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8-K - FORM 8-K - ZILLOW INCd623167d8k.htm

Exhibit 99.1

 

LOGO

 

Contacts:

Raymond Jones

Investor Relations

206-470-7137

ir@zillow.com

  

Katie Curnutte

Public Relations

206-757-2785

press@zillow.com

ZILLOW, INC. REPORTS RECORD THIRD QUARTER 2013 RESULTS

 

    Record Revenue of $53.3 million, up 67% over third quarter 2012.

 

    Record Marketplace Revenue of $40.9 million, up 73% over third quarter 2012.

 

    Record quarterly and all-time traffic, with nearly 64 million monthly unique users on mobile and Web in August 2013 (up 75% year-over-year).

 

    Premier Agent count grew 68% year-over-year, adding a record 5,942 new subscribers during the quarter.

SEATTLE – November 5, 2013 – Zillow, Inc. (NASDAQ:Z), the leading real estate and home-related marketplace, today announced financial results for the quarter ended September 30, 2013.

“The third quarter was another extremely strong one for Zillow®, as we exceeded our outlook and delivered record results. We made significant progress toward our priorities to grow audience, grow our Premier Agent business and grow our emerging marketplaces,” said Spencer Rascoff, CEO of Zillow, Inc. “It was also a momentous quarter for our brand as we hosted an unprecedented nationwide event with President Obama. We acquired New York City’s number one real estate website, StreetEasy®. Additionally, we experienced a significant positive impact during the peak of the home shopping season from our first-ever national brand advertising campaign.”

Third Quarter 2013 Financial Highlights

 

    Revenue increased 67% to a record $53.3 million from $31.9 million in the third quarter of 2012.

 

    Marketplace Revenue increased 73% to a record $40.9 million from $23.6 million in the third quarter of 2012.

 

    Real Estate Revenue grew 67% to $35.1 million from $21.0 million in the third quarter of 2012.

 

    Mortgages Revenue grew 120% to $5.7 million from $2.6 million in the third quarter of 2012.

 

    Display Revenue increased 50% to $12.4 million from $8.3 million in the third quarter of 2012.


    Due primarily to planned increases in advertising expenses, GAAP net loss was $1.2 million in the third quarter of 2013, compared to GAAP net income of $2.3 million in the third quarter of 2012. Included in our GAAP earnings is a one-time tax benefit of $4.3 million related to the acquisition of StreetEasy.

 

    Adjusted EBITDA was $4.1 million, or 8% of revenue, compared to $7.6 million in the third quarter of 2012, or 24% of revenue. This year-over-year change is primarily due to our previously announced investment in advertising. Additionally, Adjusted EBITDA for the quarter exceeded the previously announced business outlook, due primarily to higher-than-projected revenue flowing through to the bottom line.

 

    Basic and diluted GAAP loss per share was $0.03, compared to basic and diluted GAAP earnings per share of $0.08 and $0.07, respectively, in the same period last year. Basic and diluted non-GAAP net loss per share was $0.05, compared to basic and diluted non-GAAP net income per share of $0.13 in the same period last year, which excludes share-based compensation and the one-time tax benefit.

Operating and Business Highlights

 

    Zillow’s audience continues to grow substantially, extending the company’s leadership over other category players. In August, traffic reached a record 63.7 million monthly unique users on mobile and Web, an increase of 75% year-over-year. Average monthly unique users during the third quarter of 2013 were a record 61.1 million, up 69% year-over-year.

 

    On desktop, according to comScore®, Zillow’s audience market share grew from nearly 27% of the real estate category to nearly 34% of the category year-to-date. The number 2 and 3 brands in the category lost share. Zillow has more than doubled its market share on the Web over the second brand in the category over the last 12 months.

 

    Visits to Zillow via a mobile device more than doubled year-over-year in the third quarter of 2013, and in August, 321 million homes were viewed on Zillow via a mobile device. That equates to 120 homes per second. Today, 60% of visits to Zillow occur on a mobile device, jumping to more than 70% on weekends. Zillow operates 25 mobile applications across seven platforms.

 

    Premier Agent subscribers increased by a record 5,942 in the third quarter of 2013, and totaled 44,749 on September 30, 2013, up 68% year-over-year. Driven by record subscriber growth, average monthly revenue per subscriber in the third quarter of 2013 was $264.

 

    In August, Zillow acquired StreetEasy, the number one online real estate brand in New York City. StreetEasy attracts more than 1 million monthly unique users, and we believe provides untapped potential for revenue growth in the largest U.S. real estate market.

 

    In August, Zillow hosted President Barack Obama in an unprecedented event during which the President answered housing questions asked by Zillow users. The event, moderated by Zillow CEO Spencer Rascoff, was followed by a number of other events in partnership with the federal government, including a Google+ Hangout™ with the Federal Housing Finance Authority and an October housing forum, during which a number of elected and appointed officials spoke.

 

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    In September, Zillow completely redesigned the Zillow Real Estate App for iPhone® and iPad® to launch alongside Apple’s new operating system, iOS7. Apple® then highlighted the app during their launch event and heavily featured it in the App Store, contributing to heavy downloads and usage.

 

    In October, Zillow launched the Zillow Digs™ App for iPhone, which Apple featured in the App Store. Since its initial launch in February 2013, Zillow Digs users have “dug” more than 1 million photos, created more than 160,000 boards of ideas and décor, and contributed more than 85,000 photos. This new app allows users to browse photos of kitchens, bathrooms, outdoor spaces and more.

 

    Zillow Mortgage Marketplace continued to grow during the quarter with a record 5.9 million loan requests submitted by borrowers, which exceeds the number of loan requests Zillow received in the entire year of 2011.

Opportunities to Participate in Zillow Earnings Report Discussion

 

    As part of the reporting of third quarter results, Zillow is working with The Motley Fool, a multimedia financial services company, to broaden the reach of social media questions and discussion surrounding today’s earnings announcement. After results become public, Fool.com will carry an interview with Zillow CEO Spencer Rascoff. Immediately following the conference call, Motley Fool analysts will moderate a Twitter® conversation with Rascoff, using the hashtag #ZEarnings.

 

    Additionally, for the third quarter in a row, Zillow executives will consider questions submitted via Twitter and Facebook® during its third quarter earnings call, with the hashtag #ZEarnings, in addition to questions submitted by those dialed in.

Quarterly Conference Call to Include Business Outlook

Zillow management will discuss Zillow, Inc.’s third quarter of 2013 financial results, as well as the fourth quarter 2013 business outlook, in a conference call today at 2 p.m. Pacific Time (5 p.m. Eastern Time) that will also be webcast live. The live webcast of the conference call will be available on the investor relations section of Zillow, Inc.’s website at http://investors.zillow.com/. For those without access to the Internet, the call may be accessed toll-free via phone at 877-643-7152 with conference ID# 84246838. Callers outside the United States may dial 443-863-7921 with conference ID# 84246838. Questions submitted via Zillow’s Twitter account (www.twitter.com/zillow) using the hashtag #ZEarnings, and questions posted on the Zillow Facebook page (www.facebook.com/zillow), will be considered during the Q&A portion of the call, in addition to questions submitted by those dialed in. Following completion of the call, a recorded replay of the webcast and a copy of the prepared remarks will be available on the investor relations section of Zillow, Inc.’s website. The recorded replay will be available until November 12, 2013. To listen to the telephone replay, call toll-free 855-859-2056 with conference ID# 84246838. Callers outside the United States may dial 404-537-3406 with conference ID# 84246838.

 

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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, the statements regarding our belief about execution of our strategic priorities. Statements containing words such as “may,” “believe,” “anticipate,” “expect,” “intend,” “plan,” “project,” “will,” “projections,” “business outlook,” “estimate,” or similar expressions constitute forward-looking statements. Differences in Zillow’s actual results from those anticipated in these forward-looking statements may result from actions taken by Zillow as well as from risks and uncertainties beyond Zillow’s control. Factors that may contribute to such differences include, but are not limited to, Zillow’s ability to maintain and effectively manage an adequate rate of growth; the impact of the real estate industry on Zillow’s business; Zillow’s ability to innovate and provide products and services that are attractive to its users and advertisers; Zillow’s ability to increase awareness of the Zillow brand; Zillow’s ability to maintain or establish relationships with listings and data providers; Zillow’s ability to attract consumers to Zillow’s mobile applications and websites; Zillow’s ability to successfully integrate and realize the benefits of our past or future strategic acquisitions or investments; Zillow’s ability to compete successfully against existing or future competitors; the reliable performance of Zillow’s network infrastructure and content delivery processes; and Zillow’s ability to protect its intellectual property. The foregoing list of risks and uncertainties is illustrative, but is not exhaustive. For more information about potential factors that could affect Zillow’s business and financial results, please review the “Risk Factors” described in Zillow’s Annual Report on Form 10-K for the year ended December 31, 2012 filed with the Securities and Exchange Commission, or SEC, and in Zillow’s other filings with the SEC. Except as may be required by law, Zillow does not intend, and undertakes no duty, to update this information to reflect future events or circumstances.

Use of Non-GAAP Financial Measures

To provide investors with additional information regarding our financial results, this press release includes references to Adjusted EBITDA as well as non-GAAP income (loss) per share, both of which are non-GAAP financial measures. We have provided a reconciliation of Adjusted EBITDA to net income (loss), the most directly comparable GAAP financial measure, and a reconciliation of net income (loss), as reported on a GAAP basis, to net income (loss), as adjusted, and the calculation of non-GAAP net income (loss) per share—basic and diluted, within this earnings release.

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.

 

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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

 

    Other companies, including companies in our own industry, may calculate Adjusted EBITDA differently than 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 income (loss) and our other GAAP results.

Our use of non-GAAP income (loss) per share excludes the impact of share-based compensation expense and the income tax benefit. We believe the exclusion of share-based compensation expense and the income tax benefit facilitates operating performance comparisons on a period-to-period basis. However, you should not consider these metrics in isolation or as substitutes for analysis of our results as reported under GAAP.

About Zillow, Inc.

Zillow, Inc. (NASDAQ: Z) operates the leading real estate and home-related marketplaces on mobile and the Web, with a complementary portfolio of brands and products that help people find vital information about homes, and connect with the best local professionals. Zillow’s brands serve the full lifecycle of owning and living in a home: buying, selling, renting, financing, remodeling and more. In addition, Zillow offers a suite of tools and services to help local real estate, mortgage, rental and home improvement professionals manage and market their businesses. Welcoming nearly 64 million monthly unique users in August 2013, the Zillow, Inc. portfolio includes Zillow.com®, Zillow Mobile, Zillow Mortgage Marketplace, Zillow Rentals, Zillow Digs™, StreetEasy®, Postlets®, Diverse Solutions®, Agentfolio™, Mortech® and HotPads™. Zillow is headquartered in Seattle.

Please visit http://investors.zillow.com/, www.zillowblog.com, www.twitter.com/zillow, and www.facebook.com/zillow, where Zillow discloses information about the company, its financial information, and its business which may be deemed material.

The Zillow logo is available at http://zillow.mediaroom.com/index.php?s=191.

Zillow.com, Zillow, StreetEasy, Postlets, Mortech and Diverse Solutions are registered trademarks of Zillow, Inc.

HotPads, Zillow Digs and Agentfolio are trademarks of Zillow, Inc.

 

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comScore is a registered trademark of comScore, Inc.

Google+ Hangout is a trademark of Google, Inc.

Apple, iPhone and iPad are registered trademarks of Apple.

The Motley Fool is a registered trademark of Motley Fool, Inc.

Twitter is a registered trademark of Twitter, Inc.

Facebook is a registered trademark of Facebook, Inc.

(ZFIN)

 

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ZILLOW, INC.

UNAUDITED CONDENSED BALANCE SHEETS

(in thousands)

 

     September 30, 2013     December 31, 2012  

Assets

    

Current assets:

    

Cash and cash equivalents

   $ 318,888      $ 150,040   

Short-term investments

     46,154        44,054   

Accounts receivable, net

     15,712        8,655   

Prepaid expenses and other current assets

     5,005        2,652   
  

 

 

   

 

 

 

Total current assets

     385,759        205,401   

Long-term investments

     59,532        9,389   

Property and equipment, net

     22,528        13,634   

Goodwill

     93,199        54,284   

Intangible assets, net

     30,262        21,248   

Other assets

     381        279   
  

 

 

   

 

 

 

Total assets

   $ 591,661      $ 304,235   
  

 

 

   

 

 

 

Liabilities and shareholders’ equity

    

Current liabilities:

    

Accounts payable

   $ 3,987      $ 3,158   

Accrued expenses and other current liabilities

     11,817        6,318   

Accrued compensation and benefits

     4,120        2,514   

Deferred revenue

     10,893        8,349   

Deferred rent, current portion

     198        94   
  

 

 

   

 

 

 

Total current liabilities

     31,015        20,433   

Deferred rent, net of current portion

     3,395        3,485   

Shareholders’ equity:

    

Preferred stock

     —          —     

Class A common stock

     3        3   

Class B common stock

     1        1   

Additional paid-in capital

     644,083        351,981   

Accumulated deficit

     (86,836     (71,668
  

 

 

   

 

 

 

Total shareholders’ equity

     557,251        280,317   
  

 

 

   

 

 

 

Total liabilities and shareholders’ equity

   $ 591,661      $ 304,235   
  

 

 

   

 

 

 

 

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ZILLOW, INC.

UNAUDITED CONDENSED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

 

     Three Months Ended      Nine Months Ended  
     September 30,      September 30,  
     2013     2012      2013     2012  

Revenue

   $ 53,311      $ 31,915       $ 139,197      $ 82,513   

Costs and expenses:

         

Cost of revenue (exclusive of amortization) (1)(2)

     5,116        3,623         13,540        10,237   

Sales and marketing (2)

     31,195        14,118         83,913        34,586   

Technology and development (2)

     12,167        6,687         33,849        17,535   

General and administrative (2)

     10,357        5,192         27,568        14,869   
  

 

 

   

 

 

    

 

 

   

 

 

 

Total costs and expenses

     58,835        29,620         158,870        77,227   
  

 

 

   

 

 

    

 

 

   

 

 

 

Income (loss) from operations

     (5,524     2,295         (19,673     5,286   

Other income

     70        39         240        104   
  

 

 

   

 

 

    

 

 

   

 

 

 

Income (loss) before income taxes

     (5,454     2,334         (19,433     5,390   

Income tax benefit

     4,265        —           4,265        —     
  

 

 

   

 

 

    

 

 

   

 

 

 

Net income (loss)

   $ (1,189   $ 2,334       $ (15,168   $ 5,390   
  

 

 

   

 

 

    

 

 

   

 

 

 

Net income (loss) per share — basic

   $ (0.03   $ 0.08       $ (0.43   $ 0.19   

Net income (loss) per share — diluted

   $ (0.03   $ 0.07       $ (0.43   $ 0.17   

Weighted-average shares outstanding — basic

     36,667        30,040         35,011        29,115   

Weighted-average shares outstanding — diluted

     36,667        32,230         35,011        31,493   

 

(1)    Amortization of website development costs and intangible assets included in technology and development

   $ 5,092      $ 3,198       $ 13,792      $ 7,576   

(2)    Includes share-based compensation expense as follows:

         

Cost of revenue

   $ 185      $ 94       $ 524      $ 271   

Sales and marketing

     871        870         9,875        1,349   

Technology and development

     985        374         3,053        1,182   

General and administrative

     1,727        374         4,929        1,553   
  

 

 

   

 

 

    

 

 

   

 

 

 

Total

   $ 3,768      $ 1,712       $ 18,381      $ 4,355   
  

 

 

   

 

 

    

 

 

   

 

 

 

Other Financial Data:

         

Adjusted EBITDA (3)

   $ 4,121      $ 7,624       $ 14,519      $ 18,343   

 

(3) See above for more information regarding our presentation of Adjusted EBITDA.

 

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ZILLOW, INC.

UNAUDITED STATEMENTS OF CASH FLOWS

(in thousands)

 

     Nine Months Ended  
     September 30,  
     2013     2012  

Operating activities

    

Net income (loss)

   $ (15,168   $ 5,390   

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

    

Depreciation and amortization

     15,811        8,702   

Share-based compensation expense

     18,381        4,355   

Release of valuation allowance on certain deferred tax assets

     (4,265     —     

Loss on disposal of property and equipment

     894        114   

Bad debt expense

     1,181        550   

Deferred rent

     (123     1,630   

Amortization of bond premium

     246        586   

Changes in operating assets and liabilities:

    

Accounts receivable

     (7,267     (3,546

Prepaid expenses and other assets

     (1,427     (7

Accounts payable

     723        758   

Accrued expenses

     1,045        1,026   

Deferred revenue

     2,505        2,942   
  

 

 

   

 

 

 

Net cash provided by operating activities

     12,536        22,500   

Investing activities

    

Proceeds from maturities of investments

     42,000        3,600   

Purchases of investments

     (94,489     —     

Purchases of property and equipment

     (16,434     (9,652

Purchases of intangible assets

     (2,629     (2,525

Acquisitions, net of cash acquired of $0 in 2013 and $2,029 in 2012

     (42,615     (36,405
  

 

 

   

 

 

 

Net cash used in investing activities

     (114,167     (44,982

Financing activities

    

Proceeds from exercise of Class A common stock options

     16,580        6,688   

Proceeds from public offering, net of offering costs

     253,899        156,726   
  

 

 

   

 

 

 

Net cash provided by financing activities

     270,479        163,414   

Net increase in cash and cash equivalents during period

     168,848        140,932   

Cash and cash equivalents at beginning of period

     150,040        47,926   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 318,888      $ 188,858   
  

 

 

   

 

 

 

Supplemental disclosures of cash flow information

    

Noncash transactions:

    

Capitalized share-based compensation

   $ 2,814      $ 1,779   

Write-off of fully depreciated property and equipment

     3,215        2,986   

 

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Adjusted EBITDA

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

 

     Three Months Ended     Nine Months Ended  
     September 30,     September 30,  
     2013     2012     2013     2012  

Reconciliation of Adjusted EBITDA to Net Income (Loss):

  

 

Net income (loss)

   $ (1,189   $ 2,334      $ (15,168   $ 5,390   

Other income

     (70     (39     (240     (104

Depreciation and amortization expense

     5,877        3,617        15,811        8,702   

Share-based compensation expense

     3,768        1,712        18,381        4,355   

Income tax benefit

     (4,265     —          (4,265     —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

   $ 4,121      $ 7,624      $ 14,519      $ 18,343   
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP Net Income (Loss) per Share

The following table presents a reconciliation of net income (loss), as reported on a GAAP Basis, to net income (loss), adjusted, 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      Nine Months Ended  
     September 30,      September 30,  
     2013     2012      2013     2012  

Net income (loss), as reported

   $ (1,189   $ 2,334       $ (15,168   $ 5,390   

Share-based compensation expense

     3,768        1,712         18,381        4,355   

Income tax benefit

     (4,265     —           (4,265     —     
  

 

 

   

 

 

    

 

 

   

 

 

 

Net income (loss), adjusted

   $ (1,686   $ 4,046       $ (1,052   $ 9,745   
  

 

 

   

 

 

    

 

 

   

 

 

 

Weighted-average shares outstanding—basic

     36,667        30,040         35,011        29,115   

Weighted-average shares outstanding—diluted

     36,667        32,230         35,011        31,493   

Non-GAAP net income (loss) per share—basic

   $ (0.05   $ 0.13       $ (0.03   $ 0.33   

Non-GAAP net income (loss) per share—diluted

   $ (0.05   $ 0.13       $ (0.03   $ 0.31   

 

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Revenue by Type

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     Nine Months Ended  
     September 30,     September 30,  
     2013     2012     2013     2012  

Revenue:

        

Marketplace revenue:

        

Real estate

   $ 35,136      $ 21,002      $ 91,882      $ 52,232   

Mortgages

     5,742        2,614        16,465        7,600   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total Marketplace revenue

     40,878        23,616        108,347        59,832   

Display revenue

     12,433        8,299        30,850        22,681   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total revenue

   $ 53,311      $ 31,915      $ 139,197      $ 82,513   
  

 

 

   

 

 

   

 

 

   

 

 

 
     Three Months Ended     Nine Months Ended  
     September 30,     September 30,  
     2013     2012     2013     2012  

Percentage of Total Revenue:

        

Marketplace revenue:

        

Real estate

     66     66     66     63

Mortgages

     11     8     12     9
  

 

 

   

 

 

   

 

 

   

 

 

 

Total Marketplace revenue

     77     74     78     73

Display revenue

     23     26     22     27
  

 

 

   

 

 

   

 

 

   

 

 

 

Total revenue

     100     100     100     100
  

 

 

   

 

 

   

 

 

   

 

 

 

Key Growth Drivers

The following tables set forth our key growth drivers for each of the periods presented:

 

     Average Monthly Unique Users for the
Three Months Ended September 30,
     2012 to 2013  
     2013      2012      % Change  
     (in thousands)         

Unique Users

     61,118         36,096         69

Unique users source: We measure unique users with Google Analytics. Beginning in December 2012, the reported monthly unique users reflect the effect of Zillow’s December 14, 2012 acquisition of HotPads, Inc. Beginning in September 2013, the reported monthly unique users reflect the effect of Zillow’s August 26, 2013 acquisition of StreetEasy, Inc.

 

     At September 30,      2012 to 2013  
     2013      2012      % Change  

Premier Agent Subscribers

     44,749         26,703         68

 

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