ZILLOW GROUP INC
For the period ended Jun 30, 2024. Filed Aug 7, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 7, 2024
ZG$30.36-2.7%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-01.
0001617640-24-000070
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-07.
0001617640-24-000094
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 124 previous paragraphs and 143 current paragraphs.
78 unchanged; 43 reworded; 17 added; 3 removed; 0 previous and 5 current paragraphs rearranged.
Tables are not compared: 10 previous and 13 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (17)
Current report
•Residential revenue increased by $29 million, or 8%, to $409 million, due to increases in the number of visits and residential revenue per visit.
Current report
•Rentals revenue increased by $26 million, or 29%, to $117 million, due to an increase in quarterly revenue per average monthly rentals unique visitor.
Current report
Total revenue increased $126 million, or 13%, to $1.1 billion:
Current report
•Residential revenue increased $61 million, or 8%. The increase in Residential revenue was partially driven by a 4% increase in the number of visits for the six months ended June 30, 2024 as compared to the six months ended June 30, 2023. Residential revenue was also positively impacted by a 4% increase in Residential revenue per visit to $0.167 for the six months ended June 30, 2024 from $0.160 for the six months ended June 30, 2023, primarily due to the inclusion of revenue from Follow Up Boss, which we acquired in December 2023, an increase in ShowingTime+ revenue as we expanded software services available to sellers and listing agents, accelerating growth in our new construction revenue, and continued improvement in our ability to connect high-intent customers to agents.
Current report
•Rentals revenue increased $49 million, or 30%. The increase in Rentals revenue was primarily due to a 34% increase in quarterly revenue per average monthly rentals unique visitor to $3.69 for the six months ended June 30, 2024 as compared to $2.75 for the six months ended June 30, 2023, primarily driven by growth in multifamily property listings, which drove a 45% increase in multifamily rentals revenue.
Current report
•Adjusted EBITDA does not reflect acquisition-related costs;
Current report
•Adjusted EBITDA does not reflect loss on extinguishment of debt;
Current report
Sales and marketing expenses increased $42 million, or 13%, due to an increase of $29 million in headcount-related expenses, including share-based compensation expense, and $8 million in marketing and advertising costs as we continue to invest in the growth of our rentals marketplace.
Current report
General and administrative expenses decreased $22 million, or 14%, primarily due to a decrease of $20 million in headcount-related expenses, including share-based compensation expense. The decrease in headcount-related expenses was primarily driven by $17 million in share-based compensation expense associated with the departures of certain executive personnel incurred during the three months ended June 30, 2023. The decrease in general and administrative expenses was also due to a $4 million decrease in rent expense primarily driven by cost savings associated with changes in the use of certain office space in our lease portfolio.
Current report
Impairment and Restructuring Costs
Current report
We did not record any impairment and restructuring costs for the three months ended June 30, 2024. Impairment and restructuring costs totaled $2 million for the three months ended June 30, 2023 and pertained to employee termination costs.
Current report
Other Income, net
Current report
Other income, net consists primarily of interest income earned on our cash, cash equivalents and investments and fair value adjustments on an outstanding warrant.
Current report
Other income, net decreased $8 million for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023, and was primarily driven by fair value adjustments on an outstanding warrant.
Current report
Other income, net decreased $7 million for the six months ended June 30, 2024 as compared to the six months ended June 30, 2023, and was primarily driven by fair value adjustments on an outstanding warrant, partially offset by increases in returns on investments due to the higher interest rate environment as compared to the prior year period.
Current report
The 2025 Notes and 2026 Notes are not convertible at the option of the holders during the three months ending September 30, 2024. On or after March 1, 2024, until the close of business on the second scheduled trading day immediately preceding the applicable Maturity Date, holders may convert the 2024 Notes at their option at the applicable Conversion Rate then in effect. Any conversions of the 2024 Notes will be settled on the applicable Maturity Date. We expect to settle the principal amount of the 2024 Notes in cash and any conversion premium in shares of Class C capital stock. The capped call confirmations on the 2024 Notes will cover the number of shares of Class C capital stock issuable upon conversion of the 2024 Notes up to a price per share of $72.5175.
Current report
(1)Agreement was amended and renewed on May 2, 2024. The amended agreement increased the total maximum borrowing capacity from $100 million to $150 million.
Removed paragraphs (3)
Previous report
•Residential revenue increased by $32 million, or 9%, to $393 million, due to increases in residential revenue per visit and the number of visits.
Previous report
•Rentals revenue increased by $23 million, or 31%, to $97 million, due to an increase in quarterly revenue per average monthly rentals unique visitor.
Previous report
Impairment Costs
Reworded paragraphs (43)
Previous wording
As of March 31, 2024, we had 6,429 employees, compared to 6,263 employees as of December 31, 2023.
Current wording
As of June 30, 2024, we had 6,682 employees, compared to 6,263 employees as of December 31, 2023.
Previous wording
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 impact 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 transaction value increased 4% during the three months ended March 31, 2024 as compared to the three months ended March 31, 2023. Despite the current market factors mentioned above, we continue to invest in our growth pillars. We believe this continued investment has resulted in year over year total revenue results, described below, for the three months ended March 31, 2024 as compared to the same period in the prior year, that exceeded industry performance for the same 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.
Current wording
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 impact the number of transactions consumers complete using our products and services and demand for our advertising services. According to industry data from the NAR, total transaction value increased 3% during both the three months ended June 30, 2024 as compared to the three months ended June 30, 2023 and during the six months ended June 30, 2024 as compared to the six months ended June 30, 2023. Despite the current market factors mentioned above, we continue to invest in our growth pillars. We believe this continued investment has resulted in year over year total revenue results, described below, for the three and six months ended June 30, 2024 as compared to the same periods in the prior year, that exceeded industry performance for the same periods. The extent to which market factors impact our results and financial position will depend on future developments, which are uncertain and difficult to predict.
Previous wording
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 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 offered on a share of voice (“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 a Premier Agent partner’s share of total advertising purchased in a particular zip code. 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.
Current wording
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 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 offered on a share of voice (“market-based pricing”) and pay for performance (“Flex”) basis. For our market-based pricing offering, connections are distributed to Premier Agent partners in proportion to their share of voice, or a Premier Agent partner’s share of total advertising purchased in a particular zip code. 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.
Previous wording
For the three months ended March 31, 2024 and 2023, we generated total revenue of $529 million and $469 million, respectively, an increase of 13%, primarily due to increases in Residential, Rentals and Mortgages revenue.
Current wording
For the three months ended June 30, 2024 and 2023, we generated total revenue of $572 million and $506 million, respectively, an increase of 13%, primarily due to increases in Residential, Rentals and Mortgages revenue.
Previous wording
•Mortgages revenue increased by $5 million, or 19%, to $31 million, driven by an increase in mortgage originations revenue, partially offset by a decrease in Custom Quote and Connect advertising services revenue.
Current wording
•Mortgages revenue increased by $10 million, or 42%, to $34 million, driven by an increase in mortgage originations revenue, partially offset by a decrease in Custom Quote and Connect advertising services revenue.
Previous wording
During the three months ended March 31, 2024 and 2023, we generated gross profit of $406 million and $377 million, respectively, an increase of 8%.
Current wording
During the three months ended June 30, 2024 and 2023, we generated gross profit of $442 million and $402 million, respectively, an increase of 10%.
Previous wording
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.
Current wording
Universal Analytics is no longer offered by Google as of July 1, 2024 and has been replaced by Google Analytics 4. As a result of this change, from January 1, 2024 through June 30, 2024, we measured visits to Zillow using an internal measurement tool, but continued to use Universal Analytics to measure visits to StreetEasy. Beginning on July 1, 2024, we measure visits to both Zillow and StreetEasy using an internal measurement tool, and visits to Zillow and StreetEasy end after thirty minutes of user inactivity or at midnight. Trulia continues to measure visits with Adobe Analytics, and visits to Trulia end after thirty minutes of user inactivity.
Previous wording
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.
Current wording
We believe the use of an internal measurement tool to measure visits to Zillow and StreetEasy allows 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 Zillow 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 and six month periods ended June 30, 2023, primarily driven by the methodology for campaign changes.
Previous wording
The following table presents the number of visits to our mobile applications and websites for the periods presented (in millions, except percentages):
Current wording
The following table presents the number of visits to our mobile applications and websites for the periods presented (in millions, except percentages), recast for prior periods, as described above:
Previous wording
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 for Zillow using an internal measurement tool, but continue to use Universal Analytics to measure unique users for StreetEasy and HotPads. Trulia continues to measure unique users with Adobe Analytics.
Current wording
Prior to January 1, 2024, we measured unique users for Zillow, StreetEasy and HotPads using Universal Analytics. As discussed above, Universal Analytics is no longer offered as of July 1, 2024 and has been replaced by Google Analytics 4. As a result of this change, from January 1, 2024 through June 30, 2024, we measured unique users for Zillow using an internal measurement tool, but continued to use Universal Analytics to measure unique users for StreetEasy and HotPads. Beginning on July 1, 2024, we measure visits to Zillow, StreetEasy and HotPads using an internal measurement tool. Trulia continues to measure unique users with Adobe Analytics.
Previous wording
We believe the 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.
Current wording
We believe the use of an internal measurement tool to measure unique users for Zillow, StreetEasy and HotPads allows 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 for Zillow 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 and six month periods ended June 30, 2023.
Previous wording
The following table presents our average monthly unique users for the periods presented (in millions, except percentages):
Current wording
The following table presents our average monthly unique users for the periods presented (in millions, except percentages), recast for prior periods, as described above:
Previous wording
During the three months ended March 31, 2024, total loan origination volume increased 131%, compared to the three months ended March 31, 2023. This increase in total loan origination volume was primarily driven by the continued growth in Zillow Home Loans purchase loan originations as we prioritize growth in Zillow Home Loans purchase originations.
Current wording
During the three and six month periods ended June 30, 2024, total loan origination volume increased 123% and 127%, respectively, compared to the three and six month periods ended June 30, 2023. These increases were primarily driven by the continued growth in Zillow Home Loans purchase loan originations as we prioritize growth in Zillow Home Loans purchase originations.
Previous wording
Total revenue increased $60 million, or 13%, to $529 million:
Current wording
Total revenue increased $66 million, or 13%, to $572 million:
Previous wording
•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.
Current wording
•Residential revenue increased $29 million, or 8%. The increase in Residential revenue was partially driven by a 4% increase in the number of visits for the three months ended June 30, 2024, compared to the three months ended June 30, 2023. Residential revenue was also positively impacted by a 3% increase in Residential revenue per visit to $0.164 for the three months ended June 30, 2024 from $0.159 for the three months ended June 30, 2023, primarily due to the inclusion of revenue from Follow Up Boss, which we acquired in December 2023, an increase in ShowingTime+ revenue as we expanded software services available to sellers and listing agents, and growth in our new construction revenue. We calculate Residential revenue per visit by dividing the revenue generated by our Residential offerings by the number of visits in the period.
Previous wording
•Rentals revenue increased $23 million, or 31%. The increase in Rentals revenue was primarily due to a 41% increase in quarterly revenue per average monthly rentals unique visitor to $3.59 for the three months ended March 31, 2024 as compared to $2.55 for the three months ended 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 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. Average monthly rentals unique visitors was 27 million during the three months ended March 31, 2024 and 29 million during the three months ended March 31, 2023. We have estimated average monthly rentals unique visitors using Comscore data, which measures average monthly unique visitors on rental listings on Zillow, Trulia and HotPads mobile apps and websites. We expect Rentals revenue to increase in absolute dollars during the three months ending June 30, 2024, driven by macroeconomic factors, including housing availability and affordability, and decreased rental occupancy rates, as well as continued investment in growing our Rentals business.
Current wording
•Rentals revenue increased $26 million, or 29%. The increase in Rentals revenue was primarily due to a 25% increase in quarterly revenue per average monthly rentals unique visitor to $3.66 for the three months ended June 30, 2024 as compared to $2.94 for the three months ended June 30, 2023, primarily driven by growth in multifamily property listings, which drove a 44% 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. Average monthly rentals unique visitors was 32 million during the three months ended June 30, 2024 and 31 million during the three months ended June 30, 2023. We have estimated average monthly rentals unique visitors using Comscore data, which measures average monthly unique visitors on rental listings on Zillow, Trulia and HotPads mobile apps and websites.
Previous wording
•Mortgages revenue increased $5 million, or 19%. This increase was driven by a $13 million increase in mortgage originations revenue, partially offset by a $7 million decrease in Custom Quote and Connect advertising services revenue. The increase in mortgage originations revenue was due to a 131% increase in total originations volume from $262 million for the three months ended March 31, 2023 to $605 million for the three months ended March 31, 2024, primarily driven by continued growth in Zillow Home Loans purchase loan origination volume. The increase in mortgage originations revenue was also attributable to a 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 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. The increase in mortgage originations revenue was partially offset by a $7 million decrease in Custom Quote and Connect advertising services revenue, which decrease was primarily due to a 32% decrease in leads generated from marketing products sold to mortgage professionals. This decrease in leads was primarily driven by a shift in strategic priority as we focus on organic growth of our mortgage origination business.
Current wording
•Mortgages revenue increased $10 million, or 42%. This increase was primarily driven by a $16 million increase in mortgage originations revenue, partially offset by a $5 million decrease in Custom Quote and Connect advertising services revenue. The increase in mortgage originations revenue was primarily due to a 123% increase in total originations volume from $340 million for the three months ended June 30, 2023 to $759 million for the three months ended June 30, 2024, primarily driven by continued growth in Zillow Home Loans purchase loan origination volume. The increase in mortgage originations revenue was also attributable to a 23% 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 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. The increase in mortgage originations revenue was partially offset by a $5 million decrease in Custom Quote and Connect advertising services revenue, which was primarily due to a 24% decrease in leads generated from marketing products sold to mortgage professionals. This decrease in leads was primarily driven by a shift in strategic priority as we focus on organic growth of our mortgage origination business.
Previous wording
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. GAAP financial measure.
Current wording
To provide investors with additional information regarding our financial results, we have disclosed Adjusted EBITDA, a non-GAAP financial measure, in this Quarterly Report on Form 10-Q. We have provided a reconciliation below of Adjusted EBITDA to net loss, the most directly comparable GAAP financial measure.
Previous wording
•Adjusted EBITDA does not reflect impairment costs;
Current wording
•Adjusted EBITDA does not reflect impairment and restructuring costs;
Previous wording
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):
Current wording
The following table presents a reconciliation of Adjusted EBITDA to net loss for each of the periods presented (in millions, unaudited):
Previous wording
Cost of revenue increased $31 million, or 34%, driven by increases of $17 million in depreciation and amortization expense primarily due to an increase in website development costs, $4 million in mortgage loan processing costs due to increased purchase loan origination volume, $3 million in ad serving costs driven by an increase in revenue, and $2 million in headcount-related expenses, including share-based compensation expense.
Current wording
Cost of revenue increased $57 million, or 29%, driven by increases of $32 million in depreciation and amortization expense primarily due to an increase in amortization of website development costs, $8 million in mortgage loan processing costs due to increased purchase loan origination volume, $4 million in headcount-related expenses, including share-based compensation expense, $3 million in connectivity costs, and $3 million in lead acquisition costs.
Previous wording
Gross profit increased by $29 million, or 8%, primarily due to an increase in revenue, discussed above. Total gross margin decreased from 80% to 77%.
Current wording
Gross profit increased by $69 million, or 9%, primarily due to an increase in revenue, discussed above. Total gross margin decreased from 80% to 77%.
Previous wording
Sales and marketing expenses increased $10 million, or 6%, due to an increase of $12 million in headcount-related expenses, including share-based compensation expense, as we continue to invest in human capital to grow our businesses, partially offset by a $3 million decrease in marketing and advertising costs driven by active cost management. We expect sales and marketing expenses to increase in absolute dollars during the three months ending June 30, 2024 as we increase our marketing activities and headcount to support the continued expected growth in our Rentals revenue.
Current wording
Sales and marketing expenses increased $32 million, or 18%, due to an increase of $17 million in headcount-related expenses, including share-based compensation expense, and $12 million in marketing and advertising costs as we continue to invest in the growth of our rentals marketplace. We expect sales and marketing expenses to increase in absolute dollars during the three months ending September 30, 2024 as we increase our marketing and advertising activities to support the continued expected growth of our business.
Previous wording
Technology and development expenses increased $10 million, or 7%, due to increases of $12 million in headcount-related expenses, including share-based compensation expense, as we continue to invest in human capital to grow our businesses, and $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.
Current wording
Technology and development expenses increased $4 million, or 3%, due to increases of $4 million in headcount-related expenses, including share-based compensation expense, as we continue to invest in human capital to grow our businesses, $3 million in software and hardware costs, and $2 million in travel expenses. These increases were partially offset by a $4 million decrease in third-party professional service fees driven by active cost management.
Previous wording
General and administrative expenses increased $9 million, or 7%, primarily due to increases of $4 million in third-party professional service fees, $3 million in headcount-related expenses, including share-based compensation expense, and $3 million due to the change in fair value of contingent consideration associated with our acquisition of Follow Up Boss. These increases were partially offset by a decrease of $3 million in rent expense primarily driven by cost savings associated with changes in the use of certain office space in our lease portfolio.
Current wording
General and administrative expenses decreased $13 million, or 5%, primarily due to a decrease of $18 million in headcount-related expenses, including share-based compensation expense. The decrease in headcount-related expenses was primarily driven by $17 million in share-based compensation expense associated with the departures of certain executive personnel incurred during the six months ended June 30, 2023. The decrease in general and administrative expenses was also due to a $6 million decrease in rent expense primarily driven by cost savings associated with changes in the use of certain office space in our lease portfolio. These decreases were partially offset by increases of $5 million due to the change in fair value of contingent consideration associated with our acquisition of Follow Up Boss, $5 million in third-party professional service fees and $3 million in travel expenses.
Previous wording
Impairment costs were $6 million for the three month periods ended March 31, 2024 and 2023 and were associated with changes in the use of certain office space in our lease portfolio.
Current wording
Impairment and restructuring costs were $6 million and $8 million for the six months ended June 30, 2024 and 2023, respectively, and were primarily associated with changes in the use of certain office space in our lease portfolio.
Previous wording
Income tax expense was not material for the three months ended March 31, 2024 and 2023.
Current wording
Income tax expense was not material for the three and six month periods ended June 30, 2024 and 2023.
Previous wording
As of March 31, 2024 and December 31, 2023, we had cash and cash equivalents, investments and restricted cash of $2.9 billion and $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 used to fund customer home purchases in our mortgage origination business. Amounts on deposit with third-party financial institutions exceed the Federal Deposit Insurance Corporation and the Securities Investor Protection Corporation insurance limits, as applicable. As of March 31, 2024, Zillow Group and its subsidiaries were in compliance with all debt covenants specified in the facilities described below.
Current wording
As of June 30, 2024 and December 31, 2023, we had cash and cash equivalents, investments and restricted cash of $2.6 billion and $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 used to fund customer home purchases in our mortgage origination business. Amounts on deposit with third-party financial institutions exceed the Federal Deposit Insurance Corporation and the Securities Investor Protection Corporation insurance limits, as applicable. As of June 30, 2024, Zillow Group and its subsidiaries were in compliance with all debt covenants specified in the facilities described below.
Previous wording
For the three months ended March 31, 2024, net cash provided by operating activities was $80 million. This was driven by a net loss of $23 million, adjusted by share-based compensation of $108 million, depreciation and amortization of $56 million, accretion of bond discount of $8 million, impairment costs of $6 million, amortization of contract cost assets of $5 million, amortization of right of use assets of $3 million, and amortization of debt issuance costs of $2 million. Changes in operating assets and liabilities decreased cash provided by operating activities by $70 million. The changes in operating assets and liabilities are primarily related to a $32 million increase in mortgage loans held for sale due to an increase in purchase loan origination volume, a $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 $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 increase in accounts receivable primarily due to an increase in revenue from products and services billed in arrears. These changes were partially offset by a $6 million increase in accounts payable driven by the timing of payments, a $6 million increase in deferred revenue and a $2 million increase in other long-term liabilities.
Current wording
For the six months ended June 30, 2024, net cash provided by operating activities was $135 million. This was driven by a net loss of $40 million, adjusted by share-based compensation of $221 million, depreciation and amortization of $115 million, accretion of bond discount of $17 million, amortization of contract cost assets of $9 million, impairment costs of $6 million, amortization of right of use assets of $6 million, amortization of debt issuance costs of $3 million, and $8 million in other adjustments to reconcile net loss to cash provided by operating activities. Changes in operating assets and liabilities decreased cash provided by operating activities by $176 million. The changes in operating assets and liabilities are primarily related to a $95 million increase in mortgage loans held for sale due to an increase in purchase loan origination volume, a $49 million increase in prepaid expenses and other current assets primarily due to an increase in revenue from products and services billed in arrears, a $27 million decrease in lease liabilities due to contractual lease payments, a $19 million increase in accounts receivable primarily due to an increase in revenue from products and services billed in arrears, and a $9 million increase in contract cost assets primarily due to capitalized sales commissions. These changes were partially offset by an $11 million increase in accounts payable driven by the timing of payments, a $7 million increase in deferred revenue consistent with an increase in revenue, and a $6 million increase in accrued expenses and other current liabilities primarily driven by the timing of billings.
Previous wording
For the three months ended March 31, 2023, net cash provided by operating activities was $93 million. This was driven by a net loss of $22 million, adjusted by share-based compensation of $103 million, depreciation and amortization of $40 million, accretion of bond discount of $10 million, impairment costs of $6 million, amortization of contract cost assets of $6 million, amortization of right of use assets of $6 million, and other adjustments to reconcile net loss to net cash provided by operating activities of $2 million. Changes in operating assets and liabilities decreased cash provided by operating activities by $39 million. The changes in operating assets and liabilities are primarily related to a $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 $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, 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.
Current wording
For the six months ended June 30, 2023, net cash provided by operating activities was $193 million. This was driven by a net loss of $57 million, adjusted by share-based compensation of $233 million, depreciation and amortization of $85 million, accretion of bond discount of $20 million, amortization of right of use assets of $12 million, amortization of contract cost assets of $11 million, impairment costs of $6 million, amortization of debt issuance costs of $3 million, and $5 million in other adjustments to reconcile net loss to net cash provided by operating activities. Changes in operating assets and liabilities decreased cash provided by operating activities by $75 million. The changes in operating assets and liabilities are primarily related to a $32 million increase in mortgage loans held for sale due to an increase in purchase loan origination volume, a $30 million increase in prepaid expenses and other current assets and a $19 million increase in accounts receivable both primarily due to an increase in revenue from products and services billed in arrears, a $15 million decrease in lease liabilities due to contractual lease payments, an $11 million increase in contract cost assets and a $2 million decrease in other long-term liabilities. These changes were partially offset by a $27 million increase in accrued expenses and other current liabilities primarily driven by the timing of billings, a $5 million increase in deferred revenue and a $2 million increase in accrued compensation and benefits.
Previous wording
Cash Flows Provided By (Used In) Financing Activities
Current wording
Cash Flows Provided By (Used In) Investing Activities
Previous wording
For the three months ended March 31, 2024, net cash used in investing activities was $204 million. This was the result of $158 million of net purchases of investments and $46 million of purchases of property and equipment and intangible assets.
Current wording
For the six months ended June 30, 2024, net cash used in investing activities was $207 million. This was the result of $117 million of net purchases of investments and $90 million of purchases of property and equipment and intangible assets.
Previous wording
For the three months ended March 31, 2023, net cash used in investing activities was $97 million. This was the result of $57 million of net purchases of investments and $40 million of purchases of property and equipment and intangible assets.
Current wording
For the six months ended June 30, 2023, net cash provided by investing activities was $84 million. This was the result of $168 million of net proceeds from the maturity of investments and $84 million of purchases of property and equipment and intangible assets.
Previous wording
Cash Flows Used In Investing Activities
Current wording
Cash Flows Used In Financing Activities
Previous wording
Our primary financing activities 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.
Current wording
Our primary financing activities include repurchases of Class A common stock and Class C capital stock, the exercise of employee option awards, repayments of borrowings on the warehouse line of credit and master repurchase agreements related to Zillow Home Loans and settlement of long-term debt including repurchases of the 2025 Notes.
Previous wording
For the three months ended March 31, 2024, net cash provided by financing activities was $71 million, which primarily related to $50 million of proceeds from the exercise of option awards and $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.
Current wording
For the six months ended June 30, 2024, net cash used in financing activities was $240 million, which primarily related to $301 million of cash paid for share repurchases and $89 million of cash paid for the partial repurchase of the 2025 Notes. The cash outflows were partially offset by $89 million of net borrowings on our master repurchase agreements related to Zillow Home Loans and $61 million of proceeds from the exercise of option awards.
Previous wording
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.
Current wording
For the six months ended June 30, 2023, net cash used in financing activities was $177 million, which primarily related to $236 million of cash paid for share repurchases, partially offset by $30 million of proceeds from the exercise of employee option awards and $29 million of net borrowings on our warehouse line of credit and master repurchase agreements related to Zillow Home Loans.
Previous wording
As of March 31, 2024, we have a total of $1.6 billion aggregate principal amount of Notes outstanding. The Notes are senior unsecured obligations, and interest on the convertible notes is paid semi-annually. The following table summarizes our Notes as of the periods presented (in millions, except interest rates):
Current wording
As of June 30, 2024, we have a total of $1.5 billion aggregate principal amount of Notes outstanding. The Notes are senior unsecured obligations, and interest on the convertible notes is paid semi-annually. The following table summarizes our Notes as of the periods presented (in millions, except interest rates):
Previous wording
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 7 of our Notes to Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q for additional information regarding our Notes, including conversion rates, conversion and redemption dates and the related capped call transactions.
Current wording
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. The 2024 Notes and 2026 Notes may be redeemed if the last reported sale price of our Class C capital stock equals or exceeds $56.56 per share (130% of the conversion price) for a specified period of trading days. In addition, the 2025 Notes may be redeemed if the last reported sale price of our Class C capital stock equals or exceeds $87.36 per share (130% of the conversion price) for a specified period of trading days. To the extent our Class C capital stock price rises above these levels, we may redeem the 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.
Previous wording
The Board has authorized the repurchase of up to $2.5 billion of our Class A common stock, Class C capital stock, outstanding 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 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, 2023.
Current wording
The Board has authorized the repurchase of up to $2.5 billion of our Class A common stock, Class C capital stock, outstanding Notes or a combination thereof. During the six months ended June 30, 2024, we repurchased 1.1 million shares of Class A common stock and 6 million shares of Class C capital stock at an average price of $42.26 and $42.45 per share, respectively, for an aggregate purchase price of $46 million and $255 million, respectively. As of June 30, 2024, $381 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 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, 2023.
Showing the first 40 of 43 pairs. Open the source sections for the rest.
Rearranged current paragraphs (5)
Current report — wording carried from elsewhere
•Mortgages revenue increased $15 million, or 30%. This increase was driven by a $29 million increase in mortgage originations revenue, partially offset by a $12 million decrease in Custom Quote and Connect advertising services revenue. The increase in mortgage originations revenue was primarily due to a 127% increase in total originations volume from $602 million for the six months ended June 30, 2023 to $1.4 billion for the six months ended June 30, 2024, primarily driven by continued growth in Zillow Home Loans purchase loan origination volume. The increase in mortgage originations revenue was also attributable to a 21% increase in gain on sale margin. The increase in mortgage originations revenue was partially offset by a $12 million decrease in Custom Quote and Connect advertising services revenue, which was primarily due to a 28% decrease in leads generated from marketing products sold to mortgage professionals. This decrease in leads was primarily driven by a shift in strategic priority as we focus on organic growth of our mortgage origination business.
Current report — wording carried from elsewhere
Cost of revenue increased $26 million, or 25%, driven by increases of $15 million in depreciation and amortization expense primarily due to an increase in amortization of website development costs, $4 million in mortgage loan processing costs due to increased purchase loan origination volume, and $3 million in lead acquisition costs related to partnerships.
Current report — wording carried from elsewhere
Gross profit increased by $40 million, or 10%, primarily due to an increase in revenue, discussed above. Total gross margin decreased from 79% to 77%.
Current report — wording carried from elsewhere
Technology and development expenses increased $14 million, or 5%, due to increases of $16 million in headcount-related expenses, including share-based compensation expense, as we continue to invest in human capital to grow our businesses, $5 million in software and hardware costs, and $2 million in travel expenses. These increases were partially offset by a $9 million decrease in third-party professional service fees driven by active cost management.
Current report — wording carried from elsewhere
During the three months ended June 30, 2024, we repurchased $88 million aggregate principal amount of the 2025 Notes through open market transactions for $89 million in cash, including accrued interest. Refer to Note 7 of our Notes to Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q for additional information regarding our Notes, including conversion rates, conversion and redemption dates and the related capped call transactions.