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What changed in ZILLOW GROUP, INC.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of ZILLOW GROUP, INC.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+494 added−509 removedSource: 10-K (2024-02-15) vs 10-K (2023-02-15)

Top changes in ZILLOW GROUP, INC.'s 2023 10-K

494 paragraphs added · 509 removed · 361 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

64 edited+30 added−22 removed10 unchanged
Biggest changeFor further discussion on seasonality, see our Quarterly Results of Operations in Part II, Item 7 of this Annual Report on Form 10-K. 13 Source: December 2022 Economic Data published by the National Association of REALTORS®; estimate derived from annual existing home sales data and average industry commission rates 14 Sources: 2022 Mortgage Bankers Association Reports; estimate derived from annual purchase and refinance mortgage origination volumes and average industry origination fees 15 Sources: American Land and Title press release dated May 6, 2022 and December 2022 Economic Data published by the National Association of REALTORS®; estimate derived from annual existing home sales and average industry title and escrow fee rates 16 Sources: November 2022 housing statistics published by the U.S.
Biggest changeTotal transaction value calculated as existing homes sold during the period multiplied by the average existing home sales price during the same period. 11 Sources: 2023 Mortgage Bankers Association Reports; estimate derived from annual purchase mortgage origination volumes and average industry origination fees; excludes considerations associated with refinance mortgage origination volumes. 12 Sources: Estimate derived from annual existing home sales from the December 2023 Economic Data published by the National Association of REALTORS® and Zillow’s internal estimates for average industry title and escrow fee rates 13 Sources: 2023 U.S.
In the fourth quarter of 2021, the Board of Directors of Zillow Group made the determination to wind down Zillow Offers, our iBuying business which purchased and sold homes directly in markets across the United States. The wind down was completed in the third quarter of 2022 and resulted in approximately a 25% reduction of Zillow Group’s workforce.
In the fourth quarter of 2021, the Board of Directors of Zillow Group made the determination to wind down Zillow Offers, our iBuying business which purchased and sold homes directly in markets across the United States. The wind down was completed in the third quarter of 2022, which resulted in approximately a 25% reduction of Zillow Group’s workforce.
Intellectual Property We regard our intellectual property as a key differentiator that is critical to our success and rely on a combination of intellectual property laws, trade-secret protection, and contractual agreements to protect our proprietary technology and data.
Intellectual Property We regard our intellectual property as a key differentiator that is critical to our success and we rely on a combination of intellectual property laws, trade-secret protection, and contractual agreements to protect our proprietary technology and data.
This means creating the right learning resources for our employees for their current and future roles. We have developed a robust Learning & Development portfolio that includes a number of key career development programs that support our employees to equip them with the knowledge and experience to grow their careers.
This means creating the right learning resources for our employees for their current and future roles. We have developed a robust Learning and Development portfolio that includes a number of key career development programs that support our employees to equip them with the knowledge and experience to grow their careers.
These patents cover a variety of proprietary techniques relevant to our products and services, including determining a current value for real estate property and the collection, storage and display of home attribute values and creating interactive floor plans. In addition, awareness and loyalty to our brand enables us to effectively attract and retain our customers.
These patents cover a variety of proprietary techniques relevant to our products and services, including determining a current value for real estate property and the collection, storage and display of home attribute values and creating interactive floor plans. In addition, awareness and loyalty to our brand enables us to effectively attract and retain our customers and employees.
Beginning in 2023, we have enhanced our parental leave policy, which now allows for up to 20 weeks of paid parental leave.
Beginning in 2023, we enhanced our parental leave policy, which now allows for up to 20 weeks of paid parental leave.
These ongoing investments continue to reinforce Zillow’s commitment to an equitable, healthy, focused and dedicated workforce. 9 Table o f Contents Where You Can Find More Information Our filings with the Securities and Exchange Commission, or SEC, including our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports, are available on the “Investors” section of our website at www.zillowgroup.com, free of charge, as soon as reasonably practicable after the electronic filing of these reports with the SEC.
These ongoing investments continue to reinforce Zillow’s commitment to an equitable, healthy, focused and high-performing workforce. 9 Table of Contents Where You Can Find More Information Our filings with the Securities and Exchange Commission, or SEC, including our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports, are available on the “Investors” section of our website at www.zillowgroup.com, free of charge, as soon as reasonably practicable after the electronic filing of these reports with the SEC.
Our dedicated Equity and Belonging team empowers Zillow Group employees to build a strong community, amplify underrepresented voices, and foster a company culture where everyone can learn, grow and thrive. We maintain equity and belonging programs that include unconscious bias training, nine employee-led affinity networks for community members and allies, and support diversity in our recruitment practices.
Our dedicated Equity and Belonging team empowers Zillow Group employees to build a strong community, amplify underrepresented voices, and foster a company culture where everyone can learn, grow and thrive. We maintain equity and belonging programs that include unconscious bias training, nine employee-led employee resource groups for community members and allies, and support diversity in our recruitment practices.
To help achieve this goal, we utilize our Leadership Blueprint, a leadership development guide that outlines our Leadership Philosophy, our expectations for leaders and the behaviors that are essential to create a consistent leadership experience at Zillow Group. The Blueprint provides the foundation of our leadership development programs.
To help achieve this goal, we utilize our Leadership Expectations, a leadership development guide that outlines our Leadership Philosophy, provides the foundation of our leadership development programs and sets forth our expectations for leaders and the behaviors that are essential to create a consistent leadership experience at Zillow Group.
The information we post through these channels is not a part of this Annual Report on Form 10-K or any other document we file with the SEC, and the inclusion of our website addresses and Twitter account are as inactive textual references only. 10 Table o f Contents
The information we post through these channels is not a part of this Annual Report on Form 10-K or any other document we file with the SEC, and the inclusion of our website addresses and X Account are as inactive textual references only. 10 Table of Contents
Zillow Group intends to also use the following channels as a means of disclosing information about Zillow Group, its services and other matters and for complying with its disclosure obligations under Regulation FD: • Zillow Group Investor Relations Webpage (https://investors.zillowgroup.com) • Zillow Group Blog (https://www.zillowgroup.com/news/) • Zillow Group Twitter Account (https://twitter.com/zillowgroup) The information Zillow Group posts through these channels may be deemed material.
Zillow Group intends to also use the following channels as a means of disclosing information about Zillow Group, its services and other matters and for complying with its disclosure obligations under Regulation FD: • Zillow Group Investor Relations Site (https://investors.zillowgroup.com) • Zillow Group Blog (https://www.zillowgroup.com/news/) • Zillow Group X Account, formerly known as Twitter (https://twitter.com/zillowgroup) The information Zillow Group posts through these channels may be deemed material.
The 3 Table o f Contents financial results of Zillow Offers have been presented in the accompanying consolidated financial statements as discontinued operations. For additional information, see Part II, Item 8 in Note 3 in our Notes to the Consolidated Financial Statements of this Annual Report on Form 10-K.
The financial results of Zillow Offers have been presented in the accompanying consolidated financial statements as discontinued operations. For additional information, see Note 3 in our Notes to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K.
In 2022, we offered over 900 online learning opportunities through Zillow University, our internal online training platform. Zillow Group employees have completed nearly 60,000 hours of content in 2022 on Zillow University and LinkedIn Learning. A key piece in development is cultivating a learning culture where learning is a habit, and learning agility is at the forefront.
In 2023, we offered over 900 online learning opportunities through Zillow University, our internal online training platform. Zillow Group employees have completed nearly 70,000 hours of content in 2023 on the Zillow University and LinkedIn Learning® platforms. A key piece in development is cultivating a learning culture where learning is a habit, and learning agility is at the forefront.
Our living database of approximately 140 million U.S. homes is the result of substantial investment, sophisticated economic and statistical analysis and complex data aggregation of multiple sources of property, transaction and listing data, including user updates to more than 41 million property records.
Our living database of approximately 160 million U.S. homes is the result of substantial investment, sophisticated economic and statistical analysis and complex data aggregation of multiple sources of property, transaction and listing data, including user generated updates to more than 43 million property records.
Our Zestimate, which we consider to be a significant competitive advantage with respect to customer engagement, leverages patented, proprietary, automated valuation models to provide real-time home value estimates. As of December 31, 2022, we have 102 patents of varying lengths issued and 152 patent applications pending in the U.S. and internationally.
Our Zestimate feature, which we consider to be a significant competitive advantage with respect to customer engagement, leverages patented, proprietary, automated valuation models to provide real-time home value estimates. As of December 31, 2023, we have 138 patents of varying lengths issued and 203 patent applications pending in the U.S. and internationally.
With the launch of the Zestimate in 2006, we introduced important transparency to residential real estate in order to empower consumers to make better decisions. During 2022, our Zestimate had a median error rate of 2.7% for homes listed for sale and 7.6% for off-market homes.
With the launch of the Zestimate feature in 2006, we introduced important transparency to residential real estate in order to empower consumers to make better decisions. During 2023, our Zestimate feature had a median error rate of 2.3% for homes listed for sale and 7.4% for off-market homes.
We have licensed in the past, and we may license in the future, certain of our proprietary rights to third parties. To further protect our proprietary rights, we enter into confidentiality and proprietary rights agreements with our employees, consultants, contractors and business partners. Our employees and contractors are also subject to invention assignment provisions.
We have licensed in the past, and we may license in the future, certain of our proprietary rights to third parties. To further protect our proprietary rights, we enter into confidentiality and proprietary rights agreements with our employees, consultants, contractors and business partners.
The residential real estate landscape is highly fragmented and competitive from the beginning of the search process through the closing of a transaction, typically with single point service providers and new entrants joining at a rapid pace.
The residential real estate landscape is highly fragmented and competitive from the beginning of the search process through the closing of a transaction, typically with single point service providers.
We believe focusing on these growth metrics allows us to build closer relationships with our customers to help them find and move into the places they call home, which is at the core of our mission.
We believe this focus allows us to build closer relationships with our customers to help them find and move into the places they call home, which is at the core of our mission.
In 2023, our focus will be on balancing flexible work with impactful in-person connections, where cross-functional teams and organizations come together periodically to build connections, trust and collaborate in person.
In 2023, we focused on balancing flexible work with impactful in-person connections, where cross-functional teams and organizations came together periodically to build connections, trust and collaborate in person.
Approximately 5.7 million existing and new homes were sold in the U.S. in 2022 22 , with over 202,000 real estate brokerages 23 and over 68,000 mortgage lenders 24 providing their services across more than 500 different MLSs that span the country 25 . Zillow Home Loans currently makes up less than 0.05% of the mortgages originated in the U.S.
Approximately 4.8 million existing and new homes were sold in the U.S. in 2023 19 , with over 201,000 real estate brokerages 20 and over 70,000 mortgage lenders 21 providing their services across more than 500 different MLSs that span the country 22 . Zillow Home Loans currently makes up less than 0.09% of the mortgages originated in the U.S.
Once buyers find their home, they can choose to work with our Premier Agent partners and affiliated integrated services, including financing through Zillow Home Loans and title and escrow services through Zillow Closing Services, to facilitate a seamless transaction experience. For sellers, we are focused on providing multiple offerings for customers to find ways to sell their homes.
For customers who are focused on buying new construction homes, we connect them with our home builder partners. Once buyers find their home, they can choose to work with our Premier Agent partners and affiliated integrated services, including financing through Zillow Home Loans, to facilitate a seamless transaction experience.
Hundreds of millions of people visit our mobile applications and websites every month to begin their journey. At the core of Zillow is our living database of approximately 140 million U.S. homes and our differentiated content, most notably the Zestimate, our patented proprietary automated valuation model through which we provide home value estimates.
At the core of Zillow is our living database of approximately 160 million U.S. homes and our differentiated content, most notably the Zestimate, our patented proprietary automated valuation model through which we provide home value estimates.
Equity and Belonging We are committed to creating a workplace where diversity of gender, gender identity, age, race, ethnicity, sexual orientation, national origin, disability, military status and religion are represented, embraced and respected.
Equity and Belonging In pursuit of our business goals, we prioritize and embed inclusive, equitable practices and systems in our values and how we work. We are committed to creating a workplace where diversity of gender, gender identity, age, race, ethnicity, sexual orientation, national origin, disability, military status and religion are represented, embraced and respected.
Based on our assessment of compensation in 2022, we have found that women and men with similar skills are paid within approximately 1% of each other when we control for job title and function.
Based on our assessment of compensation in 2023, we have found that employees with similar skills are paid within approximately 1% of each other when we control for certain job-related pay factors, including but not limited to job title and function.
After searching for a home on our mobile applications and websites, customers can choose to meet with a local real estate professional by connecting with a Premier Agent partner, schedule an in-person home tour or obtain financing through Zillow Home Loans. For customers who are focused on buying new construction homes, we connect them with our home builder partners.
After searching for a home on our mobile applications and websites, customers can choose to meet with a local real estate professional by connecting with a Premier Agent partner, scheduling an in-person home tour powered by ShowingTime+, or obtaining financing through Zillow Home Loans.
This typically includes the need for multiple services simultaneously. Approximately 71% 1 of sellers are also buying at the same time, and among renters with plans to move within the next year, 45% 2 plan to buy their next home.
Approximately 70% of sellers are also buying at the same time, and among renters with plans to move within the next year, 43% plan to buy their next home 1 .
The amounts listed below represent the estimated total industry size associated with these opportunities for the year ended December 31, 2022 (in billions): 11 Source: Human Rights Campaign Foundation 12 Source: Great Place to Work® 5 Table o f Contents Residential real estate industry transaction fees 13 $ 96 U.S. mortgage origination revenue 14 76 Title and escrow services transaction fees 15 20 Rentals advertising spend 16 11 Property management software revenue 17 7 TAM $ 210 We also may explore additional opportunities in the future.
The amounts listed below represent the estimated total industry size associated with these opportunities for the year ended December 31, 2023 (in billions): Residential real estate industry transaction fees 10 $ 100 U.S. mortgage origination revenue 11 45 Title and escrow services transaction fees 12 17 Rentals advertising spend 13 17 Property management software revenue 14 8 TAM $ 187 We also may explore additional opportunities in the future.
Talent Rewards Talent Rewards includes the strategic oversight of compensation, benefits, and immigration/mobility programs whose purpose is to reinforce talent attraction, retention and development in support of Zillow’s culture. Throughout 2022, the labor market remained highly competitive and as a result, we have continued to refine our rewards program.
Talent Rewards Talent Rewards includes the strategic oversight of compensation, benefits, and immigration/mobility programs whose purpose is to reinforce talent attraction, retention and development in support of Zillow’s culture. Throughout 2023, we have continued to refine our rewards program. We have increased transparency and consistency in our candidate offers through a redesign of our total compensation package.
We continue to add and develop executive talent with deep experience in building transaction-focused real estate, mortgage and e-commerce businesses. The skills and experiences of our management team provide strategic insights and abilities to deliver a seamless real estate transaction experience for our customers. • Strong culture of innovation and inclusion.
We believe the skills and experiences of our management team provide strategic insights and abilities to deliver a seamless real estate transaction experience for our customers. • Strong culture of innovation and inclusion.
At Zillow Group, in 2022, White women, Black men and LatinX women and men had controlled pay of $0.99 and Black women had controlled pay at $0.98. Asian women and men at Zillow Group had pay equity of $1.01.
At Zillow Group, in 2023, White men, Asian women and LatinX women had controlled pay of $1.00 and Black women and women of two or more races had controlled pay at $0.98.
Our cash position, operating cash flow and now less capital-intensive operations as a result of the wind down of Zillow Offers, give us the flexibility to continue to invest in our growth strategy despite recent economic uncertainty and a volatile interest rate environment.
Our cash position and operating cash flow give us the flexibility to continue to invest in our growth pillars despite recent economic uncertainty and a volatile interest rate environment.
This data is the foundation of our proprietary Zestimate, Rent Zestimate, Zestimate Forecast and Zillow Home Value Index. • Superior industry partnerships. Zillow Group partners with thousands of the most productive names in real estate, maintaining strong partnerships with leading real estate agents, brokers, mortgage professionals, property managers, landlords, home builders, regional MLSs and more.
Zillow Group partners with thousands of the most productive names in real estate, maintaining strong partnerships with leading real estate agents, brokers, mortgage professionals, property managers, landlords, home builders, regional MLSs and more. Zillow is a licensed brokerage entity, which serves to enhance our partnership with MLSs.
The ethnicity of our workforce was 59% White, 20% Asian, 8% LatinX, 8% Black and 5% for all other races. For leadership, the breakdown was 73% White, 16% Asian, 5% Black, 4% LatinX and 2% for all other races. The diversity of our workforce and leadership team continues to be an area of focus.
The ethnicity of our workforce was 58% White, 20% Asian, 9% LatinX, 8% Black and 5% for all other races. For leadership, the breakdown was 72% White, 17% Asian, 5% Black, 4% LatinX and 2% for all other races.
Zillow Group has built an award-winning culture of collaboration and innovation that is committed to employee equity and creating an environment where employees feel valued, supported and that they belong.
Zillow Group has built an award-winning culture of collaboration and innovation that is committed to employee equity and creating an environment where employees feel valued, supported and that they belong. We have been recognized for our commitment to these efforts, being named on JUST Capital SM ’s “America’s JUST 100 Companies” list.
We believe our data and content has helped the Zillow brand become synonymous with residential real estate. Our vision of a “housing super app” is to help customers across all their real estate needs serving as one ecosystem of connected solutions for all the tasks and services related to moving.
Our vision of a “housing super app” is to help customers across all their real estate needs serving as one ecosystem of connected solutions for all the tasks and services related to moving. We are focused on continually improving our customer funnel, capturing customer demand and connecting that demand to our partner network.
We also compete for a share of our partners’ overall marketing budgets with traditional media as well as word-of-mouth referrals and leads from yard signs and other marketing.
Based on these and other factors, real estate partners could select other companies to work with to provide relevant and timely real estate, rental, new construction and mortgage information and services. We also compete for a share of our partners’ overall marketing budgets with traditional media as well as word-of-mouth referrals and leads from yard signs and other marketing.
Competitive Advantages We believe we have the following competitive advantages: • Large and trusted brand . The Zillow Group portfolio attracted an annual monthly high of 245 million unique users in August 2022 and approximately 10.5 billion visits in 2022, primarily to Zillow, Trulia and StreetEasy.
The Zillow Group portfolio attracted an annual monthly high of 233 million unique users in June 2023 and approximately 10.0 billion visits in 2023, primarily to our Zillow, Trulia and StreetEasy portals.
Beginning in 2023, our chief operating decision maker began to manage our business, make operating decisions, and evaluate operating performance on the basis of the company as a whole. Accordingly, this change resulted in revisions to the nature and substance of information regularly provided to and used by the chief operating decision maker.
Beginning in 2023, our chief executive officer, who acts as the chief operating decision maker, began to manage our business, make operating decisions, and evaluate operating performance on the basis of the company as a whole, instead of on a segment basis as he did prior to 2023.
We will continue our commitment and comprehensive reviews of pay equity and will look to expand our data collection and analysis to include LGBTQ+ data in the future.
White women, LatinX men, Black men, and men of two or more races at Zillow Group had pay equity of $0.99 and Asian men had a pay equity of $1.01. We will continue our commitment and comprehensive reviews of pay equity and will look to expand our data collection and analysis to include LGBTQ+ data in the future.
Below is a summary of certain of these programs: • Leadership Entrance Experience Program (LEEP) is a self-paced curriculum designed for individual contributors who want to explore people management and develop their leadership skills. • Career Pathways Program provides employees with access to skills, connections and experiences aimed at creating development opportunities through cross-functional roles. • Professional skills development through courses like Public Speaking, Insights Discovery® workshops, and access to virtual coaching.
Below is a summary of certain of these programs: • Leadership Entrance Experience Program (LEEP) is a self-paced curriculum designed for individual contributors who want to explore people management and develop their leadership skills. • Professional skills development through courses like Public Speaking, Insights Discovery® workshops, and access to virtual coaching. • Access to development platforms that connect employees to mentors, professional coaches, and peers to aid in reaching career goals Our people managers play a critical role in moving our business forward by coaching their team, developing their talent and providing strong communication to create team engagement.
We provide customers with the option to finance directly with Zillow Home Loans or to connect with our mortgage partners through our mortgage marketplace for both purchase and refinance opportunities. Zillow Home Loans, which is currently available in 48 states and jurisdictions, originates mortgage loans and then sells the loans on the secondary market.
In order to address this opportunity, we provide our customers with multiple ways to pursue mortgage financing for their transaction. We provide customers with the option to finance directly with Zillow Home Loans or to connect with our mortgage partners through our mortgage marketplace for both purchase and refinance opportunities.
Census Bureau and Zillow Group internal data and estimates; estimate derived from annual rental unit inventory, average industry turnover rates and average industry advertising costs 17 Source: April 2022 report published by Fortune Business Insights which estimates North America’s annual property management market opportunity 18 Source: August 2021 report published by IBISWorld which estimates the annual homeowners’ insurance market opportunity 19 Source: 2022 Economy of Everything Home report published by Angi Inc. which estimates the annual home services market opportunity, inclusive of home improvements, home maintenance and home emergency repairs 20 Source: June 2022 report published by IBISWorld which estimates the annual moving services market opportunity 21 Source: October 2022 report published by IBIS World which estimates the annual real estate appraisal services market opportunity 6 Table o f Contents Competition Our business depends on our ability to successfully attract, retain and provide customers with products and services that make real estate transactions faster, easier and less stressful.
Census Bureau’s Current Population Survey dated October 31, 2023 and Zillow Group internal data and estimates; estimate derived from annual rental unit inventory, average industry turnover rates and average advertising spend per unit. 14 Source: May 2023 report published by Fortune Business Insights which estimates North America’s annual property management market opportunity 15 Source: September 2023 report published by IBISWorld which estimates the annual homeowners’ insurance market opportunity 16 Source: 2022 Economy of Everything Home report published by Angi Inc. which estimates the annual home services market opportunity, inclusive of home improvements, home maintenance and home emergency repairs 17 Source: October 2023 report published by IBISWorld which estimates the annual moving services market opportunity 18 Source: February 2023 report published by IBIS World which estimates the annual real estate appraisal services market opportunity 6 Table of Contents Portions of our business have historically been affected by seasonal fluctuations in the residential real estate market, advertising spend and other factors.
We were included in the 2022 Bloomberg Gender Equality Index, which measures equality across internal company statistics, employee policies and practices and external community support and engagement. 8 Table o f Contents Career and Leadership Development At Zillow Group, we believe each of our employees should have the tools and support they need to grow their careers through experiences, resources and connections.
Career and Leadership Development At Zillow Group, we believe each of our employees should have the tools and support they need to grow their careers through experiences, resources and connections.
We also believe that the path to improving our growth metrics and “housing super app” vision involves product initiatives within five key growth pillars: • Touring – Make it easier for high-intent customers to take in-person tours and connect with our partner agents • Financing – Prepare customers to be transaction-ready with financing early in their home buying journey • Expanding seller services – Continue to innovate on novel solutions to help sellers and seller agents • Enhancing our partner network – Work with the best agents in real estate • Integrating our services – Bring our engagement, products and services together to drive more transactions and more revenue per customer transaction Prior to January 1, 2023, our business was organized into three segments, the Internet, Media & Technology (“IMT”) segment, the Mortgages segment and the Homes segment.
We also believe the path to realizing our “housing super app” vision involves executing on product initiatives across six growth pillars: • Touring – Make it easier for high-intent customers to take in-person tours and connect with our partner agents • Financing – Prepare customers to be transaction-ready with financing early in their home buying journey • Expanding seller services – Invest in tech-enabled solutions and services to make selling homes easier for sellers and listing agents • Enhancing our partner network – Help the best agents to better serve more customers and grow their businesses • Rentals – Build a comprehensive rental marketplace for customers and property managers • Integrating our services – Bring our engagement, products and services together to drive more transactions and more revenue per customer transaction We continue to operate in a challenging macro housing environment where rising mortgage rates and low housing supply have led to affordability challenges for many potential buyers.
As we have transitioned to a flexible workforce, we are also using this opportunity to diversify our workforce, as we are no longer bound by the geographic limits of our physical workspaces. We expect that our offices will continue to be a place for teams to come together to enable productivity and collaboration, though on a far less frequent basis.
This compensation philosophy allows us to compete for talent nationally. As we have transitioned to a flexible workforce, we are also using this opportunity to diversify our workforce, as we are no longer bound by the geographic limits of our physical workspaces.
Our business and the products and services that we offer are affected by a continually expanding and evolving range of local, state, federal, and international laws and regulations.
Our business and the products and services that we offer are affected by a continually expanding and evolving range of local, state, federal, and international laws and regulations. For additional information on government regulation refer to Part I, Item 1A (Risk Factors—Risks Related to Regulatory Compliance and Legal Matters) of this Annual Report on Form 10-K.
Pay Equity Zillow Group is committed to ensuring all employees in similar roles with similar qualifications are paid equitably regardless of their identity. In support of this commitment, we complete a comprehensive annual evaluation with the commitment to disclose results publicly on our corporate website.
In support of this commitment, we complete a comprehensive bi-annual evaluation with the 8 Table of Contents commitment to disclose results publicly on our corporate website annually.
Zillow Group was also named one of the Fortune 100 Best Companies to Work For® 2022 and was included on Bloomberg’s “2022 Gender Equality Index” and PEOPLE®’s 2022 “Companies That Care” list. • Strong financial position.
Additionally, in 2023, Zillow Group was named one of the Best Workplaces for Real Estate, for Parents and for Women 9 . Zillow Group was also named one of PEOPLE®’s 2023 “Companies That Care” list. • Strong financial position.
Customer Offerings To deliver on our mission, we strive to provide a seamless, integrated transaction experience for movers through Zillow, our network of trusted partners, and affiliated brands. We do this through a range of services designed to help our customers in whatever stage of the home buying journey they may be in.
Customer Offerings To deliver on our mission, we strive to provide a seamless, integrated transaction experience for movers through Zillow, our network of trusted partners, our affiliated brands, and through a comprehensive suite of marketing software and technology solutions for the real estate industry, including Spruce, Mortech, New Home Feed, ShowingTime+ and Follow Up Boss.
For instance, we launched an exclusive multi-year partnership with Opendoor to provide our customers with the option to get a cash offer on their home. We have also announced the launch of ShowingTime+, a new brand to integrate and simplify Zillow’s technology offerings for agents, brokers and multiple listing services (“MLSs”).
For sellers, we are focused on providing multiple offerings for customers to find ways to sell their homes. For instance, we have an exclusive multi-year partnership with Opendoor to provide our customers with the option to get a cash offer on their home, and we have expanded this offering to 45 markets across the country.
Since our permanent move to a flexible workforce, we have redesigned our physical workspaces to provide more space for collaboration and engagement, especially to support team gatherings. We continue to evolve our flexible work model to more effectively use our time together, provide more opportunities to work asynchronously, and allow all employees to thrive regardless of location.
Our offices will continue to be a place for teams to come together to enable productivity and collaboration, though on a far less frequent basis. Since our permanent move to a flexible workforce, we have redesigned our physical workspaces to provide more space for collaboration and engagement, especially to support team gatherings, which we call zRetreats.
We are mindful of our costs, while prioritizing our investments to drive our growth pillars and pursue the large opportunities we see ahead of us. Total Addressable Market We participate in large addressable markets of buying, selling, renting and financing residential real estate in the U.S.
We are mindful of our costs, while prioritizing our investments to drive our growth pillars and pursue the large opportunities we see ahead of us. 5 Source: 2023 National Association of REALTORS® “2023 Home Buyers and Sellers Generational Trends Report” and Zillow internal estimates 6 Source: 2023 Google Trends report 7 Source: Comscore Media Metrix® Multi-Platform Key Measures, Real Estate, Total Audience, November 2023, U.S. report 8 Source: Life Story Research 2023 America’s Most Trusted® Home Search Website Study 9 Source: Great Place to Work® 5 Table of Contents Total Addressable Market We participate in large addressable markets of buying, selling, renting and financing residential real estate in the U.S.
Continually enhancing our partner network enables us to implement scalable testing of products and features, send more customers to our best-performing partners and offer our shared customers an improved mortgage product experience. • Experienced, proven management team. We have a highly experienced management team who have successfully built Zillow and other brands into category leaders.
We aim to partner with high-performing and service-focused industry partners who share our interests in providing the best-possible services to our shared customers. Continually enhancing our partner network enables us to implement new products and features, introduce more customers to our best-performing partners and offer our shared customers an improved end-to-end transaction experience, including mortgages. • Experienced, proven management team.
We have increased transparency and consistency in our candidate offers through a redesign of our total compensation package. We conduct ongoing reviews of employee compensation to ensure that our employees are paid fairly and in alignment with market expectations.
We conduct ongoing reviews of employee compensation to ensure that our employees are paid fairly and in alignment with market expectations. In addition, our robust benefits are reflected in investments in physical, family, mental and financial wellness programs to meet the needs of our diverse base of employees.
This serves to align our reported results with our ongoing growth strategy and our intent to provide integrated customer solutions for all tasks and services related to facilitating real estate transactions. As a result, beginning in the first quarter of 2023, we plan to report our financial results as a single reportable segment.
Accordingly, this change led to revisions to the nature and substance of information regularly provided to and used by the chief operating decision maker, and served to align our reported results with our ongoing growth strategy and our intent to provide integrated customer solutions for all tasks and services related to facilitating real estate 3 Table of Contents transactions.
Zillow as a Flexible Workforce Our focus on employees throughout 2022 has been critically important in light of the unique challenges brought on by evolving working norms and employee preferences. We are redefining the employee experience and the future of flexible work, beginning with our announcement of a permanent move to a flexible workforce in late 2020.
The diversity of our workforce and leadership team continues to be an area of focus as further described in the “Equity and Belonging” section below. Zillow as a Flexible Workforce We have redefined the employee experience and the future of flexible work, beginning with our announcement of a permanent move to a flexible workforce in late 2020.
Today, more people search for “Zillow” than “real estate,” 8 and Zillow is the most visited 9 and trusted 10 brand in the online real estate industry. 1 Source: Zillow Group’s 2022 Consumer Housing Trends Report 2 Source: Zillow Group’s 2022 Consumer Housing Trends Report 3 Source: 2021 American Community Survey 4 December 2022 Economic Data published by the National Association of REALTORS® 5 Source: 2022 U.S.
Today, more people search for “Zillow” than “real estate 6 ,” and Zillow is the most visited 7 and trusted 8 brand in the online real estate industry. • Living database of homes and superior data science and technology advantages .
Our rentals marketplace assists our partners with listings, advertising, and leasing services in the U.S. market of nearly 47 million rental units. 5 We connect prospective renters with our property management and landlord partners in the Zillow Rental Network, which provides landlords access to the most visited online rental network 6 .
For Renters – During 2023, we estimate that there were almost three times more households moving to a new rental than purchasing a home in the United States 2 . Our rentals marketplace assists our partners with listings, advertising, leasing and property management services through Zillow Rental Manager in the U.S. market of nearly 48 million rental units 3 .
Our Total Addressable Market (“TAM”) includes Zillow’s estimate of total industry transaction fees derived from residential real estate transactions. In addition, we provide important adjacent services, including mortgages through Zillow Home Loans and title and escrow services through Zillow Closing Services. Our TAM also includes our complementary rentals marketplace which includes rentals advertising and property management software spend.
Our Total Addressable Market (“TAM”) includes Zillow’s estimate of total industry transaction fees derived from residential real estate transactions.
The amounts listed in the table below represent the estimated total industry size associated with these additional opportunities (in billions): Home insurance 18 $ 121 Home renovation services 19 657 Moving services 20 19 Home appraisal services 21 10 Seasonality Portions of our business are affected by seasonal fluctuations in the residential real estate market, advertising spending, and other factors.
The amounts listed in the table below represent the estimated total industry size associated with additional opportunities we may pursue (in billions): Home insurance 15 $ 148 Home renovation services 16 657 Moving services 17 21 Home appraisal services 18 12 Seasonality 10 Sources: Estimate derived from total transaction value data from the December 2023 Economic Data published by the National Association of REALTORS® and Zillow’s internal estimate for average industry commission rates.
We value integrity, accountability, collaboration, creativity, respect and transparency as central to our core values. As of December 31, 2022, we had 5,724 employees. Our internal data shows that 52% of our workforce self-identified as men and 48% self-identified as women, with women representing 40% of our leadership team (defined as director level and above).
Our internal data shows that approximately 55% of our workforce self-identified as men and approximately 45% self-identified as women, as well as certain employees that identified as nonbinary. Women currently represent 43% of our leadership team (defined as director level and above).
For additional information, see Part II, Item 8 in Note 16 in our Notes to the Consolidated Financial Statements of this Annual Report on Form 10-K. In addition, our robust benefits are reflected in investments in physical, family, mental and financial wellness programs to meet the needs of our diverse base of employees.
Follow Up Boss has been a key integration partner of ours for several years, and the product is widely utilized by the broader real estate industry and many of our Premier Agent partners. For additional information, see Note 7 in our Notes to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K.
We also provide renters with the ability to easily submit applications, sign leases and make rental payments through our platform. For Borrowers – Approximately 87% of homes purchased in the U.S. are financed with mortgage debt 7 . We provide our customers with multiple ways to pursue mortgage financing for their transaction.
We connect prospective renters with our property management and landlord partners through our rental websites which provide landlords access to the most visited online rental network 4 . We also provide renters with the ability to easily submit applications, sign leases and make rental payments through our platform.
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Item 1. Business. Overview We are reimagining real estate to make it easier to unlock life’s next chapter. As the most visited real estate website in the United States, Zillow and its affiliates and partners offer customers an on-demand experience for selling, buying, renting or financing with transparency and ease.
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Item 1. Business. Overview We are reimagining real estate to make home a reality for more and more people.
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We are focused on increasing customer transactions and revenue per customer transaction, which measures revenue attributable to each unique home purchase or sale transaction in which the homebuyer or seller uses Zillow Home Loans, Zillow Closing Services and/or involves a Premier Agent with whom the buyer or seller connected through Zillow Group.
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As the most visited real estate website in the United States, Zillow and its affiliates help people find and get the home they want by connecting them with digital solutions, dedicated partners and agents, and easier buying, selling, financing and renting experiences. Hundreds of millions of people visit our mobile applications and websites every month to begin their journey.
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We estimate Zillow participated in approximately 360,000 customer transactions with both buyers and sellers in 2021, which is the first time we reported this metric. We anticipate providing this metric for 2022 in a future quarter.
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We believe our data and content has helped the Zillow brand become synonymous with residential real estate with Zillow being searched more than the term “real estate” in the United States.
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These segments reflect the way we evaluated business performance and managed our operations.
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Many potential sellers have postponed or forgone opportunities to sell, choosing instead to hold onto their existing lower-rate mortgages, limiting for-sale housing supply as a result. However, while this shortfall of for-sale inventory has limited sales volume, prices have continued to rise as competition for the relatively few available for-sale homes remains firm.
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The IMT segment includes the financial results for the Premier Agent and rentals marketplaces (including StreetEasy rentals product offerings) as well as Other IMT, which includes our new construction marketplace and revenue from the sale of other advertising and business technology solutions for real estate professionals, including display, StreetEasy for-sale product offerings and ShowingTime+, which houses ShowingTime, Bridge Interactive, dotloop and interactive floor plans.
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These macroeconomic factors and their impact on the residential real estate market have affected our business and influenced the resources we use to direct our operations.
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The Mortgages segment primarily includes financial results for mortgage originations through Zillow Home Loans and advertising sold to mortgage lenders and other mortgage professionals. The Homes segment includes the financial results from title and escrow services performed by Zillow Closing Services and certain indirect costs of the Homes segment which do not qualify as discontinued operations.
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As a result, beginning in the first quarter of 2023, we began to report our financial results as a single reportable segment. In the fourth quarter of 2023, we closed the acquisition of Follow Up Boss, a customer relationship management system that gives real estate professionals a central hub to organize and engage customers, close deals, and build their teams.
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For Renters – Over 67% more households move to a new rental than homes are sold in the U.S. (over 9.5 million leases executed 3 versus 5.7 million homes sold 4 , comprised of 5.1 million existing homes sold 4 and 0.6 million new homes sold 4 ).
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We do this through a range of services designed to help our customers in whatever stage of the housing journey they may be in. This typically includes the need for multiple services simultaneously.
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Census’ Current Population Survey 6 Source: 2022 Comscore Media Metrix® report 7 Source: National Association of REALTORS® “2022 Home Buyers and Sellers Generational Trends Report” 8 Source: 2022 Google Trends report 9 Source: 2022 Comscore Media Metrix® report 10 Source: 2022 Life Story® research 4 Table o f Contents • Living database of homes and superior data science and technology advantages .
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Additionally, we launched the Listing Showcase product under ShowingTime+, which allows sellers and listing agents to differentiate themselves on Zillow through higher-quality listings via an immersive premium experience featuring rich media, including scrolling hero images, room-by-room photo organization and interactive floor plans.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeRisks Related to Our Business and Industry • Our business has and may continue to be impacted by the current and future health and stability of the economy and United States residential real estate industry, including inflationary conditions, interest rates, housing availability and affordability, labor shortages and supply chain issues. • Our business could be harmed if our real estate partners reduce or end their advertising spending with us or if we are unable to effectively manage advertising inventory or pricing. • We may not be able to establish or maintain relationships with listing and data providers, which could adversely affect traffic to our mobile applications and websites. • If we do not comply with MLS rules and requirements, our use of listings data may be restricted. • Our success depends on our ability to continue to innovate and compete successfully to attract customers and real estate partners. • Zillow Home Loans depends on United States government-sponsored entities and government agencies, operates in a highly regulated industry, and may be unable to obtain or maintain sufficient financing to fund its origination of mortgages, may not meet customers’ financing needs with its product offerings, may not be able to continue to grow its mortgage origination business, may not be able to resell originated mortgages on the secondary market, and may be impacted by interest rate and general market fluctuations. • Natural disasters and catastrophic events (including pandemics such as COVID-19) may harm our business. • If our data integrity suffers harm, our business may suffer and we may be held liable. • Pending or future litigation and other disputes or enforcement actions may harm our business. • Our success depends on attracting and retaining a highly skilled workforce. • Acquisitions, investments, strategic partnerships, capital-raising activities, or other corporate transactions or commitments by us or our competitors could harm our business. • Our fraud detection processes and information security systems may not be effective. • We are subject to multiple risks related to accepting credit and debit card payments. • If our security measures or technology systems, or those of third parties upon which we rely, are compromised or there is any significant disruption in service on our platforms or in our network, we may suffer significant losses and our business may be harmed. • We rely on third-party services to support critical functions of our business. • We have and may continue to be subject to outstanding real property or other claims following the wind down of our Zillow Offers operations.
Biggest changeRisks Related to Our Business and Industry • Our business has and may continue to be impacted by the current and future health and stability of the economy and United States residential real estate industry, including inflationary conditions, interest rates, housing availability and affordability, changes to industry standards and practices, labor shortages and supply chain issues. • Our business may be impacted by industry changes, including as a result of certain or future class action lawsuits or government investigations. • Our business could be harmed if real estate professionals reduce or end their spending with us or if we are unable to effectively manage advertising and product inventory or pricing. • We may not be able to establish or maintain relationships with listing and data providers, including MLSs, which could adversely affect traffic to our mobile applications and websites. • If we do not comply with MLS rules and requirements and data listing agreements, our use of listings data may be restricted. • Our success depends on our ability to continue to innovate and compete successfully against our existing or future competitors to attract customers and real estate partners. • Natural disasters, geopolitical events, and catastrophic events may harm our business. • If our data integrity suffers harm, our business may suffer and we may be held liable. • Pending or future litigation and other disputes or enforcement actions may harm our business. • Our success depends on attracting and retaining a highly skilled workforce. • Acquisitions, investments, strategic partnerships, capital-raising activities, or other corporate transactions or commitments by us or our competitors could harm our business. • Our fraud detection processes and information security systems may not be effective in preventing bad actors from perpetrating fraud or accessing data or systems. • We are subject to multiple risks related to accepting credit and debit card payments. • If our security measures or technology systems, or those of third parties upon which we rely, are compromised or there is any significant disruption in service on our platforms or in our network, we may suffer significant losses and our business may be harmed. • We rely on third-party services to support critical functions of our business.
Our business depends in part on revenue generated through sales of advertising products and services to real estate agents and brokerages, rental professionals, mortgage professionals, home builders, property managers, and other real estate partners in categories relevant to real estate (collectively, “real estate partners”).
Our business depends in part on revenue generated through sales of advertising and other products and services to real estate agents and brokerages, rental professionals, mortgage professionals, home builders, property managers, and other real estate partners in categories relevant to real estate (collectively, “real estate partners”).
Our ability to attract and retain real estate partners, and ultimately to generate advertising revenue, depends on a number of factors, including how successfully we can: • increase the number of customers who use one or more of our products and services to effectuate transactions and the frequency of their use, provide them with tools to promote engagement between real estate market participants, and enhance their user experience so we can retain them; • offer an attractive return on investment to our real estate partners for their advertising spending with us; • continue to develop our advertising products and services to increase adoption by and engagement with our real estate partners; • keep pace with and anticipate changes in technology to provide industry-leading products and services to real estate partners and customers; and • compete effectively for advertising dollars with other options.
Our ability to attract and retain real estate partners, and ultimately to generate advertising revenue, depends on a number of factors, including how successfully we can: • increase the number of customers who use one or more of our products and services to effectuate transactions and the frequency of their use, provide them with tools to promote engagement between real estate market participants, and enhance their user experience so we can retain them; • offer an attractive return on investment to our real estate partners for their spending with us; • continue to develop our products and services to increase adoption by and engagement with our real estate partners; • keep pace with and anticipate changes in technology to provide industry-leading products and services to real estate partners and customers; and • compete effectively for advertising dollars with other options.
Zillow Home Loans funds substantially all of its lending operations using warehouse and loan repurchase facilities, intending to sell all loans and corresponding servicing rights to third-party financial institutions, government-sponsored entities or mortgage servicing rights purchasers after a holding period.
Zillow Home Loans funds substantially all of its lending operations using warehouse and loan repurchase facilities, intending to sell substantially all loans and corresponding servicing rights to third-party financial institutions, government-sponsored entities or mortgage servicing rights purchasers after a holding period.
The option counterparties or their respective affiliates may modify their hedge positions by entering into or unwinding various derivative transactions with respect to our Class C capital stock and/or purchasing or selling our Class C capital stock or other securities of ours in secondary market transactions prior to the maturity of each of the 2024 Notes and 2026 Notes (and are likely to do so during any observation period related to a conversion of 2024 Notes or 2026 Notes or in connection with any repurchase of 2024 Notes or 2026 Notes by us).
The option counterparties or their respective affiliates may modify their hedge positions by entering into or unwinding various derivative transactions with respect to our Class C capital stock and/or purchasing or selling our Class C capital stock or other securities of ours in secondary market transactions prior to the maturity of each of the 2024 Notes and 2026 Notes (and are likely to do so during any observation period related to a conversion of 2024 Notes or 2026 Notes or in connection with any repurchase or redemption of 2024 Notes or 2026 Notes by us).
We are from time to time involved in, or may in the future be subject to, claims, suits, government investigations, enforcement actions and proceedings arising from our business, including actions with respect to intellectual property, privacy, consumer protection, information security, mortgage brokering, mortgage origination, real estate, real estate brokerage, environmental, data protection, antitrust, the Real Estate Settlement Procedures Act of 1974 (RESPA), fair housing or fair lending, compliance with securities laws, or law enforcement matters, tax matters, labor and employment, and commercial claims, as well as actions involving content generated by our customers, shareholder derivative actions, purported class action lawsuits, and other matters, including those matters described in Part II, Item 8 in Note 18 under the subsection titled “Legal Proceedings” in our Notes to Consolidated Financial Statements in this Annual Report on Form 10-K.
We are from time to time involved in, or may in the future be subject to, claims, suits, government investigations, enforcement actions and proceedings arising from our business, including actions with respect to intellectual property, privacy, consumer protection, information security, mortgage brokering, mortgage origination, real estate, real estate brokerage, environmental, data protection, antitrust, the Real Estate Settlement Procedures Act of 1974 (RESPA), fair housing or fair lending, compliance with securities laws, or law enforcement matters, tax matters, labor and employment, and commercial claims, as well as actions involving content generated by our customers, shareholder derivative actions, purported class action lawsuits, and other matters, including those matters described in Part II, Item 8 in Note 16 under the subsection titled “Legal Proceedings” in our Notes to Consolidated Financial Statements in this Annual Report on Form 10-K.
If any of the MLS Members are deemed to be noncompliant with an MLS’s rules or to have provided improper responses to or resolution of complaints, they may face disciplinary sanctions by that MLS, which could include monetary fines, restricting or terminating our access to that MLS’s data, or other disciplinary measures.
If any of the MLS Members are deemed to be noncompliant with an MLS’s rules or to have provided improper responses to or resolution of complaints, they may face disciplinary sanctions by that MLS, which could include monetary fines, restricting, suspending or terminating our access to that MLS’s data, or other disciplinary measures.
We cannot assure you that we, or our licensed personnel, are and will remain at all times, in full compliance with real estate, title and escrow, and mortgage licensing and consumer protection laws and regulations and we may be subject to fines or penalties in the event of any non-compliance.
We cannot assure you that we, or our licensed personnel, are and will remain at all times, in full compliance with real estate, title and escrow, insurance and mortgage licensing and consumer protection laws and regulations and we may be subject to fines or penalties in the event of any non-compliance.
Upon conversion of our convertible senior notes, unless we elect to deliver solely shares of our Class C capital stock to settle such conversion (other than paying cash in lieu of delivering any fractional share), we will be required to make cash payments in respect of the notes being converted.
Upon conversion of our convertible senior notes, unless we elect to deliver solely shares of our Class C capital stock to settle such conversion (other than paying cash in lieu of delivering any fractional shares), we will be required to make cash payments in respect of the notes being converted.
A security incident or other interruption could disrupt our ability (and that of third parties upon whom we rely) to provide our services. While we have implemented security measures designed to protect against security incidents, there can be no assurance that these measures will be effective.
A security incident or other interruption could disrupt our ability (and that of third parties upon whom we rely) to provide our services. While we have security measures designed to protect against security incidents, there can be no assurance that these measures will be effective.
In addition to our patented technology, our Zestimate home valuation uses a significant amount of proprietary, trade secret methodology. Any accidental disclosure, or disclosure in response to litigation or regulatory inquiries that do not include confidential information protection could harm our competitive advantage.
In addition to our patented technology, our Zestimate home valuation model uses a significant amount of proprietary, trade secret methodology. Any accidental disclosure, or disclosure in response to litigation or regulatory inquiries that do not include confidential information protection could harm our competitive advantage.
Zillow Home Loans May Not Be Able to Continue to Grow its Mortgage Loan Origination Business, Which Could Negatively Affect Our Mortgages Segment, Financial Condition and Results of Operations. The Zillow Home Loans mortgage loan origination business consists of providing purchase money loans to homebuyers and refinancing existing loans.
Zillow Home Loans May Not Be Able to Continue to Grow its Mortgage Loan Origination Business, Which Could Negatively Affect Our Mortgages Business, Financial Condition and Results of Operations. The Zillow Home Loans mortgage loan origination business consists of providing purchase money loans to homebuyers and refinancing existing loans.
Our success depends on our continued innovation to provide new, and improve upon existing, products and services that make real estate transactions faster, easier and less stressful for our customers and provide value to real estate, rental and mortgage professionals, home buyers and our other real estate partners.
Our success depends on our continued innovation to provide new, and improve upon existing, products and services that make real estate transactions faster, easier and less stressful for our customers and provide value to real estate, rental and mortgage professionals, home buyers and sellers and our other real estate partners.
We Face Competition for Customers in the Real Estate Category, Which Could Impair Our Ability to Attract Users of Our Mobile Applications, Websites and Other Products and Services, Which Could Harm Our Business, Results of Operations and Financial Condition.
We Face Competition for Users in the Real Estate Category, Which Could Impair Our Ability to Attract Users of Our Mobile Applications, Websites and Other Products and Services, Which Could Harm Our Business, Results of Operations and Financial Condition.
Any of our current or future competitors could merge with each other or a separate entity, which may enable them to compete with us even more vigorously and acquire more share of customer transactions and engagement.
Any of our current or future competitors could merge with each other or a separate entity, which may enable them to compete with us even more vigorously and acquire a greater share of customer transactions and engagement.
Our amended and restated articles of incorporation or amended and restated bylaws include provisions, some of which will become effective only after the date, which we refer to as the threshold date, on which the Class B common stock controlled by our founders represents less than 7% of the aggregate number of shares of our outstanding Class A common stock and Class B common stock, that: • set forth the structure of our capital stock, which concentrates voting control of matters submitted to a vote of our shareholders with the holders of our Class B common stock, which is held or controlled by our founders; 35 Table o f Contents • authorize our board of directors to issue, without further action by our shareholders, up to 30,000,000 shares of undesignated preferred stock, subject, prior to the threshold date, to the approval rights of the holders of our Class B common stock; • establish that our board of directors will be divided into three classes, Class I, Class II and Class III, with each class serving three-year staggered terms; • prohibit cumulative voting in the election of directors; • provide that, after the threshold date, our directors may be removed only for cause; • provide that, after the threshold date, vacancies on our board of directors may be filled only by the affirmative vote of a majority of directors then in office or by the sole remaining director; • provide that only our board of directors may change the board’s size; • specify that special meetings of our shareholders can be called only by the chair of our board of directors, our board of directors, our chief executive officer, our president or, prior to the threshold date, holders of at least 25% of all the votes entitled to be cast on any issue proposed to be considered at any such special meeting; • establish an advance notice procedure for shareholder proposals to be brought before a meeting of shareholders, including proposed nominations of persons for election to our board of directors; • require the approval of our board of directors or the holders of at least two-thirds of all the votes entitled to be cast by shareholders generally in the election of directors, voting together as a single group, to amend or repeal our bylaws; and • require the approval of not less than two-thirds of all the votes entitled to be cast on a proposed amendment, voting together as a single group, to amend certain provisions of our articles of incorporation.
Our amended and restated articles of incorporation or amended and restated bylaws include provisions, some of which will become effective only after the date, which we refer to as the threshold date, on which the Class B common stock controlled by our founders represents less than 7% of the aggregate number of shares of our outstanding Class A common stock and Class B common stock, that: • set forth the structure of our capital stock, which concentrates voting control of matters submitted to a vote of our shareholders with the holders of our Class B common stock, which is held or controlled by our founders; • authorize our board of directors to issue, without further action by our shareholders, up to 30,000,000 shares of undesignated preferred stock, subject, prior to the threshold date, to the approval rights of the holders of our Class B common stock; • establish that our board of directors will be divided into three classes, Class I, Class II and Class III, with each class serving three-year staggered terms; • prohibit cumulative voting in the election of directors; • provide that, after the threshold date, our directors may be removed only for cause; • provide that, after the threshold date, vacancies on our board of directors may be filled only by the affirmative vote of a majority of directors then in office or by the sole remaining director; • provide that only our board of directors may change the board’s size; • specify that special meetings of our shareholders can be called only by the chair of our board of directors, our board of directors, our chief executive officer, our president or, prior to the threshold date, holders of at least 25% of all the votes entitled to be cast on any issue proposed to be considered at any such special meeting; • establish an advance notice procedure for shareholder proposals to be brought before a meeting of shareholders, including proposed nominations of persons for election to our board of directors; • require the approval of our board of directors or the holders of at least two-thirds of all the votes entitled to be cast by shareholders generally in the election of directors, voting together as a single group, to amend or repeal our bylaws; and • require the approval of not less than two-thirds of all the votes entitled to be cast on a proposed amendment, voting together as a single group, to amend certain provisions of our articles of incorporation.
The technology underlying our Zestimate home valuation, for example, which we consider to be a trade secret affording us a key competitive advantage with respect to customer engagement, is currently protected by patents, the loss of which could benefit comparable services provided by our competitors and result in decreased user traffic and engagement with our mobile applications and websites, thereby harming our results of operations and financial condition.
Aspects of the technology underlying our Zestimate home valuation model, for example, which we consider to be a trade secret affording us a key competitive advantage with respect to customer engagement, is currently protected by patents, the loss of which could benefit comparable services provided by our competitors and result in decreased user traffic and engagement with our mobile applications and websites, thereby harming our results of operations and financial condition.
Our data processing activities may subject us to numerous data privacy and security obligations, such as various laws, regulations, guidance, industry standards, external and internal privacy and security policies, contractual requirements, and other obligations relating to data privacy and security.
Our data processing activities subject us to numerous data privacy and security obligations, such as various laws, regulations, guidance, industry standards, external and internal privacy and security policies, contractual requirements, and other obligations relating to data privacy and security.
Consumer demand for certain mortgage products and loan types are frequently driven by changes in market conditions, interest rates, lender fees, and other transaction costs. If interest rates continue to rise, our business could be adversely affected if we are unable to increase our share of purchase mortgages or if affordability challenges contract the total addressable market.
Consumer demand for certain mortgage products and loan types are frequently driven by changes in market conditions, interest rates, lender fees, and other transaction costs. If interest rates continue to rise or remain elevated, our business could be adversely affected if we are unable to increase our share of purchase mortgages or if affordability challenges contract the total addressable market.
Zillow Home Loans has entered into warehouse financing agreements, including credit and repurchase agreements, to provide capital for the growth and operation of our mortgage origination businesses.
Zillow Home Loans has entered into warehouse financing agreements, including repurchase agreements, to provide capital for the growth and operation of our mortgage origination businesses.
The market price of our Class A common stock and Class C capital stock could be 33 Table o f Contents subject to wide fluctuations in response to many of the risk factors discussed in this Annual Report on Form 10-K and others beyond our control, including: • actual or anticipated fluctuations in our financial condition and results of operations; • changes in projected operational and financial results; • addition or loss of significant customers; • actual or anticipated changes in our growth rate relative to that of our competitors; • announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital-raising activities or commitments; • announcements of technological innovations or new offerings by us or our competitors; • additions or departures of key personnel; • changes in laws or regulations applicable to our services; • fluctuations in the valuation of companies perceived by investors to be comparable to us; • the inclusion, exclusion, or deletion of our Class A common stock and Class C capital stock from any trading indices, such as the S&P 500 Index; • issuance of new or updated research or reports by securities analysts; • sales of our Class A common stock and Class C capital stock by us or our shareholders; • repurchases of our Class A common stock and Class C capital stock by us or our shareholders; • issuances of our Class C capital stock upon conversion of our 2024 Notes, 2025 Notes or 2026 Notes; • stock price and volume fluctuations attributable to inconsistent trading volume levels of our shares; and • general economic and market conditions.
The market price of our Class A common stock and Class C capital stock could be subject to wide fluctuations in response to many of the risk factors discussed in this Annual Report on Form 10-K and others beyond our control, including: • actual or anticipated fluctuations in our financial condition and results of operations; • changes in projected operational and financial results; • addition or loss of significant customers; • actual or anticipated changes in our growth rate relative to that of our competitors; • announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital-raising activities or commitments; • announcements of technological innovations or new offerings by us or our competitors; • additions or departures of key personnel; • changes in laws or regulations applicable to our services; • fluctuations in the valuation of companies perceived by investors to be comparable to us; • the inclusion, exclusion, or deletion of our Class A common stock and Class C capital stock from any trading indices, such as the S&P 500 Index; • issuance of new or updated research or reports by securities analysts; • sales of our Class A common stock and Class C capital stock by us or our shareholders; • repurchases of our Class A common stock and Class C capital stock by us or our shareholders; • issuances of our Class C capital stock upon conversion of our 2024 Notes, 2025 Notes or 2026 Notes; • stock price and volume fluctuations attributable to inconsistent trading volume levels of our shares; and • general economic and market conditions.
These companies could devote greater financial, technical and other resources than we have available to real estate services, sales, advertising or research and development, have a more accelerated time frame for deployment or leverage their existing customer bases and proprietary technologies to provide products and services that customers might view as superior to our offerings.
These companies could devote greater financial, technical and other resources than we have available to real estate services, sales, advertising or research and development, have a more accelerated time frame for deployment or leverage their existing customer bases and proprietary technologies to provide products and services that users might view as superior to our offerings.
MLS rules vary among markets and are in some cases inconsistent between MLSs, such that we are required to customize our websites, mobile applications, or services to accommodate differences between MLS rules. Handling complaints received by the MLS Members across markets may create heightened operational or financial risks with short response and resolution deadlines.
MLS rules vary among markets and are in some cases inconsistent between MLSs, such that we are required to customize our websites, mobile applications, or services to accommodate differences between MLS rules and compliance requirements. Handling complaints received by the MLS Members across markets may create heightened operational or financial risks with short response and resolution deadlines.
To estimate variable consideration and revenue associated with the Flex model, we use a number of assumptions, including estimating the conversion rate of a lead to a real estate transaction, estimating the velocity of conversions and estimating the fee amounts likely to be received. We use similar performance advertising models for our rentals pay per lease and StreetEasy Experts products.
To estimate variable consideration and revenue associated with the Flex model, we use a number of assumptions, including estimating the conversion rate of a lead to a real estate transaction, estimating the velocity of conversions and estimating the fee amounts likely to be received. We use similar performance based models for our rentals pay per lease and StreetEasy Experts products.
Further, if we do not realize the benefits we expect from the strategic relationships we enter into, our business could be harmed. Customers may prefer other service providers because they offer different or superior services or those services are easier to use, faster or more cost effective than our services.
Further, if we do not realize the benefits we expect from the strategic relationships or we enter into or acquisitions we complete, our business could be harmed. Customers may prefer other service providers because they offer different or superior services or those services are easier to use, faster or more cost effective than our services.
If the use of online products and services for shopping, renting, buying, selling, or financing residential real estate does not continue to develop and grow or we are not able to continue to attract customers to our mobile applications, websites, real estate services and other services, our business, results of operations and financial condition could be harmed.
If the use of online products and services for shopping, renting, buying, selling, or financing residential real estate does not continue to develop and grow or we are not able to continue to attract users to our mobile applications, websites, real estate services and other services, our business, results of operations and financial condition could be harmed.
These covenants may limit our operational flexibility and may restrict our ability to engage in transactions that we believe would otherwise be in the best interests of our shareholders. Additionally, undrawn amounts are not committed, meaning the applicable lender is not obligated to advance loan funds in excess of outstanding borrowings.
These covenants may limit our operational flexibility and may restrict our ability to engage in transactions that we believe would otherwise be in the best interests of our shareholders. Additionally, undrawn amounts are generally not committed, meaning the applicable lender may not be obligated to advance loan funds in excess of outstanding borrowings.
Recent market factors, including low housing inventory, fewer new for-sale listings, volatility in mortgage interest rates and home price fluctuations, inflationary conditions and high rental occupancy rates have impacted demand for our products and services by consumers and advertisers, which in turn has negatively impacted our financial performance.
Recent market factors, including low housing inventory, fewer new for-sale listings, volatility in mortgage interest rates and home price fluctuations, inflationary conditions and rental occupancy rate fluctuations have impacted demand for our products and services by consumers and advertisers, which in turn has negatively impacted our financial performance.
Any discontinuation of, or significant reduction in, the operation of Fannie Mae or Freddie Mac or any significant adverse change in their capital structure, financial condition, activity levels in the primary or secondary mortgage markets or underwriting criteria could materially and adversely affect our Mortgages segment, liquidity, financial condition, and results of operations.
Any discontinuation of, or significant reduction in, the operation of Fannie Mae or Freddie Mac or any significant adverse change in their capital structure, financial condition, activity levels in the primary or secondary mortgage markets or underwriting criteria could materially and adversely affect our mortgages business, liquidity, financial condition, and results of operations.
For example, in November 2021, we announced plans to wind down Zillow Offers operations, in part, because it served too narrow a portion of our customers, instead opting to develop and offer other products and services primarily focused within our five growth pillars.
For example, in November 2021, we announced plans to wind down Zillow Offers operations, in part, because it served too narrow a portion of our customers, instead opting to develop and offer other products and services primarily focused within our six growth pillars.
If we or the third parties on which we rely fail, or are perceived to have failed, to address or comply with applicable data privacy and security obligations, we could face significant consequences, including but not limited to: government enforcement actions (e.g., investigations, fines, penalties, audits, inspections, and similar); litigation (including class-action claims); additional reporting requirements and/or oversight; bans on processing personal data; and orders to destroy or not use personal data.
If we or the third parties on which we rely fail, or are perceived to have failed, to address or comply with applicable data privacy and security obligations, we could face significant consequences, including but not limited to: government enforcement actions (e.g., investigations, fines, penalties, audits, inspections, and similar); litigation (including class-action claims) and mass arbitration demands; additional reporting requirements and/or oversight; bans on processing personal data; and orders to destroy or not use personal data.
Our Class A common stock entitles its holder to one vote per share, and our Class B common stock entitles its holder to 10 votes per share. All shares of Class B common stock have been and are held or controlled by our founders, Richard Barton and Lloyd Frink. As of December 31, 2022, Mr. Barton’s holdings and Mr.
Our Class A common stock entitles its holder to one vote per share, and our Class B common stock entitles its holder to 10 votes per share. All shares of Class B common stock have been and are held or controlled by our founders, Richard Barton and Lloyd Frink. As of December 31, 2023, Mr. Barton’s holdings and Mr.
Since our customers may rely on our products and services, including our real estate transaction services and customer relationship management tools, for important aspects of their personal lives and businesses, problems with the reliability, availability or security of our systems could damage our customers’ businesses, harm our reputation, delay or inhibit a customer from completing a real estate transaction, result in a loss of customers of our products and services and of real estate partners and result in additional costs, any of which could harm our business, results of operations and financial condition.
Since our customers 22 Table of Contents may rely on our products and services, including our real estate transaction services and customer relationship management tools, for important aspects of their personal lives and businesses, problems with the reliability, availability or security of our systems could damage our customers’ businesses, harm our reputation, delay or inhibit a customer from completing a real estate transaction, result in a loss of customers of our products and services and of real estate partners and result in additional costs, any of which could harm our business, results of operations and financial condition.
New entrants continue to join the real estate space at a rapid pace and the tools and services for buying, selling, renting, or financing homes are significantly less developed than in other industries, such as books, music, travel and other customer products.
New entrants continue to join the real estate space at a rapid pace and the tools and services for buying, selling, renting, or financing homes are significantly less developed than in other industries, such as books, music, travel and other consumer products.
Complying with the rules and compliance requirements of each MLS requires significant investment, including personnel, technology and development resources, and the exercise of considerable judgment. Rules and compliance requirements of MLSs may be changed across markets, including potential for targeted changes in response to our operations.
Complying with the rules and compliance requirements of each MLS requires significant investment, including personnel, technology and development resources, and the exercise of considerable judgment. Rules and compliance requirements of MLSs may be changed across markets, including potential for targeted changes or interpretations in response to our operations.
If any of these government agencies or GSEs limit Zillow Home Loans’ ability to participate in any of these programs, or if the operation of any of these government agencies or GSEs or the programs they administer are eliminated or changed, our Mortgages segment, liquidity, financial condition, and results of operations may be adversely affected.
If any of these government agencies or GSEs limit Zillow Home Loans’ ability to participate in any of these programs, or if the operation of any of these government agencies or GSEs or the programs they administer are eliminated or changed, our mortgages business, liquidity, financial condition, and results of operations may be adversely affected.
We endeavor to ensure that any content created by Zillow Group is consistent with such laws and regulations by obtaining assurances of compliance from our advertisers and customers for their activities through, and the content they provide on, our mobile applications and websites.
We endeavor to ensure that any content displayed by Zillow Group is consistent with such laws and regulations by obtaining assurances of compliance from our advertisers and customers for their activities through, and the content they provide on, our mobile applications and websites.
The extent to which these and additional economic factors, such as those described below, impact our results and financial position will depend on future developments, which are uncertain and difficult to predict : • downturns in the United States residential real estate market – both seasonal and cyclical – which may be due to one or more factors, whether included in this list or not; • changes in federal monetary policy or inflationary conditions; • changes in international, national, regional, or local economic, demographic, or real estate market conditions; • slow economic growth or recessionary conditions; • increased levels of unemployment or a decrease in labor availability, and/or slowly growing or declining wages; • declines in the value of residential real estate and/or the pace of home appreciation, or the lack thereof; • illiquidity in residential real estate; 12 Table o f Contents • overall conditions in the housing market, including macroeconomic shifts in demand, and increases in costs for homeowners such as property taxes, homeowners association fees and availability and affordability of insurance; • low levels of customer confidence in the economy and/or the United States residential real estate industry; • low home and/or rental inventory levels or lack of affordably priced homes and rentals; • changes in interest rates, mortgage rates or down payment requirements and/or restrictions on mortgage financing availability; • changes to real estate commissions; • federal, state, or local legislative or regulatory changes that would negatively impact rental properties or the residential real estate industry, such as the Tax Cuts and Jobs Act of 2017 (the “Tax Act”), which limited deductions of certain mortgage interest expenses and property taxes; • volatility and general declines in the stock market; and/or • natural and man-made disasters and other catastrophic events, such as pandemics, hurricanes, earthquakes, wildfires, terrorist attacks and other events that disrupt local, regional, or national real estate markets.
The extent to which these and additional economic factors, such as those described below, impact our results and financial position will depend on future developments, which are uncertain and difficult to predict : 12 Table of Contents • fluctuations in the United States residential real estate market – both seasonal and cyclical – which may be due to one or more factors, whether included in this list or not; • changes in federal monetary policy or inflationary conditions; • changes in international, national, regional, or local economic, demographic, or real estate market conditions; • slow economic growth or recessionary conditions; • increased levels of unemployment or a decrease in labor availability, and/or slowly growing or declining wages; • declines in the value of residential real estate and/or the pace of home appreciation, or the lack thereof; • illiquidity in residential real estate; • overall conditions in the housing market, including macroeconomic shifts in demand, and increases in costs for homeowners such as property taxes, homeowners association fees and availability and affordability of insurance; • low levels of customer confidence in the economy and/or the United States residential real estate industry; • low home and/or rental inventory levels or lack of affordably priced homes and rentals; • changes in interest rates, mortgage rates or down payment requirements and/or restrictions on mortgage financing availability; • changes to how real estate commissions are negotiated or paid, or changes to other industry standards and practices; • federal, state, or local legislative or regulatory changes that would negatively impact rental properties or the residential real estate industry, such as the Tax Cuts and Jobs Act of 2017 (the “Tax Act”), which limited deductions of certain mortgage interest expenses and property taxes; • volatility and general declines in the stock market; and/or • natural and man-made disasters and other catastrophic events, such as pandemics, hurricanes, earthquakes, wildfires, terrorist attacks and other events that disrupt local, regional, or national real estate markets.
The ability of Zillow Home Loans to generate revenue through loan sales depends, in part, on its participation in programs administered by government agencies such as the United States Department of Housing and Urban Development’s Federal Housing Administration, the United States Department of Veterans Affairs, the United States Department of Agriculture, or government-sponsored entities (“GSEs”) such as the Federal National Mortgage Association (“Fannie Mae”) or the Federal Home Loan Mortgage Corporation (“Freddie Mac”).
The ability of Zillow Home Loans to generate revenue through loan sales depends, in part, on its participation in programs administered by government agencies such as the United States Department of Housing and Urban Development’s 24 Table of Contents Federal Housing Administration, the United States Department of Veterans Affairs, the United States Department of Agriculture, or government-sponsored entities (“GSEs”) such as the Federal National Mortgage Association (“Fannie Mae”) or the Federal Home Loan Mortgage Corporation (“Freddie Mac”).
In addition, Zillow Homes Loans must ensure that our lending operations serve consumers in accordance with a variety of federal and state fair lending laws and regulations, including without limitation the Fair Housing Act, the Equal Credit Opportunity Act, the Home Mortgage Disclosure Act, and the prohibition against engaging in Unfair, Deceptive, or Abusive Acts or Practices pursuant to the Dodd-Frank Act.
In addition, Zillow Homes Loans must ensure that our lending operations serve consumers in accordance with a variety of federal and state fair lending laws and regulations, including without limitation the Fair Housing Act, the Equal Credit Opportunity Act, the Home Mortgage Disclosure Act, and the prohibition against engaging in Unfair, Deceptive, or Abusive Acts or Practices pursuant to the Dodd-Frank Act, Federal Trade Commission Act, and state corollaries.
Any changes in laws and regulations affecting the relationship between Fannie Mae and Freddie Mac and their regulators or the United States federal government, and any changes in leadership at any of these entities could adversely affect our Mortgages segment and prospects.
Any changes in laws and regulations affecting the relationship between Fannie Mae and Freddie Mac and their regulators or the United States federal government, and any changes in leadership at any of these entities could adversely affect our mortgages business and prospects.
Our subsidiaries that access and use listings data through MLS memberships (the “MLS Members”) must comply with each MLS’s rules and compliance requirements to maintain their access to listings data and remain a member in good standing.
Our subsidiaries that access and use listings data through MLS memberships (the “MLS Members”) must comply with each MLS’s rules, compliance requirements and data license agreements to maintain their access to listings data and remain a member in good standing.
Failure to comply with applicable laws and regulations could result in fines and/or damages, suspension of personnel, civil liability or other sanctions. 21 Table o f Contents If Our Security Measures or Technology Systems, or Those of Third Parties Upon Which We Rely, Are Compromised, We May Be Subject to Legal Claims and Suffer Significant Losses, and Customers May Curtail Use of Our Products and Services and Our Real Estate Partners May Reduce or Eliminate Their Advertising on Our Mobile Applications and Websites.
Failure to comply with applicable laws and regulations could result in fines and/or damages, suspension of personnel, civil liability or other sanctions. 20 Table of Contents If Our Security Measures or Technology Systems, or Those of Third Parties Upon Which We Rely, Are Compromised, We May Be Subject to Legal Claims and Suffer Significant Losses, and Customers May Curtail Use of Our Products and Services and Our Real Estate Partners May Reduce or Eliminate Their Advertising on Our Mobile Applications and Websites.
Regardless of whether we can successfully enforce our rights against the operators of these websites, any measures that we may take could require us to expend significant financial or other resources, which could harm our business, results of operations or financial condition. 26 Table o f Contents Risks Related to Regulatory Compliance and Legal Matters Failure to Comply with Federal, State and Local Laws, Rules and Regulations or to Obtain and Maintain Required Licenses or Authorizations, Could Materially and Adversely Affect our Business, Financial Condition and Results of Operations.
Regardless of whether we can successfully enforce our rights against the operators of these websites, any measures that we may take could require us to expend significant financial or other resources, which could harm our business, results of operations or financial condition. 27 Table of Contents Risks Related to Regulatory Compliance and Legal Matters Failure to Comply with Federal, State and Local Laws, Rules and Regulations or to Obtain and Maintain Required Licenses or Authorizations, Could Materially and Adversely Affect our Business, Financial Condition and Results of Operations.
Please see “Competition” under Part 1, Item 1 of this Annual Report on Form 10-K for a general discussion of the competitive conditions in each of our businesses. Competitors for our real estate transaction services include rental listing service providers, real estate brokers, real estate investors, mortgage lenders, mortgage brokers, financial institutions, and title and settlement service providers.
Please see “Competition” under Part 1, Item 1 of this Annual Report on Form 10-K for a general discussion of the competitive conditions in each of our businesses. 16 Table of Contents Competitors for our real estate transaction services include rental listing service providers, real estate brokers, real estate investors, mortgage lenders, mortgage brokers, financial institutions, and title and settlement service providers.
Because homes represent significant investments, and many customer decisions regarding homes are data-driven, our ability to attract and retain customers and real estate partners to our products and services is dependent upon our ability to publish, and reputation for publishing, accurate and complete residential real estate information, including the output of proprietary models, through our mobile applications and websites.
Because homes represent significant investments, and many customer decisions regarding homes are data-driven, our ability to attract and retain customers and real estate partners to our products and services is dependent upon our ability to publish, and reputation for publishing, accurate and complete residential real estate information, including the output of 15 Table of Contents proprietary models, through our mobile applications and websites.
Refer to Note 13 of our Notes to Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K for additional information on our Zillow Home Loans warehouse financing facilities.
Refer to Note 11 of our Notes to Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K for additional information on our Zillow Home Loans warehouse financing facilities.
In addition, if we add, eliminate or change any of our processing vendors, we may experience processing disruptions and increased operating expenses, either of which could harm our business, financial condition, or results of operations. 20 Table o f Contents The payment methods that we offer also subject us to potential fraud and theft by criminals, who are becoming increasingly sophisticated, seeking to obtain unauthorized access to or exploit weaknesses that may exist in the payment systems.
In addition, if we add, eliminate or change any of our processing vendors, we may experience processing disruptions and increased operating expenses, either of which could harm our business, financial condition, or results of operations. 19 Table of Contents The payment methods that we offer also subject us to potential fraud and theft by criminals, who are becoming increasingly sophisticated, seeking to obtain unauthorized access to or exploit weaknesses that may exist in the payment systems.
Refer to Note 13 of our Notes to Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K for additional information on our warehouse and loan repurchase facilities.
Refer to Note 11 of our Notes to Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K for additional information on our warehouse and loan repurchase facilities.
Any such adverse impacts could threaten Zillow Home Loans’ ability to continue operations. Servicing Our Debt Requires a Significant Amount of Cash, and We May Not Have Sufficient Cash Flow From Our Business to Pay Our Substantial Debt, Settle Conversions of Our Convertible Senior Notes, or Repurchase Our Convertible Senior Notes Upon a Fundamental Change.
Any such adverse impacts could threaten Zillow Home Loans’ ability to continue operations. 31 Table of Contents Servicing Our Debt Requires a Significant Amount of Cash, and We May Not Have Sufficient Cash Flow From Our Business to Pay Our Substantial Debt, Settle Conversions of Our Convertible Senior Notes, or Repurchase Our Convertible Senior Notes Upon a Fundamental Change.
Our business model depends on our ability to continue to attract customers to our mobile applications, websites, real estate services and other services and enhance their engagement with our products and services in a cost-effective manner.
Our business model depends on our ability to continue to attract users to our mobile applications, websites, real estate services and other services and enhance their engagement with our products and services in a cost-effective manner.
In addition, our ability to be successful depends, in part, on attracting customers who have historically shopped for or bought, sold, rented, or financed their homes through more traditional channels.
In addition, our ability to be successful depends, in part, on attracting users who have historically shopped for or bought, sold, rented, or financed their homes through more traditional channels.
In order to protect our technologies and strategic business and operations information, we rely in part on proprietary rights agreements with our employees, independent contractors, vendors, licensees, and other third parties.
In order to protect our technologies and strategic business and operations information, we rely in part on proprietary rights agreements and other assignment provisions with our employees, independent contractors, vendors, licensees, and other third parties.
The seasonal variance and cyclical nature of home sales may contribute to the variability of our revenue and results of operations for our Mortgages segment, in particular, which seasonality may be masked by segment growth.
The seasonal variance and cyclical nature of home sales may contribute to the variability of our revenue and results of operations for our Mortgages business, in particular, which seasonality may be masked by business growth.
For example, higher interest rates, increased competition from new and existing market participants, reductions in the overall level of refinancing activity or slow growth in the level of new home purchase activity can impact our ability to continue to grow our loan production volumes, and we may be forced to accept lower margins in our respective businesses in order to continue to compete and keep our volume of activity consistent with past or projected levels.
For example, volatile interest rates, affordability challenges, increased competition from new and existing market participants, reductions in the overall level of refinancing activity or slow growth in the level of new home purchase activity can impact our ability to continue to grow our loan production volumes, and we may be forced to accept lower margins in our respective businesses in order to continue to compete and keep our volume of activity consistent with past or projected levels.
The loss of existing relationships with MLSs and other listing providers, whether due to termination of agreements, loss of MLS memberships, or otherwise, changes to our rights to use or timely access listing data or an inability to continue to add new listing providers or changes to the way real estate information is shared, may negatively impact our listing data quality.
The loss of existing relationships with real estate listing providers, whether due to termination of agreements, loss of MLS memberships, or otherwise, changes to our rights to use or timely access listing data or an inability to continue to add new listing providers or changes to the way real estate information is shared, may negatively impact our listing data quality.
This could markedly decrease the quantity and quality of the sale and rental data we provide, reduce customer confidence in our products and services and cause customers to go elsewhere for real estate listings and information, which could severely harm our business, results of operations and financial condition.
This could markedly decrease the quantity and quality of the for sale and rental listing data and other real estate information that we provide, reduce customer confidence in our products and services and cause customers to go elsewhere for real estate listings and information, which could severely harm our business, results of operations and financial condition.
Our ability to monitor these vendors’ information security practices is limited and these vendors may not have adequate information security measures in place. If our vendors experience a security incident or other interruption, we could experience adverse consequences, including harm to our business, results of operations and financial condition.
Our ability to monitor these vendors’ information security practices is limited and these vendors may not have adequate information security measures in place. If our 21 Table of Contents vendors experience a security incident or other interruption, we could experience adverse consequences, including harm to our business, results of operations and financial condition.
The terms of these warehouse financing agreements and related financing documents require Zillow Home Loans to comply with a number of customary financial and other covenants, such as maintaining certain levels of liquidity, tangible net worth, leverage ratios, net income and adequate insurance coverage.
The terms of these warehouse financing agreements and related financing documents require Zillow Home Loans to comply with a number of customary financial and 32 Table of Contents other covenants, such as maintaining certain levels of liquidity, tangible net worth, leverage ratios, net income and adequate insurance coverage.
Certain of our hedges related to newly originated mortgages may be subject to margin calls, which, if made, could adversely impact our liquidity. There may be periods during which Zillow Home Loans elects not to hedge some or all of its interest rate risk.
Certain of 25 Table of Contents our hedges related to newly originated mortgages may be subject to margin calls, which, if made, could adversely impact our liquidity. There may be periods during which Zillow Home Loans elects not to hedge some or all of its interest rate risk.
Any of our future or existing competitors may introduce different services or solutions that attract customers or provide services or solutions similar to our own but with better branding or marketing resources.
Any of our future or existing competitors may introduce different services or solutions that attract users or provide services or solutions similar to our own but with better branding or marketing resources.
For example, Zillow Home Loans’ failure to comply with these laws, regulations and rules may result in increased costs of doing business, changes to the way we operate our business, reduced payments by 17 Table o f Contents borrowers, modification of the original terms of loans, permanent forgiveness of debt, delays in the foreclosure process, forfeiture or refunds on fees collected on loan originations, increased servicing advances, litigation, reputational damage, enforcement actions, and repurchase and indemnification obligations.
For example, Zillow Home Loans’ failure to comply with these laws, regulations and rules may result in increased costs of doing business, changes to the way we operate our business, reduced payments by borrowers, modification of the original terms of loans, permanent forgiveness of debt, delays in the foreclosure process, forfeiture or refunds on fees collected on loan originations, increased servicing advances, litigation, reputational damage, enforcement actions, and repurchase and indemnification obligations.
The capped call transactions are expected generally to reduce the potential dilution in connection with the conversion of the 2024 Notes or 2026 Notes and/or offset any cash payments we are required to make in excess of the principal amount of converted notes, as the case may be.
The capped call transactions are expected generally to reduce 36 Table of Contents potential dilution in connection with the conversion of the 2024 Notes or 2026 Notes and/or offset any cash payments we are required to make in excess of the principal amount of converted notes, as the case may be.
To provide these listings and this information, we maintain relationships with real estate brokerages, real estate listing aggregators, multiple listing services (“MLSs”), property management companies, home builders, other third-party listing providers and homeowners and their real estate agents to include listing data in our services.
To provide these listings and this information, we maintain relationships with real estate brokerages, real estate listing aggregators, multiple listing services (“MLSs”), property management companies, home builders, other third-party listing providers and homeowners and their real estate agents to include listing data in our services (collectively, “real estate listing providers”).
The loss of any of our senior management or key employees could materially 19 Table o f Contents adversely affect our ability to build on the efforts they have undertaken and to execute our business plan, and we may not be able to find adequate replacements. The market for highly skilled personnel is very competitive.
The loss of any of our senior management or key employees could materially adversely affect our ability to build on the efforts they have undertaken and to execute our business 18 Table of Contents plan, and we may not be able to find adequate replacements. The market for highly skilled personnel is very competitive.
At the same time, we also expect certain of our costs to increase in future periods as we continue to expend substantial financial resources to develop and expand our business, including with respect to: • expansion of Zillow Home Loans; • product and services development; • sales and marketing; • technology infrastructure; • strategic opportunities, including commercial relationships and acquisitions; and • general and administrative expenses, including legal and accounting expenses related to being a public company.
At the same time, we also expect certain of our costs to increase in future periods as we continue to expend substantial financial resources to develop and expand our business, which may include: • expansion of Zillow Home Loans; • product and services development; • sales and marketing; • technology infrastructure; • strategic opportunities, including commercial relationships and acquisitions; and • general and administrative expenses, including legal and accounting expenses related to being a public company.
We Compete in a Dynamic Industry, and We May Invest Significant Resources to Pursue Strategies and Develop New Products and Services That Do Not Prove Effective. The industry for residential real estate transaction services, technology, information marketplaces and advertising is dynamic, and the expectations and behaviors of customers and professionals shift constantly and rapidly.
We Compete in a Dynamic Industry, and We May Invest Significant Resources to Pursue Strategies, Develop New Products and Services and Expand Existing Products Into New Markets That Do Not Prove Effective. The industry for residential real estate transaction services, technology, information marketplaces and advertising is dynamic, and the expectations and behaviors of customers and professionals shift constantly and rapidly.
Risks Related to Our Business and Industry Our Business and Operating Results Have and May Continue to Be Impacted by the Health of the United States Residential Real Estate Industry and May Be Negatively Affected by Downturns in This Industry and General Economic Conditions.
Risks Related to Our Business and Industry Our Business and Operating Results Have and May Continue to Be Impacted by the Health of the United States Residential Real Estate Industry and May Be Negatively Affected by Downturns or Significant Changes in This Industry and General Economic Conditions.
In addition, we continually evaluate and utilize various pricing and value delivery strategies in order to better align our revenue opportunities with the growth in usage of our mobile and web platforms and customer transactions. For example, we offer a pay for performance pricing model called “Flex” for Premier Agent advertising services in certain markets.
In addition, we continually evaluate and utilize various pricing and value delivery strategies in order to better align our revenue opportunities with the growth in usage of our mobile and web platforms and customer transactions. For example, we offer a pay for performance pricing model called “Flex” for Premier Agents in certain markets.
Our inability to conduct our lending operations in compliance with fair lending laws and regulations may expose Zillow Home Loans to regulatory action, litigation, and reputational damage, among other things. Our Mortgages Segment is Impacted by Interest Rates. Changes in Prevailing Interest Rates May Have an Adverse Effect on the Financial Results for Our Mortgages Segment.
Our inability to conduct our lending operations in compliance with fair lending laws and regulations may expose Zillow Home Loans to regulatory action, litigation, and reputational damage, among other things. Our Mortgages Business is Impacted by Interest Rates. Changes in Prevailing Interest Rates May Have an Adverse Effect on Our Financial Results.
In addition, patent or other intellectual property disputes or litigation may result in significant settlement costs. Any of these events could harm our business, results of operations, financial condition and reputation. 25 Table o f Contents In addition, we use open source software in our services and will continue to use open source software in the future.
In addition, patent or other intellectual property disputes or litigation may result in significant settlement costs. Any of these events could harm our business, results of operations, financial condition and reputation. 26 Table of Contents In addition, we use open source software in our services and will continue to use open source software in the future.
Our production and customer direct lending operations are also subject to overall market factors that can impact our ability to grow our loan production volume.
Our production and consumer direct lending operations are also subject to overall market factors that can impact our ability to grow our loan production volume.
The occurrence of a significant natural disaster or other catastrophic event such as a pandemic, health crisis, earthquake, hurricane, windstorm, fire, flood, power loss, telecommunications failure, cyber-attack, war, civil unrest, terrorist attack or other similar event, may damage or destroy our properties, disrupt our operations, impair local and regional real estate markets or economies and negatively impact our business, results of operations and financial condition.
The occurrence of a significant natural disaster or other catastrophic event such as a pandemic, health crisis, earthquake, hurricane, windstorm, fire, flood, power loss, telecommunications failure, cyber-attack, geopolitical instability, war, civil unrest, terrorist attack or other similar event, may disrupt our operations, impair local and regional real estate markets or economies and negatively impact our business, results of operations and financial condition.
In either case, our mortgage origination business and the financial results for our Mortgages segment could be harmed. Zillow Home Loans uses derivatives and other instruments to reduce exposure to adverse changes in interest rates. Hedging interest rate risk is a complex process, requiring sophisticated models and constant monitoring.
In either case, our mortgage origination business and our financial results could be harmed. Zillow Home Loans uses derivatives and other instruments to reduce exposure to adverse changes in interest rates. Hedging interest rate risk is a complex process, requiring sophisticated models and constant monitoring.
Any or all of these consequences could negatively impact our ability to attract new customers and increase engagement by existing customers, cause existing customers to curtail or stop use of our products or services or close their accounts, cause existing real estate partners to cancel their contracts, thereby harming our business, results of operations and financial condition.
Any or all of these consequences could negatively impact our ability to attract new customers and increase engagement by existing customers, prevent or cause existing customers to stop using our products or services or close their accounts, or cause existing real estate partners to cancel their contracts, thereby harming our business, results of operations and financial condition.
A margin call would require the borrower to repay a portion of the outstanding borrowings. A large, unanticipated margin call could have a material effect on our liquidity. At December 31, 2022, $37 million of our borrowings under our warehouse financing agreements was at variable rates of interest, thereby exposing us to interest rate risk.
A margin call would require the borrower to repay a portion of the outstanding borrowings. A large, unanticipated margin call could have a material effect on our liquidity. At December 31, 2023, $93 million of our borrowings under our warehouse financing agreements was at variable rates of interest, thereby exposing us to interest rate risk.
If Zillow Home Loans is Unable to Obtain and Maintain Sufficient Financing to Fund Its Origination of Mortgages or is Unable to Resell Mortgages on the Secondary Market, Our Mortgages Business and the Mortgages Segment Financial Results May Suffer.
Risks Related to Our Mortgages Business If Zillow Home Loans is Unable to Obtain and Maintain Sufficient Financing to Fund Its Origination of Mortgages or is Unable to Resell Mortgages on the Secondary Market, Our Mortgages Business and Financial Results May Suffer.
Obligations related to data privacy and security are quickly changing, becoming increasingly stringent, and creating regulatory uncertainty. Additionally, these obligations may be subject to differing applications and interpretations, which may be inconsistent or conflict among jurisdictions.
Obligations related to data privacy and security (and consumers’ data privacy expectations) are quickly changing, becoming increasingly stringent, and creating uncertainty. Additionally, these obligations may be subject to differing applications and interpretations, which may be inconsistent or conflict among jurisdictions.
We also have operations outside of the United States, including in Canada, and Canada’s Personal Information Protection and Electronic Documents Act 28 Table o f Contents (“PIPEDA”) imposes strict requirements for processing personal data and there are also various provincial and territorial privacy laws that govern the protection of personal data.
We also have operations outside of the United States, including in Canada, and Canada’s Personal Information 29 Table of Contents Protection and Electronic Documents Act (“PIPEDA”) imposes strict requirements for processing personal data and there are also various provincial and territorial privacy laws that govern the protection of personal data.
Risks Related to Our Financial Position We Incurred Significant Operating Losses in the Past and We May Not Be Able to Generate Sufficient Revenue to Be Profitable Over the Long Term. We have incurred significant net operating losses in the past and, as of December 31, 2022 , we had an accumulated deficit of $1.6 billion.
Risks Related to Our Financial Position We Incurred Significant Operating Losses in the Past and We May Not Be Able to Generate Sufficient Revenue to Be Profitable Over the Long Term. We have incurred significant net operating losses in the past and, as of December 31, 2023 , we had an accumulated deficit of $1.8 billion.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeLocation Purpose Approximate Square Feet (1) Principal Lease Expiration Dates Seattle, Washington Corporate headquarters for Zillow Group 264,745 2032 San Francisco, California General office space 92,562 2032 Irvine, California General office space 80,952 2027 New York, New York General office space 76,199 2030 Overland Park, Kansas General office space 70,373 2024 Atlanta, Georgia General office space 51,822 2025 (1) Excludes square footage of subleased space.
Biggest changeLocation Purpose Approximate Square Feet (1) Principal Lease Expiration Dates Seattle, Washington (2) Corporate headquarters for Zillow Group 267,290 2032 Overland Park, Kansas General office space 70,373 2024 Irvine, California General office space 60,714 2027 Atlanta, Georgia General office space 51,822 2025 New York, New York General office space 49,159 2030 San Francisco, California General office space 26,646 2032 (1) Excludes square footage of subleased space.
In addition, we lease office space in several other locations in the United States and Canada. See Note 2 and Note 12 of Part II, Item 8 of this Annual Report on Form 10-K for more information about our lease commitments.
See Note 2 and Note 10 of Part II, Item 8 of this Annual Report on Form 10-K for more information about our lease commitments.
Item 2. Properties. We have various operating leases for office space which are summarized as of December 31, 2022 in the table below. Given the permanent move to a flexible workforce, our operating leases no longer support specific reportable segments. We believe that our facilities are adequate for our current needs.
Item 2. Properties. We have various operating leases for office space which are summarized as of December 31, 2023 in the table below. We believe our facilities are adequate for our current needs.
Added
(2) During the year ended December 31, 2023, we amended our existing office space lease for our corporate headquarters in Seattle, Washington to provide the landlord the option to terminate a portion of our lease prior to the original lease termination date. In December 2023, our landlord exercised their option to partially terminate our lease, effective June 30, 2024.
Added
We have ceased use of all 151,275 square feet of terminated space, included in the table above, as of December 31, 2023. In addition, we lease office space in several other locations, primarily in the United States.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings. For information regarding legal proceedings in which we are involved, see Note 18 under the subsection titled “Legal Proceedings” in our Notes to Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K.
Biggest changeItem 3. Legal Proceedings. For information regarding legal proceedings in which we are involved, see Note 16 under the subsection titled “Legal Proceedings” in our Notes to Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe Repurchase Authorizations do not have an expiration date. 39 Table o f Contents Performance Graph The following graph compares our cumulative total shareholder return on Zillow Group’s common and capital stock with the Nasdaq Composite Index and the RDG Internet Composite Index.
Biggest changeDuring the three months ended December 31, 2023, we repurchased $58 million aggregate principal amount of convertible senior notes for $56 million in cash, plus accrued interest, which reduced the remaining dollar value available under the Repurchase Authorizations. 42 Table of Contents Performance Graph The following graph compares our cumulative total shareholder return on Zillow Group’s common and capital stock with the Nasdaq Composite Index and the RDG Internet Composite Index.
Holders of Record As of February 9, 2023, there were 316, three, and 131 holders of record of our Class A common stock, our Class B common stock, and our Class C capital stock, respectively.
Holders of Record As of February 7, 2024, there were 291, three, and 154 holders of record of our Class A common stock, our Class B common stock, and our Class C capital stock, respectively.
Recent Sales of Unregistered Securities and Use of Proceeds from Registered Securities Recent Sales of Unregistered Securities There were no sales of unregistered securities during the three months ended December 31, 2022. 38 Table o f Contents Purchases of Equity Securities by the Issuer The following table summarizes our Class A common stock and Class C capital stock repurchases during the three months ended December 31, 2022 (in millions, except share data which are presented in thousands, and per share amounts): Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (1) Period Class A common stock Class C capital stock Class A common stock Class C capital stock October 1 - October 31, 2022 — — $ — $ — — $ 674 November 1 - November 30, 2022 592 3,530 34.23 34.93 4,122 531 December 1 - December 31, 2022 111 688 37.11 37.57 799 500 Total 703 4,218 4,921 (1) On December 2, 2021, the Board of Directors authorized a stock repurchase program granting the authority to repurchase up to $750 million of our Class A common stock, Class C capital stock or a combination of both.
Recent Sales of Unregistered Securities and Use of Proceeds from Registered Securities Recent Sales of Unregistered Securities There were no sales of unregistered securities during the three months ended December 31, 2023. 41 Table of Contents Purchases of Equity Securities by the Issuer The following table summarizes our Class A common stock and Class C capital stock repurchases during the three months ended December 31, 2023 (in millions, except share data which are presented in thousands, and per share amounts): Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (1) Period Class A common stock Class C capital stock Class A common stock Class C capital stock October 1 - October 31, 2023 365 1,574 $ 37.59 $ 37.96 1,939 $ 840 November 1 - November 30, 2023 72 326 35.60 36.23 398 770 December 1 - December 31, 2023 — — — — — 770 Total 437 1,900 2,337 (1) On December 2, 2021, the Board of Directors authorized a stock repurchase program granting the authority to repurchase up to $750 million of our Class A common stock, Class C capital stock or a combination thereof.
On May 4, 2022, the Board of Directors authorized the repurchase of up to an additional $1 billion (together the “Repurchase Authorizations”) of our Class A common stock, Class C capital stock or a combination thereof.
On May 4, 2022, the Board of Directors authorized the repurchase of up to an additional $1 billion of our Class A common stock, Class C capital stock or a combination thereof. On November 1, 2022, the Board of Directors further expanded these authorizations to allow for the repurchase of a portion of our outstanding convertible senior notes.
Removed
On November 1, 2022, the Board of Directors further expanded the Repurchase Authorizations to allow for the repurchase of a portion of our outstanding convertible senior notes. There were no repurchases of convertible senior notes during the year ended December 31, 2022.
Added
On July 31, 2023, the Board authorized the repurchase of up to an additional $750 million of Class A common stock, Class C capital stock, outstanding convertible senior notes or a combination thereof (together with the previous authorizations, “Repurchase Authorizations”). The Repurchase Authorizations do not have an expiration date.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeCosts and Expenses, Gross Profit and Other Items % of Total Revenue Year Ended December 31, 2021 to 2022 2020 to 2021 Year Ended December 31, 2022 2021 2020 $ Change % Change $ Change % Change 2022 2021 2020 (in millions, except percentages) Cost of revenue $ 367 $ 323 $ 255 $ 44 14 % $ 68 27 % 19 % 15 % 16 % Gross profit 1,591 1,809 1,369 (218) (12) 440 32 81 85 84 Operating expenses: Sales and marketing 664 715 535 (51) (7) 180 34 34 34 33 Technology and development 498 421 324 77 18 97 30 25 20 20 General and administrative 498 414 324 84 20 90 28 25 19 20 Restructuring costs 24 10 77 14 140 (67) (87) 1 — 5 Acquisition-related costs — 9 — (9) N/A 9 N/A — — — Integration costs — 1 — (1) N/A 1 N/A — — — Total operating expenses 1,684 1,570 1,260 114 7 310 25 86 74 78 Gain (loss) on extinguishment of debt — (17) 1 17 100 (18) (1800) — (1) — Other income, net 43 7 25 36 514 (18) (72) 2 — 2 Interest expense (35) (128) (138) 93 73 10 (7) (2) (6) (8) Income tax benefit (expense) (3) 1 8 (4) (400) (7) (88) — — — 49 Table o f Contents Cost of Revenue Cost of revenue consists of expenses related to operating our mobile applications and websites, including associated headcount-related expenses, such as salaries, benefits, bonuses and share-based compensation expense, as well as revenue-sharing costs related to our commercial business relationships, depreciation expense, and costs associated with hosting our mobile applications and websites.
Biggest changeThe 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): Year Ended December 31, 2023 2022 Reconciliation of Adjusted EBITDA to Net Loss: Net loss $ (158) $ (101) Loss from discontinued operations, net of income taxes — 13 Income taxes 4 3 Other income, net (151) (43) Depreciation and amortization 187 150 Share-based compensation 451 433 Impairment and restructuring costs 19 24 Acquisition-related costs 4 — Gain on extinguishment of debt (1) — Interest expense 36 35 Adjusted EBITDA $ 391 $ 514 50 Table of Contents Costs and Expenses, Gross Profit and Other Items % of Total Revenue Year Ended December 31, 2022 to 2023 Year Ended December 31, 2023 2022 $ Change % Change 2023 2022 (in millions, except percentages) Cost of revenue $ 421 $ 367 $ 54 15 % 22 % 19 % Gross profit 1,524 1,591 (67) (4) 78 81 Operating expenses: Sales and marketing 658 664 (6) (1) 34 34 Technology and development 560 498 62 12 29 25 General and administrative 553 498 55 11 28 25 Impairment and restructuring costs 19 24 (5) (21) 1 1 Acquisition-related costs 4 — 4 N/A — — Total operating expenses 1,794 1,684 110 7 92 86 Gain on extinguishment of debt 1 — 1 N/A — — Other income, net 151 43 108 251 8 2 Interest expense (36) (35) (1) (3) (2) (2) Income tax expense (4) (3) (1) (33) — — Cost of Revenue Cost of revenue consists of expenses related to operating our mobile applications and websites, including associated headcount-related expenses, such as salaries, benefits, bonuses and share-based compensation expense, as well as revenue-sharing costs related to our commercial business relationships, depreciation expense, and costs associated with hosting our mobile applications and websites.
Some of these limitations are: • Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs; • Adjusted EBITDA does not reflect the results of discontinued operations; • 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 expenditures or contractual commitments; • Adjusted EBITDA does not reflect impairment and restructuring costs; • Adjusted EBITDA does not reflect acquisition-related costs; • Adjusted EBITDA does not reflect gain (loss) on extinguishment of debt; • Adjusted EBITDA does not reflect interest expense or other income (expense), net; • Adjusted EBITDA does not reflect income taxes; and • Other companies, including companies in our own industry, may calculate Adjusted EBITDA differently from the way we do, limiting its usefulness as a comparative measure.
Some of these limitations are: • Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs; • Adjusted EBITDA does not reflect the results of discontinued operations; • 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 expenditures or contractual commitments; • Adjusted EBITDA does not reflect impairment and restructuring costs; • Adjusted EBITDA does not reflect acquisition-related costs; • Adjusted EBITDA does not reflect the gain on extinguishment of debt; • Adjusted EBITDA does not reflect interest expense or other income, net; • Adjusted EBITDA does not reflect income taxes; and • Other companies, including companies in our own industry, may calculate Adjusted EBITDA differently from the way we do, limiting its usefulness as a comparative measure.
We assess the impairment of goodwill at the reporting unit level on an annual basis, in our fourth quarter, or whenever events or changes in circumstances indicate that goodwill may be impaired. In our evaluation of goodwill, we first perform a qualitative assessment to determine whether the carrying value of each reporting unit is greater than its fair value.
We assess the impairment of goodwill at the reporting unit level on an annual basis, in our fourth quarter, or whenever events or changes in circumstances indicate that goodwill may be impaired. In our evaluation of goodwill, we first perform a qualitative assessment to determine whether the carrying value of our reporting unit is greater than its fair value.
Technology and Development Technology and development expenses consist of headcount-related expenses, including salaries, benefits, bonuses and share-based compensation expense for individuals engaged in the design, development and testing of our products, mobile applications and websites and the tools and applications that support our products. Technology and development expenses also include equipment and maintenance costs and depreciation expense.
Technology and Development Technology and development expenses consist of headcount-related expenses, including salaries, benefits, bonuses and share-based compensation expense for individuals engaged in the design, development and testing of our products, mobile applications and websites and the tools and applications that support our products. Technology and development expenses also include equipment and software maintenance costs and depreciation expense.
If it is more likely than not that the carrying value of a reporting unit is greater than its fair value, we perform a quantitative assessment and an impairment charge is recorded in our statements of operations for the excess of carrying value of the reporting unit over its fair value.
If it is more likely than not that the carrying value of the reporting unit is greater than its fair value, we perform a quantitative assessment and an impairment charge is recorded in our consolidated statements of operations for the excess of carrying value of the reporting unit over its fair value.
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. We offer these products and services through our Premier Agent program.
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.
Therefore, we consider these to be our critical accounting policies and estimates. Accounting for Certain Revenue Accrued Revenue. We accrue revenue for certain of our products, primarily our Premier Agent Flex, rentals pay per lease (“Zillow Lease Connect”) and StreetEasy Experts offerings.
Therefore, we consider these to be our critical accounting estimates. Accounting for Certain Revenue Accrued Revenue. We accrue revenue for certain of our products, primarily our Premier Agent Flex, rentals pay per lease (“Zillow Lease Connect”) and StreetEasy Experts offerings.
Rentals revenue also includes revenue generated from our rental applications product, through which potential renters can submit applications to multiple properties for a flat service fee.
Rentals revenue also includes revenue generated from our rental applications product, through which potential renters can submit applications to multiple properties for a flat service fee. Mortgages.
StreetEasy revenue includes advertising services sold to real estate professionals serving the New York City for-sale market primarily on a cost per listing or performance fee basis.
StreetEasy for-sale revenue includes advertising services sold to real estate professionals serving the New York City for sale market primarily on a cost per property or performance fee basis.
ShowingTime revenue is primarily generated by Appointment Center, a software-as-a-service and call center solution allowing real estate agents, brokerages and multiple listing services to efficiently schedule real estate viewing appointments on behalf of their customers. Appointment Center services also include call center specialists who provide scheduling support to customers.
Revenue generated through ShowingTime+ includes ShowingTime revenue, which is primarily generated by Appointment Center, a software-as-a-service and call center solution allowing real estate agents, brokerages and multiple listing services to efficiently schedule real estate viewing appointments on behalf of their customers. Appointment Center services also include call center specialists who provide scheduling support to customers.
We exercise judgment in determining whether it is more likely than not that the carrying value of each reporting unit is greater than its fair value.
We exercise judgment in determining whether it is more likely than not that the carrying value of our reporting unit is greater than its fair value.
We believe that cash from operations and cash and cash equivalents and investment balances will be sufficient to meet our ongoing operating activities, working capital, capital expenditures and other capital requirements for at least the next 12 months.
We believe that cash from operations and cash and cash equivalents and investment balances will be sufficient to meet our ongoing operating activities, working capital, capital expenditures, strategic acquisitions and investments and other capital requirements for at least the next 12 months.
When determining the grant date fair value of share-based awards, management considers whether an adjustment is required to the observable market price or volatility of our Class C capital stock used in the valuation as a result of material non-public information. Risk-free interest rate. Risk-free interest rates are derived from U.S. Treasury securities as of the option award’s grant date.
When determining the grant date fair value of share-based awards, management also considers whether an adjustment is required to the observable market price or volatility of our Class C capital stock used in the valuation as a result of material non-public information. Risk-free interest rate. Risk-free interest rates are derived from U.S.
Recently Adopted Accounting Standards and Recently Issued Accounting Standards Not Yet Adopted For information about our recently adopted accounting standards and recently issued accounting standards not yet adopted, see Note 2 of the accompanying Notes to Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K. 64 Table o f Contents
Recently Adopted Accounting Standards and Recently Issued Accounting Standards Not Yet Adopted For information about our recently adopted accounting standards and recently issued accounting standards not yet adopted, see Note 2 of the accompanying Notes to Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K. 61 Table of Contents
The weighted-average expected life of the option awards is estimated based on our historical exercise data. We will continue to use judgment in evaluating the expected volatility expected terms utilized for our share-based compensation expense calculations on a prospective basis.
The weighted-average expected life of the option awards is estimated based on our historical exercise data. 60 Table of Contents We will continue to use judgment in evaluating the expected volatility and expected terms utilized for our share-based compensation expense calculations on a prospective basis.
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 interest rate lock commitments 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.
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 interest rate lock commitments 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. • Rentals revenue increased $83 million, or 30%.
The following events and circumstances are considered when performing the qualitative assessment: • Macroeconomic conditions, industry and market considerations, and entity-specific conditions, such as changes in cost factors and financial performance; • The amount by which the fair values of each reporting unit exceeded their carrying values as of the date of the most recent quantitative assessment; • Changes in interest rates since the most recent quantitative assessment; • Changes in our business or strategy since our most recent quantitative assessment; • The current reporting unit forecasts as compared to the forecasts included in the most recent quantitative assessment; • Changes in our market capitalization and overall enterprise value.
The following events and circumstances are considered when performing the qualitative assessment: • Macroeconomic conditions, industry and market considerations, and entity-specific conditions, such as changes in cost factors and financial performance; • The amount by which the fair value of the reporting unit exceeded the carrying value as of the date of the most recent quantitative assessment; • Changes in interest rates since the most recent quantitative assessment; • Changes in our business or strategy since our most recent qualitative assessment; • Changes in our market capitalization and overall enterprise value.
Contractual Obligations and Other Commitments Convertible Senior Notes - Includes the aggregate principal amounts of the 2024 Notes, 2025 Notes and 2026 Notes due on their contractual maturity dates, as well as the associated coupon interest. As of December 31, 2022, we have an outstanding aggregate principal amount of $1.7 billion, none of which is payable within 12 months.
Contractual Obligations and Other Commitments Convertible Senior Notes - Includes the aggregate principal amounts of the 2024 Notes, 2025 Notes and 2026 Notes due on their contractual maturity dates, as well as the associated coupon interest. As of December 31, 2023, we have an outstanding aggregate principal amount of $1.6 billion, $608 million of which is payable within 12 months.
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 in total and for each segment has limitations as an analytical tool, and you should not consider these measures in isolation or as a substitute for analysis of our results as reported under GAAP.
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 this measure in isolation or as a substitute for analysis of our results as reported under GAAP.
Cash flow estimates are by their nature subjective and include assumptions regarding factors such as recent and forecasted operating performance, revenue 62 Table o f Contents trends and operating margins. These estimates could also be adversely impacted by changes in federal, state, or local regulations, economic downturns or developments, pandemics such as COVID-19, or other market conditions affecting our industry.
Cash flow estimates are by their nature subjective and include assumptions regarding factors such as recent and forecasted operating performance, revenue trends and operating margins. These estimates could also be adversely impacted by changes in federal, state, or local regulations, economic downturns or developments, or other market conditions affecting our industry.
Rentals revenue includes advertising sold to property managers, landlords and other rental professionals on a cost per lead, click, lease, listing or impression basis or for a fixed fee for certain advertising packages through both Zillow and StreetEasy.
Rentals revenue includes advertising and a suite of tools sold to property managers, landlords and other rental professionals on a cost per lead, lease, listing or impression basis or for a fixed fee for certain advertising packages through both the Zillow and StreetEasy brands.
For additional information regarding the restructuring, see Note 3 of our Notes to Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K.
For additional information regarding impairment costs, see Note 10 of our Notes to Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K.
The following table presents selected cash flow data for the periods presented (in millions): Year Ended December 31, 2022 2021 2020 Cash Flow Data: Net cash provided by (used in) operating activities $ 4,504 $ (3,177) $ 423 Net cash provided by (used in) investing activities (1,533) 1,088 (1,038) Net cash provided by (used in) financing activities (4,341) 3,148 1,163 Cash Flows Provided By (Used In) Operating Activities Our operating cash flows result primarily from cash received from real estate professionals, rental professionals, mortgage professionals, builders and brand advertisers, as well as cash received from sales of mortgages originated by Zillow Home Loans and, prior to September 30, 2022, from customers for sales of homes through Zillow Offers.
The following table presents selected cash flow data for the periods presented (in millions): Year Ended December 31, 2023 2022 Cash Flow Data: Net cash provided by operating activities $ 354 $ 4,504 Net cash provided by (used in) investing activities 25 (1,533) Net cash used in financing activities (352) (4,341) Cash Flows Provided By Operating Activities Our operating cash flows result primarily from cash received from real estate professionals, rental professionals, mortgage professionals, builders and brand advertisers, as well as cash received from sales of mortgages originated by Zillow Home Loans and, prior to September 30, 2022, from customers for sales of homes through Zillow Offers.
This was primarily driven by a net loss of $101 million, adjusted by share-based compensation expense of $451 million, depreciation and amortization expense of $157 million, amortization of contract cost assets of $30 million, amortization of debt discount and debt issuance costs of $26 million, amortization of right of use assets of $23 million, a loss on extinguishment of debt of $21 million and an inventory valuation adjustment of $9 million.
This was primarily driven by a net loss of $101 million, adjusted by share-based compensation expense of $451 million, depreciation and amortization expense of $157 million, amortization of contract cost assets of $30 million, amortization of debt discount and debt issuance costs of $26 million, amortization of right of use assets of $23 million, a loss on extinguishment of debt of $21 million, other adjustments to reconcile net loss to net cash provided by operating activities of $15 million, and an inventory valuation adjustment of $9 million.
Connections are delivered when customer contact information is provided to Premier Agent partners. Connections are provided as part of our suite of advertising services for Premier Agent partners; we do not charge a separate fee for these customer leads. We also offer a pay for performance pricing model called “Flex” for Premier Agent services in certain markets to select partners.
Connections are provided as part of our suite of advertising services for Premier Agent partners; we do not charge a separate fee for these customer leads. Our pay for performance pricing model is called “Flex” and is available in certain markets to select partners.
Prior to the wind down of Zillow Offers operations, our primary uses of cash from operating activities also included payments for homes purchased through Zillow Offers. For the year ended December 31, 2022, net cash provided by operating activities was $4.5 billion.
Prior to the wind down of Zillow Offers operations, our primary uses of cash from operating activities also included payments for homes purchased through Zillow Offers. For the year ended December 31, 2023, net cash provided by operating activities was $354 million.
In our Mortgages segment, we primarily generate revenue through mortgage originations and the related sale of mortgages on the secondary market through Zillow Home Loans and from advertising sold to mortgage lenders and other mortgage professionals on a cost per lead basis, including our Custom Quote and Connect services.
Mortgages revenue primarily includes revenue generated through mortgage originations and the related sale of mortgages on the secondary market through Zillow Home Loans and from advertising sold to mortgage lenders and other mortgage professionals on a cost per lead basis, including our Custom Quote and Connect services. Other. Other revenue includes revenue generated primarily by display advertising.
This was primarily the result of $1.4 billion of net purchases of investments and $140 million of purchases of property and equipment and intangible assets. For the year ended December 31, 2021, net cash provided by investing activities was $1.1 billion.
For the year ended December 31, 2022, net cash used in investing activities was $1.5 billion. This was primarily the result of $1.4 billion of net purchases of investments and $140 million of purchases of property and equipment and intangible assets.
Our actual results could differ from these estimates, and the health of the real estate market, the broader economy and the COVID-19 pandemic (including variants) have introduced significant additional uncertainty with respect to estimates, judgments and assumptions, which may materially impact our estimates.
Our actual results could differ from these estimates, and the health of the housing market and the broader economy have introduced significant additional uncertainty with respect to estimates, judgments and assumptions, which may materially impact our estimates.
For example, our revenue depends in part, on users accessing our mobile applications and websites to engage in the sale, purchase and financing of homes, including with Zillow Home Loans, and our Premier Agent revenue, rentals revenue and display revenue depend on advertisements being served to users of our mobile applications and websites.
For example, our revenue depends in part, on users accessing our mobile applications and websites to engage in the sale, purchase, renting and financing of homes, including with Zillow Home Loans, and a significant portion of our Residential revenue, Rentals revenue and Other revenue depend on advertisements being served to users of our mobile applications and websites.
For additional information on the loss on extinguishment of debt, see Note 13 of our Notes to Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K. Other Income, net Other income, net consists primarily of interest income earned on our cash, cash equivalents and investments and fair value adjustments on an outstanding warrant.
For additional information regarding these costs, see Note 3 of our Notes to Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K. 52 Table of Contents Other Income, net Other income, net consists primarily of interest income earned on our cash, cash equivalents and investments, and fair value adjustments on an outstanding warrant.
Our estimated revenue is based on a number of assumptions, which include estimating the conversion rate of a lead to a real estate transaction or qualified lease, estimating the velocity of conversions and estimating the fee amounts likely to be received.
Our estimated revenue is based on a number of assumptions, which include estimating the conversion rate of a lead to a real estate transaction or qualified lease, estimating the velocity of conversions and estimating the fee amounts likely to be received. Estimates are primarily developed based on historical data and our future expectations based on current market trends.
For additional information regarding discontinued operations, see Note 3 in our Notes to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K.
For additional information regarding the August 2022 Equity Award Actions, see Note 14 in our Notes to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K.
Income Taxes We are subject to income taxes in the United States (federal and state), Canada, and Serbia. As of December 31, 2022 and December 31, 2021, we have provided a valuation allowance against our net deferred tax assets that we believe, based on the weight of available evidence, are not more likely than not to be realized.
As of December 31, 2023 and December 31, 2022, we have provided a valuation allowance against our net deferred tax assets that we believe, based on the weight of available evidence, are not more likely than not to be realized.
We believe that the estimates, judgments and assumptions associated with accounting for certain revenue offerings, amortization period and recoverability of contract cost assets, website and software development costs, recoverability of intangible assets with definite lives and other long-lived assets, recoverability of goodwill, and share-based compensation have the greatest potential impact on our consolidated financial statements.
We believe that the estimates, judgments and assumptions associated with accounting for certain revenue offerings, website and software development costs, business combinations, including the initial and subsequent fair value measurements of assets (primarily intangible assets), liabilities and contingent consideration, recoverability of intangible assets with definite lives and other long-lived assets, recoverability of goodwill and share-based compensation have the greatest potential impact on our consolidated financial statements.
The extent to which COVID-19 (including any variants) continues to impact our results and financial position will depend on future developments, which are uncertain and difficult to predict.
The extent to which market factors impact our results and financial position will depend on future developments, which are uncertain and difficult to predict.
We believe we will meet longer-term expected future cash requirements and obligations through a combination of cash flows from operations, debt financing and equity offerings, as applicable. The cash flows related to discontinued operations have not been separated. Accordingly, the consolidated statements of cash flows and the following discussions include the results of continuing and discontinued operations.
We believe we will meet longer-term expected future cash requirements and obligations through a combination of cash flows from operations, debt financing and equity offerings, as applicable. 53 Table of Contents Summarized Cash Flow Information The cash flows related to discontinued operations have not been separated.
At December 31, 2022, our total goodwill balance was $2.4 billion. Share-Based Compensation We measure compensation expense for all share-based awards at fair value on the date of grant and recognize compensation expense over the service period for awards expected to vest.
Therefore, we concluded that it was not necessary to perform a quantitative impairment test. At December 31, 2023, our total goodwill balance was $2.8 billion. Share-Based Compensation We measure compensation expense for all share-based awards at fair value on the date of grant and recognize compensation expense over the service period for awards expected to vest.
Recoverability of Goodwill Goodwill is measured as the excess of consideration transferred for an acquired business over the net of the acquisition date fair value of the assets acquired and liabilities assumed, and is not amortized.
Changes in any of the inputs may result in a significant fair value adjustment. 59 Table of Contents Recoverability of Goodwill Goodwill is measured as the excess of consideration transferred for an acquired business over the net of the acquisition date fair value of the assets acquired and liabilities assumed, and is not amortized.
The examples noted above are not all-inclusive, and we consider other relevant events and circumstances that affect the fair value of a reporting unit in determining whether to perform a quantitative assessment. Commencing in the first quarter of 2023, our operating structure will be realigned into one reportable segment.
The examples noted above are not all-inclusive, and we consider other relevant events and circumstances that affect the fair value of the reporting unit in determining whether to perform a quantitative assessment.
For our IMT and Mortgages segments, cost of revenue also includes credit card fees and ad serving costs paid to third parties. For our Mortgages segment, cost of revenue also consists of direct costs to originate loans, including underwriting and processing costs.
Cost of revenue also includes credit card fees and ad serving costs paid to third parties, direct costs to provide our rental applications product, and direct costs to originate mortgage loans, including underwriting and processing costs.
We use the Black-Scholes-Merton option-pricing model to determine the fair value for option awards and recognize compensation expense on a straight-line basis over the option awards’ vesting period. Determining the fair value of option awards at the grant date requires judgment.
We use the Black-Scholes-Merton option-pricing model to determine the fair value for option awards and recognize compensation expense on a straight-line basis over the option awards’ vesting period. Determining the fair value of option awards at the grant date requires judgment. In valuing our option awards, we make assumptions about risk-free interest rates, dividend yields, volatility, and weighted-average expected lives.
The following table summarizes our warehouse line of credit and master repurchase agreements as of the periods presented (in millions, except interest rates): Lender Maturity Date Maximum Borrowing Capacity Outstanding Borrowings at December 31, 2022 Outstanding Borrowings at December 31, 2021 Weighted Average Interest Rate Credit Suisse AG, Cayman Islands March 17, 2023 $ 100 $ 23 $ 77 6.16 % Citibank, N.A.
The following table summarizes our warehouse line of credit and master repurchase agreements as of the periods presented (in millions, except interest rates): Lender Maturity Date Maximum Borrowing Capacity Outstanding Borrowings at December 31, 2023 Outstanding Borrowings at December 31, 2022 Weighted Average Interest Rate UBS AG (1) October 9, 2024 $ 100 $ 45 $ — 7.08 % JPMorgan Chase Bank, N.A.
Critical Accounting Policies and Estimates Our consolidated financial statements are prepared in accordance with GAAP. The preparation of these consolidated financial statements requires us to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses and related disclosures. We evaluate our estimates, judgments and assumptions on an ongoing basis.
The preparation of these consolidated financial statements requires us to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses and related disclosures. We evaluate our estimates, judgments and assumptions on an ongoing basis. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances.
June 9, 2023 100 3 17 6.18 % Comerica Bank June 24, 2023 50 11 19 6.22 % Total $ 250 $ 37 $ 113 Refer to Note 13 of our Notes to Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K for additional information on Zillow Group’s warehouse line of credit and master repurchase agreements.
Refer to Note 11 of our Notes to Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K for additional information on Zillow Group’s warehouse line of credit and master repurchase agreements.
For additional information regarding our operating leases, see Note 12 to our Notes to Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K.
For additional information regarding our purchase obligations, see Note 16 to our Notes to Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K. Critical Accounting Estimates Our consolidated financial statements are prepared in accordance with GAAP.
Expected dividend yields. Expected dividend yields are based on our historical dividend payments, which have been zero to date. Volatility. The expected volatility for our Class A common stock and Class C capital stock is estimated using our historical volatility. 63 Table o f Contents Expected term.
Treasury securities as of the option award’s grant date. Expected dividend yields. Expected dividend yields are based on our historical dividend payments, which have been zero to date. Volatility. The expected volatility for our Class C capital stock is estimated using our historical volatility. Expected term.
This was partially offset by $3 million in other adjustments to reconcile net loss to net cash provided by operating activities. Changes in operating assets and liabilities increased cash provided by operating activities by $3.9 billion.
This was partially offset by $18 million in accretion of bond discount. Changes in operating assets and liabilities increased cash provided by operating activities by $3.9 billion.
Cash Flows Provided By (Used In) Financing Activities Net cash provided by (used in) financing activities has primarily resulted from repurchases of Class A common stock and Class C capital stock, settlement of long term debt including our securitization term loans, net proceeds from equity offerings, the exercise of employee option awards, proceeds from our securitization transaction, proceeds from and repayments of borrowings on our credit facilities related to Zillow Offers and repayments of borrowings on the warehouse lines of credit and master repurchase agreements related to Zillow Home Loans. 58 Table o f Contents For the year ended December 31, 2022, cash used in financing activities was $4.3 billion, which was primarily related to $2.2 billion of repayments on borrowings of our credit facilities and 1.2 billion for the repayment of the term loans associated with the wind down of Zillow Offers operations, $947 million of cash paid for share repurchases and $76 million of net repayments on our warehouse line of credit and master repurchase agreements related to Zillow Home Loans.
For the year ended December 31, 2022, cash used in financing activities was $4.3 billion, which was primarily related to $2.2 billion of repayments on borrowings of our credit facilities and $1.2 billion for the repayment of the term loans associated with the wind down of Zillow Offers operations, $947 million of cash paid for share repurchases and $76 million of net repayments on our warehouse line of credit and master repurchase agreements related to Zillow Home Loans.
The decrease in our Custom Quote and Connect advertising revenue was primarily due to a 37% decrease in leads generated from marketing products sold to mortgage professionals.
This decrease was driven by a $28 million decrease in our Custom Quote and Connect advertising services revenue, partially offset by an $8 million increase in mortgage originations revenue. The decrease in our Custom Quote and Connect advertising revenue was primarily due to a 32% decrease in leads generated from marketing products sold to mortgage professionals.
With this pricing model, the transaction price represents variable consideration, as the amount to which we expect to be entitled varies based on the number of validated leads that convert into real estate transactions and the value of those transactions.
With these pricing models, the transaction price represents variable consideration, as the amount to which we expect to be entitled varies based on the number of leads that convert into closed real estate transactions or secured leases and the value of those transactions. As of December 31, 2023, we accrued $90 million in revenue associated with these products.
We group assets for purposes of such review at the lowest level for which identifiable cash flows of the asset group are largely independent of the cash flows of the other groups of assets and liabilities.
Recoverability is measured by comparing the carrying amount of an asset group to future undiscounted net cash flows expected to be generated. We group assets for purposes of such review at the lowest level for which identifiable cash flows of the asset group are largely independent of the cash flows of the other groups of assets and liabilities.
Refer to Note 13 of our Notes to Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K for stated interest rates and interest payment dates for each of our convertible senior notes.
Refer to Note 11 of our Notes to Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K for additional information regarding our convertible senior notes, including conversion rates, conversion and redemption dates and the related capped call transactions.
With Premier Agent Flex, Premier Agents are provided 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 within two years.
With these pricing models, our customers are provided with leads at no initial cost and pay a performance advertising fee only when a real estate transaction is closed, generally within two years, or a lease is secured with one of the leads we have provided, generally within six months.
With the Flex model, Premier Agent partners are provided with validated leads at no initial cost and pay a performance fee only when a real estate transaction is closed with one of the leads within two years.
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. 45 Table of Contents New construction revenue primarily includes advertising services sold to home builders on a cost per residential community or cost per impression basis.
Sales and Marketing Sales and marketing expenses consist of advertising costs and other sales expenses related to promotional and marketing activities, headcount-related expenses, including salaries, commissions, benefits, bonuses and share-based compensation expense for sales, sales support, customer support, including the customer connections team, marketing and public relations employees, depreciation expense and amortization of certain intangible assets recorded in connection with acquisitions, including trade names and trademarks and customer relationships.
Sales and Marketing Sales and marketing expenses consist of advertising costs and other sales expenses related to promotional and marketing activities, headcount-related expenses, including salaries, commissions, benefits, bonuses and share-based compensation expense for sales, sales support, customer support, including the customer connections team and mortgage loan officers and specialists, marketing and public relations employees, depreciation expense and amortization of certain intangible assets recorded in connection with acquisitions, including trade names and trademarks and customer relationships. 51 Table of Contents Sales and marketing expenses decreased $6 million, or 1%, due to decreases of $7 million in marketing and advertising costs and $4 million in third-party professional service fees, both driven by active cost management, a $2 million decrease in depreciation and amortization expense and a $2 million decrease in trade shows and events.
We have accumulated federal tax losses of approximately $1.8 billion as of December 31, 2022, which are available to reduce future taxable income. We have accumulated state tax losses of approximately $63 million (tax effected) as of December 31, 2022. We recorded income tax expense of $3 million for the year ended December 31, 2022, primarily driven by state taxes.
We have accumulated federal tax losses of approximately $1.4 billion as of December 31, 2023, which are available to reduce future taxable income. We have accumulated state tax losses of approximately $56 million (tax effected) as of December 31, 2023.
Estimates are primarily developed based on historical data and our future expectations based on current market trends. 61 Table o f Contents Mortgage Origination Revenue. Mortgage origination revenue generated by Zillow Home Loans reflects origination fees on purchase or refinance mortgages and the corresponding sale, or expected future sale, of a loan.
Mortgage Origination Revenue. Mortgage origination revenue generated by Zillow Home Loans reflects origination fees on purchase or refinance mortgages and the corresponding sale, or expected future sale, of a loan.
The decrease in mortgage originations revenue was also attributable to a 25% decrease in gain on sale margin driven by industry margin compression. Gain on sale margin represents the net gain on sale of mortgage loans divided by total loan origination volume for the period.
Gain on sale margin represents the net gain on sale of mortgage loans divided by total loan origination volume for the period.
These changes were partially offset by a $71 million decrease in accrued expenses and other liabilities and a $60 million decrease in accrued compensation and benefits driven primarily by the wind down of Zillow Offers operations, a $21 million decrease in lease liabilities primarily due to lease payments, an $18 million increase in contract cost assets and a $7 million decrease in deferred revenue. 57 Table o f Contents For the year ended December 31, 2021, net cash used in operating activities was $3.2 billion.
These changes were partially offset by a $71 million decrease in accrued expenses and other current liabilities and a $60 million decrease in accrued compensation and benefits driven primarily by the wind down of Zillow Offers operations, a $21 million decrease in lease liabilities primarily due to lease payments, an $18 million increase in contract cost assets and a $7 million decrease in deferred revenue. 54 Table of Contents Cash Flows Provided By (Used In) Investing Activities Our primary investing activities include the purchase and sale or maturity of investments, the purchase of property and equipment and intangible assets, and cash paid in connection with acquisitions.
These changes were partially offset by a $294 million increase in mortgage loans held for sale, a $42 million increase in contract cost assets due primarily to the capitalization of sales commissions, a $16 million increase in prepaid expenses and other current assets due primarily to timing of payments and growth in our contract assets, a $7 million increase in accounts receivable due to an increase in revenue from products and services billed in arrears and a $2 million decrease in lease liabilities due to scheduled lease payments.
The changes in operating assets and liabilities are primarily related to a $59 million increase in mortgage loans held for sale due to an increase in purchase loan origination volume, a $30 million decrease in lease liabilities primarily due to contractual lease payments, a $24 million increase in accounts receivable primarily due to an increase in revenue from products and services billed in arrears, a $21 million increase in contract cost assets primarily due to capitalized sales commissions, an $18 million decrease in accrued expenses and other current liabilities driven by the timing of payments, a $17 million increase in prepaid expenses and other current assets primarily due to an increase in revenue from products and services billed in arrears, and a $2 million decrease in other long-term liabilities.
Discontinued Operations In the fourth quarter of 2021, the Board of Directors (the “Board”) of Zillow Group made the determination to wind down the operations of Zillow Offers, our iBuying business which purchased and sold homes directly in certain markets across the United States.
For additional information on acquisitions, see Note 7 in our Notes to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K. 44 Table of Contents Discontinued Operations In the fourth quarter of 2021, the Board of Directors (the “Board”) of Zillow Group made the determination to wind down the operations of Zillow Offers, our iBuying business which purchased and sold homes directly in certain markets across the United States.
Our dotloop real estate transaction management software-as-a-service solution is a monthly subscription service allowing real estate partners to efficiently manage their transactions. Display revenue consists of graphical mobile and web advertising sold on a cost per impression or cost per click basis to advertisers promoting their brands on our mobile applications and websites.
Display revenue consists of graphical mobile and web advertising sold on a cost per thousand impressions or cost per click basis to advertisers promoting their brands on our mobile applications and websites.
The repricing of eligible option awards and the issuance of supplemental restricted stock units (collectively the “August 2022 Equity Award Actions”) is expected to result in total incremental share-based compensation expense of approximately $189 million, $77 million of which was recognized during the year ended December 31, 2022.
The repricing of eligible option awards and the issuance of supplemental restricted stock units (collectively the “August 2022 Equity Award Actions”) has and is expected to continue to result in incremental share-based compensation expense over the remaining requisite service period, which is largely through the third quarter of 2024.
As of December 31, 2022, Zillow Group and its subsidiaries were in compliance with all debt covenants specified in the facilities described below.
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 December 31, 2023, Zillow Group and its subsidiaries were in compliance with all debt covenants specified in the facilities described below.
Recoverability of Intangible Assets with Definite Lives and Other Long-Lived Assets We evaluate intangible assets and other long-lived assets for impairment whenever events or circumstances indicate that they may not be recoverable. Recoverability is measured by comparing the carrying amount of an asset group to future undiscounted net cash flows expected to be generated.
Recoverability of Intangible Assets with Definite Lives and Other Long-Lived Assets We evaluate intangible assets and other long-lived assets, including our lease right of use assets, for impairment whenever events or circumstances indicate that they may not be recoverable.
This was the result of $1.7 billion of net proceeds from the maturity of investments, partially offset by $497 million of net cash paid for our September 2021 acquisition of ShowingTime, and $105 million of purchases of property and equipment and intangible assets. For the year ended December 31, 2020, net cash used in investing activities was $1.0 billion.
For the year ended December 31, 2023, net cash provided by investing activities was $25 million. This was the result of $623 million of net proceeds from the maturity of investments, $433 million of cash paid for acquisitions, net of cash acquired, and $165 million of purchases of property and equipment and intangible assets.
During the year ended December 31, 2022, we repurchased 4.1 million shares of Class A common stock and 18.2 million shares of Class C capital stock at an average price of $44.14 and $42.30 per share, respectively, for an aggregate purchase price of $179 million and $768 million, respectively.
The Repurchase Authorizations do not have an expiration date. During the year ended December 31, 2023, we repurchased 2.2 million shares of Class A common stock and 7.3 million shares of Class C capital stock at an average price of $46.45 and $43.94 per share, respectively, for an aggregate purchase price of $103 million and $321 million, respectively.
The following table presents the number of visits to our mobile applications and websites for the periods presented (in millions, except percentages): Year Ended December 31, 2021 to 2022 % Change 2020 to 2021 % Change 2022 2021 2020 Visits 10,470 10,207 9,627 3 % 6 % Unique Users 43 Table o f Contents Measuring unique users is important to us because much of our revenue depends in part on our ability to connect home buyers and sellers, renters and individuals with or looking for a mortgage to real estate, rental and mortgage professionals, products and services.
Unique Users Measuring unique users is important to us because much of our revenue depends in part on our ability to connect home buyers and sellers, renters and individuals with or looking for a mortgage to real estate, rental and mortgage professionals, products and services.
Other IMT revenue increased primarily as a result of the addition of ShowingTime revenue beginning in the fourth quarter of 2021. Beginning in the first quarter of 2023, we plan to report our financial results as a single reportable segment and plan to report revenue categories of Residential, Rentals, Mortgages and Other.
As a result, beginning in the first quarter of 2023, we began to report our financial results as a single reportable segment. Revenue Overview Our revenue is classified into four categories: Residential, Rentals, Mortgages and Other. Certain prior period amounts have been revised to reflect these changes. Residential.
The decrease in Premier Agent revenue was driven by macro housing market factors including interest rate and home price increases and volatility, as well as tight housing inventory levels.
This decrease was primarily driven by macro housing market factors including low housing inventory, fewer new for-sale listings, increases and volatility in mortgage interest rates as well as home price fluctuations.
These cash inflows were partially offset by $302 million of cash paid for share repurchases pursuant to our stock buyback program and $197 million of net repayments on our warehouse line of credit and master repurchase agreements related to Zillow Home Loans.
These cash outflows were partially offset by $72 million of proceeds from the exercise of option awards and $56 million of net borrowings on our warehouse line of credit and master repurchase agreements related to Zillow Home Loans.
Judgment is required to determine the appropriate pull-through rate, which is estimated based on expected changes in market conditions, loan stage and historical borrower behavior. Revenue from loan origination fees is recognized at the time the related purchase or refinance transactions are completed, usually upon the close of escrow and when we fund the purchase or refinance mortgage loans.
Judgment is required to determine the appropriate pull-through rate, which is estimated based on expected changes in market conditions, loan stage and historical borrower behavior.
This was primarily driven by a net loss of $162 million, adjusted by share-based compensation expense of $197 million, depreciation and amortization expense of $111 million, amortization of debt discount and debt issuance costs of $102 million, non-cash impairment costs of $77 million, amortization of contract cost assets of $37 million, amortization of right of use assets of $24 million and $3 million in other adjustments to reconcile net loss to cash provided by operating activities.
This was primarily driven by a net loss of $158 million, adjusted by share-based compensation expense of $451 million, depreciation and amortization expense of $187 million, accretion of bond discount of $35 million, amortization of right of use assets of $35 million, amortization of contract cost assets of $21 million, impairment costs of $16 million, and amortization of debt issuance costs of $5 million.
Other income, net increased $36 million, for the year ended December 31, 2022 as compared to the year ended December 31, 2021. The increase was primarily driven by increases in returns on corporate investments due to rising interest rates, partially offset by a $7 million fair value adjustment on an outstanding warrant recorded within our IMT segment.
Other income, net increased $108 million, for the year ended December 31, 2023 as compared to the December 31, 2022. The increase in other income, net was primarily driven by increases in returns on investments due to the higher interest rate environment as compared to the prior year period.
On May 4, 2022, the Board of Directors authorized the repurchase of up to an additional $1 billion (together the “Repurchase Authorizations”) of our Class A common stock, Class C capital stock or a combination thereof.
On July 31, 2023, the Board authorized the repurchase of up to an additional $750 million of Class A common stock, Class C capital stock, outstanding convertible senior notes or a combination thereof. This additional authorization (together with the previous authorizations, the “Repurchase Authorizations”) increased our total cumulative Repurchase Authorizations to $2.5 billion.
Our actual results may differ materially from those described in or implied by any forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Annual Report on Form 10-K, particularly in the section titled “Risk Factors”.
Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Annual Report on Form 10-K, particularly in the sections titled “Note Regarding Forward Looking Statements” and “Risk Factors”. Overview of our Business Zillow Group is reimagining real estate to make home a reality for more and more people.
As of December 31, 2022, we have purchase obligations totaling $111 million, with $79 million payable within 12 months. For additional information regarding our purchase obligations, see Note 18 to our Notes to Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K.
For additional information regarding this contingent consideration, see Note 4 and Note 7 of our Notes to Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K. Purchase Obligations - We have non-cancellable purchase obligations for content related to our mobile applications and websites and certain cloud computing costs.
Financial Overview For the years ended December 31, 2022 and 2021, we generated revenue of $2.0 billion and $2.1 billion, respectively, representing a year-over-year decrease of 8%.
For additional information regarding our revenue recognition policies, see Note 2 of our Notes to Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K. Financial Overview For the years ended December 31, 2023 and 2022, we generated revenue of $1.9 billion and $2.0 billion, respectively, representing a year-over-year decrease of 1%.
If any of the assumptions used in the Black-Scholes-Merton model changes significantly, share-based compensation expense for future option awards may differ materially compared with the awards granted previously. In valuing our option awards, we make assumptions about risk-free interest rates, dividend yields, volatility, and weighted-average expected lives.
If any of the assumptions changes significantly, share-based compensation expense for future option awards may differ materially compared with the awards granted previously.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

11 edited+1 added−1 removed7 unchanged
Biggest changeThese increases have impacted other market rates derived from this benchmark rate, including mortgage interest rates. The increase in mortgage interest rates across the industry has decreased demand for mortgages overall and, in turn, had an adverse impact on the results of operations for our Mortgages segment during 2022.
Biggest changeIn response to ongoing inflationary pressures in the United States, the Federal Reserve has implemented a number of increases to the federal funds rate during 2022 and 2023. Despite inflation stabilizing in the second half of 2023, these federal funds rate increases have impacted other market rates derived from this benchmark rate, including mortgage interest rates.
For our investment portfolio, we do not believe an immediate 10% increase in interest rates would have a material effect on the fair market value of our portfolio. As of December 31, 2022, we had approximately $1.7 billion aggregate principal amount of convertible senior notes outstanding with maturities ranging from September 2024 through September 2026.
For our investment portfolio, we do not believe an immediate 10% increase in interest rates would have a material effect on the fair market value of our portfolio. As of December 31, 2023, we had approximately $1.6 billion aggregate principal amount of convertible senior notes outstanding with maturities ranging from September 2024 through September 2026.
Despite these near-term effects, we do not expect these inflationary pressures to have a material impact on our ability to execute our long-term business strategy. 65 Table o f Contents Foreign Currency Exchange Risk We do not believe that foreign currency exchange risk has had a material effect on our business, results of operations or financial condition.
Despite these near-term effects, we do not expect these inflationary pressures to have a material impact on our ability to execute our long-term business strategy. 62 Table of Contents Foreign Currency Exchange Risk We do not believe that foreign currency exchange risk has had a material effect on our business, results of operations or financial condition.
As we do not maintain a significant balance of foreign currency, we do not believe an immediate 10% increase or decrease in foreign currency exchange rates relative to the U.S. dollar would have a material effect on our business, results of operations or financial condition. 66 Table o f Contents
As we do not maintain a significant balance of foreign currency, we do not believe an immediate 10% increase or decrease in foreign currency exchange rates relative to the U.S. dollar would have a material effect on our business, results of operations or financial condition. 63 Table of Contents
We are also subject to market risk which may impact our mortgage loan origination volume and associated revenue and the net interest margin derived from borrowings under our warehouse line of credit and master repurchase agreements that provide capital for Zillow Home Loans.
We are also subject to market risk which may impact our mortgage loan origination volume and associated revenue and the net interest margin derived from borrowings under our master repurchase agreements that provide capital for Zillow Home Loans.
Market risk occurs in periods where changes in short-term interest rates result in mortgage loans being originated with terms that provide a smaller interest rate spread above the financing terms of our warehouse line of credit and master repurchase agreements, which can negatively impact our net income (loss). This risk is primarily mitigated through expedited sale of our loans.
Market risk occurs in periods where changes in short-term interest rates result in mortgage loans being originated with terms that provide a smaller interest rate spread above the financing terms of our master repurchase agreements, which can negatively impact our results of operations. This risk is primarily mitigated through expedited sale of our loans.
Assuming no change in the outstanding borrowings on the warehouse line of credit and master repurchase agreements, we estimate that a one percentage point increase in SOFR or BSBY, as applicable, would not have a material effect on our annual interest expense associated with the warehouse line of credit and master repurchase agreements as of December 31, 2022 and December 31, 2021.
Assuming no change in the outstanding borrowings on the master repurchase agreements, we estimate that a one percentage point increase in SOFR would not have a material effect on our annual interest expense associated with the master repurchase agreements as of December 31, 2023.
If the inflation rate continues to increase, our costs, in particular labor, marketing and hosting costs, will continue to be subject to significant inflationary pressures and we may not be able to fully offset such higher costs through price increases.
If inflationary pressures persist, our costs, in particular labor, marketing and hosting costs, may increase and we may not be able to fully offset such higher costs through price increases.
For additional details related to our credit facilities and convertible senior notes, see Note 13 to our Notes to Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K.
For additional details related to our credit facilities and convertible senior notes, see Note 11 to our Notes to Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K. Inflation Risk The macroeconomic environment in the United States has experienced and continues to experience inflationary pressures.
While it is difficult to accurately measure the impact of these inflationary pressures on our business, we believe these effects have been pervasive throughout our business during the year ended December 31, 2022. In response to ongoing inflationary pressures in the United States, the Federal Reserve has implemented a number of increases to the federal funds rate during 2022.
While it is difficult to accurately measure the impact of these inflationary pressures on our business, we believe these effects have been pervasive throughout our business beginning in 2022 and continuing during the year ended December 31, 2023.
As of December 31, 2022 and December 31, 2021, we had $37 million and $113 million, respectively, of outstanding borrowings on our warehouse line of credit and master repurchase agreements which bear interest either at a floating rate based on Secured Overnight Financing Rate (“SOFR”) plus an applicable margin, as defined by the governing agreements, or Bloomberg Short-Term Bank Yield Index Rate (“BSBY”) plus an applicable margin, as defined by the governing agreements.
As of December 31, 2023, we had $93 million of outstanding borrowings on our master repurchase agreements. Borrowings on the master repurchase agreements bear interest at a floating rate based on Secured Overnight Financing Rate (“SOFR”) plus an applicable margin, as defined by the governing agreements.
Removed
Inflation Risk The macroeconomic environment in the United States has experienced, and continues to experience, significant inflationary pressures, including the highest levels of inflation in nearly four decades.
Added
The persistently high mortgage interest rates across the industry relative to recent years has impacted the number of transactions consumers complete using our products and services and the demand for our advertising services and mortgage origination offerings and, in turn, had an adverse impact on our revenue during 2023.

Other Z 10-K year-over-year comparisons