Zillow Group Reports Second Quarter 2015 Results
Real Estate Revenue Up 37% Year-over-Year, Adjusted EBITDA of $21.0 Million
- Revenue of
$171.3 million , up 20% year over year on a pro forma basis. - Marketplace Revenue of
$145.5 million , up 29% year over year on a pro forma basis, and Real Estate Revenue of$122.6 million , up 37% year over year on a pro forma basis. - Adjusted EBITDA of
$21.0 million , up 277% year over year on a pro forma basis. - GAAP net loss of
$38.7 million compared to GAAP net loss of$97.1 million during the same period last year. - In the second quarter, 141 million average monthly unique users visited
Zillow Group's consumer brandsZillow ,Trulia , StreetEasy and HotPads. - Zillow Group brands now represent 72% market share of all mobile exclusive visitors to the real estate category, according to comScore.
Trulia integration on track for completion by end of third quarter, one quarter ahead of forecast.
"
Second Quarter 2015 Financial Highlights
Throughout this release, financial results are presented on both a reported and pro forma basis. Reported results were prepared in accordance with generally accepted accounting principles (GAAP). Pro forma results exclude items described in the reconciliation tables below and assume the
- Revenue increased 20% to
$171.3 million from pro forma revenue of$142.8 million in the second quarter of 2014, exceeding the high end of the company's outlook by$2.3 million . Excluding Market Leader Revenue, Revenue increased 25% to$158.7 million from$126.8 million in the second quarter of 2014 on a pro forma basis.- Marketplace Revenue increased 29% to
$145.5 million from pro forma revenue of$112.4 million in the second quarter of 2014. - Real Estate Revenue grew 37% to
$122.6 million from pro forma revenue of$89.2 million in the second quarter of 2014. - Mortgages Revenue grew 44% to
$10.4 million from pro forma revenue of$7.2 million in the second quarter of 2014. - Market Leader Revenue decreased 21% to
$12.5 million from pro forma revenue of$16.0 million in the second quarter of 2014. As previously announced,Zillow Group is conducting a strategic review of the Market Leader business.
- Real Estate Revenue grew 37% to
- Display Revenue decreased 15% to
$25.8 million from pro forma revenue of$30.4 million in the second quarter of 2014.
- Marketplace Revenue increased 29% to
- Pro forma net loss was
$26.7 million in the second quarter of 2015 compared to pro forma net loss of$29.6 million in the same period last year. - GAAP net loss was
$38.7 million in the second quarter of 2015, which includes the impact of$1.7 million of acquisition-related costs and$6.7 million of restructuring costs due to the company'sFebruary 2015 acquisition ofTrulia and the related restructuring plan. - Adjusted EBITDA was
$21.0 million in the second quarter of 2015, or 12% of Revenue, which was an increase from pro forma Adjusted EBITDA of$5.6 million in the second quarter of 2014, or 4% of pro forma Revenue, and exceeded the company's outlook by approximately$17 million . The higher than expected result was driven primarily by lower than expected advertising spend to achieve audience growth, integration related cost synergies and better than expected revenue in the quarter. - Pro forma basic and diluted net loss per share was
$0.46 in the second quarter of 2015 compared to pro forma basic and diluted net loss per share of$0.52 in the same period last year. - Basic and diluted GAAP net loss per share was
$0.66 in the second quarter of 2015 compared to basic and diluted GAAP net loss per share of$0.26 in the same period last year. The second quarter of 2015 includes the impact of$0.03 on basic and diluted GAAP net loss per share from acquisition-related costs and$0.11 on basic and diluted GAAP net loss per share from restructuring costs due to the company'sFebruary 2015 acquisition ofTrulia and the related restructuring plan. - Basic and diluted non-GAAP net loss per share was
$0.01 in the second quarter of 2015 compared to basic and diluted non-GAAP net loss per share of$0.05 in the same period last year, which excludes share-based compensation expense, acquisition-related costs and restructuring costs.
- On
August 3, 2015 ,Zillow Group announced the appointment ofKathleen Philips to the position of Chief Financial Officer, effectiveAugust 7, 2015 . Philips was previouslyZillow Group's Chief Operating Officer and has played a pivotal role in all of the company's key corporate and finance initiatives. - During the second quarter, 141 million average monthly unique users visited
Zillow Group consumer brandsZillow ,Trulia , StreetEasy and HotPads. According to comScore, Zillow Group brands now represent 72% market share of all mobile exclusive visitors to the category. - The integration of
Zillow's andTrulia's rentals and mortgages products, display advertising and corporate infrastructure is complete, and the combination ofZillow's andTrulia's agent advertising products is on track for completion in the third quarter, several months ahead of schedule. The Company continues to expect to realize approximately$100 million in cost synergies by the end of 2016. Zillow Group is benefitting from the combined audience scale of having several of the largest mobile and online real estate brands under one roof. Since January, more than 300 MLSs have signed agreements to send listings directly toZillow andTrulia , providing their members access to the largest audience of home shoppers on mobile and Web 1.- In the second quarter,
Zillow Group average monthly revenue per advertiser, orARPA , was$375 , up 18% from$318 compared to the same period last year on a pro forma basis.Zillow Group's agent advertisers totaled 101,297 as ofJune 30, 2015 . During the quarter, the company strategically ended several ofTrulia's short-term discounted products and changed the sales team's incentives to focus on net revenue rather than the number of advertisers. The current advertiser count reflects the Company's continued strategic focus on highARPA agents who provide a superior consumer experience. This number of agent advertisers is de-duplicated acrossZillow andTrulia and excludes Market Leader-only subscribers. Additional information regarding historical pro forma agent advertisers and pro forma quarterlyARPA can be found on the Zillow Group Investor Relations Blog at www.zillowgroup.com/ir-blog. - On
July 21, 2015 ,Zillow Group announced a stock dividend of Class C capital stock. All shareholders of record ofZillow Group's Class A and Class B common stock onJuly 31, 2015 , the record date for the dividend, will receive two shares of Class C capital stock for each share of Class A and Class B common stock held by them as of the record date. This is an extension of the company's dual-class share structure and is intended to enable management to continue its focus on long-term growth and innovation, while maintaining the flexibility to issue additional stock for strategic business decisions and to retain and attract the best employees. - On
July 22, 2015 Zillow Group announced the planned acquisition of DotLoop, aCincinnati -based company that simplifies real estate transactions by enabling real estate professionals and their clients to share, edit, sign, and store documents digitally. The acquisition aligns with the company's mission to provide value-add productivity tools and products to its partner brokers and their agents and is expected to close in the third quarter.
A quarterly conference call to discuss
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 that involve risks and uncertainties, including, without limitation, statements regarding our expectations related to integration of the
Use of Non-GAAP Financial Measures
To provide investors with additional information regarding our financial results, this press release includes references to certain pro forma financial results, Adjusted EBITDA and non-GAAP net income (loss) per share, all of which are non-GAAP financial measures. We have provided a reconciliation of pro forma Adjusted EBITDA to pro forma net loss, Adjusted EBITDA to net loss, the most directly comparable GAAP financial measure, and a reconciliation of net income (loss), adjusted, to net loss, as reported on a GAAP basis, and the calculations of non-GAAP net income (loss) per share - basic and diluted and pro forma weighted-average shares outstanding - basic and diluted, within this earnings release.
The pro forma financial results included in this press release, although helpful in illustrating the financial characteristics of
Adjusted EBITDA is a key metric used by our management and board of directors to measure operating performance and trends, and to prepare and approve our annual budget. In particular, the exclusion of certain expenses in calculating Adjusted EBITDA facilitates operating performance comparisons on a period-to-period basis.
Our use of Adjusted EBITDA has limitations as an analytical tool, and you should not consider it 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 our cash expenditures or future requirements for capital expenditures or contractual commitments;
- Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;
- Adjusted EBITDA does not consider the potentially dilutive impact of share-based compensation;
- Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements; and
- Adjusted EBITDA does not reflect acquisition-related costs;
- Adjusted EBITDA does not reflect restructuring costs;
- Adjusted EBITDA does not reflect interest expense; and
- Other companies, including companies in our own industry, may calculate Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure.
Our presentation of non-GAAP net income (loss) per share excludes the impact of share-based compensation expense, acquisition-related costs and restructuring costs. 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 (loss) per share as supplemental information to investors, as we believe the exclusion of share-based compensation expense, acquisition-related costs and restructuring costs facilitates investors' operating performance comparisons on a period-to-period basis. You should not consider these metrics in isolation or as substitutes for analysis of our results as reported under GAAP.
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Please visit http://investors.zillowgroup.com, www.zillowgroup.com/ir-blog, and www.twitter.com/zillowgroup, where
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DotLoop is a registered trademark of
(ZFIN)
Pro Forma Financial Information
The following pro forma financial information gives effect to the
Three Months Ended | Six Months Ended | |||
2015 (1) | 2014 (2) | 2015 (3) | 2014 (4) | |
Pro forma revenue | $ 171,269 | $ 142,761 | $ 333,800 | $ 263,493 |
Pro forma net loss | $ (26,731) | $ (29,648) | $ (44,585) | $ (53,454) |
Pro forma net loss per share — basic and diluted | $ (0.46) | $ (0.52) | $ (0.76) | $ (0.93) |
Pro forma weighted-average shares outstanding — basic and diluted | 58,714 | 57,060 | 58,430 | 57,574 |
_________ | ||||
Other Financial Data: | ||||
Pro forma Adjusted EBITDA (5) | $ 21,039 | $ 5,576 | $ 45,540 | $ 16,937 |
(1) The three months ended | ||||
(2) The three months ended | ||||
(3) The six months ended | ||||
(4) The six months ended | ||||
(5) See below for a reconciliation of pro forma Adjusted EBITDA to pro forma net loss. |
Three Months Ended | Six Months Ended | |||
2015 | 2014 | 2015 | 2014 | |
Weighted-average shares outstanding — basic and diluted (1) | 41,454 | 39,800 | 41,170 | 40,314 |
Class A common stock issued in connection with the acquisition of | 17,260 | 17,260 | 17,260 | 17,260 |
Pro forma weighted-average shares outstanding — basic and diluted | 58,714 | 57,060 | 58,430 | 57,574 |
(1) Amounts exclude shares of Zillow Group Class A common stock issued in connection with the acquisition of |
Three Months Ended | Six Months Ended | |||
2015 | 2014 | 2015 | 2014 | |
Reconciliation of Pro Forma Adjusted EBITDA to Pro Forma Net Loss: | ||||
Pro forma net loss | $ (26,731) | $(29,648) | $ (44,585) | $(53,454) |
Pro forma other income | (450) | (430) | (752) | (794) |
Pro forma depreciation and amortization expense | 20,419 | 16,895 | 40,281 | 35,054 |
Pro forma share-based compensation expense | 26,221 | 16,979 | 47,457 | 32,680 |
Pro forma interest expense | 1,580 | 1,582 | 3,139 | 3,155 |
Pro forma provision for income taxes | -- | 198 | -- | 296 |
Pro forma Adjusted EBITDA | $ 21,039 | $ 5,576 | $ 45,540 | $ 16,937 |
Three Months Ended | Six Months Ended | |||
2015 | 2014 | 2015 | 2014 | |
Pro Forma Revenue: | ||||
Pro forma Marketplace revenue: | ||||
Real estate | $ 122,558 | $ 89,206 | $ 235,954 | $ 162,725 |
Mortgages | 10,393 | 7,212 | 20,343 | 14,708 |
Market Leader | 12,530 | 15,952 | 26,111 | 31,204 |
Total pro forma Marketplace revenue | 145,481 | 112,370 | 282,408 | 208,637 |
Pro forma Display revenue | 25,788 | 30,391 | 51,392 | 54,856 |
Total pro forma revenue | $ 171,269 | $ 142,761 | $ 333,800 | $ 263,493 |
Reported Consolidated Results | ||
ZILLOW GROUP, INC. | ||
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS | ||
(in thousands) | ||
June 30, 2015 | December 31, 2014 | |
Assets | ||
Current assets: | ||
Cash and cash equivalents | $ 302,272 | $ 125,765 |
Short-term investments | 322,695 | 246,829 |
Accounts receivable, net | 35,198 | 18,684 |
Prepaid expenses and other current assets | 21,888 | 10,059 |
Total current assets | 682,053 | 401,337 |
Restricted cash | 6,635 | -- |
Long-term investments | -- | 83,326 |
Property and equipment, net | 81,416 | 41,600 |
Goodwill | 1,832,961 | 96,352 |
Intangible assets, net | 565,345 | 26,757 |
Other assets | 1,452 | 358 |
Total assets | $ 3,169,862 | $ 649,730 |
Liabilities and shareholders' equity | ||
Current liabilities: | ||
Accounts payable | $ 11,908 | $ 9,358 |
Accrued expenses and other current liabilities | 60,134 | 16,883 |
Accrued compensation and benefits | 11,800 | 6,735 |
Accrued restructuring costs | 4,186 | -- |
Deferred revenue | 23,199 | 15,356 |
Deferred rent, current portion | 1,148 | 864 |
Total current liabilities | 112,375 | 49,196 |
Deferred rent, net of current portion | 13,524 | 11,755 |
Long-term debt | 230,000 | -- |
Deferred tax liabilities and other long-term liabilities | 143,521 | -- |
Total liabilities | 499,420 | 60,951 |
Shareholders' equity: | ||
Class A common stock | 5 | 3 |
Class B common stock | 1 | 1 |
Additional paid-in capital | 2,895,155 | 716,506 |
Accumulated other comprehensive income | 117 | -- |
Accumulated deficit | (224,836) | (127,731) |
Total shareholders' equity | 2,670,442 | 588,779 |
Total liabilities and shareholders' equity | $ 3,169,862 | $ 649,730 |
ZILLOW GROUP, INC. | ||||
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||
(in thousands, except per share data) | ||||
Three Months Ended | Six Months Ended | |||
2015 | 2014 | 2015 | 2014 | |
Revenue | $ 171,269 | $ 78,675 | $ 298,542 | $ 144,918 |
Costs and expenses: | ||||
Cost of revenue (exclusive of amortization) (1)(2) | 17,037 | 6,793 | 30,056 | 12,957 |
Sales and marketing (2) | 87,942 | 48,429 | 147,228 | 83,562 |
Technology and development (2) | 51,740 | 19,508 | 89,065 | 36,243 |
General and administrative (2) | 43,810 | 14,522 | 81,834 | 29,211 |
Acquisition-related costs | 1,679 | 184 | 14,156 | 184 |
Restructuring costs (2) | 6,652 | -- | 31,717 | -- |
Total costs and expenses | 208,860 | 89,436 | 394,056 | 162,157 |
Loss from operations | (37,591) | (10,761) | (95,514) | (17,239) |
Other income | 450 | 284 | 719 | 503 |
Interest expense | (1,580) | -- | (2,310) | -- |
Net loss | $ (38,721) | $ (10,477) | $ (97,105) | $ (16,736) |
Net loss per share — basic and diluted | $ (0.66) | $ (0.26) | $ (1.80) | $ (0.42) |
Weighted-average shares outstanding — basic and diluted | 58,714 | 39,800 | 53,949 | 40,314 |
_________ | ||||
(1) Amortization of website development costs and intangible assets included in technology and development | $ 17,117 | $ 6,857 | $ 28,899 | $ 13,641 |
(2) Includes share-based compensation expense as follows: | ||||
Cost of revenue | $ 1,110 | $ 418 | $ 2,062 | $ 791 |
Sales and marketing | 8,784 | 1,698 | 12,993 | 3,001 |
Technology and development | 7,005 | 3,056 | 12,771 | 5,081 |
General and administrative | 12,981 | 3,238 | 25,061 | 6,669 |
Restructuring costs | 3,584 | -- | 14,004 | -- |
Total | $ 33,464 | $ 8,410 | $ 66,891 | $ 15,542 |
Other Financial Data: | ||||
Adjusted EBITDA (3) | $ 21,039 | $ 6,429 | $ 37,693 | $ 15,157 |
(3) See above for more information regarding our presentation of Adjusted EBITDA. |
ZILLOW GROUP, INC. | ||
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||
(in thousands) | ||
Six Months Ended | ||
2015 | 2014 | |
Operating activities | ||
Net loss | $ (97,105) | $ (16,736) |
Adjustments to reconcile net loss to net cash provided by operating activities: | ||
Depreciation and amortization | 34,447 | 16,670 |
Share-based compensation expense | 52,887 | 15,542 |
Restructuring costs | 18,147 | -- |
Loss on disposal of property and equipment | 499 | 353 |
Bad debt expense | 1,605 | 1,225 |
Deferred rent | 2,310 | 2,779 |
Amortization of bond premium | 1,593 | 1,751 |
Changes in operating assets and liabilities: | ||
Accounts receivable | (5,026) | (5,876) |
Prepaid expenses and other assets | 8,494 | (1,565) |
Accounts payable | (2,516) | 9,555 |
Accrued expenses and other current liabilities | 13 | 1,515 |
Accrued compensation and benefits | (3,259) | 1,923 |
Accrued restructuring costs | 1,425 | -- |
Deferred revenue | (366) | 1,739 |
Other long-term liabilities | 2,998 | -- |
Net cash provided by operating activities | 16,146 | 28,875 |
Investing activities | ||
Proceeds from maturities of investments | 165,723 | 73,885 |
Purchases of investments | (164,718) | (159,253) |
Proceeds from sales of investments | 4,979 | -- |
Decrease in restricted cash | 312 | -- |
Purchases of property and equipment | (25,546) | (15,373) |
Purchases of intangible assets | (8,006) | (2,132) |
Cash acquired in acquisition, net | 173,406 | -- |
Cash paid for acquisition | -- | (3,500) |
Net cash provided by (used in) investing activities | 146,150 | (106,373) |
Financing activities | ||
Proceeds from exercise of Class A common stock options | 14,722 | 14,027 |
Value of equity awards withheld for tax liability | (511) | -- |
Net cash provided by financing activities | 14,211 | 14,027 |
Net increase (decrease) in cash and cash equivalents during period | 176,507 | (63,471) |
Cash and cash equivalents at beginning of period | 125,765 | 201,760 |
Cash and cash equivalents at end of period | $ 302,272 | $ 138,289 |
Supplemental disclosures of cash flow information | ||
Cash paid for interest | $ 3,163 | $ -- |
Noncash transactions: | ||
Value of Class A common stock issued in connection with an acquisition | $ 1,883,728 | $ -- |
Capitalized share-based compensation | $ 4,783 | $ 3,086 |
Write-off of fully depreciated property and equipment | $ 13,001 | $ 3,017 |
The following table presents a reconciliation of Adjusted EBITDA to net loss, the most directly comparable GAAP financial measure, for each of the periods presented (in thousands, unaudited):
Three Months Ended | Six Months Ended | |||
2015 | 2014 | 2015 | 2014 | |
Reconciliation of Adjusted EBITDA to Net Loss: | ||||
Net loss | $ (38,721) | $(10,477) | $ (97,105) | $(16,736) |
Other income | (450) | (284) | (719) | (503) |
Depreciation and amortization expense | 20,419 | 8,596 | 34,447 | 16,670 |
Share-based compensation expense | 29,880 | 8,410 | 52,887 | 15,542 |
Acquisition-related costs | 1,679 | 184 | 14,156 | 184 |
Restructuring costs | 6,652 | -- | 31,717 | -- |
Interest expense | 1,580 | -- | 2,310 | -- |
Adjusted EBITDA | $ 21,039 | $ 6,429 | $ 37,693 | $ 15,157 |
The following table presents a reconciliation of net income (loss), adjusted, to net loss, as reported on a GAAP basis, and the calculation of non-GAAP net income (loss) per share - basic and diluted, for each of the periods presented (in thousands, except per share data, unaudited):
Three Months Ended | Six Months Ended | |||
2015 | 2014 | 2015 | 2014 | |
Net loss, as reported | $ (38,721) | $ (10,477) | $ (97,105) | $ (16,736) |
Share-based compensation expense | 29,880 | 8,410 | 52,887 | 15,542 |
Acquisition-related costs | 1,679 | 184 | 14,156 | 184 |
Restructuring costs | 6,652 | -- | 31,717 | -- |
Net income (loss), adjusted | $ (510) | $ (1,883) | $ 1,655 | $ (1,010) |
Weighted-average shares outstanding - basic | 58,714 | 39,800 | 53,949 | 40,314 |
Weighted-average shares outstanding - diluted | 58,714 | 39,800 | 59,623 | 40,314 |
Non-GAAP net income (loss) per share - basic | $ (0.01) | $ (0.05) | $ 0.03 | $ (0.03) |
Non-GAAP net income (loss) per share - diluted | $ (0.01) | $ (0.05) | $ 0.07 | $ (0.03) |
The following tables present our revenue by type and as a percentage of total revenue for each of the periods presented (in thousands, unaudited):
Three Months Ended | Six Months Ended | |||
2015 | 2014 | 2015 | 2014 | |
Revenue: | ||||
Marketplace revenue: | ||||
Real estate | $ 122,558 | $ 56,051 | $ 215,870 | $ 102,646 |
Mortgages | 10,393 | 6,565 | 19,951 | 13,694 |
Market Leader | 12,530 | -- | 18,587 | -- |
145,481 | 62,616 | 254,408 | 116,340 | |
Display revenue | 25,788 | 16,059 | 44,134 | 28,578 |
Total revenue | $ 171,269 | $ 78,675 | $ 298,542 | $ 144,918 |
Three Months Ended | Six Months Ended | |||
2015 | 2014 | 2015 | 2014 | |
Percentage of Total Revenue: | ||||
Marketplace revenue: | ||||
Real estate | 72% | 71% | 72% | 71% |
Mortgages | 6% | 8% | 7% | 9% |
Market Leader | 7% | 0% | 6% | 0% |
85% | 80% | 85% | 80% | |
Display revenue | 15% | 20% | 15% | 20% |
Total revenue | 100% | 100% | 100% | 100% |
The following tables set forth our key growth drivers for each of the periods presented:
Average Monthly Unique Users for the Three Months Ended | 2014 to 2015 | ||
2015 | 2014 | % Change | |
(in thousands) | |||
Unique Users | 140,959 | 81,108 | 74% |
At | 2014 to 2015 | ||
2015 | 2014 | % Change | |
Agent Advertisers | 101,297 | 56,818 | 78% |
CONTACT:Raymond Jones Investor Relations 206-470-7137 ir@zillow.comCamille Salama Public Relations 206-757-2701 press@zillow.com
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