|
| Homes | 10,286 |
| | — |
| | 10,286 |
| | — |
|
| Total cost of revenue | 36,672 |
| | 22,152 |
| | 86,118 |
| | 62,644 |
|
| Sales and marketing | 128,734 |
| | 107,108 |
| | 413,752 |
| | 344,266 |
|
| Technology and development | 105,314 |
| | 83,389 |
| | 299,623 |
| | 234,798 |
|
| General and administrative | 70,743 |
| | 54,226 |
| | 187,395 |
| | 153,038 |
|
| Impairment costs | 10,000 |
| | — |
| | 10,000 |
| | — |
|
| Acquisition-related costs | 1,405 |
| | 218 |
| | 2,064 |
| | 366 |
|
| Integration costs | 523 |
| | — |
| | 523 |
| | — |
|
| Total costs and expenses | 353,391 |
| | 267,093 |
| | 999,475 |
| | 795,112 |
|
| Income (loss) from operations | (10,297 | ) | | 14,746 |
| | (31,256 | ) | | (648 | ) |
| Other income | 7,773 |
| | 1,407 |
| | 13,308 |
| | 3,970 |
|
| Interest expense | (12,668 | ) | | (6,906 | ) | | (26,928 | ) | | (20,526 | ) |
| Income (loss) before income taxes | (15,192 | ) | | 9,247 |
| | (44,876 | ) | | (17,204 | ) |
| Income tax benefit (expense) | 14,700 |
| | (41 | ) | | 22,700 |
| | (41 | ) |
| Net income (loss) | $ | (492 | ) | | $ | 9,206 |
| | $ | (22,176 | ) | | $ | (17,245 | ) |
| Net income (loss) per share — basic and diluted | $ | — |
| | $ | 0.05 |
| | $ | (0.11 | ) | | $ | (0.09 | ) |
| Weighted-average shares outstanding — basic | 202,416 |
| | 187,692 |
| | 195,208 |
| | 185,447 |
|
| Weighted-average shares outstanding — diluted | 202,416 |
| | 196,425 |
| | 195,208 |
| | 185,447 |
|
____________________ (1) Amortization of website development costs and intangible assets included in technology and development | $ | 18,165 |
| | $ | 23,537 |
| | $ | 61,735 |
| | $ | 69,957 |
|
| (2) Includes share-based compensation expense as follows: | | | | | | | |
| Cost of revenue | $ | 969 |
| | $ | 1,014 |
| | $ | 3,180 |
| | $ | 2,942 |
|
| Sales and marketing | 5,911 |
| | 5,914 |
| | 17,413 |
| | 17,694 |
|
| Technology and development | 15,031 |
| | 10,438 |
| | 40,920 |
| | 29,329 |
|
| General and administrative | 19,771 |
| | 11,208 |
| | 49,853 |
| | 34,197 |
|
| Total | $ | 41,682 |
| | $ | 28,574 |
| | $ | 111,366 |
| | $ | 84,162 |
|
| Other Financial Data: | | | | | | | |
| Adjusted EBITDA (3) | $ | 66,165 |
| | $ | 70,957 |
| | $ | 168,475 |
| | $ | 165,456 |
|
| (3) See Exhibit 99.1 for more information regarding our presentation of Adjusted EBITDA and for a reconciliation of Adjusted EBITDA to net income (loss), the most directly comparable GAAP financial measure, for each of the periods presented. |
ZILLOW GROUP, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
|
| | | | | | | |
| | Nine Months Ended September 30, |
| | 2018 | | 2017 |
| Operating activities | | | |
| Net loss | $ | (22,176 | ) | | $ | (17,245 | ) |
| Adjustments to reconcile net loss to net cash provided by operating activities: | | | |
| Depreciation and amortization | 76,301 |
| | 81,576 |
|
| Share-based compensation expense | 111,366 |
| | 84,162 |
|
| Amortization of contract cost assets | 27,227 |
| | — |
|
| Amortization of discount and issuance costs on 2021 and 2023 Notes | 17,990 |
| | 13,391 |
|
| Impairment costs | 10,000 |
| | — |
|
| Deferred income taxes | (22,700 | ) | | — |
|
| Loss on disposal of property and equipment | 3,129 |
| | 4,085 |
|
| Bad debt expense | 1,053 |
| | 5,861 |
|
| Deferred rent | (3,116 | ) | | 3,072 |
|
| Amortization (accretion) of bond premium (discount) | (2,172 | ) | | 451 |
|
| Changes in operating assets and liabilities: | | | |
| Accounts receivable | (12,994 | ) | | (19,272 | ) |
| Inventory | (43,257 | ) | | — |
|
| Prepaid expenses and other assets | (15,012 | ) | | 4,434 |
|
| Contract cost assets | (32,143 | ) | | — |
|
| Accounts payable | 2,254 |
| | 224 |
|
| Accrued expenses and other current liabilities | (3,751 | ) | | 13,174 |
|
| Accrued compensation and benefits | 6,503 |
| | 1,194 |
|
| Deferred revenue | 4,041 |
| | 1,775 |
|
| Other long-term liabilities | — |
| | 41 |
|
| Net cash provided by operating activities | 102,543 |
| | 176,923 |
|
| Investing activities | | | |
| Proceeds from maturities of investments | 261,675 |
| | 204,520 |
|
| Purchases of investments | (848,838 | ) | | (303,241 | ) |
| Purchases of property and equipment | (44,482 | ) | | (51,580 | ) |
| Purchases of intangible assets | (8,179 | ) | | (9,377 | ) |
| Purchase of equity investment | — |
| | (10,000 | ) |
| Proceeds from divestiture of a business | — |
| | 579 |
|
| Cash paid for acquisition, net | (2,000 | ) | | (11,147 | ) |
| Net cash used in investing activities | (641,824 | ) | | (180,246 | ) |
| Financing activities | | | |
| Proceeds from issuance of 2023 Notes, net of issuance costs | 364,020 |
| | — |
|
| Premiums paid for Capped Call Confirmations | (29,414 | ) | | — |
|
| Proceeds from issuance of Class C Capital Stock, net of issuance costs | 360,345 |
| | — |
|
| Proceeds from borrowing on revolving credit facility | 24,674 |
| | — |
|
| Proceeds from exercise of stock options | 114,623 |
| | 80,010 |
|
| Value of equity awards withheld for tax liability | (67 | ) | | (337 | ) |
| Net cash provided by financing activities | 834,181 |
| | 79,673 |
|
| Net increase in cash, cash equivalents and restricted cash during period | 294,900 |
| | 76,350 |
|
| Cash, cash equivalents and restricted cash at beginning of period | 352,095 |
| | 243,592 |
|
| Cash, cash equivalents and restricted cash at end of period | $ | 646,995 |
| | $ | 319,942 |
|
| Supplemental disclosures of cash flow information | | | |
| Cash paid for interest | $ | 4,800 |
| | $ | 4,458 |
|
| Noncash transactions: | | | |
| Capitalized share-based compensation | $ | 6,674 |
| | $ | 8,915 |
|
| Write-off of fully depreciated property and equipment | $ | 18,687 |
| | $ | 12,685 |
|
| Write-off of fully amortized intangible assets | $ | 10,797 |
| | $ | 5,454 |
|
Non-GAAP Net Income per Share
Our presentation of non-GAAP net income per share excludes the impact of share-based compensation expense, impairment costs, acquisition-related costs and income taxes. This measure is not a key metric used by our management and board of directors to measure operating performance or otherwise manage the business. However, we provide non-GAAP net income per share as supplemental information to investors, as we believe the exclusion of share-based compensation expense, impairment costs, acquisition-related costs and income taxes facilitates investors’ operating performance comparisons on a period-to-period basis. You should not consider non-GAAP net income per share in isolation or as a substitute for analysis of our results as reported under GAAP.
The following table sets forth a reconciliation of net income, adjusted, to net income (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
September 30, | | Nine Months Ended
September 30, |
| | 2018 | | 2017 | | 2018 | | 2017 |
| Net income (loss), as reported | $ | (492 | ) | | $ | 9,206 |
| | $ | (22,176 | ) | | $ | (17,245 | ) |
| Share-based compensation expense | 41,682 |
| | 28,574 |
| | 111,366 |
| | 84,162 |
|
| Impairment costs | 10,000 |
| | — |
| | 10,000 |
| | — |
|
| Acquisition-related costs | 1,405 |
| | 218 |
| | 2,064 |
| | 366 |
|
| Income tax (benefit) expense | (14,700 | ) | | 41 |
| | (22,700 | ) | | 41 |
|
| Net income, adjusted | $ | 37,895 |
| | $ | 38,039 |
| | $ | 78,554 |
| | $ | 67,324 |
|
| Non-GAAP net income per share — basic | $ | 0.19 |
| | $ | 0.20 |
| | $ | 0.40 |
| | $ | 0.36 |
|
| Non-GAAP net income per share — diluted | $ | 0.18 |
| | $ | 0.19 |
| | $ | 0.38 |
| | $ | 0.35 |
|
| Weighted-average shares outstanding — basic | 202,416 |
| | 187,692 |
| | 195,208 |
| | 185,447 |
|
| Weighted-average shares outstanding — diluted | 211,746 |
| | 196,863 |
| | 204,926 |
| | 194,605 |
|
Segment Results of Operations
The following tables present our segment results for the periods presented (in thousands, unaudited):
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended
September 30, 2018 | | Three Months Ended
September 30, 2017 |
| | IMT | | Homes | | Consolidated | | IMT | | Homes | | Consolidated |
| Revenue | $ | 332,076 |
| | $ | 11,018 |
| | $ | 343,094 |
| | $ | 281,839 |
| | $ | — |
| | $ | 281,839 |
|
| Costs and expenses: | | | | | | | | | | | |
| Cost of revenue | 26,386 |
| | 10,286 |
| | 36,672 |
| | 22,152 |
| | — |
| | 22,152 |
|
| Sales and marketing | 123,755 |
| | 4,979 |
| | 128,734 |
| | 107,108 |
| | — |
| | 107,108 |
|
| Technology and development | 99,570 |
| | 5,744 |
| | 105,314 |
| | 83,389 |
| | — |
| | 83,389 |
|
| General and administrative | 65,156 |
| | 5,587 |
| | 70,743 |
| | 54,226 |
| | — |
| | 54,226 |
|
| Impairment costs | 10,000 |
| | — |
| | 10,000 |
| | — |
| | — |
| | — |
|
| Acquisition-related costs | 1,405 |
| | — |
| | 1,405 |
| | 218 |
| | — |
| | 218 |
|
| Integration costs | 523 |
| | — |
| | 523 |
| | — |
| | — |
| | — |
|
| Total costs and expenses | 326,795 |
| | 26,596 |
| | 353,391 |
| | 267,093 |
| | — |
| | 267,093 |
|
| Income (loss) from operations | 5,281 |
| | (15,578 | ) | | (10,297 | ) | | 14,746 |
| | — |
| | 14,746 |
|
| Other income | 7,773 |
| | — |
| | 7,773 |
| | 1,407 |
| | — |
| | 1,407 |
|
| Interest expense | (12,236 | ) | | (432 | ) | | (12,668 | ) | | (6,906 | ) | | — |
| | (6,906 | ) |
| Income (loss) before income taxes | $ | 818 |
| | $ | (16,010 | ) | | $ | (15,192 | ) | | $ | 9,247 |
| | $ | — |
| | $ | 9,247 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended
September 30, 2018 | | Nine Months Ended
September 30, 2017 |
| | IMT | | Homes | | Consolidated | | IMT | | Homes | | Consolidated |
| Revenue | $ | 957,201 |
| | $ | 11,018 |
| | $ | 968,219 |
| | $ | 794,464 |
| | $ | — |
| | $ | 794,464 |
|
| Costs and expenses: | | | | | | | | | | | |
| Cost of revenue | 75,832 |
| | 10,286 |
| | 86,118 |
| | 62,644 |
| | — |
| | 62,644 |
|
| Sales and marketing | 405,525 |
| | 8,227 |
| | 413,752 |
| | 344,266 |
| | — |
| | 344,266 |
|
| Technology and development | 286,983 |
| | 12,640 |
| | 299,623 |
| | 234,798 |
| | — |
| | 234,798 |
|
| General and administrative | 172,756 |
| | 14,639 |
| | 187,395 |
| | 153,038 |
| | — |
| | 153,038 |
|
| Impairment costs | 10,000 |
| | — |
| | 10,000 |
| | — |
| | — |
| | — |
|
| Acquisition-related costs | 2,064 |
| | — |
| | 2,064 |
| | 366 |
| | — |
| | 366 |
|
| Integration costs | 523 |
| | — |
| | 523 |
| | — |
| | — |
| | — |
|
| Total costs and expenses | 953,683 |
| | 45,792 |
| | 999,475 |
| | 795,112 |
| | — |
| | 795,112 |
|
| Loss from operations | 3,518 |
| | (34,774 | ) | | (31,256 | ) | | (648 | ) | | — |
| | (648 | ) |
| Other income | 13,308 |
| | — |
| | 13,308 |
| | 3,970 |
| | — |
| | 3,970 |
|
| Interest expense | (26,496 | ) | | (432 | ) | | (26,928 | ) | | (20,526 | ) | | — |
| | (20,526 | ) |
| Loss before income taxes | $ | (9,670 | ) | | $ | (35,206 | ) | | $ | (44,876 | ) | | $ | (17,204 | ) | | $ | — |
| | $ | (17,204 | ) |
Key Metrics
The following table sets forth our key metrics for each of the periods presented:
|
| | | | | | | | |
| | Three Months Ended September 30, | | 2017 to 2018
% Change |
| | 2018 | | 2017 | |
| | (in millions) | | |
| Average Monthly Unique Users (1) | 186.6 |
| | 175.2 |
| | 7 | % |
| Visits (2) | 1,888.9 |
| | 1,667.1 |
| | 13 | % |
| |
| (1) | Zillow, StreetEasy, HotPads, Naked Apartments and RealEstate.com measure unique users with Google Analytics, and Trulia measures unique users with Adobe Analytics. |
| |
| (2) | Visits includes visits to the Zillow, Trulia, StreetEasy and RealEstate.com mobile apps and websites. We measure Zillow, StreetEasy and RealEstate.com visits with Google Analytics and Trulia visits with Adobe Analytics. |
