~~Risks Related to Our Intellectual Property and Technology~~

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.

Our products and services involve the transmission, processing, and/or storage of users’ information, some of which may be private or include personally identifiable information such as social security numbers, financial account information, and credit card information. For example, our dotloop real estate transaction management software stores sensitive personal and financial information, our Mortech mortgage product and pricing software for mortgage professionals processes social security numbers, our rental applications product allows customers to obtain credit and background checks containing sensitive personal and financial information, and both Zillow Home Loans and Zillow Closing Services, our mortgage origination business ~~receives, handles~~ and ~~transmits~~real estate closings business, respectively, receive, handle and transmit highly sensitive personal and financial information about ~~its borrowers. Security breaches~~their customers. Cyber-attacks, malicious internet-based activity, online and offline fraud, administrative or technical failures ~~could expose us to a risk~~and other similar activities threaten the confidentiality, integrity and availability of our information technology systems, including those of the third parties upon which we rely, and our sensitive data, ~~loss or exposure,~~ including ~~both~~ customer, employee and real estate partner data as well as intellectual property and other confidential business information, which could result in potential significant liability and litigation. ~~Like all mobile application~~Such threats are prevalent and ~~website providers, our mobile applications~~continue to rise, are increasingly difficult to detect and ~~websites~~come from a variety of sources, including traditional computer “hackers”, threat actors, “hacktivists”, organized criminal threat actors, personnel (such as through theft or misuse), sophisticated nation states and nation-state-supported actors.

Some actors now engage and are expected to continue to engage in cyber-attacks, including without limitation nation-state actors for geopolitical reasons and in conjunction with military conflicts and defense activities. During times of war and other major conflicts, we and the third parties upon which we rely may be vulnerable to ~~computer~~a heightened risk of these attacks, including retaliatory cyber-attacks, that could materially disrupt our systems and operations, supply chain and ability to produce, sell and distribute our services.

We and the third parties upon which we rely may be subject to a variety of evolving threats, including but not limited to social-engineering attacks (including through phishing attacks), malicious code (such as viruses ~~break-ins, phishing~~and worms), malware (including as a result of advanced persistent threat intrusions), denial-of-service attacks (such as credential stuffing), credential harvesting, personnel misconduct or error, ransomware attacks, supply-chain attacks, software bugs, server malfunctions, software or hardware failures, loss of data or other information technology assets, adware, telecommunications failures, earthquakes, fires, floods and other similar threats. In particular, severe ransomware attacks ~~any of which could~~are becoming increasingly prevalent and can lead to significant interruptions in our operations, loss of ~~critical~~sensitive data and income, reputational harm and diversion of funds. Extortion payments may alleviate the negative impact of a ransomware attack, but we may be unwilling or ~~the unauthorized disclosure~~unable to make such payments due to, for example, applicable laws or ~~use~~regulations prohibiting such payments.

Remote work has become more common and has increased risks to our information technology systems and data, as more of ~~personal~~our employees utilize network connections, computers and devices outside our premises or ~~other confidential information. Further, outside~~network, including working at home, while in transit and in public locations. Additionally, future or past business transactions (such as acquisitions or integrations) could expose us to additional cybersecurity risks and vulnerabilities, as our systems could be negatively affected by vulnerabilities present in acquired or integrated entities’ systems and technologies. Outside parties may attempt to fraudulently induce employees, officers, directors, customers or real estate partners to disclose sensitive information in order to gain access to our information or our customers’ or real estate partners’ information, and our information technology and infrastructure may be vulnerable to attacks by hackers or breached due to user error, malfeasance or other disruptions. If we experience compromises to our security that result in the loss or unauthorized disclosure of confidential information, our customers and real estate partners may lose trust in us, customers may decrease the use of our mobile applications or websites or stop using our mobile applications, websites, or services in their entirety, real estate partners may decrease or stop advertising on our mobile applications or websites, and we may be subject to legal claims and liability, government investigation and additional state and federal legal requirements. If we experience compromises to our security that result in the loss of availability of our data, our mobile applications, websites, or services may be unable to function at a level necessary to meet our customers’ needs.

~~Table of Contents~~

Our reliance on vendors could introduce new cybersecurity risks and vulnerabilities, including supply-chain attacks, and other threats to our business operations. We engage a variety of vendors to process and store sensitive data, including certain customer information, some of which may be private or include personally identifiable information. We also depend on vendors to host many of the systems and infrastructure used to provide our products and services. ~~If our data storage~~Our ability to monitor these vendors’ information security practices is limited and these vendors ~~fail to maintain~~may not have adequate information security ~~systems and~~measures in place. If our ~~systems~~vendors experience a security incident or ~~our customers’ information is compromised,~~other interruption, we could experience adverse consequences, including harm to our business, results of operations and financial ~~condition could be harmed. A~~condition. Further, a security breach at our vendor could be perceived by customers

Table o f Contents

or our real estate partners as a breach of our systems and could result in damage to our reputation and expose us to other losses. While we may be entitled to damages if our vendors fail to satisfy their privacy or security-related obligations to us, any award may be insufficient to cover our damages, or we may be unable to recover such award. In addition, supply-chain attacks have increased in frequency and severity, and we cannot guarantee that third parties’ infrastructure in our supply chain or our third-party partners’ supply chains have not been compromised.

~~Further, because~~Any of the previously identified or similar threats could cause a security incident or other interruption that could result in unauthorized, unlawful or accidental acquisition, modification, destruction, loss, alteration, encryption, disclosure of or access to our sensitive data of our information technology systems, or those of the third parties upon whom we rely. 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. Because the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently, often are not recognized until launched against a target, and may originate from less regulated and remote areas around the world, we may be unable to proactively address all these techniques or to implement adequate preventative measures. We may be unable in the future to detect vulnerabilities in our information technology systems because such threats and techniques change frequently and are often sophisticated in nature. Further, we may experience delays in developing and deploying remedial measures designed to address any such identified vulnerabilities.

Applicable data privacy and security obligations may require us to notify relevant stakeholders of security incidents. Such disclosures are costly and the disclosure or the failure to comply with such requirements could lead to adverse consequences.

If we (or a third party upon whom we rely) experience a security incident or are perceived to have experienced a security incident, we may experience adverse consequences. These consequences may include: government enforcement actions (for example, investigations, fines, penalties, audits and inspections); additional reporting requirements and/or oversight; restrictions on processing sensitive data (including personal data); litigation (including class action claims); indemnification obligations; negative publicity; reputational harm; monetary fund diversions; interruptions in our operations including availability of data); financial loss and other similar harms. Any or all of these ~~issues~~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, ~~cause us to incur significant costs to notify affected individuals and upgrade our technology, or subject us to third-party lawsuits, regulatory fines or other action or liability,~~ thereby harming our business, results of operations and financial condition.

Our contracts may not contain limitations of liability, and even where they do, there can be no assurance that limitations of liability in our contracts are sufficient to protect us from liabilities, damages or claims related to our data privacy and information security obligations. We cannot be sure that our insurance coverage will be adequate or sufficient to protect us from or to mitigate liabilities arising out of our privacy and security practices, that such coverage will continue to be available on commercially reasonable terms or at all or that such coverage will pay future claims.

Any Significant Disruption in Service on Our Mobile Applications or Websites or in Our Network Could Damage Our Reputation and Brands, and Result in a Loss of Customers of Our Products and Services and of Our Real Estate Partners, Which Could Harm Our Business, Results of Operations and Financial Condition.

Our brand, reputation and ability to attract customers and real estate partners and deliver quality products and services depend on the reliable performance of our network infrastructure and content delivery processes. Our mobile applications and websites are exposed to attempts to overload our servers with denial-of-service attacks or similar disruptions from unauthorized use of our computer systems. We have experienced minor interruptions in these systems in the past, including server failures that temporarily slowed the performance of our mobile applications and websites, and we may experience interruptions in the future. Interruptions in these systems, whether due to system failures, computer viruses, software errors or physical or electronic break-ins, could affect the security or availability of our products and services on our mobile applications and websites and prevent or inhibit the ability of customers to access or effect transactions using our services. 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.

To deliver ~~web~~mobile and ~~mobile~~web Zillow Group brand content while ensuring scalability and redundancy, as well as internal support for our enterprise, we utilize both third-party web services for cloud computing and storage and shared data centers in Seattle, Washington, Ashburn, Virginia, and Santa Clara, California.

Table o f Contents

We do not own or control the operation of certain of these facilities. Our systems and operations are vulnerable to damage or interruption from fire, flood, power loss, telecommunications failure, terrorist attacks, acts of war, electronic and physical break-ins, computer viruses, earthquakes and similar events. The occurrence of any of the foregoing events could result in damage to our systems and hardware or could cause them to fail completely, and our insurance may not cover such events or may be insufficient to compensate us for losses that may occur.

A failure of our systems at one site could result in reduced functionality for our customers, and a total failure of our systems could cause our mobile applications or websites to be ~~inaccessible.~~inaccessible or for us to be unable to carry out day-to-day operations. Problems faced by our third-party web-hosting providers with the telecommunications network providers with which they contract or with the systems by which they allocate capacity among their customers, including us, could adversely affect the experience of our customers. Our third-party web-hosting providers could decide to close their facilities without adequate notice. Any financial difficulties, such as bankruptcy reorganization, faced by our third-party web-hosting providers or any of the service providers with whom they contract may have negative effects on our business, the nature and extent of which are difficult to predict. If our third-party web-hosting providers are unable to keep up with our growing needs for capacity, our customers, real estate partners and business could be harmed. In addition, if distribution channels for our mobile applications experience disruptions, such disruptions could adversely affect the ability of users and potential users to access or update our mobile applications, which could harm our business.

We domay not carry business interruption insurance sufficient to compensate us for the potentially significant losses, including the potential harm to the future growth of our business, which may result from interruptions in our service as a result of system failures. Any errors, defects, disruptions or other performance problems with our services could harm our reputation, business, results of operations and financial condition.

~~Table of Contents~~

We Rely Upon Certain Third-Party Services to Support Critical Functions of Our Business and Any Disruption of or Interference with our Use of those ~~Third -Party~~Third-Party Services Could Adversely Impact Our Operations and Our Business.

A limited number of third-party services support essential functions of our business, including Amazon Web Services (“AWS”) and certain other cloud communications platform-as-a-service (“CPaaS”), Infrastructure-as-a-Service (“IaaS”) and Software-as-a-Service (“SaaS Services”) technologies hosted by third parties ~~(“SaaS~~(together with CPaaS and IaaS, “Cloud Services”). AWS provides us with a distributed computing infrastructure platform for business operations, which is commonly referred to as a “cloud” computing service. Certain of our computer systems utilize data processing, storage capabilities and other services provided by AWS, and we currently run the vast majority of computing to power our mobile applications, websites, and other technology products and services on AWS. In addition, we use ~~SaaS~~Cloud Services to support important functions of our business, including enterprise resource planning, accounting, including revenue recognition, real estate transaction services, customer communications, and customer relationship management. We store a significant amount of information about our customers, real estate partners, employees, and business on AWS and in the ~~SaaS~~Cloud Services, and we rely on these third-party service providers to provide services on a timely and effective basis. Their failure to perform as expected or as required by contract could result in significant disruptions and costs to our operations. In light of our reliance on AWS and ~~SaaS~~Cloud Services, coupled with the complexity of obtaining replacement services, any disruption of or interference with our use of these third-party services could adversely impact our operations and business.

We Have and May Continue to be Subject to Outstanding Claims Related to Zillow Offers Following the Wind Down of Our Zillow Offers Operations.

Although we concluded the wind down of our Zillow Offers operations in 2022, we have and may in the future be subject to, claims, suits, government investigations, enforcement actions and proceedings arising from or related to Zillow Offers, including actions with respect to the purchase, renovation and resale of properties; Zillow Offers operations; and the subsequent wind down of operations. For example, on March 10, 2022, May 5, 2022 and July 20, 2022 shareholder derivative suits were filed in the U.S. District Court for the Western District of Washington and on July 25, 2022, a shareholder derivative suit was filed in the Superior Court of the State of Washington, King County, against us and certain of our executive officers and directors seeking unspecified damages on behalf of us and certain other relief, such as reform to corporate governance practices. The plaintiffs (including us as a nominal defendant) allege, among other things, that the defendants breached their fiduciary duties by failing to maintain an effective system of internal controls, which purportedly caused the losses we incurred when we decided to wind down Zillow Offers operations. Plaintiffs also allege, among other things, violations of Section 14(a) and Section 20(a) of the Securities Exchange Act of 1934, as amended, insider trading and waste of corporate assets. On June 1, 2022 and September 14, 2022, the U.S. District Court for the Western District of Washington issued orders consolidating the three federal derivative suits and staying the consolidated action until further order of the court. On September 15, 2022, the Superior Court of the State of Washington entered a temporary stay in the state derivative suit, which stay was lifted on January 23, 2023. This and other similar claims, suits, government investigations, and proceedings are inherently uncertain, and their results cannot be predicted with certainty. Regardless of the outcome, any such legal proceedings can have an adverse impact on us because of legal costs, diversion of management and other personnel, and other factors. In addition, it is possible that a

Table o f Contents

resolution of one or more such proceedings could result in reputational harm, liability, fines, penalties, or sanctions, as well as judgments, consent decrees, or orders, which could in the future materially and adversely affect our business, operating results and financial condition.

Risks Related to Our Intellectual Property

We May Be Unable to Adequately Protect Our Intellectual Property, Which Could Harm the Value of Our Brands and Our Business.

We regard our intellectual property as critical to our success, and we rely on trademark, copyright and patent law, trade secret protection and contracts to protect our proprietary rights. If we are not successful in protecting our intellectual property, the value of our brands and our business, results of operations and financial condition could be harmed.

While we believe that our issued patents and pending patent applications help to protect our business, we cannot ensure that our operations do not, or will not, infringe valid, enforceable patents of third parties or that competitors will not devise new methods of competing with us that are not covered by our patents or patent applications. We cannot ensure that our patent applications will be approved, that any patents issued will adequately protect our intellectual property, that such patents will not be challenged by third parties or found to be invalid or unenforceable, or that our patents will be effective in preventing third parties from utilizing a “copycat” business model to offer the same products or services. ~~Our~~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 ~~a patent,~~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. 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.

Effective trademark, service mark, copyright and trade secret protection may not be available in every country in which our products and services may be provided. The laws of certain countries do not protect proprietary rights to the same extent as the laws of the United States and, therefore, in certain jurisdictions, we may be unable to protect intellectual property and our proprietary technology adequately against unauthorized third-party copying or use, which could harm our competitive position. We have licensed in the past, and expect to license in the future, certain of our proprietary rights, such as trademarks or copyrighted material, to third parties. These licensees may take actions that might diminish the value of our proprietary rights or harm our reputation, even if we have agreements prohibiting such activity. Though certain of these third parties are obligated to indemnify us for breaches of our intellectual property rights, they may be unable to meet these obligations. In addition, we rely on intellectual property and technology developed or licensed by third parties, and we may not be able to obtain licenses and technologies from these third parties on reasonable terms or at all. Any of these events could harm our business, results of operations or financial condition.

In addition, we may actively pursue entities that infringe our intellectual property, including through legal action. Taking such action may be costly, and we cannot ensure that such actions will be successful. Any increase in the unauthorized use of our intellectual property could make it more expensive for us to do business and harm our results of operations or financial condition.

Intellectual Property Disputes Are Costly to Defend and Could Harm Our Business, Results of Operations, Financial Condition and Reputation.

From time to time, we face allegations that we have infringed the trademarks, copyrights, patents and other intellectual property rights of third parties. We are currently subject to intellectual property infringement ~~claims.~~claims, including actions brought by International Business Machines Corporation. These claims allege, among other things, that aspects of our technology infringe upon the plaintiffs’ intellectual property. If we are not successful in defending ourselves against these claims, we may be required to pay damages and may be subject to injunctions, each of which could harm our business, results of operations, financial condition and reputation. As we grow our business and expand our operations, we expect that we will continue to be subject to intellectual property claims and allegations. Patent and other intellectual property disputes or litigation may be protracted and expensive, and the results are difficult to predict and may require us to stop offering certain products, services or features, purchase licenses that may be expensive to procure, or modify

~~Table of Contents~~

our products or services. 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.

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. From time to time, we may be subject to claims brought against companies that incorporate open source software into their products or services, claiming ownership of, or demanding release of, the source code, the open source software and/or derivative works that were developed using such software, or otherwise seeking to enforce the terms of the applicable open source license. These claims could also result in litigation, and we may be required to purchase a costly license or remove open source software, devote additional research and development resources to changing our products or services, make generally available the source code for our proprietary technology, or waive certain of our intellectual property rights, any of which would have a negative effect on our business and results of operations.

Even if these matters do not result in litigation or are resolved in our favor or without significant cash settlements, the time and resources necessary to resolve them could harm our business, results of operations, financial condition and reputation.

We May Be Unable to Continue to Use the Domain Names That We Use in Our Business, or Prevent Third Parties From Acquiring and Using Domain Names That Infringe on, Are Similar to, or Otherwise Decrease the Value of Our Brand or Our Trademarks or Service Marks.

We have registered domain names for our websites that we use in our business. If we lose the ability to use a domain name, we may incur significant expenses to market our products and services under a new domain name, which could harm our business. In addition, our competitors could attempt to capitalize on our brand recognition by using domain names similar to ours. Domain names similar to ours have been registered in the United States and elsewhere. We may be unable to prevent third parties from acquiring and using domain names that infringe on, are similar to, or otherwise decrease the value of our brand or our trademarks or service marks. Protecting and enforcing our rights in our domain names and determining the rights of others may require litigation, which could result in substantial costs and diversion of management’s attention.

~~Confidentiality~~Proprietary Rights Agreements With Employees and Others May Not Adequately Prevent Disclosure of Trade Secrets and Other Proprietary Information.

In order to protect our technologies and strategic business and operations information, we rely in part on ~~confidentiality~~proprietary rights agreements with our employees, independent contractors, vendors, licensees, and other third parties. These agreements may not ~~effectively prevent~~be enough to fully mitigate the possibility of inadvertent disclosure of confidential information, including trade secrets, and may not provide an adequate remedy in the event of unauthorized disclosure of confidential information. The loss of trade secret protection could make it easier for third parties to compete with our products by copying functionality. Others may independently discover our trade secrets and proprietary information, and in such cases, we could not assert any trade secret rights against such parties. Further, if our employees, contractors or other third parties with whom we do business use intellectual property owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions. Any changes in, or unfavorable interpretations of, intellectual property laws may compromise our ability to enforce our trade secret and intellectual property rights. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our proprietary rights, and failure to obtain or maintain protection of our trade secrets or other proprietary information could harm our business, results of operations, reputation and competitive position.

We May Not Be Able to Halt the Operations of Websites That Aggregate or Misappropriate Our Data.

From time to time, third parties have misappropriated our data through website scraping, robots or other means, and aggregated this data on their websites with data from other companies. In addition, copycat websites have misappropriated data on our network and attempted to imitate our brand or the functionality of our websites. When we have become aware of such websites, we have employed technological or legal measures in an attempt to halt their operations. We may not be able, however, to detect all such websites in a timely manner and, even if we could, technological and legal measures may be insufficient to halt their operations. In some cases, particularly in the case of websites operating outside of the United States, our available remedies may not be adequate to protect us against the impact of the operation of such websites. In addition, if such activity creates confusion among customers or real estate partners, our brands and business could be harmed. This misappropriation of data may also harm our relationships with any third party data providers who originally licensed the data to us, including potentially breaching our agreements with these third parties depending on the terms of each license agreement. 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.

1726

Table of 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.

We provide products and services to customers and real estate partners in heavily regulated industries through a number of different channels across the United States and to some extent, in Canada. As a result, we are currently subject to a variety of, and may in the future become subject to additional or newly enacted, international, federal, state and local laws and regulations in various jurisdictions, which are subject to change at any time, including laws regarding the real estate, rental, mortgage and ~~mortgage~~insurance industries, mobile and internet based businesses and other businesses that rely on advertising, as well as privacy, data security, and consumer protection laws, and employment laws. These laws are complex and can be costly to comply with, require significant management time and effort, and subject us to claims, government enforcement actions, civil and criminal liability or other remedies, including suspension of business operations. These laws may conflict with each other, and if we comply with the laws of one jurisdiction, weit may ~~find that we are violating~~require us to adjust our practices in other jurisdictions. Our distributed workforce may subject us to employment laws, ~~of another jurisdiction.~~

~~For example, certain of the advertising~~including employment taxes, in many states and ~~transactional services that we provide to customers and real estate professionals~~localities in the ~~residential real estate, rental, mortgage~~United States, many provinces in Canada and ~~new construction industries, are~~other locations where employees perform work, and may increase the costs and expenses we incur to comply with or seek compliance with these laws. Presence of our employees located in Serbia requires us to conform to employment, tax and other applicable requirements in Serbia and may increase costs and expenses we incur to comply with or seek compliance with these requirements. In addition, our contingent workers throughout the United States, Canada and other current and future global locations may subject us to laws and ~~regulations relating~~taxes in those jurisdictions and may increase the costs and expenses we incur to the collection, use, and disclosure of data collected from our users, including those promulgated and enforced by the U.S. Federal Trade Commission and certain states, such as the Telephone Consumer Protection Act (“TCPA”), the Telemarketing Sales Rule, the CAN-SPAM Act, the Fair Credit Reporting Act, the Canadian Anti-Spam Law, the Personal Information Protection and Electronic Documents Act, and the California Consumer Privacy Act (“CCPA”). The CCPA, which took effect on January 1, 2020, imposes obligations and restrictions on companies regarding their collection, use, and sharing of personal information. Implementing regulations from the California Attorney General have not been finalized but are expected to impose additional obligations and restrictions, and additional amendments to the CCPA may be introduced in 2020. Several other states are actively considering privacy laws, which may impose substantial penalties for violations, impose significant costs for investigations and compliance, allow private class-action litigation and carry significant potential liability for our business.

Additionally, laws, regulations, and standards covering marketing and advertising activities conducted by telephone, email, mobile devices, and the internet, may be applicable to our business, such as the TCPA, the Telemarketing Sales Rule, the CAN-SPAM Act, and similar state consumer protection laws. ~~We also assist~~imply with the processing of customer credit card transactions and consumer credit report requests, originate mortgage loans, buy and sell homes, and provide other product offerings, which results in us receiving or facilitating transmission of personally identifiable information. This information is increasingly subject to legislation and regulation in the United States. These laws and regulations are generally intended to protect the privacy and security of personal information, including credit card information that is collected, processed and transmitted. We could be adversely affected if government regulations require us to significantly change our business practices with respect to this type of information or if the third-parties that we engage with to provide processing and screening services violate applicable laws and ~~regulations.~~maintain adequate protection of our rights, including intellectual property rights.

In addition, by providing a medium through which users can post content and communicate with one another, we may also be subject to laws governing intellectual property ownership, obscenity, libel, and privacy, among other issues. The real estate agents, mortgage professionals, banks, property managers, rental agents and certain of our other customers and advertisers are subject to various state and federal laws and regulations, including, but not limited to those relating to real estate, rentals and mortgages, which may impact their use of our mobile applications and websites. We cannot ensure that these entities will comply with applicable laws and regulations, including any future changes to those laws and regulations, at all times. 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 ~~consumers~~customers for their activities through, and the content they provide on, our mobile applications and websites.

In connection with the real estate transaction products and services that we provide, we maintain real estate brokerage, title and escrow, mortgage broker, insurance agent/producer and mortgage lender licenses in ~~certain states~~the markets in which we ~~operate.~~operate those regulated products and services. Certain of our mortgage marketing products are operated by our wholly owned subsidiary, Zillow Group Marketplace, Inc., a licensed mortgage broker, and we originate residential mortgages through Zillow Home Loans, ~~LLC, which we acquired in October 2018.~~a licensed mortgage lender. Zillow Group Marketplace, Inc. and Zillow Home Loans ~~LLC~~ are subject to stringent state and federal laws and regulations and to the scrutiny of state and federal government agencies as a licensed mortgage broker and licensed mortgage lender, respectively. Mortgage products are regulated at the state level by licensing authorities and administrative agencies, ~~with additional oversight from~~and also by the ~~Consumer Financial Protection Bureau~~CFPB and other federal agencies. These laws generally regulate the manner in which lending and lending-related activities are marketed or made available, including advertising and other consumer disclosures, payments for services and record keeping requirements; these laws include but are not limited to the Real Estate Settlement Procedures Act, the Fair Credit Reporting Act, the Truth in Lending Act, the Equal Credit Opportunity Act, the Fair Housing Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act and various federal, state and local laws. The CFPB also has broad authority to enforce prohibitions on practices that it deems to be unfair, deceptive or abusive.

The growing CFPB focus on artificial intelligence/automated underwriting, digital mortgage comparison shopping platforms, property valuation and marketing models, coupled with rapidly changing fair housing enforcement priorities by the CFPB and other regulators may impact our ability to adapt our business and maintain compliance, which may affect our business operations, financial condition or results of operations. State laws may restrict the amount and nature of interest and fees that may be charged by a lender or mortgage broker, or otherwise regulate the manner in which lenders or mortgage brokers operate or advertise.

~~Table of Contents~~

~~As a buyer and seller of residential real estate through our Zillow Offers business, we~~We hold real estate brokerage licenses through multiple entities in multiple states and may apply for additional real estate brokerage licenses as needed to support our ~~business grows.~~business. To maintain these licenses, we must comply with the requirements governing ~~the licensing and conduct of~~licensed real estate ~~brokerage~~activities and brokerage-related businesses in the markets where we operate. We may be subject to additional local, state and federal laws and regulations governing residential real estate transactions, including those

Table o f Contents

administered by the Department of Housing and Urban Development (“HUD”), and the states and municipalities in which we transact. Further, due to the geographic scope of our operations and the nature of the services we provide, certain of our other subsidiaries maintain ~~real estate brokerage and~~ title and escrow licenses in certain states in which we operate, including in connection with Zillow ~~Offers and Zillow~~ Closing Services.

~~For~~

A number of our personnel are required to maintain individual real estate agent or broker licenses, title and escrow agent licenses, mortgage broker, mortgage loan originator licenses and mortgage lender licenses. In addition, for certain company licenses that we hold, we are required to designate individual licensed brokers of record, qualified individuals and control persons. We cannot assure you that we, or our licensed personnel, are and will remain at all times, in full compliance with ~~state and federal~~ 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. If we, or our licensed personnel, apply for new licenses, we may become subject to additional licensing requirements, which we may not be in compliance with at all times. If in the future a state agency were to determine that we, or our licensed personnel, are required to obtain additional licenses in that state in order to operate our business, or if we or our licensed personnel lose or do not renew an existing license or are otherwise found to be in violation of a law or regulation, we or our licensed personnel may be subject to fines or legal penalties, lawsuits, enforcement actions, void contracts, or our business operations in that state may be suspended or prohibited. Compliance with these laws and regulations is complicated and costly and may inhibit our ability to innovate or grow.

Zillow Home Loans operates its Federal Housing Administration loan program under authority granted by HUD. In the event that HUD determines that Zillow Home Loans has failed or refused to comply with all relevant terms and conditions necessary to maintain its authority active and in good standing, then such authority could be suspended, revoked or materially altered, which would materially and adversely affect the ability of Zillow Home Loans to conduct its business.

If we are unable to comply with these laws or regulations in a cost-effective manner, we may modify impacted products and services, which could require a substantial investment and loss of revenue, or require that we cease providing the impacted product or service altogether. If we are found to have violated laws or regulations, we may be subject to significant fines, penalties, and other losses.

We Are Subject to Stringent and Evolving Laws, Regulations, Rules, Contractual Obligations, Policies and Other Obligations Related to Data Privacy and Security in the United States and Canada and May Be Subject to Similar Data Privacy and Security Obligations in Other Jurisdictions Where We Have Operations and/or Vendors. Our Actual or Perceived Failure to Comply With Such Obligations Could Lead to Regulatory Investigations or Actions; Litigation; Fines and Penalties; Disruptions of Our Business Operations; Reputational Harm; Loss of Revenue or Profits; Loss of Customers and Other Adverse Business Consequences.

In the ordinary course of business, we collect, receive, store, process, generate, use, transfer, disclose, make accessible, protect, secure, dispose of, transmit, and share (collectively, processing) personal data and other sensitive data, which may include proprietary and confidential business data, trade secrets, intellectual property, sensitive third-party data, business plans, transactions, social security numbers, financial account information, and credit card information.

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.

In the United States, federal, state, and local governments have enacted numerous data privacy and security laws, including data breach notification laws, personal data privacy laws, consumer protection laws (e.g., Section 5 of the Federal Trade Commission Act), and other similar laws (e.g., wiretapping laws). For example, the California Consumer Privacy Act of 2018 (“CCPA”) requires businesses to provide specific disclosures in privacy notices and honor requests of California residents to exercise certain privacy rights. The CCPA provides for civil penalties of up to $7,500 per violation and allows private litigants affected by certain data breaches to recover significant statutory damages. In addition, the California Privacy Rights Act of 2020 (“CPRA”), which becomes operative January 1, 2023, will expand the CCPA’s requirements, including applying to personal information of business representatives and employees and establishing a new regulatory agency to implement and enforce the law.

Other states, such as Virginia, Colorado, Connecticut and Utah, have also passed comprehensive privacy laws, and similar laws are being considered in several other states, as well as at the federal and local levels. We also have operations outside of the United States, including in Canada, and Canada’s Personal Information Protection and Electronic Documents Act

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. These developments may further complicate compliance efforts and may increase legal risk and compliance costs for us and the third parties upon whom we rely.

Additionally, laws, regulations, and standards covering marketing and advertising activities conducted by telephone, email, mobile devices, and the internet, may be applicable to our business, such as the Telephone Consumer Protection Act, the Telemarketing Sales Rule, the Controlling the Assault of Non-Solicited Pornography and Marketing Act, and similar state consumer protection laws. We also assist with the processing of customer credit card transactions and consumer credit report requests, originate mortgage loans, perform real estate closings and provide other product offerings, which results in us receiving or facilitating transmission of personally identifiable information. Processing of this type of information is increasingly subject to legislation and regulation in the United States, including under the Fair Credit Reporting Act and the Gramm-Leach-Bliley Act. These laws and regulations are generally intended to protect the privacy and security of personal information, including credit card information that is collected, processed and transmitted. We could be adversely affected if government regulations require us to significantly change our business practices with respect to this type of information or if the third parties that we engage with to provide processing and screening services violate applicable laws and regulations. Further, restrictions implemented on the platforms through which our websites and applications are accessed, such as mobile operating systems, may impede the effectiveness of our marketing efforts and ability to measure the effectiveness of those efforts, reducing our ability to market our products and services and grow our customer base. A number of states have in place laws regulating the interception of electronic communications; if a court were to conclude that our monitoring of user activity violates such laws, our ability to understand our customers, and therefore the effectiveness of our product offerings and marketing efforts, could be reduced.

In addition to data privacy and security laws, we may be contractually subject to industry standards adopted by industry groups and may become subject to such obligations in the future. We may also be bound by other contractual obligations related to data privacy and security, and our efforts to comply with such obligations may not be successful.For example, we may be subject to the Payment Card Industry Data Security Standard (“PCI DSS”) requirements. The PCI DSS requires companies to adopt certain measures to ensure the security of cardholder information, including using and maintaining firewalls, adopting proper password protections for certain devices and software, and restricting data access. Noncompliance with PCI-DSS can result in penalties ranging from $5,000 to $100,000 per month by credit card companies, litigation, damage to our reputation, and revenue losses. We may also rely on vendors to process payment card data; those vendors may be subject to PCI DSS, and our business may be negatively affected if our vendors are fined or suffer other consequences as a result of PCI DSS noncompliance.

We may publish privacy notices, marketing materials, and other statements, such as compliance with certain certifications or self-regulatory principles, regarding data privacy and security. If these policies, materials or statements are found to be deficient, lacking in transparency, deceptive, unfair, or misrepresentative of our practices, we may be subject to investigation, enforcement actions by regulators, or other adverse consequences.

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. Preparing for and complying with these obligations requires us to devote significant resources and may necessitate changes to our services, information technologies, systems, and practices and to those of any third parties that process personal data on our behalf.

We may at times fail (or be perceived to have failed) in our efforts to comply with our data privacy and security obligations. Moreover, despite our efforts, our personnel or third parties on whom we rely may fail to comply with such obligations, which could negatively impact our business operations. 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. Any of these events could have a material adverse effect on our reputation, business, or financial condition, including but not limited to: loss of customers; inability to process personal data or to operate in certain jurisdictions; limited ability to develop or commercialize our products and services; expenditure of time and resources to defend any claim or inquiry; adverse publicity; or substantial changes to our business model or operations.

Table o f Contents

We are From Time to Time Involved In, or May Inin the Future be Subject to, Claims, Suits, Government Investigations, and Other Proceedings That May Result Inin Adverse Outcomes.

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 ~~lending,~~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 2018 under the subsection titled “Legal Proceedings” in our Notes to Consolidated Financial Statements in this Annual Report on Form 10-K. Such claims, suits, government investigations, and proceedings are inherently uncertain, and their results cannot be predicted with certainty. Regardless of the outcome, any such legal proceedings can have an adverse impact on us because of legal costs, diversion of management and other personnel, and other factors. In addition, it is possible that a resolution of one or more such proceedings could result in reputational harm, liability, fines, penalties, or sanctions, as well as judgments, consent decrees, or orders preventing us from offering certain features, functionalities, products, or services, or requiring a change in our business practices, products or technologies, which could in the future materially and adversely affect our business, operating results and financial condition.

In some instances, third parties may have an obligation to indemnify us for liabilities related to litigation or governmental investigations, and they may be unable to, or fail to, fulfill such obligations. If such third parties failed to indemnify us, we ~~would~~may be financially responsible, which could adversely affect our financial condition and cash flow. For example, on October 31, 2018, we acquired MLOA by way of purchase of the then-outstanding equity of MLOA. Prior to the acquisition, on February 2, 2018, a former MLOA employee, Beau Charbonneau, filed a complaint against MLOA in United States District Court for the District of Kansas. The complaint alleges, among other things, that MLOA improperly classified its team leader roles as exempt from the overtime provisions of the Fair Labor Standards Act and that it failed to pay its loan officers for all hours worked in excess of 40 hours in any work week. The complaint also asserts wage-related claims under the Kansas Wage Payment Act and under Kansas common law. On December 6, 2018, the court issued an order conditionally certifying the case as a collective action under the Fair Labor Standards Act and authorized the plaintiff’s attorneys to send notice of the case to impacted team leaders and loan officers advising them of the case and their opportunity to join as a plaintiff. The court has not made any determinations regarding the merits of the claims asserted in the complaint, nor has it found that the matter should be tried as a collective or class action. Zillow Group and its affiliates are indemnified for losses incurred in connection with this matter by certain of the prior stockholders of MLOA. Additionally, in accordance with the equity purchase agreement governing the acquisition of MLOA, any costs incurred related to this matter will be paid directly by those same certain prior stockholders of MLOA. Although we do not believe a loss to Zillow Group is probable, should the sellers of MLOA fail to indemnify us for losses related to this matter, our financial condition may be negatively impacted.

~~Table of Contents~~

Risks Related to Our Financial ~~Statements~~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, ~~2019,~~2022, we had an accumulated deficit of ~~$977.1 million. Although we have experienced significant growth in revenue,~~ $1.6 billion. It is possible that our ~~revenue~~ growth rate may decline in the future as the result of a variety of factors, including the maturation of our ~~business.~~business or if we are unable to successfully execute on our growth strategy. 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 ~~Offers;~~

•~~expansion of our mortgage origination business;~~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.

These investments may not result in increased revenue or growth in our business. If we fail to continue to grow our revenue and overall business and to manage our expenses, we may incur significant losses in the future and not be able to achieve or maintain profitability.

A failure by Zillow Home Loans to operate at a profit could also place its Federal Housing Administration Title II lender authorization in jeopardy, adversely impact our relationship with Fannie Mae and Freddie Mac, limit our ability to sell loans to third party financial institutions and may adversely impact our ability to utilize our loan repurchase facilities and warehouse lines of credit. 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 ~~Convertible~~ Notes, or Repurchase Our Convertible Senior Notes ~~upon~~Upon a Fundamental Change.

We utilize several forms of debt to provide capital for the continued growth and operation of our business, ~~including several~~such as tranches of convertible senior notes ~~bi-lateral credit facilities for Zillow Offers,~~ and warehouse and repurchase facilities for Zillow Home Loans. Our ~~ability to make payments of~~indebtedness includes the principal of, to pay interest on or to refinance our indebtedness, including the remaining outstanding $9.6 million aggregate principal under Trulia’s Convertible Senior Notes due in 2020 (the “2020 Notes”), the $460.0 million aggregate principal under our Convertible Senior Notes due in 2021 (the “2021 Notes”), the $373.8 million aggregate principal amount under our Convertible Senior Notes due in 2023 (the “2023 Notes”), the $673.0$608 million aggregate principal amount under our Convertible Senior Notes due in 2024 (the “2024 Notes”), the ~~$500.0~~$565 million aggregate principal amount under our Convertible Senior Notes due in 2025 (the “2025 Notes”), the $499 million

Table o f Contents

aggregate principal amount under our Convertible Senior Notes due in 2026 (the “2026 Notes”), and ~~all amounts outstanding under our credit~~mortgage debt facilities ~~for Zillow Offers (current~~(aggregate maximum borrowing capacity of ~~$1.5 billion) and mortgage debt facilities (current maximum borrowing capacity~~$250 million as of ~~$125 million)~~December 31, 2022). Our ability to make payments on the principal of, to pay interest on or to refinance our indebtedness depends on our future performance and, if applicable, the value of collateral, which is subject to economic, industry, competitive and other factors beyond our control. Our business may not continue to generate cash flow from operations in the future sufficient to service our debt and make necessary capital expenditures. If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as selling assets, restructuring debt or obtaining additional equity capital on terms that may be onerous or highly dilutive. Our ability to extend or refinance our indebtedness will depend on the capital markets and our financial condition at such time. We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations, including our convertible senior notes, credit facilities, or otherwise.

Holders of our convertible senior notes have the right to require us to repurchase their notes upon the occurrence of a fundamental change at a repurchase price equal to 100% of the principal amount of the notes to be repurchased, plus accrued and unpaid interest. Holders of our convertible senior notes may elect to convert their notes at various times and pursuant to specific circumstances, as provided in the corresponding indenture. When such an election is made, we may opt to settle any such conversion by delivering solely shares of our Class C capital stock, solely cash payments, or a combination of Class C capital stock and cash payments after consideration of various factors, including the price of our Class C capital stock, market factors, liquidity, and the needs of our business. Upon conversion of our convertible senior notes, unless we elect to deliver solely shares of our Class C capital stock ~~(for the 2021 Notes, 2023 Notes, 2024 Notes, and 2026 Notes) or solely shares of our Class A common stock (for the 2020 Notes)~~ 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. We may not have enough available cash or be able to obtain financing at the time we are required to make repurchases of the notes surrendered ~~therefor~~therefore or at the time the notes are being converted. Our failure to repurchase our convertible senior notes at a time when the repurchase is required by the indenture or to pay any cash payable on future conversions of the notes would constitute an event of default. If the repayment of any indebtedness were to be accelerated because of such event of default (whether under the notes or otherwise), we may not have sufficient funds to repay the indebtedness and repurchase the notes or make cash payments upon conversions thereof. An event of default under the indenture may lead to an acceleration of our convertible senior notes. Any such acceleration could result in

~~Table of Contents~~

our bankruptcy. In a bankruptcy, the holders of our convertible senior notes would have a claim to our assets that is senior to the claims of our equity holders.

In addition, our significant indebtedness, combined with our other financial obligations and contractual commitments, could have other important consequences. For example, it could:

•make us more vulnerable to adverse changes in general ~~U.S.~~United States and worldwide economic, industry and competitive conditions and adverse changes in government regulation;

•limit our flexibility in planning for, or reacting to, changes in our business and our industry;

•place us at a disadvantage compared to our competitors who have less debt; and

•limit our ability to borrow additional amounts for working capital and other general corporate purposes, including to fund possible acquisitions of, or investments in, complementary businesses, products, services and technologies.

Any of these factors could materially and adversely affect our business, financial condition and results of operations. In addition, if we incur additional indebtedness, the risks related to our business and our ability to service or repay our indebtedness would increase.

The Credit and Debt Facilities that Provide Capital for Zillow ~~Offers and Zillow~~ Home Loans Include Covenants and Other Provisions that May Restrict Our Operating Activities, and ~~Expose Us to the Possibility of Foreclosure~~Have a Material Effect on Our ~~Ownership Interests.~~Liquidity. They Also Incorporate Variable Interest Rates that May Subject Us to Interest Rate Risk, Which Could Cause Our Debt Service Obligations to Increase Significantly.

~~We have~~Zillow Home Loans has entered into ~~debt~~warehouse financing agreements, including credit and repurchase agreements, to provide capital for the growth and operation of our ~~businesses, including bi-lateral credit facilities to support Zillow Offers and warehouse and repurchase facilities to support Zillow Home Loans.~~mortgage origination businesses. The terms of these ~~debt~~warehouse financing agreements and related financing documents require Zillow ~~Group and certain of its subsidiaries, as applicable,~~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 and market capitalization.~~coverage. 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. Further, borrowing base requirements associated with these debt agreements may prevent us from drawing upon our total maximum capacity under these financing arrangements if sufficient eligible collateral, in accordance with these debt agreements, is not available. Refer to Note 1513 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 ~~Offers credit facilities and Zillow~~ Home Loans ~~mortgage~~warehouse financing facilities. Upon the occurrence of any event of default under these ~~debt~~warehouse financing agreements, the lenders ~~will not be required to lend any additional amounts to us and~~ could elect to declare all borrowings outstanding, together with accrued and unpaid interest and fees, to be immediately due and payable, even in the absence of a payment default. A default under one of

Table o f Contents

our ~~debt~~warehouse financing agreements could result in a cross-default under other ~~debt~~warehouse financing agreements and our lenders could elect to declare outstanding amounts due and payable or terminate their commitments. If we fail to repay the amounts due under our ~~credit facilities,~~warehouse financing agreements, the lenders of such ~~debt~~warehouse financing agreements may ~~require the posting of additional collateral and/or~~ proceed against the collateral granted to secure the credit facilities. ~~We have pledged the~~The majority of ~~the homes owned by our Zillow Offers business and~~ loans originated by Zillow Home Loans are pledged as collateral to secure such indebtedness. As a result, a default under applicable debt covenants could have an adverse effect on our financial condition or results of operations.

Certain of our debt agreements are subject to margin calls based on the lender’s opinion of the value of the collateral securing such financing. 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, ~~2019, $722.0~~2022, $37 million of our borrowings under our ~~debt~~warehouse financing agreements was at variable rates of interest, thereby exposing us to interest rate risk. If interest rates ~~continue to~~ increase, our debt service obligations on the variable rate indebtedness would increase even if the amount borrowed remained the same, and our net loss would increase. In addition, our variable rate indebtedness may use LIBOR as a benchmark for establishing the rate. LIBOR is the subject of recent national, international and other regulatory guidance and proposals for reform. These reforms and other pressures may cause LIBOR to disappear entirely or to perform differently than in the past. The consequences of these developments cannot be entirely predicted, but could include an increase in the cost of our variable rate indebtedness.

We May Need to Raise Additional Capital to Grow Our Business and We May Not Be Able to Raise Additional Capital on Terms Acceptable to Us, or At All.

Growing and operating our business, including through the development of new and enhanced products and services, may require significant cash outlays, liquidity reserves and capital expenditures. If cash on hand, cash generated from operations and cash equivalents and investment balances are not sufficient to meet our cash and liquidity needs or fund future growth and development, we may need to seek additional capital and we may not be able to raise the necessary cash on terms acceptable to us, or at all. ~~For example, Zillow Offers requires significant cash to acquire, update and sell homes. We currently utilize three credit facilities we entered into in~~

~~Table of Contents~~

July 2018, January 2019, and October 2019 to provide capital for Zillow Offers, and may seek to enter into similar credit facilities in the future. In addition, to provide capital for mortgage home loan originations for Zillow Home Loans, we utilize warehouse and repurchase facilities. Refer to Note 1513 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 ~~revolving credit facilities~~warehouse and ~~mortgage~~loan repurchase facilities. In addition, in February 2021, we entered into an Equity Distribution Agreement pursuant to which we may offer and sell from time to time, through certain financial institutions, shares of our Class C capital stock having an aggregate gross sales price of up to $1 billion, and as of November 2022, our board of directors has authorized the repurchase of up to a total of $1.8 billion of our Class A common stock, Class C capital stock, a combination thereof, or our outstanding convertible senior notes. We may decide to raise additional capital or repurchase outstanding stock or debt through these arrangements at levels or under terms that prove to be unfavorable or at times and share prices that prove to be disadvantageous based on changes in market conditions. Such decisions may negatively impact our financial position and/or future ability to raise capital. Financing arrangements we maintain, pursue or assume may require us to grant certain rights, take certain actions, or agree to certain restrictions, that could negatively impact our business. If additional capital is not available to us on terms acceptable to us or at all, we may need to modify our business plans, which would harm our ability to grow our operations.

We Rely on Assumptions, Estimates, and Business Data to Calculate our Key Performance Indicators and Other Business Metrics, and Real or Perceived Inaccuracies in These Metrics May Harm our Reputation and Negatively Affect our Business.

Certain of our performance metrics are calculated using third party applications or internal company data that have not been independently verified. While these numbers are based on what we believe to be reasonable calculations for the applicable period of measurement, there are inherent challenges in measuring such information. For example, our measurement of visits and unique users may be affected by applications that automatically contact our servers to access our mobile applications and websites with no user action involved, and this activity can cause our system to count the user associated with such a device as a unique user or as a visit on the day such contact occurs.

We regularly review and may adjust our processes for calculating our performance metrics to improve accuracy. Our measure of certain metrics may differ from estimates published by third parties or from similarly-titled metrics of our competitors due to differences in methodology. If real estate professionals, our real estate partners or investors do not perceive our visits or unique users to be an accurate representation of our user engagement, or if we discover material inaccuracies in our visits or unique users, our reputation may be harmed, and real estate professionals and advertisers may be less willing to allocate their resources to our products and services, which could negatively affect our business and operating results.

We Expect Our Results of Operations to Fluctuate on a Quarterly and Annual Basis.

Our revenue and results of operations could vary significantly from period to period and may fail to match expectations as a result of a variety of factors, some of which are outside our control. The other risk factors discussed in this “Risk Factors” section may contribute to the variability of our quarterly and annual results. In addition, our results may fluctuate as a result of seasonal variances of home sales, which historically peak in the spring and summer seasons, fluctuations in the quantity of ~~and the price at which we are able to sell,~~

Table o f Contents

homes available, our remnant advertising, and the size and seasonal variability of our real estate partners’ marketing budgets. The seasonal variance and cyclical nature of home sales may contribute to the variability of our revenue and results of operations for our ~~Homes and~~ Mortgages ~~segments,~~segment, in particular, which seasonality may be masked ~~as those segments are growing.~~by segment growth. As a result of the potential variations in our revenue and results of operations, period-to-period comparisons may not be meaningful and the results of any one period should not be relied on as an indication of future performance. In addition, our results of operations may not meet the expectations of investors or public market analysts who follow us, which may adversely affect our stock price.

We Could Be Subject to Additional ~~Income~~ Tax ~~Liabilities and Our Ability to Use Our Net Operating Loss Carryforwards and Certain Other Tax Attributes May Be Limited.~~Liabilities.

We are subject to ~~federal and state~~ income taxes in the United States (federal and ~~in Canada.~~state), Canada, and Serbia. Tax laws, regulations, and administrative practices in various jurisdictions may be subject to significant change, with or without notice, due to economic, political, and other ~~conditions,~~conditions. New tax laws, regulations and ~~significant~~administrative practices could be enacted or adopted at any time, and existing tax laws, regulations and administrative practices could be interpreted, modified or applied adversely to us, possibly with retroactive effect. These changes could require us to pay additional taxes, penalties, interest and other related costs, and also could increase our compliance, operating and other costs. For instance, the recently enacted Inflation Reduction Act imposes, among other rules, a 15% minimum tax on the book income of certain large corporations and a 1% excise tax on certain corporate stock repurchases.

Significant judgment is required in evaluating and estimating ~~these taxes.~~the taxes imposed under such tax laws. Our effective tax rates could be affected by numerous factors, such as entry into new businesses and geographies, changes to our existing business and operations, acquisitions and investments and how they are financed, changes in our stock price, changes in our deferred tax assets and liabilities and their valuation, and changes in the relevant tax, accounting, and other laws, regulations, administrative practices, principles, and interpretations. ~~For example, On December 22, 2017,~~We are required to take positions regarding the ~~U.S. government enacted comprehensive~~interpretation of complex statutory and regulatory tax ~~legislation under~~rules and on valuation matters that are subject to uncertainty, and the Internal Revenue Service or other tax authorities may challenge the positions we take.

Our Ability to Use Our Net Operating Loss Carryforwards and Certain Other Tax Attributes May Be Limited.

We have incurred losses during our history. To the extent that we continue to generate losses, unused losses will carry forward to offset future taxable income, if any, until such unused losses expire, if at all. Under the Tax ~~Cuts~~Act, as modified by the Coronavirus Aid, Relief, and ~~Jobs~~Economic Security Act, ~~(the “Tax Act”). The Tax Act makes broad and complex changes to the U.S. tax code, including but not limited to: (1) reducing the U.S.~~United States federal corporate tax rate from 35 percent to 21 percent; (2) requiring companies to pay a one-time transition tax on certain untaxed earnings of foreign subsidiaries; (3) generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries; (4) eliminating the corporate alternative minimum tax (“AMT”) and how AMT credits are utilized; and (5) the additional limitations on deducting executive compensation under IRC section 162(m); and (6) changing rules related to uses and limitations of net operating loss carryforwards ~~created~~generated in ~~tax~~taxable years beginning after December 31, ~~2017.~~

~~The Tax Act significantly changes how~~2017, may be carried forward indefinitely, but the ~~U.S. taxes corporations. The Tax Act requires complex computations to be performed that were not previously required in U.S. tax law, significant judgments to be made in interpretation~~deductibility of ~~the provisions of the Tax Act and significant estimates in calculations, and the preparation and analysis of information not previously relevant~~

~~Table of Contents~~

or regularly produced. The U.S. Treasury Department, the IRS, and other standard-setting bodies have not implemented all relevant regulations or issued substantive guidance to-date and could interpret or issue guidance on how provisions of the Tax Act will be applied or otherwise administered that is different from our current interpretation.

~~As of December 31, 2019, we had federal~~such net operating loss carryforwards in taxable years beginning after December 31, 2020 is limited to 80% of ~~approximately $1,137.6 million, state net operating loss carryforwards of approximately $34.3 million (tax effected), and net tax credit carryforwards of approximately $71.0 million. Under~~taxable income.

In addition, under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended (the “Code”), if a corporation undergoes an ~~ownership change,~~“ownership change”, the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes, such as research ~~tax~~and development credits, to offset its post-change taxable income or income tax liability may be limited. ~~In connection with~~An “ownership change” occurs for these purposes if one or more shareholders (including certain groups of shareholders) that each owns at least 5% of the corporation’s stock by value increase their aggregate ownership by more than 50 percentage points over their lowest ownership percentages within a rolling three-year period. Similar rules may apply under state tax laws. We have undergone ownership changes in the past, and we may experience ownership changes in the future because of shifts in our ~~August 2013 public offering~~stock ownership, many of which are outside of our ~~Class A Common stock,~~control. As a result, if we ~~experienced an ownership change that triggered Sections 382 and 383, which may limit~~achieve profitability, our ability to ~~utilize~~use our net operating loss carryforwards and other tax ~~credit carryforwards. In connection with our February 2015 acquisition of Trulia, Inc., Trulia, Inc. experienced an ownership change that triggered Section 382 and 383,~~attributes to offset future United States federal taxable income or income tax liabilities may be, or may become, subject to limitations, which ~~may limit Zillow Group’s ability~~could result in increased future tax liability to ~~utilize Trulia, Inc.’s net operating loss and tax credit carryforwards.~~us.

Risks Related to Ownership of Our Common and Capital Stock and Debt Instruments

Our Class A Common Stock and Class C Capital Stock Prices May Be Volatile, and the Value of an Investment in Our Class A Common Stock and Class C Capital Stock May Decline.

An active, liquid and orderly market for our Class A common stock and Class C capital stock may not be sustained, which could depress the trading price of our Class A common stock and Class C capital stock. The trading price of our Class A common stock and Class C capital stock has at times experienced price volatility and may continue to be volatile. For example, ~~since shares of our Class A common stock began trading in February 2015,~~during the last three fiscal years ending December 31, 2022, the closing price of our Class A common stock has ranged from ~~$17.06~~$23.51 per share to ~~$65.21~~$203.79 per ~~share (adjusted for~~share. During the ~~August 2015 stock split effected in the form of a dividend) through December 31, 2019. Since shares of our Class C capital stock began trading in August 2015,~~same time period, the closing price of our Class C capital stock has ranged from ~~$16.01~~$25.01 per share to ~~$65.57~~$199.90 per ~~share through December 31, 2019.~~share. The market price of our Class A common stock and Class C capital stock could be

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;

•~~issuances~~repurchases of our Class A common stock ~~upon conversion of the 2020 Notes~~ and Class C capital stock by us or our shareholders;

•issuances of our Class C capital stock upon conversion of our ~~2021~~2024 Notes, ~~2023 Notes, 2024~~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.

Furthermore, the stock markets in recent years have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of the equity securities of many companies. These fluctuations often have been unrelated or disproportionate to the operating performance of those companies. These broad market and industry fluctuations, as well as general economic, political and market conditions such as recessions, changes to federal monetary policy, interest ~~rate changes~~rates or international currency fluctuations, may negatively impact the market price of our Class A common stock and Class C capital stock. In the past, companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation. We have in the past been and are currently the target of this type of litigation, and we may continue to be the target of this type of litigation in the future. Past, current, and future securities litigation against us could result in substantial costs and

~~Table of Contents~~

divert management’s attention from other business concerns, which could harm our business, results of operations or financial condition.

The Structure of Our Capital Stock as Contained in Our Charter Documents Has the Effect of Concentrating Voting Control With Our Founders, and Limits Your Ability to Influence Corporate Matters.

Since Zillow Group’s inception, our capital structure has included authorized Class A common stock and authorized Class B common stock. 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, ~~2019,~~2022, Mr. Barton’s holdings and Mr. Frink’s holdings represented approximately ~~31.3%~~31.6% and ~~20.4%~~20.5%, respectively, of the voting power of our outstanding capital stock.

For the foreseeable future, Mr. Barton and Mr. Frink will therefore have significant control over our management and affairs and will be able to control most matters requiring shareholder approval, including the election or removal (with or without cause) of directors and the approval of any significant corporate transaction, such as a merger or other sale of us or our assets. In addition, because our Class C capital stock carries no voting rights (except as required by applicable law or as expressly provided in our amended and restated articles of incorporation), the issuance of Class C capital stock (instead of Class A common stock) could prolong the duration of Mr. Barton’s and Mr. Frink’s relative ownership of our voting power. This concentrated control could delay, defer or prevent a change of control, merger, consolidation, takeover, or other business combination involving us that you, as a shareholder, may otherwise support. This concentrated control could also discourage a potential investor from acquiring our Class A common stock or Class C capital stock due to the limited voting power of such stock relative to the Class B common stock and might harm the market price of our Class A common stock and Class C capital stock.

Future Sales of Our Stock in the Public Market Could Cause Our Stock Price to Decline.

~~Our Class A common stock began trading on The Nasdaq Global Select Market on February 18, 2015, and our Class C capital stock began trading on The Nasdaq Global Select Market on August 17, 2015.~~

We cannot predict the effect, if any, that market sales of shares or the availability of shares for sale will have on the prevailing trading price of our Class A common stock and Class C capital stock from time to time. There is currently no contractual restriction on our ability to issue additional shares, and all of our outstanding shares are generally freely tradable,

Table o f Contents

except for shares held by our “affiliates” as defined in Rule 144 under the Securities Act of 1933, as amended, which may be sold in compliance with the volume restrictions of Rule 144. Sales of a substantial number of shares of our Class A common stock and Class C capital stock could cause our stock price to decline. In addition, we may in the future issue shares of Class C capital stock for financings, acquisitions, equity incentives, including under our Equity Distribution Agreement or ~~equity incentives.~~to settle our outstanding convertible notes. If we issue shares of Class C capital stock in the future, such issuances would have a dilutive effect on the economic interest of our Class A common stock.

If Securities or Industry Analysts or Other Third Parties Do Not Publish Research or Publish Inaccurate or Unfavorable Research About Our Business, Our Class A Common Stock and Class C Capital Stock Price and Trading Volume Could Decline.

The trading market for our Class A common stock and Class C capital stock depends in part on the research and reports that securities or industry analysts or other third parties publish about our company. If few or no securities or industry analysts or other third parties cover our company, the market price of our publicly-traded stock could be negatively impacted. If securities or industry analysts or other third parties cover us and if one or more of such analysts downgrade our stock or publish inaccurate or unfavorable research about our business, our stock price would likely decline. If one or more of the analysts covering us fail to publish reports on us regularly, demand for our stock could decline, which could cause our stock price and trading volume to decline.

If We Issue Additional Equity Securities or ~~Issue Additional~~ Convertible Debt to Raise Capital or Elect to Settle Conversions of Our Convertible Senior Notes in Stock, It May Have a Dilutive Effect on Shareholders’ Investment.

If we raise additional capital through further issuances of equity or convertible debt securities or elect to settle conversions of our convertible senior notes in shares of our Class C capital stock, our existing shareholders could suffer significant dilution in their percentage ownership of us. Moreover, any new equity securities we issue could have rights, preferences and privileges senior to those of holders of our common stock.

The Capped Call Transactions May Affect the Value of Our ~~2021 Notes, 2023 Notes,~~ 2024 Notes, 2026 Notes and Our Class C Capital Stock.

~~Table of Contents~~

In connection with the pricing of each of the ~~2021 Notes, 2023 Notes,~~ 2024 Notes and 2026 Notes, we entered into capped call transactions with certain financial institutions (the “option counterparties”). The capped call transactions are expected generally to reduce the potential dilution ~~upon~~in connection with the conversion of the ~~2021 Notes, 2023 Notes,~~ 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. In connection with our Convertible Senior Notes due in 2021 (“2021 Notes”) and 2023 (“2023 Notes”), the balance of which we redeemed in late 2020 and mid-2021 respectively, we exercised our right to keep the associated capped call confirmations open through the expiration of the 2021 Notes and 2023 Notes, which caused short term dilution. We may pursue similar options with the capped call confirmations associated with each of the 2024 Notes and 2026 Notes in the future.

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 ~~2021~~2024 Notes ~~2023 Notes, 2024 Note,~~ and 2026 Notes (and are likely to do so during any observation period related to a conversion of ~~2021 Notes, 2023 Notes,~~ 2024 Notes or 2026 Notes or in connection with any repurchase of ~~2021 Notes, 2023 Notes,~~ 2024 Notes or 2026 Notes by us). This activity could cause or avoid an increase or a decrease in the market price of our Class C capital stock, ~~the 2021 Notes, the 2023 Notes,~~ the 2024 Notes or the 2026 Notes.

Anti-Takeover Provisions in Our Charter Documents and Under Washington Law Could Make an Acquisition of Us More Difficult, Limit Attempts by Shareholders to Replace or Remove Our Management and Affect the Market Price of Our Stock.

Provisions in our articles of incorporation and bylaws, as amended and restated, may have the effect of delaying or preventing a change of control or changes in our management. 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;

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.

Prior to the threshold date, our directors can be removed with or without cause by holders of our Class A common stock and Class B common stock, voting together as a single group, and vacancies on the board of directors may be filled by such shareholders, voting together as a single group. Given the structure of our capital stock, our founders, Richard Barton and Lloyd Frink, who hold or control our Class B common stock, will have the ability for the foreseeable future to control these shareholder actions. See the risk factor above titled “The Structure of Our Capital Stock as Contained in Our Charter Documents Has the Effect of Concentrating Voting Control With our Founders, and Limits Your Ability to Influence Corporate Matters.”

~~Table of Contents~~

The provisions described above, after the threshold date, may frustrate or prevent any attempts by our shareholders to replace or remove our current management by making it more difficult for shareholders to replace members of our board of directors, which board is responsible for appointing our management. In addition, because we are incorporated in the State of Washington, we are governed by the provisions of Chapter 23B.19 of the Washington Business Corporation Act, which prohibits certain business combinations between us and certain significant shareholders unless specified conditions are met. These provisions may also have the effect of delaying or preventing a change of control of our company, even if this change of control would benefit our shareholders.

Item 1B. Unresolved Staff Comments.

Not applicable.

Table o f Contents

Item 2. Properties.

We have various operating leases for office space which are summarized as of December 31, ~~2019~~2022 in the table ~~below, by~~below. Given the permanent move to a flexible workforce, our operating leases no longer support specific reportable ~~segment. Beginning January 1, 2019, Zillow Group has three segments: Homes, Internet, Media & Technology (“IMT”) and Mortgages.~~segments. We believe that our facilities are adequate for our current needs.


Location	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

Location Purpose Primary Reportable Segment(s) Approximate
Square Feet
Principal Lease
Expiration Dates
Seattle, Washington Corporate headquarters for Zillow Group All segments 386,275 2024
New York, New York General office space IMT 201,562 2030
Atlanta, Georgia General office space All segments 108,213 2025
San Francisco, California General office space All segments 105,897 2023
Irvine, California General office space All segments 80,312 2027
Denver, Colorado General office space All segments 73,781 2021
Overland Park, Kansas General office space Mortgages 70,373 2024
(1) Excludes square footage of subleased space.

In addition, we lease office space in several other ~~U.S.~~ locations in the United States and ~~in Vancouver, British Columbia.~~Canada. See Note 142 and Note 2012 of Part II, Item 8 of this Annual Report on Form 10-K for more information about our lease commitments.

Item 3. Legal Proceedings.

For information regarding legal proceedings in which we are involved, see Note 2018 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 4. Mine Safety Disclosures.

Not applicable.

Table of o f Contents

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Market Information and Holders

Our Class A common stock has traded on The Nasdaq Global Select Market under the symbol “ZG” since August 17, 2015 and under the symbol “Z” from July 20, 2011 through August 14, 2015.

Our Class B common stock is not listed and there is no established public trading market.

Our Class C capital stock has traded on The Nasdaq Global Select Market under the symbol “Z” since August 17, 2015. Prior to that time, there was no public market for our Class C capital stock.

Holders of Record

As of February ~~12, 2020,~~9, 2023, there were ~~81,~~316, three, and ~~132~~131 holders of record of our Class A common stock, our Class B common stock, and our Class C capital stock, respectively.

Dividends

We have never declared or paid a cash dividend on our common or capital stock and we intend to retain all available funds and any future earnings to fund the development and growth of our business. We therefore do not anticipate paying any cash dividends on our common or capital stock in the foreseeable future. Any future determinations to pay dividends on our common or capital stock would depend on our results of operations, our financial condition and liquidity requirements, restrictions that may be imposed by applicable law or our contracts and any other factors that our board of directors may consider relevant.

Recent Sales of Unregistered Securities and Use of Proceeds from Registered Securities

Recent Sales of Unregistered Securities

~~Except as previously reported on a current report on Form 8-K, we had~~There were no ~~unregistered~~ sales of ~~equity~~unregistered securities during the ~~year~~three months ended December 31, ~~2019.~~2022.

Table o f Contents

Purchases of Equity Securities by the Issuer

~~None.~~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. 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 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. The Repurchase Authorizations do not have an expiration date.

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.

For our Class A common stock, this graph covers the period from December 31, 2014 through December 31, 2019. This graph assumes that the value of the investment in Zillow Group’s Class A common stock and each index (including reinvestment of dividends) was $100 on December 31, 2014.

For our Class C capital stock, this graph covers the period from August 3, 2015, using the closing price for the first day of trading during the when-issued trading period prior to the August 2015 stock split effected in the form of a dividend through December 31, 2019. This graph assumes that the value of the investment in Zillow Group’s Class C capital stock (including reinvestment of dividends) was $100 on August 3, 2015.

The information contained in the graph is based on historical data and is not intended to forecast possible future performance.

~~Table of Contents~~

Item 6. Reserved.

~~Table of Contents~~

~~PART II~~

~~Item 6. Selected Financial Data.~~

The selected financial data set forth below should be read in conjunction with the information under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K and our previously audited financial statements that are not included herein. We have included Trulia, Inc. in Zillow Group’s results of operations prospectively after February 17, 2015, the date of acquisition. We have given retroactive effect to prior period share and per share amounts in our consolidated statements of operations for the August 2015 stock split effected in the form of a dividend so that prior periods are comparable to current period presentation. Prior periods have been recast to align with Zillow Group’s segment change effective January 1, 2019. In 2018, our business model evolved significantly with the launch of Zillow Offers in April and the acquisition of Zillow Home Loans in October. Zillow Offers, for example, is a cash- and inventory-intensive business with a high cost of revenue as compared with other parts of our operations; the cost of revenue includes the amount we pay to purchase homes and costs incurred to renovate the homes prior to sale. Revenue for the Homes segment includes the sale prices of homes less resale concessions and credits to the buyer, and does not reflect real estate agent commissions, closing or other associated costs. As a result of this evolution of our business model, financial performance for prior year periods may not be indicative of future performance. Amounts are in thousands, except per share data.

~~Table of Contents~~

Year Ended December 31,
2019 2018 2017 2016 2015

Statement of Operations Data:
Revenue:
Homes $ 1,365,250 $ 52,365 $ — $ — $ —
IMT 1,276,896 1,201,143 996,203 775,456 600,414
Mortgages 100,691 80,046 80,591 71,133 44,263
Total revenue 2,742,837 1,333,554 1,076,794 846,589 644,677
Cost of revenue (exclusive of amortization) (1)(2):
Homes 1,315,345 49,392 — — —
IMT 98,522 96,693 80,310 64,446 55,946
Mortgages 18,154 7,505 4,893 4,816 4,181
Total cost of revenue 1,432,021 153,590 85,203 69,262 60,127
Sales and marketing (1) 714,128 552,621 448,201 382,419 308,125
Technology and development (1) 477,347 410,818 319,985 255,583 184,477
General and administrative (1) 366,176 262,153 210,816 332,007 184,984
Impairment and restructuring costs (1) — 79,000 174,000 — 35,551
Acquisition-related costs — 2,332 463 1,423 16,576
Integration costs 650 2,015 — — —
Loss (gain) on divestiture of businesses — — — (1,251) 4,368
Total costs and expenses 2,990,322 1,462,529 1,238,668 1,039,443 794,208
Loss from operations (247,485) (128,975) (161,874) (192,854) (149,531)
Loss on debt extinguishment — — — (22,757) —
Other income 39,658 19,270 5,385 2,711 1,501
Interest expense (101,792) (41,255) (27,517) (7,408) (5,489)
Loss before income taxes (309,619) (150,960) (184,006) (220,308) (153,519)
Income tax benefit (expense) 4,258 31,102 89,586 (130) 4,645
Net loss $ (305,361) $ (119,858) $ (94,420) $ (220,438) $ (148,874)
Net loss per share—basic and diluted $ (1.48) $ (0.61) $ (0.51) $ (1.22) $ (0.88)
Weighted average shares outstanding—basic and diluted 206,380 197,944 186,453 180,149 169,767
(1) Includes share-based compensation as follows:
Cost of revenue $ 3,978 $ 4,127 $ 3,884 $ 3,550 $ 2,384
Sales and marketing 25,126 22,942 22,735 23,320 25,391
Technology and development 69,921 56,673 39,938 31,466 26,849
General and administrative 99,877 65,342 47,014 48,582 50,590
Impairment and restructuring costs — — — — 14,859
Total $ 198,902 $ 149,084 $ 113,571 $ 106,918 $ 120,073
(2) Amortization of website development costs and intangible assets included in technology and development $ 61,937 $ 79,309 $ 94,349 $ 87,060 $ 63,189

Table of o f Contents

At December 31,
2019 2018 2017 2016 2015

Balance Sheet Data:
Cash, cash equivalents and investments $ 2,422,252 $ 1,554,925 $ 762,539 $ 507,515 $ 520,289
Working capital 2,589,637 1,605,200 723,138 485,617 493,672
Property and equipment, net 170,489 135,172 112,271 98,288 85,523
Total assets 6,131,973 4,291,116 3,230,517 3,149,677 3,135,700
Long-term debt 1,543,402 699,020 385,416 367,404 230,000
Other long-term liabilities 232,633 37,419 65,890 151,444 146,225
Total shareholders’ equity 3,435,421 3,267,179 2,660,823 2,533,587 2,679,053

~~Table of Contents~~

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion of our financial condition and results of operations should be read in conjunction with our audited consolidated financial statements and the related notes included elsewhere in this Annual Report on Form 10-K. In the fourth quarter of 2021, we began to wind down the operations of Zillow Offers, our iBuying business which purchased and sold homes directly in certain markets across the country. The ~~following~~wind down of Zillow Offers operations was completed in the third quarter of 2022, and we have presented the financial results of Zillow Offers as discontinued operations in our consolidated financial statements for all periods presented. The discussion ~~focuses on 2019~~of 2021 and ~~2018~~2020 financial condition, ~~and~~ results of operations and year-to-year comparisons between 2019 and 2018. Similar discussion of our 2017 financial condition and results and year-to-year comparisons between 2018 and 2017 can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 ofwithin the ~~Company’s Annual Report on Form 10-K for the year ended December 31, 2018.~~sections below have been revised to conform with this current period presentation.

In addition to historical financial information, the following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. 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”.

Overview of our Business

Zillow Group ~~Inc. houses one of the largest portfolios of~~is reimagining real estate ~~brands on mobile and the web. Zillow Group is committed to leveraging its proprietary data, technology and innovations~~ to make ~~home buying, selling, financing~~it easier to unlock life’s next chapter. As the most visited real estate website in the United States, Zillow and ~~renting a seamless,~~its affiliates offer customers an on-demand experience for ~~customers. As its flagship brand,~~selling, buying, renting or financing with transparency and ease.

Our portfolio of consumer brands includes Zillow now offers a fully integrated home shopping experience that includes access to for sale and rental listings, Zillow Offers, which provides a hassle-free way to buy and sell eligible homes directly through Zillow, andPremier Agent, Zillow Home Loans, ~~Zillow’s affiliated~~our affiliate lender, ~~that provides an easy way to receive mortgage pre-approvals and financing. Other consumer brands include~~Zillow Closing Services, Zillow Rentals, Trulia, StreetEasy, HotPads ~~Naked Apartments~~ and Out East. In addition, Zillow Group provides a comprehensive suite of marketing software and technology solutions ~~to help~~for the real estate ~~partners maximize business opportunities~~industry which include Mortech, New Home Feed and ~~connect with millions~~ShowingTime+, which houses ShowingTime, Bridge Interactive, dotloop and interactive floor plans.

Discontinued Operations

In the fourth quarter of ~~customers.~~2021, the Board of Directors (the “Board”) of Zillow Group made the determination to wind down the operations of Zillow Offers, our iBuying business ~~brands~~which purchased and sold homes directly in certain 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. The financial results of Zillow Offers have been presented in the accompanying consolidated financial statements as discontinued operations and, therefore, are excluded from the following discussion of the results of our continuing operations. In addition, the discussion of 2021 and 2020 financial condition, results of operations and year-to-year comparisons within the sections below have been revised to conform with this current period presentation. Given the wind down of Zillow Offers and corresponding shift in our strategic plans, financial performance for ~~real estate, rental~~prior and ~~mortgage professionals, include Mortech, dotloop, Bridge Interactive~~current periods may not be indicative of future performance. 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.

August 2022 Equity Award Actions

On August 3, 2022, upon the recommendation of the Compensation Committee of the Board, the Board approved adjustments to the exercise price of certain outstanding vested and ~~New Home Feed.~~unvested option awards for eligible employees. The exercise price of eligible option awards was reduced to $38.78, which was the closing market price of our Class C capital stock on August 8, 2022. No other changes were made to the terms and conditions of the eligible option awards. In addition, the Board approved a supplemental grant of restricted stock units to eligible employees that was granted on August 8, 2022 and vests quarterly over a two-year period beginning in August 2022. 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 remaining expense will be recognized over the remaining requisite service period, which is largely over the next two years. For additional information regarding the August 2022 Equity Award, see Note 16 in our Notes to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K.

Reportable Segments and Revenue Overview

~~As of January 1, 2019,~~ Zillow Group has three reportable segments: ~~the Homes segment,~~ the Internet, Media & Technology (“IMT”) segment, the Mortgages segment and the ~~Mortgages~~Homes segment. ~~The Homes segment includes the financial results from Zillow Group’s purchase and sale of homes directly through the Zillow Offers service.~~

The IMT segment includes the financial results for the Premier Agent ~~Rentals~~ and ~~new construction~~rentals marketplaces (including StreetEasy rentals product offerings) as well as ~~dotloop, display~~Other IMT, which includes our new construction marketplace and revenue from the sale of

Table o f Contents

other advertising and business ~~software solutions.~~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. In the fourth quarter of 2021, we began to include the financial results of ShowingTime in the IMT segment. For additional information regarding the September 2021 acquisition of ShowingTime, see Note 9 in our Notes to Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K. The Mortgages segment primarily includes ~~the~~ financial results for mortgage originations through Zillow Home Loans and advertising sold to mortgage lenders and other mortgage ~~professionals, mortgage originations through Zillow Home Loans and our Mortech mortgage software solutions.~~

~~In our~~professionals. The Homes segment ~~we generate revenue~~includes the financial results from title and escrow services performed by Zillow Closing Services and certain indirect costs of the ~~resale of homes on the open market through our Zillow Offers service. We began buying homes through the Zillow Offers service in April 2018, and we began selling homes in July 2018.~~Homes segment which do not qualify as discontinued operations.

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 ~~and~~program. Premier ~~Broker programs. Premier~~ Agent ~~and Premier Broker advertising~~ products, which include the delivery of ~~impressions and~~ validated ~~consumer~~customer connections, or leads, are primarily ~~sold~~offered on a share of voice basis. ~~Impressions and leads~~Connections are distributed to Premier ~~Agents and Premier Brokers~~Agent partners in proportion to their share of voice, or an agent advertiser’s share of total advertising purchased in a particular zip code. ~~Impressions~~Connections are delivered when ~~an advertisement of a Premier Agent or Premier Broker appears on pages viewed by users of our mobile applications and websites and connections are delivered when consumer~~customer contact information is provided to Premier ~~Agents and Premier Brokers.~~Agent partners. Connections ~~and impressions~~ are ~~each~~ provided as part of our suite of advertising services for Premier Agent ~~and Premier Brokers;~~partners; we do not charge a separate fee for these ~~consumer~~customer leads.

~~In October 2018, we began testing~~We also offer a ~~new Flex~~pay for performance pricing model called “Flex” for Premier Agent ~~and Premier Broker advertising~~ services in ~~limited markets. We may continue~~certain markets to ~~extend the testing of this pricing model to additional regions in the future.~~select partners. With the Flex model, Premier ~~Agents and Premier Brokers~~Agent partners are provided with ~~impressions and connections~~validated leads at no ~~upfront~~initial cost and ~~they~~ pay a performance ~~advertising~~ fee only when a real estate transaction is closed with one of ~~those leads.~~the leads within two years.

Rentals revenue ~~primarily~~ includes advertising sold to property managers, landlords and other rental professionals on a cost per lead, ~~cost per~~ click, ~~cost per~~ lease, listing or ~~cost per listing basis.~~impression basis or for a fixed fee for certain advertising packages through both Zillow and StreetEasy. Rentals revenue also includes revenue generated ~~through~~from our rental applications product, ~~whereby~~through which potential renters can submit applications to multiple properties for a flat service fee.

~~Table of Contents~~

Other IMT revenue primarily includes revenue generated by our new construction marketplace and ~~display advertising, as well as~~ revenue from the sale of ~~various~~ other advertising and business technology solutions for real estate professionals, including ~~dotloop.~~display, StreetEasy for-sale product offerings and ShowingTime+. New construction revenue primarily includes advertising services sold to home builders on a cost per residential community or cost per impression basis. 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 ~~primarily~~ 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. 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. 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. Appointment Center revenue is primarily billed in advance on a monthly basis.

In our Mortgages segment, we generate revenue from advertising sold to mortgage lenders and other mortgage professionals on a cost per lead or subscription basis, including our Connect and Custom Quote services, and from Mortech, which provides subscription-based mortgage software solutions, including a product and pricing engine and lead management platform. We alsoprimarily generate revenue through mortgage originations and the related sale of mortgages on the secondary market through Zillow Home ~~Loans.~~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.

Homes segment revenue relates to revenue associated with title and escrow services provided through Zillow Closing Services and was not material for the periods presented.

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 ~~Highlights~~

Overview

For the years ended December 31, ~~2019~~2022 and ~~2018,~~2021, we generated revenue of ~~$2,742.8 million~~$2.0 billion and ~~$1,333.6 million,~~$2.1 billion, respectively, representing a year-over-year ~~growth~~decrease of ~~106%~~8%. The ~~increase~~decrease in total revenue was primarily attributable to the following:

•~~Our Zillow Offers business began selling homes in July of 2018. Homes~~Mortgages segment revenue ~~grew~~decreased by $127 million to ~~$1,365.3~~$119 million for the year ended December 31, ~~2019 due~~2022 compared to ~~the sale of 4,313~~ ~~homes at an average selling price of~~ ~~$316.5 thousand per home. For the~~ ~~year~~ ~~ended~~ ~~December 31, 2018, Homes revenue was~~ ~~$52.4 million~~ ~~due to the sale of 177 homes at an average selling price of~~ ~~$295.8 thousand per home~~. ~~As of December 31, 2019, Zillow Offers was operating in 22 metropolitan areas.~~

•~~Premier Agent revenue increased by $25.5 million to $923.9~~$246 million for the year ended December 31, ~~2019~~2021, driven primarily by a decrease in revenue generated by Zillow Home Loans, as total loan origination volumes decreased 62% primarily resulting from a decrease in demand for refinance mortgages attributable to the rising and volatile interest rate environment. The decrease in Mortgages segment revenue was also impacted by a decrease in revenue from Custom Quote and Connect advertising services.

Table o f Contents

•Premier Agent revenue decreased by $105 million to $1.3 billion for the year ended December 31, 2022 compared to ~~$898.3~~$1.4 billion for the year ended December 31, 2021. The decrease in Premier Agent revenue was primarily due to macro housing market factors including interest rate and home price increases and volatility, as well as tight housing inventory levels. These factors resulted in a 10% decrease in Premier Agent revenue per visit.

•The decreases noted above were partially offset by a $48 million increase in Other IMT revenue to $274 million for the year ended December 31, ~~2018.~~

•~~Rentals revenue increased by $29.6 million~~2022 compared to ~~$164.2~~$226 million for the year ended December 31, ~~2019 compared~~2021, primarily due to ~~$134.6 million for~~ the ~~year ended December 31, 2018.~~

•~~Mortgages~~addition of ShowingTime revenue increased by $20.6 million to $100.7 million for the year ended December 31, 2019 compared to $80.0 million for the year ended December 31, 2018, driven by our mortgage originations business, which we acquiredbeginning in the fourth quarter of ~~2018.~~2021.

•~~Visits for~~For the years ended December 31, ~~2019~~2022 and ~~2018 were 8,065.5 million~~2021, we generated total gross profit of $1.6 billion and ~~7,182.1 million,~~$1.8 billion, respectively, representing a year-over-year ~~growth~~decrease of 12%~~. The increase~~, due to the combined factors discussed below.

Health of Housing Market

Our financial performance is impacted by changes in ~~visits increased~~the health of the housing market, which is impacted, in turn, by general economic conditions. Current market factors, including low housing inventory, fewer new for-sale listings, increases and volatility in mortgage interest rates as well as home price fluctuations, inflationary conditions and changing rental occupancy rates may have a negative impact on the number of ~~events~~transactions that consumers complete using our products and services and on demand for our advertising services. The extent to which these factors impact our results and financial position will depend on future developments, which are uncertain and difficult to predict.

COVID-19 Impact

The effect and extent of the impact of the COVID-19 pandemic on our business continues to be uncertain and difficult to predict. While we ~~monetized across~~have seen recovery in our ~~revenue categories.~~

•business and the businesses of our customers and real estate partners from the initial economic effects of the pandemic, the duration and impact of the COVID-19 pandemic (including variants) may continue to affect our financial results. The ~~average number of monthly unique users for the three months ended December 31, 2019~~extent to which COVID-19 (including any variants) continues to impact our results and ~~2018 were 172.6 million~~financial position will depend on future developments, which are uncertain and ~~157.2 million, respectively, representing year-over-year growth of 10%.~~difficult to predict.

Key Metrics

Management has identified visits, ~~and~~ unique users and the volume of loans originated through Zillow Home Loans as relevant to investors’ and others’ assessment of our financial condition and results of operations. We no longer consider the number of homes sold as a key metric given the wind down of Zillow Offers operations.

Visits

The number of visits is an important metric because it is an indicator of consumers’ level of engagement with our mobile applications, websites and other services. We believe highly engaged consumers are more likely to ~~participate in~~use our ~~Zillow Offers program or use~~products and services, including Zillow Homes Loans, or ~~more likely to~~ be transaction-ready real estate market participants and therefore are more sought-after by our ~~real estate~~Premier Agent partners.

We define a visit as a group of interactions by users with the Zillow, Trulia and StreetEasy ~~mobile applications and websites, as we monetize our Premier Agent and Premier Broker products on these~~ mobile applications and websites. A single visit can contain multiple page views and actions, and a single user can open multiple visits across domains, web browsers, desktop or mobile devices. Visits can occur on the same day, or over several days, weeks or months.

~~Table of Contents~~

Zillow and StreetEasy measure visits with Google Analytics, and Trulia measures visits with Adobe Analytics. Visits to Trulia end after thirty minutes of user inactivity. Visits to Zillow and StreetEasy end either: (i) after thirty minutes of user inactivity or at midnight; or (ii) through a campaign change. A visit ends through a campaign change if a visitor arrives via one campaign or source (for example, via a search engine or referring link on a third-party website), leaves the mobile application or website, and then returns via another campaign or source.

The following table presents the number of visits to our mobile applications and websites for the periods presented (in ~~millions)~~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

Year Ended December 31, 2018 to 2019
% Change
2017 to 2018
% Change
2019 2018 2017
Visits 8,065.5 7,182.1 6,314.4 12 % 14 %
Table o f Contents

~~Unique Users~~

Measuring unique users is important to us because much of our revenue depends in part on our ability to ~~enable real estate, rental and mortgage professionals to~~ connect ~~with our customers -~~ home buyers and sellers, renters and individuals with or looking for a ~~mortgage.~~mortgage to real estate, rental and mortgage professionals, products and services. Growth in consumer traffic to our mobile applications and websites increases the number of impressions, clicks, connections, leads and other events we can monetize to generate revenue. For example, our ~~Homes segment~~ revenue depends in part, on users accessing our mobile applications and websites to engage in the sale, purchase and ~~purchase~~financing of homes, including with Zillow ~~Group,~~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.

We count a unique user the first time an individual accesses one of our mobile applications using a mobile device during a calendar month and the first time an individual accesses one of our websites using a web browser during a calendar month. If an individual accesses our mobile applications using different mobile devices within a given month, the first instance of access by each such mobile device is counted as a separate unique user. If an individual accesses more than one of our mobile applications within a given month, the first access to each mobile application is counted as a separate unique user. If an individual accesses our websites using different web browsers within a given month, the first access by each such web browser is counted as a separate unique user. If an individual accesses more than one of our websites in a single month, the first access to each website is counted as a separate unique user since unique users are tracked separately for each domain. Zillow, StreetEasy ~~HotPads~~ and ~~Naked Apartments~~HotPads measure unique users with Google Analytics, and Trulia measures unique users with Adobe Analytics.

Due to third-party technological limitations, user software settings, or user behavior, Google Analytics may assign a unique cookie to different instances of access by the same individual to our mobile applications and websites. In such instances, Google Analytics would count different instances of access by the same individual as separate unique users. Accordingly, reliance on the number of unique users counted by Google Analytics may overstate the actual number of unique users who access our mobile applications and websites during the period.

The following table presents our average monthly unique users for the periods presented (in ~~millions)~~millions, except percentages):


	Year Ended December 31,			2021 to 2022 % Change		2020 to 2021 % Change
	2022	2021	2020
Average monthly unique users	220	218	212	1	%	3	%

Three Months Ended December 31, 2018 to 2019
% Change
2017 to 2018
% Change
2019 2018 2017
Average Monthly Unique Users 172.6 157.2 151.6 10 % 4 %
Loan Origination Volume

~~Basis~~Loan origination volume is an important metric as it is a measure of ~~Presentation~~

~~Revenue~~

~~We recognize revenue when or as~~how successful we ~~satisfy our performance obligations by transferring control~~are at the origination and subsequent sale of ~~promised~~mortgage loan products ~~or services to our customers in an amount that reflects the consideration to which we expect to be entitled in exchange for those products or services.~~

~~In our Homes segment, we generate revenue from the resale of homes on the open market~~ through our mortgage origination business, Zillow ~~Offers program.~~

In our IMT segment, we generate revenue from the sale of advertising services and our suite of marketing software and technology solutions to residential real estate businesses, professionals and consumers. These professionals include real estate, rental and new construction brand advertisers, professionals and consumers. Our three primary revenue categories within our IMT segment are Premier Agent, Rentals and Other.

~~Table of Contents~~

InHome Loans, which directly impacts our Mortgages segment ~~we generate revenue from~~revenue. Loan origination volume represents the ~~sale~~total value of ~~advertising services to~~ mortgage ~~lenders and other mortgage professionals, mortgage~~loan originations ~~and the related sale of mortgages on the secondary market~~closed through Zillow Home Loans ~~as well as Mortech mortgage software solutions.~~

~~Homes Revenue.~~ Homes revenue is derived from the resale of homes on the open market through our Zillow Offers program. Homes revenue is recognized at the time of the closing of the home sale when title to and possession of the property are transferred to the buyer. The amount of revenue recognized for each home sale is equal to the sale price of the home net of resale concessions and credits to the buyer and does not reflect real estate agent commissions, closing or other costs associated with the transaction.

~~Premier Agent Revenue.~~ Premier Agent revenue is derived from our Premier Agent and Premier Broker programs. Our Premier Agent and Premier Broker programs offer a suite of marketing and business technology products and services to help real estate agents and brokers achieve their advertising goals, while growing and managing their businesses and brands. All Premier Agents and Premier Brokers receive access to a dashboard portal on our mobile application and website that provides individualized program performance analytics, our customer relationship management, or CRM, tool that captures detailed information about each contact made with a Premier Agent or Premier Broker through our mobile and web platforms, and our account management tools. The marketing and business technology products and services promised to Premier Agents and Premier Brokers are delivered over time, as the customer simultaneously receives and consumes the benefit of the performance obligations.

Premier Agent and Premier Broker advertising products, which include the delivery of impressions and validated consumer connections, or leads, are primarily offered on a share of voice basis. Payment is received prior to the delivery of impressions and connections. Impressions are delivered when an advertisement appears on pages viewed by users of our mobile applications and websites and connections are delivered when consumer contact information is provided to Premier Agents and Premier Brokers. We do not promise any minimum or maximum number of impressions or connections to customers, but instead control when and how many impressions and connections to deliver based on a customer’s share of voice. We determine the number of impressions and connections to deliver to Premier Agents and Premier Brokers in each zip code using a market-based pricing method in consideration of the total amount spent by Premier Agents and Premier Brokers to purchase impressions and connections in the zip code during the month. This results in the delivery of impressions and connections over time in proportion to each Premier Agent’s and Premier Broker’s share of voice. A Premier Agent’s or Premier Broker’s share of voice in a zip code is determined by their proportional monthly prepaid spend in that zip code as a percentage of the total monthly prepaid spend of all Premier Agents and Premier Brokers in that zip code, and includes both the share of impressions delivered as advertisements appearing on pages viewed by users of our mobile applications and websites as well as the proportion of consumer connections a Premier Agent or Premier Broker receives. The number of impressions and connections delivered for a given spend level is dynamic - as demand for advertising in a zip code increases or decreases, the number of impressions and connections delivered to a Premier Agent or Premier Broker in that zip code decreases or increases accordingly.

We primarily recognize revenue related to the Premier Agent and Premier Broker products and services based on the monthly prepaid spend recognized on a straight-line basis during the monthly billing period over which the products and services are provided. This methodology best depicts how we satisfy our performance obligations to customers, as we continuously transfer control of the performance obligations to the customer over time. Given a Premier Agent or Premier Broker typically prepays their monthly spend and the monthly spend is refunded on a pro-rata basis upon cancellation of the contract by a customer at any point in time, we have determined that Premier Agent and Premier Broker contracts are effectively daily contracts, and each performance obligation is satisfied over time as each day lapses. We have not allocated the transaction price to each performance obligation within our Premier Agent and Premier Broker arrangements, as the amounts recognized would be the same irrespective of any allocation.

In October 2018, we began testing a new pricing model, Flex, for Premier Agent and Premier Broker advertising services in limited markets. With the Flex model, Premier Agents and Premier Brokers are provided with validated leads at no upfront cost and pay a performance advertising fee only when a real estate transaction is closed with one of the leads. 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. During this testing phase, we recognize revenue when we receive payment for a real estate transaction closed with a Flex lead. We will continuously reevaluate this determination and the point at which we may begin to estimate variable consideration and record revenue as performance obligations are transferred.

~~Table of Contents~~

landlords and other rental professionals on a cost per lead, cost per click, cost per lease, cost per listing or cost per impression basis. We recognize revenue as leads, clicks and impressions are provided to rental professionals, or as rental listings are published on our mobile applications and websites, which is the amount for which we have the right to invoice. The number of leases generated through our rentals pay per lease product during the period is accounted for as variable consideration, and we estimate the amount of variable consideration based on the expected number of qualified leases secured during the period. ~~We do not believe that a significant reversal~~

The following table presents loan origination volume by purpose and in ~~the amount of cumulative revenue recognized will occur once the uncertainty related to the number of leases secured is subsequently resolved.~~

~~Rentals revenue also includes revenue generated from our rental applications product through which potential renters can submit applications to multiple rental properties over a 30-day period~~total for a flat service fee. We recognize revenue for the rental applications product on a straight-line basis during the contractual period over which the customer has the right to access and submit the rental application.

~~Other Revenue.~~ Other revenue primarily includes revenue generated by new construction and display, as well as revenue from the sale of various other marketing and business products and services to real estate professionals. Our new construction marketing solutions allow home builders to showcase their available inventory to home shoppers. New construction revenue primarily includes revenue generated by advertising sold to builders on a cost per residential community basis, and revenue is recognized on a straight-line basis during the contractual period over which the communities are advertised on our mobile applications and websites. New construction revenue also includes revenue generated on a cost per impression basis whereby we recognize revenue as impressions are delivered to users interacting with our mobile applications and websites, which is the amount for which we have the right to invoice. Consideration for new construction products is billed in arrears. Display revenue primarily 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. We recognize display revenue as clicks occur or as impressions are delivered to users interacting with our mobile applications or websites, which is the amount for which we have the right to invoice.

~~Mortgages Revenue.~~ Mortgages revenue includes marketing products sold to mortgage professionals on a cost per lead basis, including our Custom Quote and a portion of our Connect services, and on a subscription basis, including a portion of our Connect service. Zillow Group operates Custom Quote and Connect through its wholly owned subsidiary, Zillow Group Marketplace, Inc., a licensed mortgage broker. For our Connect and Custom Quote cost per lead marketing products, participating qualified mortgage professionals typically make a prepayment to gain access to consumers interested in connecting with mortgage professionals. Mortgage professionals who exhaust their initial prepayment prepay additional funds to continue to participate in the marketplace. For our Connect subscription mortgage marketing product, participating qualified mortgage professionals prepay a monthly subscription fee, which they then allocate to desired geographic counties. In Zillow Group’s Connect platform, consumers answer a series of questions to find a local lender, and mortgage professionals receive consumer contact information, or leads, when the consumer chooses to share their information with a lender. Consumers who request rates for mortgage loans in Custom Quotes are presented with customized quotes from participating mortgage professionals.

For our cost per lead mortgages products, we recognize revenue when a user contacts a mortgage professional through our mortgages platform, which is the amount for which we have the right to invoice. For our subscription product, the opportunity to receive a consumer contact is based on the mortgage professional’s relative share of voice in a geographic county. When a consumer submits a contact, we contact a group of subscription mortgage professionals via text message, and the first mortgage professional to respond receives the consumer contact information. We recognize revenue based on the contractual spend on a straight-line basis during the contractual period over which the service is provided. This methodology best depicts how we satisfy our performance obligation to subscription customers, as we continuously transfer control of the performance obligation to the customer throughout the contractual period.

~~Beginning in the fourth quarter of 2018, mortgages revenue also includes revenue generated by~~ Zillow Home Loans Zillow’s affiliated mortgage lender. Mortgage origination revenue recorded within our Mortgages segment reflects both origination fees and the corresponding sale, or expected future sale, of a loan. When an interest rate lock commitment is made to a customer, we record the expected gain on sale of the mortgage, plus the estimated earnings from the expected sale of the associated servicing rights, adjusted for a pull-through percentage (which is defined as the likelihood that an interest rate lock commitment will be originated), as revenue. Revenue from loan origination fees is recognized at the time the related real estate transactions are completed, usually upon the close of escrow and when we fund mortgage loans. Once funded, mortgage loans held for sale are recorded at fair value based on either sale commitments or current market quotes and are adjusted for subsequent changes in fair value until the loan is sold. Net origination costs associated with mortgage loans are recognized as incurred. We sell substantially all of the mortgages we originate and the related servicing rights to third-party purchasers.

~~Table of Contents~~

Mortgages revenue also includes revenue generated by Mortech, which provides subscription-based mortgage software solutions, including a product and pricing engine and lead management platform, for which we recognize revenue on a straight-line basis during the contractual period over which the services are provided.

~~Costs and Expenses~~

~~Cost of Revenue.~~ Our cost of revenue consists of expenses related to operating our mobile applications and websites, including associated headcount 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. For our Homes segment, our cost of revenue also consists of the consideration paid to acquire and make certain repairs and updates to each home, including associated overhead costs, as well as inventory valuation adjustments. 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, our cost of revenue also consists of direct costs to originate loans, including underwriting and processing costs.

~~Sales and Marketing.~~ Sales and marketing expenses consist of advertising costs and other sales expenses related to promotional and marketing activities, headcount expenses, including salaries, commissions, benefits, bonuses and share-based compensation expense for sales, sales support, customer support, marketing and public relations employees and depreciation expense. For our Homes segment, sales and marketing expenses also consist of selling costs, such as real estate agent commissions, escrow and title fees, and staging costs, as well as holding costs incurred during the period that homes are listed for sale, including utilities, taxes and maintenance. For our Mortgages segment, sales and marketing expenses include headcount expenses for loan officers and specialists supporting Zillow Home Loans.

~~Technology and Development.~~ Technology and development expenses consist of headcount 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 amortization costs related to capitalized website and development activities, amortization of software, amortization of certain intangibles and other data agreement costs related to the purchase of data used to populate our mobile applications and websites, amortization of intangible assets recorded in connection with acquisitions, including developed technology and customer relationships, amongst others, equipment and maintenance costs and depreciation expense.

~~General and Administrative.~~ General and administrative expenses consist of headcount expenses, including salaries, benefits, bonuses and share-based compensation expense for executive, finance, accounting, legal, human resources, recruiting, corporate information technology costs and other administrative support. General and administrative expenses also include legal settlement costs and estimated legal liabilities, legal, accounting and other third-party professional service fees, rent expense, depreciation expense and bad debt expense.

~~Impairment Costs.~~ ~~There were no impairment costs~~ for the year ended December 31, 2019. Impairment costs for the year ended December 31, 2018 consist of a $10.0 million non-cash impairment related to our June 2017 equity investment and a $69.0 million non-cash impairment related to the indefinite-lived Trulia trade names and trademarks intangible asset. For additional information about the impairments, see Note 9 and Note 11 of our Notes to Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K.periods presented (in millions, except percentages):

~~Acquisition-related Costs.~~ ~~Acquisition-related costs consist of investment banking, legal, accounting, tax and regulatory filing fees associated with effecting acquisitions.~~

~~Integration Costs.~~ Integration costs consist of expenses incurred to incorporate operations, systems, technology and rights and responsibilities of acquired companies, during both pre-closing and post-closing periods, into Zillow Group’s business. For the years ended December 31, 2019 and 2018, integration costs primarily include consulting-related expenses incurred in connection with the integration of Zillow Home Loans.

~~Other Income~~

Other income consists primarily of interest income earned on our cash, cash equivalents and short-term investments. For our Mortgages segment, Other income includes interest income earned on mortgage loans held for sale.

~~Table of Contents~~

~~Interest Expense~~

Our corporate interest expense consists of interest on Trulia’s Convertible Senior Notes due in 2020 (the “2020 Notes”) we guaranteed in connection with our February 2015 acquisition of Trulia, interest on the Convertible Senior Notes due in 2021 (the “2021 Notes”) we issued in December 2016, interest on the Convertible Senior Notes due in 2023 (the “2023 Notes”) we issued in July 2018, interest on the Convertible Senior Notes due in 2024 and in 2026 (the “Initial 2024 Notes” and the “2026 Notes”, respectively) we issued in September 2019, and interest on the additional Convertible Senior Notes due in 2024 (together with the Initial 2024 Notes, the “2024 Notes”) we issued in October 2019. Our corporate interest expense also includes the amortization of the debt discount and deferred issuance costs for the 2021 Notes, 2023 Notes, 2024 Notes and 2026 Notes over the term of the notes. Refer to Note 15 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.

For our Homes segment, interest expense includes interest on borrowings, funding fees and other fees, including the amortization of deferred issuance costs, on our revolving credit facilities related to our Zillow Offers business. Borrowings on our revolving credit facilities bear interest at the one-month LIBOR plus an applicable margin, as defined in the credit agreements.

For our Mortgages segment, interest expense includes interest on the warehouse lines of credit and beginning in the fourth quarter of 2019, interest on the master repurchase agreement, related to our Zillow Home Loans business. Borrowings on the warehouse lines of credit and master repurchase agreement bear interest at the one-month LIBOR plus an applicable margin, as defined in the agreements.

~~Income Taxes~~

We are subject to federal and state income taxes in the United States and federal and provincial income taxes in Canada. As of December 31, 2019 and December 31, 2018, we have recorded a valuation allowance against our net deferred tax assets which we believe, based on the weight of available evidence, are not more likely than not to be realized. Therefore, no material current tax liability or expense has been recorded in the consolidated financial statements. We have accumulated federal tax losses of approximately $1,137.6 million as of December 31, 2019, which are available to reduce future taxable income. We have accumulated state tax losses of approximately $34.3 million (tax effected) as of December 31, 2019.

We recorded an income tax benefit of $4.3 million for the year ended December 31, 2019. The majority of the income tax benefit is a result of federal and state interest expense limitation carryforwards that are indefinite-lived deferred tax assets that can offset our indefinite-lived deferred tax liabilities. Net operating losses generated after December 31, 2017 can also be offset against the indefinite-lived deferred tax liabilities. Both of these items contributed to a release of the valuation allowance and the recognition of an income tax benefit.

We recorded an income tax benefit of $31.1 million for the year ended December 31, 2018. Approximately $15.4 million of the income tax benefit relates to a $69.0 million non-cash impairment we recorded during the year ended December 31, 2018 related to the indefinite-lived Trulia trade names and trademarks intangible asset. The remaining portion of our income tax benefit is primarily the result of net operating losses generated after December 31, 2017 with an indefinite carryforward period due to the Tax Cuts and Jobs Act of 2017 (“the Tax Act”). Current year net operating losses can now be offset against the indefinite-lived deferred tax liabilities which resulted in a release of the valuation allowance and the recognition of an income tax benefit.


	Year Ended December 31,						2021 to 2022 % Change		2020 to 2021 % Change
	2022		2021		2020
Purchase loan origination volume	$	794	$	1,035	$	540	(23)	%	92	%
Refinance loan origination volume	750		3,023		1,213		(75)	%	149	%
Total loan origination volume	$	1,544	$	4,058	$	1,753	(62)	%	131	%

During the year ended December 31, ~~2018, we completed our accounting for the income tax effects related~~2022, total loan origination volume decreased 62% compared to the deduction limitations on compensation under the Tax Act. The Internal Revenue Service provided further guidance in applying the written binding contracts requirement under the Tax Act, and we believe certain of our executive compensation previously eligible to be deducted for tax purposes under Section 162(m) of the Internal Revenue Code will be considered grandfathered and, therefore, will continue to be deductible. Based on the clarification of these rules, the accounting related to the Section 162(m) limitation of the Internal Revenue Code is considered complete and as a result, we recorded a $5.9 million tax benefit for the year ended December 31, ~~2018.~~

2021, driven primarily by higher interest rates which decreased demand for refinance mortgages. During the year ended December 31, 2021, total loan origination volume increased 131% compared to the year ended December 31, 2020, driven primarily by low interest rates coupled with growth of our mortgage originations business.

3844

Table of o f Contents

Results of Operations

~~In 2018, our business model evolved significantly with~~Given continued uncertainty surrounding the ~~launch~~health of ~~Zillow Offers in April~~the housing market, interest rate environment, inflationary conditions and the acquisition of Zillow Home Loans in October. Zillow Offers, for example, is a cash- and inventory-intensive business with a high cost of revenue as compared with other parts of our operations; the cost of revenue includes the amount we pay to purchase homes. Revenue for the Homes segment includes the sale prices of homes less resale concessions and credits to the buyer, and does not reflect real estate agent commissions, closing or other associated costs. As a result of this evolution of our business model,COVID-19 pandemic, financial performance for current and prior ~~year~~ periods may not be indicative of future performance.

Revenue


															% 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)
Revenue:
IMT segment:
Premier Agent	$	1,291	$	1,396	$	1,047	$	(105)	(8)	%	$	349	33	%	66	%	65	%	64	%
Rentals	274		264		222		10		4		42		19		14		12		14
Other	274		226		181		48		21		45		25		14		11		11
Total IMT segment revenue	1,839		1,886		1,450		(47)		(2)		436		30		94		88		89
Mortgages segment	119		246		174		(127)		(52)		72		41		6		12		11
Total revenue	$	1,958	$	2,132	$	1,624	$	(174)	(8)	%	$	508	31	%	100	%	100	%	100	%

Year Ended December 31, 2022 compared to year ended December 31, 2021

Total revenue decreased $174 million, or 8%, to $2.0 billion:

•Mortgages segment revenue decreased 52% to $119 million primarily due to a decline in mortgage originations revenue which drove 72% of the decrease in Mortgages segment revenue, and a decline in our Custom Quote and Connect advertising services revenue which drove 28% of the decrease in Mortgages segment revenue. The ~~following tables present our results~~decrease in mortgage originations revenue was primarily due to a 62% decrease in loan origination volume from $4.1 billion to $1.5 billion, primarily resulting from a decrease in demand for refinance mortgages attributable to the rising and volatile interest rate environment. 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 ~~operations~~mortgage loans divided by total loan origination volume for the ~~periods indicated~~period. Net gain on sale of mortgage loans includes all components related to the origination and sale of mortgage loans, including the net gain on sale of loans into the secondary market, loan origination fees, unrealized gains and losses associated with changes in fair value of 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. 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 decrease in demand for mortgages attributable to the rising and volatile interest rate environment, as well as an increase in leads consumed by Zillow Home Loans.

•IMT segment revenue decreased 2% to $1.8 billion, primarily due to a decrease of $105 million, or 8%, in Premier Agent revenue, partially offset by a $48 million, or 21%, increase in Other IMT revenue. 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. These factors resulted in a decrease in Premier Agent revenue per visit, which decreased by 10% to $0.123 for the year ended December 31, 2022 from $0.137 for the year ended December 31, 2021. We calculate Premier Agent revenue per visit by dividing the revenue generated by our Premier Agent programs by the number of visits in the period. 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. The Residential revenue category will primarily include revenue for our Premier Agent and new construction marketplaces, as well as StreetEasy for-sale product offerings, Zillow Closing Services and ShowingTime+, which houses ShowingTime, Bridge Interactive, dotloop and interactive floor plans. Our Rentals and Mortgages revenue categories will remain consistent with our historical presentation, and our Other revenue category will primarily include revenue generated from display advertising.

Table o f Contents

Year Ended December 31, 2021 compared to year ended December 31, 2020

Total revenue increased $508 million, or 31%, to $2.1 billion:

•IMT segment revenue increased 30% to $1.9 billion, due to increases of $349 million, or 33%, in Premier Agent revenue, $45 million, or 25%, in Other IMT revenue, and $42 million, or 19%, in rentals revenue.

◦Premier Agent revenue increased 33% to $1.4 billion, primarily driven by an increase in Premier Agent revenue per visit, which increased by 26% to $0.137 for the year ended December 31, 2021 from $0.109 for the year ended December 31, 2020, driven primarily by continued strong demand across the residential real estate industry and growth in monetization of customer connections. The increase in visits increased the number of impressions and leads we could monetize in our Premier Agent marketplace. Additionally, Premier Agent revenue for the year ended December 31, 2020 was negatively impacted by temporary discounts offered to our Premier Agent partners in response to the COVID-19 pandemic.

◦Other IMT increased 25% to $226 million, primarily due to a 126% increase in StreetEasy for-sale revenue due to growth in StreetEasy Experts, a 58% increase in display revenue due to increased discretionary marketing spend after lower spend in 2020 as a result of the COVID-19 pandemic, and as a ~~percentage~~result of ~~total~~the addition of ShowingTime revenue ~~(in thousands, except per share and percentage data):~~

Year Ended December 31,
2019 2018 2017
Statements of Operations Data:
Revenue:
Homes $ 1,365,250 $ 52,365 $ —
IMT 1,276,896 1,201,143 996,203
Mortgages 100,691 80,046 80,591
Total revenue 2,742,837 1,333,554 1,076,794
Cost of revenue (exclusive of amortization) (1)(2):
Homes 1,315,345 49,392 —
IMT 98,522 96,693 80,310
Mortgages 18,154 7,505 4,893
Total cost of revenue 1,432,021 153,590 85,203
Sales and marketing (1) 714,128 552,621 448,201
Technology and development (1) 477,347 410,818 319,985
General and administrative (1) 366,176 262,153 210,816
Impairment costs — 79,000 174,000
Acquisition-related costs — 2,332 463
Integration costs 650 2,015 —
Total costs and expenses 2,990,322 1,462,529 1,238,668
Loss from operations (247,485) (128,975) (161,874)
Other income 39,658 19,270 5,385
Interest expense (101,792) (41,255) (27,517)
Loss before income taxes (309,619) (150,960) (184,006)
Income tax benefit 4,258 31,102 89,586
Net loss $ (305,361) $ (119,858) $ (94,420)
Net loss per share — basic and diluted $ (1.48) $ (0.61) $ (0.51)
Weighted-average shares outstanding — basic and diluted 206,380 197,944 186,453
Other Financial Data:
Segment income (loss) before income taxes:
Homes segment $ (312,120) $ (59,691) $ —
IMT segment $ 80,060 $ (57,638) $ (151,747)
Mortgages segment $ (44,962) $ (13,711) $ (10,127)
Adjusted EBITDA (3):
Homes segment $ (241,326) $ (48,460) $ —
IMT segment 303,863 240,025 219,648
Mortgages segment (23,653) 9,267 16,667
Total Adjusted EBITDA $ 38,884 $ 200,832 $ 236,315
beginning in the fourth quarter of 2021.

◦Rentals revenue increased 19% to $264 million, primarily due to an increase in revenue generated by our rentals flat fee, pay per listing and rental applications products. The increase in rentals revenue was also impacted by COVID-19 related discounts offered during the first half of 2020.

•Mortgages segment revenue increased 41% to $246 million, primarily due to growth in mortgage originations revenue, which drove 57% of the increase in Mortgages segment revenue, and growth in our Custom Quote and Connect advertising services revenue, which accounted for 41% of the increase in Mortgages segment revenue. The increase in mortgage originations revenue was primarily driven by an increase in loan origination volume from $1.8 billion to $4.1 billion, or 131%, as we continued to grow our mortgage originations business. We believe low interest rates coupled with growth of our mortgage originations business, driven by purchase origination growth from Zillow Offers, supported strong refinance and home purchase activity during the year ended December 31, 2021. This was partially offset by a 36% decrease in gain on sale margin driven by industry margin compression. The increase in our Custom Quote and Connect advertising revenue was primarily due to a 20% increase in leads generated from marketing products sold to mortgage professionals.

Income (Loss) from Continuing Operations Before Income Taxes


															% of 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)
Income (loss) from continuing operations before income taxes:
IMT segment	$	160	$	545	$	262	$	(385)	(71)	%	$	283	108	%	9	%	29	%	18	%
Mortgages segment	(167)		(52)		5		(115)		(221)		(57)		(1140)		(140)		(21)		3	%
Homes segment	(93)		(254)		(153)		161		63		(101)		(66)		N/A		N/A		N/A
Corporate items (1)	15		(138)		(117)		153		111		(21)		(18)		N/A		N/A		N/A
Total income (loss) from continuing operations before income taxes	$	(85)	$	101	$	(3)	$	(186)	(184)	%	$	104	3467	%	(4)	%	5	%	—	%

(1) Certain corporate items are not directly attributable to any of our segments, including the gain (loss) on extinguishment of debt, interest income earned on our short-term investments included in other income, net and interest costs on our convertible senior notes included in interest expense.

Table of o f Contents

Year Ended December 31,
2019 2018 2017
(1) Includes share-based compensation as follows:
Cost of revenue $ 3,978 $ 4,127 $ 3,884
Sales and marketing 25,126 22,942 22,735
Technology and development 69,921 56,673 39,938
General and administrative 99,877 65,342 47,014
Total $ 198,902 $ 149,084 $ 113,571
(2) Amortization of website development costs and intangible assets included in technology and development $ 61,937 $ 79,309 $ 94,349
(3) See “Adjusted EBITDA” below for more information and for a reconciliation of Adjusted EBITDA to the most directly comparable financial measure calculated and presented in accordance with U.S. generally accepted accounting principles, or GAAP, which is net loss on a consolidated basis and income (loss) before income taxes for each segment.

Year Ended December 31,
2019 2018 2017
Percentage of Revenue:
Revenue:
Homes 50 % 4 % 0 %
IMT 47 90 93
Mortgages 4 6 7
Total revenue 100 100 100
Cost of revenue (exclusive of amortization):
Homes 48 4 0
IMT 4 7 7
Mortgages 1 1 —
Total cost of revenue 52 12 8
Sales and marketing 26 41 42
Technology and development 17 31 30
General and administrative 13 20 20
Impairment costs 0 6 16
Acquisition-related costs 0 — —
Integration costs — — 0
Total costs and expenses 109 110 115
Loss from operations (9) (10) (15)
Other income 1 1 1
Interest expense (4) (3) (3)
Loss before income taxes (11) (11) (17)
Income tax benefit — 2 8
Net loss (11) % (9) % (9) %

Adjusted EBITDA

The following table summarizes net loss, which includes the impact of discontinued operations, and Adjusted EBITDA in total and for each segment, both of which exclude the impact of discontinued operations (in millions, except percentages):


															% of 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
Net loss:	$	(101)	$	(528)	$	(162)	$	427	81	%	$	(366)	(226)	%	(5)	%	(25)	%	(10)	%
Adjusted EBITDA:
IMT segment	672		854		556		(182)		(21)		298		54		37		45		38
Mortgages segment	(92)		(9)		30		(83)		(922)		(39)		(130)		(77)		(4)		17
Homes segment	(66)		(191)		(125)		125		65		(66)		(53)		N/A		N/A		N/A
Total Adjusted EBITDA	$	514	$	654	$	461	$	(140)	(21)	%	$	193	42	%	26	%	31	%	28	%

To provide investors with additional information regarding our financial results, we have disclosed Adjusted EBITDA in total and for each segment, each a non-GAAP financial measure, within this Annual Report on Form 10-K. We have provided a reconciliation below of Adjusted EBITDA in total to net loss and Adjusted EBITDA by segment to income (loss) from continuing operations before income taxes for each segment, the most directly comparable ~~GAAP~~U.S. generally accepted accounting principles (“GAAP”) financial measures.

~~Table of Contents~~

We have included Adjusted EBITDA in total and for each segment in this Annual Report on Form 10-K as they are key metrics used by our management and board of directors to measure operating performance and trends and to prepare and approve our annual budget. In particular, the exclusion of certain expenses in calculating Adjusted EBITDA facilitates operating performance comparisons on a period-to-period basis.

Our use of Adjusted EBITDA 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. Some of these limitations are:

•Adjusted EBITDA does not reflect ~~our cash expenditures or future requirements for capital expenditures or contractual commitments;~~

•~~Adjusted EBITDA does not reflect~~ changes in, or cash requirements for, our working capital needs;

•Adjusted EBITDA does not 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 ~~expenditure requirements;~~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;~~income (expense), net;

•Adjusted EBITDA does not reflect income taxes; and

•Other companies, including companies in our own industry, may calculate Adjusted EBITDA differently ~~than~~from the way we do, limiting its usefulness as a comparative measure.

Because of these limitations, you should consider Adjusted EBITDA in total and for each segment alongside other financial performance measures, including various cash flow metrics, net loss, income (loss) from continuing operations before income taxes for each segment and our other GAAP results.

Table o f Contents

The following tables present a reconciliation of Adjusted EBITDA to the most directly comparable GAAP financial measure, which is net loss on a consolidated basis and income (loss) from continuing operations before income taxes for each segment, for each of the periods presented (in ~~thousands)~~millions):

Year Ended December 31, 2019
Homes IMT Mortgages Corporate Items (2) Consolidated
Reconciliation of Adjusted EBITDA to Net Loss and Income (Loss) Before Income Taxes:
Net loss (1) N/A N/A N/A N/A $ (305,361)
Income tax benefit N/A N/A N/A N/A (4,258)
Income (loss) before income taxes $ (312,120) $ 80,060 $ (44,962) $ (32,597) $ (309,619)
Other income — — (1,409) (38,249) (39,658)
Depreciation and amortization expense 8,414 73,369 5,684 — 87,467
Share-based compensation expense 32,390 150,434 16,078 — 198,902
Interest expense 29,990 — 956 70,846 101,792
Adjusted EBITDA $ (241,326) $ 303,863 $ (23,653) $ — $ 38,884


	Year Ended December 31, 2022
	IMT		Mortgages		Homes		Corporate Items (2)		Consolidated
Reconciliation of Adjusted EBITDA to Net Loss and Income (Loss) From Continuing Operations Before Income Taxes:
Net loss (1)	N/A		N/A		N/A		N/A		$	(101)
Loss from discontinued operations, net of income taxes	N/A		N/A		N/A		N/A		13
Income taxes	N/A		N/A		N/A		N/A		3
Income (loss) from continuing operations before income taxes	$	160	$	(167)	$	(93)	$	15	$	(85)
Other expense (income), net	7		(3)		—		(47)		(43)
Depreciation and amortization	137		11		2		—		150
Share-based compensation	356		60		17		—		433
Restructuring costs	12		4		8		—		24
Interest expense	—		3		—		32		35
Adjusted EBITDA	$	672	$	(92)	$	(66)	$	—	$	514


	Year Ended December 31, 2021
	IMT		Mortgages		Homes		Corporate Items (2)		Consolidated
Reconciliation of Adjusted EBITDA to Net Loss and Income (Loss) From Continuing Operations Before Income Taxes:
Net loss (1)	N/A		N/A		N/A		N/A		$	(528)
Loss from discontinued operations, net of income taxes	N/A		N/A		N/A		N/A		630
Income taxes	N/A		N/A		N/A		N/A		(1)
Income (loss) from continuing operations before income taxes	$	545	$	(52)	$	(254)	$	(138)	$	101
Other income, net	—		(5)		—		(2)		(7)
Depreciation and amortization	99		8		13		—		120
Share-based compensation	201		34		41		—		276
Acquisition-related costs	9		—		—		—		9
Loss on extinguishment of debt	—		—		—		17		17
Restructuring costs	—		1		9		—		10
Interest expense	—		5		—		123		128
Adjusted EBITDA	$	854	$	(9)	$	(191)	$	—	$	654

4148

Table of o f Contents

Year Ended December 31, 2018
Homes IMT Mortgages Corporate Items (2) Consolidated
Reconciliation of Adjusted EBITDA to Net Loss and Loss Before Income Taxes:
Net loss (1) N/A N/A N/A N/A $ (119,858)
Income tax benefit N/A N/A N/A N/A (31,102)
Loss before income taxes $ (59,691) $ (57,638) $ (13,711) $ (19,920) $ (150,960)
Other income — — (244) (19,026) (19,270)
Depreciation and amortization expense 1,323 91,232 6,836 — 99,391
Share-based compensation expense 7,731 131,404 9,949 — 149,084
Impairment costs — 75,000 4,000 — 79,000
Acquisition-related costs — 27 2,305 — 2,332
Interest expense 2,177 — 132 38,946 41,255
Adjusted EBITDA $ (48,460) $ 240,025 $ 9,267 $ — $ 200,832

Year Ended December 31, 2017
Homes IMT Mortgages Corporate Items (2) Consolidated
Reconciliation of Adjusted EBITDA to Net Loss and Loss Before Income Taxes:
Net loss (1) N/A N/A N/A N/A $ (94,420)
Income tax benefit N/A N/A N/A N/A (89,586)
Loss before income taxes $ — $ (151,747) $ (10,127) $ (22,132) $ (184,006)
Other income — — — (5,385) (5,385)
Depreciation and amortization expense — 103,648 6,507 — 110,155
Share-based compensation expense — 105,434 8,137 — 113,571
Impairment costs — 161,850 12,150 — 174,000
Acquisition-related costs — 463 — — 463
Interest expense — — — 27,517 27,517
Adjusted EBITDA $ — $ 219,648 $ 16,667 $ — $ 236,315


	Year Ended December 31, 2020
	IMT		Mortgages		Homes		Corporate Items (2)		Consolidated
Reconciliation of Adjusted EBITDA to Net Loss and Income (Loss) From Continuing Operations Before Income Taxes:
Net loss (1)	N/A		N/A		N/A		N/A		$	(162)
Loss from discontinued operations, net of income taxes	N/A		N/A		N/A		N/A		167
Income taxes	N/A		N/A		N/A		N/A		(8)
Income (loss) from continuing operations before income taxes	$	262	$	5	$	(153)	$	(117)	$	(3)
Other income, net	(5)		(2)		—		(18)		(25)
Depreciation and amortization	90		7		8		—		105
Share-based compensation	135		15		20		—		170
Gain (loss) on extinguishment of debt	—		—		—		(1)		(1)
Impairment and restructuring costs	74		3		—		—		77
Interest expense	—		2		—		136		138
Adjusted EBITDA	$	556	$	30	$	(125)	$	—	$	461

(1) We use income (loss) from continuing operations before income taxes as our profitability measure in making operating decisions and assessing the performance of our ~~segments,~~segments; therefore, net loss and income ~~tax benefit~~taxes are calculated and presented only on a consolidated basis within our financial statements.

(2) Certain corporate items are not directly attributable to any of our segments, including the gain (loss) on extinguishment of debt, interest income earned on our short-term investments included in ~~Other~~other income, net and interest costs on our convertible senior notes included in ~~Interest~~interest expense.

Costs 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)		—		—		—

Table of 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. Cost of revenue also includes amortization costs related to capitalized website and development activities, amortization of software, amortization of certain intangible assets and other costs to obtain data used to populate our mobile applications and websites, and amortization of certain intangible assets recorded in connection with acquisitions, including developed technology. 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.

Year Ended December 31, ~~2019 Compared~~2022 compared to ~~Year Ended December 31, 2018~~

~~Revenue~~

~~The following table presents Zillow Group’s revenue by category and by segment for the periods presented (in thousands):~~

Year Ended December 31, 2018 to 2019
% Change
2019 2018
Homes $ 1,365,250 $ 52,365 2,507 %
IMT Revenue:
Premier Agent 923,876 898,332 3 %
Rentals 164,173 134,587 22 %
Other 188,847 168,224 12 %
Total IMT revenue 1,276,896 1,201,143 6 %
Mortgages 100,691 80,046 26 %
Total revenue $ 2,742,837 $ 1,333,554 106 %

~~The following table presents Zillow Group’s revenue by category and by segment as percentages of total revenue for the periods presented:~~

Year Ended December 31,
2019 2018
Percentage of Total Revenue:
Homes 50 % 4 %
IMT Revenue:
Premier Agent 34 67
Rentals 6 10
Other 7 13
Total IMT revenue 47 90
Mortgages 4 6
Total revenue 100 % 100 %

~~Table of Contents~~

~~Total revenue increased by $1,409.3 million, or 106%, for the~~ year ended December 31, ~~2019 compared~~2021

Cost of revenue increased $44 million, or 14%, due primarily to the year ended December 31, 2018. The increase in total revenue was primarily attributable to our Zillow Offers business, which began selling homes in July of 2018. Homes revenue grew to $1,365.3 million for the year ended December 31, 2019 from $52.4 million for the year ended December 31, 2018, an increase of ~~$1,312.9 million. Visits increased 12% to 8,065.5~~$72 million for the year ended December 31, 2019 from 7,182.1 million for the year ended December 31, 2018. There were approximately 172.6 million average monthly unique users of our mobile applications and websites for the three months ended December 31, 2019 compared to 157.2 million average monthly unique users for the three months ended December 31, 2018, representing year-over-year growth of 10%. The increases in visits and unique users increased the number of impressions, leads, clicks and other events we monetized across our revenue categories.

~~Homes Segment~~

~~Homes revenue was $1,365.3 million for the year ended December 31, 2019 due to the sale of 4,313~~ ~~homes at an average selling price of~~ ~~$316.5 thousand per home. For the~~ ~~year~~ ~~ended~~ ~~December 31, 2018, Homes revenue was~~ ~~$52.4 million~~ ~~as a result of the sale of 177 homes at an average selling price of~~ ~~$295.8 thousand per home. The increase in Homes revenue was due to an increase in the number of homes sold in the period as customer adoption of Zillow Offers increases in geographic areas in which it is currently operating and as Zillow Offers expands into new geographic markets. As of December 31, 2019, Zillow Offers was operating in 22 metropolitan areas.~~

~~IMT Segment~~

~~Premier Agent Revenue.~~ Premier Agent revenue grew to $923.9 million for the year ended December 31, 2019 from $898.3 million for the year ended December 31, 2018, an increase of $25.5 million, or 3%. Premier Agent revenue was positively impacted by an increase in visits. As discussed above, visits increased 12% to 8,065.5 million for the year ended December 31, 2019 from 7,182.1 million for the year ended December 31, 2018. The increase in visits increased the number of impressions and leads we could monetize in our ~~Premier Agent marketplace. Advertiser churn, or exit from~~IMT segment, partially offset by decreases of $16 million in our ~~advertising platform, normalized throughout 2019, which contributed to the increase~~Mortgages segment and $12 million in ~~Premier Agent revenue during the year ended December 31, 2019.~~

Premier Agent revenue per visit decreased by 8% to $0.115 for the year ended December 31, 2019 from $0.125 for the year ended December 31, 2018. We calculate Premier Agent revenue per visit by dividing the revenue generated by our Premier Agent and Premier Broker programs in the period by the number of visits in the period. We believe the decrease in Premier Agent revenue per visit was primarily a result of changes we made to our Premier Agent and Premier Broker programs in 2018. For example, in April 2018, we began testing a new method of consumer lead validation and distribution to our Premier Agent and Premier Broker advertisers. A validated consumer connection is made when a consumer who is interested in connecting with a real estate professional does not select a specific Premier Agent or Premier Broker with whom they want to connect through one of our mobile applications or websites; applying the new model, these validated consumer leads are distributed to Premier Agents and Premier Brokers in proportion to their share of voice, or an agent advertiser’s share of total advertising purchased in a particular zip code. This transition to the new lead validation and distribution process resulted in a decrease in the total number of leads received by some advertisers and increased advertiser churn in the third and fourth quarters of 2018 as current and prospective Premier Agents and Premier Brokers evaluated the value of these higher-quality leads and market-based pricing continued to take effect. We believe we made appropriate adjustments to the Premier Agent and Premier Broker programs to help address this advertiser churn, by, for example, decreasing the number of screening questions posed to consumers during the consumer lead validation process, in an effort to return to prior lead volumes, and setting price caps on the cost per impression and cost per lead paid by Premier Agents and Premier Brokers to help stabilize auction-based pricing dynamics in certain markets, as advertiser churn normalized throughout 2019.

Premier Agent revenue for the year ended December 31, 2019 also included an insignificant amount of revenue generated from our initial testing of a new pricing model for Premier Agent and Premier Broker advertisers, Flex, in limited markets. With the Flex model, Premier Agents and Premiers Brokers are provided with validated leads at no upfront cost, and they pay a performance advertising fee only when a real estate transaction is closed with one of the leads. We may continue to extend the testing of this pricing model to additional regions in the future.

~~Table of Contents~~

Homes segment.

~~Rentals Revenue.~~ •Rentals revenue was $164.2 million for the year ended December 31, 2019 compared to $134.6 million for the year ended December 31, 2018, an increase of $29.6 million, or 22%. The increase in Rentals revenue was positively impacted by an increase in quarterly revenue per average monthly rental listing, which increased 18% to approximately $1,021 for the year ended December 31, 2019 from approximately $867 for the year ended December 31, 2018. We calculate quarterly revenue per average monthly rental listing by dividing total Rentals revenue for the period by the average monthly monetized deduplicated rental listings for the period and then dividing by the number of quarters in the period. The increase in quarterly revenue per average monthly rental listing was primarily driven by an increase in revenue from our Rentals application product and revenue from our Rentals cost per impression product. The increase in Rentals revenue was also attributable to an increase in the number of average monthly rental listings on our mobile applications and websites, which increased to 40,211 average monthly rental listings for the year ended December 31, 2019 from 38,816 average monthly rental listings for the year ended December 31, 2018, an increase of 4%. Average monthly rental listings include the average monthly monetized deduplicated rental listings for the period, which are displayed across all of our mobile applications and websites. An increase in rental listings on our mobile applications and websites increases the likelihood that a consumer will contact a rental professional, which in turn increases the likelihood of a lead, click, impression, lease or listing that we monetize. Finally, the increase in Rentals revenue was also driven in part by the 12% increase in visits to 8,065.5 million for the year ended December 31, 2019, which increases the likelihood a consumer will contact a rental professional and, in turn, increases the likelihood of a lead, click, impression, lease or listing that we monetize.

~~Other Revenue.~~ Other revenue was $188.8 million for the year ended December 31, 2019 compared to $168.2 million for the year ended December 31, 2018, an increase of $20.6 million, or 12%. The increase in Other revenue was primarily the result of a 23% increase in revenue generated by our new construction marketing solutions. Growth in new construction revenue was primarily attributable to higher spend for our cost per impression product, driven by a greater volume of impressions that we monetized, and increases in adoption by and advertising sales to new home builders through our new construction platform.

~~Mortgages Segment~~

Mortgages revenue was $100.7 million for the year ended December 31, 2019 compared to $80.0 million for the year ended December 31, 2018, an increase of $20.6 million, or 26%. The increase in mortgages revenue was primarily a result of the addition of revenue generated by Zillow Home Loans, Zillow’s affiliated mortgage lender, which we acquired in the fourth quarter of 2018.

~~Year Ended December 31, 2019 Compared to Year Ended December 31, 2018~~

~~Segment Results of Operations~~

~~The following table presents Zillow Group’s segment results for the periods presented (in thousands):~~

Year Ended December 31, 2019 Year Ended December 31, 2018
Homes IMT Mortgages Homes IMT Mortgages
Revenue $ 1,365,250 $ 1,276,896 $ 100,691 $ 52,365 $ 1,201,143 $ 80,046
Costs and expenses:
Cost of revenue 1,315,345 98,522 18,154 49,392 96,693 7,505
Sales and marketing 171,634 488,909 53,585 17,134 502,785 32,702
Technology and development 78,994 365,769 32,584 21,351 363,712 25,755
General and administrative 81,407 243,636 41,133 22,002 220,564 19,587
Impairment costs — — — — 75,000 4,000
Acquisition-related costs — — — — 27 2,305
Integration costs — — 650 — — 2,015
Total costs and expenses 1,647,380 1,196,836 146,106 109,879 1,258,781 93,869
Income (loss) from operations (282,130) 80,060 (45,415) (57,514) (57,638) (13,823)
Other income — — 1,409 — — 244
Interest expense (29,990) — (956) (2,177) — (132)
Income (loss) before income taxes (1) $ (312,120) $ 80,060 $ (44,962) $ (59,691) $ (57,638) $ (13,711)

~~Table of Contents~~

~~(1) The following table presents the reconciliation of total segment loss before income taxes to consolidated loss before income taxes for the periods presented (in thousands):~~

Year Ended December 31,
2019 2018
Total segment loss before income taxes $ (277,022) $ (131,040)
Corporate interest expense (70,846) (38,946)
Corporate other income 38,249 19,026
Consolidated loss before income taxes $ (309,619) $ (150,960)

~~Homes Segment~~

~~Cost of Revenue.~~ ~~Cost of revenue was $1,315.3 million for the year ended December 31, 2019 compared to $49.4 million for the year ended December 31, 2018, an increase of $1,266.0 million.~~ The increase in cost of revenue in our IMT segment was primarily attributable to ~~home~~a $41 million increase in depreciation and amortization expense driven by an increase in capitalized website and development activities, a $16 million increase in headcount-related expenses, including share-based compensation expense, which was impacted by the August 2022 Equity Award Actions, and a $9 million increase in data acquisition costs.

•The decrease in cost of revenue in our Mortgages segment was primarily attributable to a $13 million decrease in lead acquisition costs due to a decrease in volume associated with the macro housing market environment and ~~renovation~~a $3 million decrease in headcount-related expenses, including share-based compensation expense, partially offset by a $2 million increase in depreciation and amortization expense.

•The decrease in cost of revenue in our Homes segment was primarily attributable to a $7 million decrease in depreciation and amortization expense, a $5 million decrease in data acquisition costs and a $2 million decrease in software and hardware costs, resulting from the wind down of Zillow Offers and the reduction in indirect costs related to the ~~4,313 homes that we sold during~~Homes segment. The decrease was partially offset by an increase of $3 million in headcount-related expenses, including share-based compensation expense, which was impacted by the ~~period compared to the sale of 177 homes during the year ended December 31, 2018.~~ August 2022 Equity Award Actions.

We expect cost of revenue to increase in absolute dollars ~~in future years~~for the three months ending March 31, 2023 due to increased headcount-related spend as we continue to ~~incur more~~invest to support the growth of our business.

Year Ended December 31, 2021 compared to year ended December 31, 2020

Cost of revenue increased $68 million, or 27%, due primarily to increases of $45 million in our Mortgages segment, $13 million in our Homes segment and $10 million in our IMT segment.

•The increase in cost of revenue in our Mortgages segment was primarily attributable to an increase in headcount-related expenses, ~~that are~~including share-based compensation expense, of $18 million, an increase in lead acquisition costs of $18 million associated with growth in ~~revenue~~our Zillow Home Loans business, and ~~expansion~~an increase in mortgage loan processing costs of ~~Zillow Offers into new markets.~~$4 million corresponding with the increase in loan origination volume.

~~Sales~~•The increase in cost of revenue in our Homes segment was primarily attributable to an increase in headcount-related expenses, including share-based compensation expense, of $7 million, and ~~Marketing.~~ an increase in depreciation and amortization expense of $3 million.

•~~Sales~~The increase in cost of revenue in our IMT segment was primarily attributable to an increase of $13 million in depreciation and ~~marketing~~amortization expense, an increase of $9 million in direct product costs, an increase of $7 million in lead acquisition costs, and an increase of $7 million in headcount-related expenses, ~~were $171.6~~including share-based compensation expense, partially offset by a decrease of $28 million in data acquisition costs.

Table o f Contents

Gross Profit

Gross profit is calculated as revenue less cost of revenue. Gross margin is gross profit expressed as a percentage of revenue. Our gross profit has and will continue to be affected by a number of factors, including the mix of revenue from our segments.

Year Ended December 31, 2022 compared to year ended December 31, 2021

Gross profit decreased by $218 million, or 12%, primarily due to decreases in gross profit of $119 million in our IMT segment and $111 million in our Mortgages segment, partially offset by an increase of $12 million in our Homes segment. Total gross margin decreased from 85% to 81%.

•The decrease in IMT segment gross profit was driven by a decrease in revenue due to macro housing market factors, including rising interest rates and housing prices and volatility, which have reduced our Premier Agent revenue per visit compared to the year ended December 31, 2021, coupled with the increase in cost of revenue, discussed above. Gross margin decreased from 89% for the year ended December 31, ~~2019 compared~~2021 to ~~$17.1 million~~85% for the year ended December 31, ~~2018,~~2022.

•The decrease in Mortgages segment gross profit was driven by decreases in mortgage originations and Custom Quote and Connect advertising services revenue, discussed above. Gross margin decreased from 66% for the year ended December 31, 2021 to 43% for the year ended December 31, 2022.

Year Ended December 31, 2021 compared to year ended December 31, 2020

Gross profit increased by $440 million, or 32%, primarily due to increases of gross profit of $426 million in our IMT segment and $27 million in our Mortgages segment, partially offset by a decrease of $13 million in our Homes segment. Total gross margin increased from 84% to 85%.

•The increase in IMT segment gross profit was driven by an improvement in gross margin from 87% to 89%, primarily associated with increased revenue, discussed above.

•The increase in Mortgages segment gross profit was driven by an increase in revenue, discussed above. However, gross margin declined from 78% to 66%, driven by increases in cost of revenue, primarily associated with additional lead acquisition costs and headcount-related expenses as a result of increased origination volume, which outpaced the growth in revenue, primarily due to industry margin compression.

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. For our Mortgages segment, sales and marketing expenses include headcount-related expenses for loan officers and specialists supporting Zillow Home Loans.

Year Ended December 31, 2022 compared to year ended December 31, 2021

Sales and marketing expenses decreased $51 million, or 7%, due to decreases of $41 million in our Homes segment and $30 million in our Mortgages segment, partially offset by an increase of ~~$154.5 million.~~ $20 million in our IMT segment.

•The decrease in sales and marketing expenses in the Homes segment was primarily attributable to a $20 million decrease in marketing and advertising costs and a $17 million decrease in headcount-related expenses, including share-based compensation expense. The decreases resulted from the wind down of Zillow Offers and the reduction in indirect costs related to the Homes segment.

•The decrease in sales and marketing expenses in the Mortgages segment was primarily attributable to a $19 million decrease in headcount-related expenses, including share-based compensation expense, and a $12 million decrease in marketing and advertising costs driven by active cost management.

Table o f Contents

•The increase in sales and marketing expenses in the IMT segment was primarily attributable to a ~~$56.9 million increase in selling expenses directly attributable to the resale of homes, a $44.2~~$45 million increase in headcount-related expenses, including share-based compensation expense, ~~a $20.7~~primarily driven by the impact of the August 2022 Equity Award Actions, an $8 million increase in ~~holding~~both travel expenses and trade shows and events expenses, and a $4 million increase in software and hardware costs. These increases were partially offset by a $32 million decrease in marketing and advertising costs, a ~~$20.0~~$9 million decrease in professional services, both driven by active cost management, and a $4 million decrease in depreciation and amortization expenses.

Year Ended December 31, 2021 compared to year ended December 31, 2020

Sales and marketing expenses increased $180 million, or 34%, due to increases of $111 million in our IMT segment, $49 million in our Mortgages segment and $20 million in our Homes segment.

•The increase in sales and marketing expenses in the IMT segment was primarily attributable to a $69 million increase in marketing and advertising costs and an increase in headcount-related expenses, including share-based compensation expense, of $46 million. Marketing and advertising costs for the year ended December 31, 2021 were higher than the comparable prior year period due to our pause in most discretionary spending associated with liquidity preservation in response to the COVID-19 pandemic in the year ended December 31, 2020.

•The increase in sales and marketing expenses in the Mortgages segment was primarily attributable to an increase in headcount-related expenses, including share-based compensation expense, of $32 million, and a $15 million increase in marketing and advertising expenses ~~a $3.3~~associated with growth of our Zillow Home Loans business.

•The increase in sales and marketing expenses in the Homes segment was primarily attributable to an $11 million increase in ~~travel expenses, a $3.1 million~~marketing and advertising costs and an increase in ~~professional services fees, a $2.2 million increase~~headcount-related expenses, including share-based compensation expense, of $7 million.

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 ~~and amortization expense and a $4.1 million increase in miscellaneous expenses.~~expense.

~~Sales and marketing expenses include $22.6 million in holding costs for the~~Year Ended December 31, 2022 compared to year ended December 31, ~~2019 and $1.9 million in holding costs for the year ended December 31, 2018.~~2021

~~We expect our sales and marketing expenses to increase in absolute dollars in future periods as we continue to expand the Homes segment.~~

~~Technology and Development.~~ Technology and development expenses ~~which include research~~increased $77 million, or 18%, primarily due to increases of $120 million in our IMT segment and ~~development costs, were $79.0~~$18 million ~~for the year ended December 31, 2019 compared to $21.4~~in our Mortgages segment, partially offset by a decrease of $61 million ~~for the year ended December 31, 2018, an increase of $57.6 million.~~ in our Homes segment.

•The increase in technology and development expenses in the IMT segment was primarily attributable to a $96 million increase in headcount related costs, including share-based compensation expense, primarily driven by the August 2022 Equity Award Actions, and a $14 million increase in professional services.

•The increase in technology and development expenses in the Mortgages segment was primarily attributable to an $11 million increase in headcount-related costs, including share-based compensation expense, primarily driven by the August 2022 Equity Award Actions, and a $6 million increase in professional services.

•The decrease in technology and development expenses in the Homes segment was primarily attributable to a $55 million decrease in headcount-related costs, including share-based compensation expense, which was primarily driven by the wind down of Zillow Offers and the reduction in indirect costs related to the Homes segment.

We expect technology and development expenses to increase in absolute dollars for the three months ending March 31, 2023 due to increased headcount-related spend as we continue to invest to support the growth of our business.

Year Ended December 31, 2021 compared to year ended December 31, 2020

Technology and development expenses increased $97 million, or 30%, primarily due to increases of $58 million in our IMT segment, $30 million in our Homes segment and $9 million in our Mortgages segment.

•The increase in technology and development expenses for each of our segments was primarily attributable to increases in headcount-related expenses, including share-based compensation expense, of $54 million, $28 million and $5 million for our IMT, Homes and Mortgages segments, respectively.

Table o f Contents

General and Administrative

General and administrative expenses consist of headcount-related expenses, including salaries, benefits, bonuses and share-based compensation expense for executive, finance, accounting, legal, human resources, recruiting, corporate information technology costs and other administrative support. General and administrative expenses also include legal settlement costs and estimated legal liabilities, legal, accounting and other third-party professional service fees, rent expense, depreciation expense and bad debt expense.

Year Ended December 31, 2022 compared to year ended December 31, 2021

General and administrative expenses increased $84 million, or 20%, due to increases of $117 million in our IMT segment and $13 million in our Mortgages segment, partially offset by a ~~$45.2~~decrease of $46 million in our Homes segment.

•The increase in general and administrative expenses for our IMT segment was primarily attributable to a $94 million increase in headcount-related expenses, including share-based compensation expense, ~~as we continue to grow our teams to support~~primarily driven by the ~~Homes segment,~~August 2022 Equity Award Actions, a ~~$4.6 million increase in data acquisition costs, a $3.8 million increase in depreciation and amortization expense, a $2.0~~$9 million increase in professional services ~~fees~~ and a ~~$2.0~~$6 million increase in ~~miscellaneous expenses. We expect our technology~~software and development expenses to increase in absolute dollars in future periods as we continue to build new website functionality and other technologies that will facilitate the purchasing and sales processes related to our Homes segment.hardware costs.

~~General and Administrative.~~ •~~General and administrative expenses were $81.4 million for the year ended December 31, 2019 compared to $22.0 million for the year ended December 31, 2018, an increase of $59.4 million.~~ The increase in general and administrative expenses for our Mortgages segment was primarily ~~due~~attributable to ~~a $36.5~~an $11 million increase in headcount-related expenses, including share-based compensation expense, ~~as we continue to grow our teams to support~~primarily driven by the ~~Homes segment. In addition, there was an $8.3 million increase~~August 2022 Equity Award Actions.

•The decrease in building lease-related expenses including rent, utilities and insurance, a $4.2 million increase in professional services fees, a $3.5 million increase in software and hardware costs, a $2.1 million increase in travel expense and a $4.8 million increase in miscellaneous expenses. We expect general and administrative expenses ~~to increase in absolute dollars in future periods as we continue to expand~~for our Homes ~~segment.~~

~~Interest Expense.~~ Interest expense was $30.0 million for the year ended December 31, 2019 compared to $2.2 million for the year ended December 31, 2018, an increase of $27.8 million. The increase in interest expense was attributable to borrowings, funding fees and other fees, including the amortization of deferred issuance costs, on our credit facilities supporting Zillow Offers. We expect interest expense to increase in absolute dollars in future periods as we continue to expand our Homes segment.

~~Table of Contents~~

~~IMT Segment~~

~~Cost of Revenue.~~ Cost of revenue was $98.5 million for the year ended December 31, 2019 compared to $96.7 million for the year ended December 31, 2018, an increase of $1.8 million, or 2%. The increase in cost of revenuesegment was primarily attributable to a ~~$4.9 million increase in data center and connectivity costs and a $3.5 million increase in other direct product costs, partially offset by a $3.4~~$28 million decrease in headcount-related expenses, including share-based compensation expense, ~~a $1.4~~and $6 million ~~decrease~~decreases in both facilities costs and software and hardware costs, ~~a $1.2 million decrease~~which were primarily driven by the wind down of Zillow Offers and the reduction in ~~revenue share~~indirect costs ~~and a $0.6 million decrease in miscellaneous expenses.~~related to the Homes segment.

~~Sales and Marketing.~~ ~~Sales and marketing expenses were $488.9 million for the~~Year Ended December 31, 2021 compared to year ended December 31, ~~2019 compared to $502.8 million for the year ended December 31, 2018, a decrease of $13.9~~2020

General and administrative expenses increased $90 million, or ~~3%.~~ 28%, due to increases of $33 million in our IMT segment, $29 million in our Homes segment and $28 million in our Mortgages segment.

•The ~~decrease~~increase in ~~sales~~general and ~~marketing~~administrative expenses for our IMT and Mortgages segments was primarily attributable to ~~a $29.1~~increases in headcount-related expenses, including share-based compensation expense, of $40 million ~~decrease~~and $20 million for our IMT and Mortgages segments, respectively, as we continued to invest in ~~marketing and advertising expenses, a $1.5 million decrease in travel expenses and a $1.3 million decrease in miscellaneous expenses, partially offset by a $12.2 million~~human capital to grow our businesses.

•The increase in ~~professional services fees~~general and ~~a $5.8 million~~administrative expenses for our Homes segment was primarily attributable to an increase in headcount-related expenses, including share-based compensation ~~expense.~~expense, of $21 million, a $3 million increase in professional services and a $3 million increase in software and hardware costs.

~~Technology~~

Impairment and ~~Development.~~ Restructuring Costs

Restructuring costs of $24 million and $10 million for the years ended December 31, 2022 and 2021, respectively,~~Technology~~were attributable to the wind down of Zillow Offers operations and ~~development expenses,~~additional cost actions to streamline our operations and prioritize investments. Restructuring costs within our IMT and Mortgages segments and certain indirect costs of the Homes segment which ~~include research~~do not qualify as discontinued operations related to employee termination costs and ~~development costs, were $365.8~~totaled $12 million, $4 million, and $8 million, respectively, for the year ended December 31, ~~2019 compared to $363.7~~2022, and $9 million and $1 million for the Homes and Mortgages segments, respectively, for the year ended December 31, ~~2018, an increase of $2.1 million, or 1%. Approximately $10.3 million~~of the increase related to growth in headcount-related expenses, including share-based compensation expense, as we continue to grow our engineering teams to support current and future product initiatives. In addition, there was a $4.4 million increase in software and hardware costs, a $3.5 millionincrease in other non-capitalizable data content expenses and a $1.7 million increase in miscellaneous expenses. These increases were partially offset by a $17.2 million decrease in depreciation and amortization expense and a $0.6 million decrease in professional services fees.

~~General and Administrative.~~ General and administrative expenses were $243.6 million for the year ended December 31, 2019 compared to $220.6 million for the year ended December 31, 2018, an increase of $23.1 million, or 10%. The increase in general and administrative expenses was primarily due to a $17.4 million increase in headcount-related expenses driven by the recognition of a total of $23.3 million of share-based compensation expense in the IMT segment during the year ended December 31, 2019 in connection with the modification of certain outstanding equity awards related to the departure of Spencer Rascoff, who served as Zillow Group’s Chief Executive Officer beginning in 2010 and who remains a member of Zillow Group’s board of directors.2021. For additional information regarding the ~~equity modification,~~restructuring, see Note ~~18 in our Notes to Consolidated Financial Statements in Part II, Item 8~~3 of this Annual Report on Form 10-K. In addition, there was an $8.3 million increase in building lease-related expenses including rent, utilities and insurance, partially offset by a $1.9 million decrease in professional services fees.

~~Impairment Costs.~~ There were no impairment costs for the year ended December 31, 2019. Impairment costs recorded to the IMT segment for the year ended December 31, 2018 consist of a $10.0 million non-cash impairment related to our June 2017 equity investment and $65.0 million of the total $69.0 million impairment related to the indefinite-lived Trulia trade names and trademarks intangible asset. For additional information about these impairments, see Note 9 and Note 11 in our Notes to Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K.

~~Mortgages Segment~~

~~Cost~~Impairment costs of ~~Revenue.~~ ~~Cost of revenue was $18.2~~$77 million for the year ended December 31, 2019 compared to $7.5 million for the year ended December 31, 2018, an increase of $10.6 million. The increase in cost of revenue was primarily attributable to our October 2018 acquisition of Zillow Home Loans, and includes a $7.2 million increase in headcount-related expenses, including share-based compensation expense, a $1.7 million increase in mortgage loan processing costs and a $1.7 million increase in miscellaneous expenses. We expect cost of revenue to increase in absolute dollars in future years as we continue to incur expenses associated with growth in revenue and expansion of Zillow Home Loans.

~~Sales and Marketing.~~ Sales and marketing expenses were $53.6 million for the year ended December 31, 2019 compared to $32.7 million for the year ended December 31, 2018, an increase of $20.9 million, or 64%. The increase in sales and marketing expenses was primarily attributable to a $16.4 million increase in headcount-related expenses, including share-based compensation expense, primarily related to our October 2018 acquisition of Zillow Home Loans, a $1.9 million increase in marketing and advertising expenses and a $2.6 million increase in miscellaneous expenses. We expect our sales and marketing expenses to increase in absolute dollars in future periods as we continue to expand the Mortgages segment.

~~Table of Contents~~

~~Technology and Development.~~ Technology and development expenses, which include research and development costs, were $32.6 million for the year ended December 31, 2019 compared to $25.8 million for the year ended December 31, 2018, an increase of $6.8 million, or 27%. The increase in technology and development expenses was primarily a result2020 consist of a ~~$6.6~~$72 millionincrease in headcount-related expenses, including share-based compensation expense, related to our October 2018 acquisition of Zillow Home Loans. We expect our technology and development expenses to increase in absolute dollars in future periods as we continue to build new website functionality and other technologies that will facilitate the origination of mortgages in Zillow Home Loans.

~~General and Administrative.~~ General and administrative expenses were $41.1 million for the year ended December 31, 2019 compared to $19.6 million for the year ended December 31, 2018, an increase of $21.5 million. The increase in general and administrative expenses was primarily due to a $15.6 million increase in headcount-related expenses, including share-based compensation expense, primarily related to our October 2018 acquisition of Zillow Home Loans. In addition, there was a $2.2 million increase in building lease-related expenses including rent, utilities and insurance, a $1.3 million increase in professional services fees, a $1.1 million increase in software and hardware costs and a $1.3 million increase in miscellaneous expenses. We expect general and administrative expenses to increase over time in absolute dollars as we continue to expand our mortgage business.

~~Acquisition-Related Costs.~~ There were no acquisition-related costs for the year ended December 31, 2019. Acquisition-related costs were $2.3 million for the year ended December 31, 2018 and related to our acquisition of Zillow Home Loans.

~~Impairment Costs.~~ ~~There were no impairment costs for the year ended December 31, 2019. Impairment costs for the Mortgages Segment for the year ended December 31, 2018 consist of $4.0 million of the total $69.0 million~~ non-cash impairment related to the ~~indefinite-lived~~ Trulia trade names and trademarks intangible ~~asset. For additional information about~~asset, of which $69 million was recorded to the ~~impairment, see~~IMT segment and $3 million was recorded to the Mortgages segment. Refer to Note ~~11 in~~10 of our Notes to Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form ~~10-K.~~10-K for additional information on the impairment costs related to the Trulia trade names and trademarks intangible asset. Additionally, impairment costs include a $5 million non-cash impairment related to our October 2016 equity investment, the entirety of which was recorded to the IMT segment.

~~Corporate Items~~Table o f Contents

~~Certain corporate items are~~Acquisition-Related Costs

Acquisition-related costs consist of investment banking, legal, accounting and tax costs associated with effecting acquisitions. We did not ~~directly attributable to~~record any ~~of our segments, including interest income earned on our short-term investments included in Other income and interest~~material acquisition-related costs ~~on our convertible senior notes included in Interest expense.~~

~~Interest Expense.~~ ~~Interest expense was $70.8~~for the years ended December 31, 2022 or December 31, 2020. Acquisition-related costs were $9 million for the year ended December 31, ~~2019 compared to $38.9~~2021, primarily as a result of our September 2021 acquisition of ShowingTime.

Gain (Loss) on Extinguishment of Debt

We recorded a $17 million ~~for~~loss on extinguishment of debt during the year ended December 31, ~~2018, an increase~~2021 associated with conversions of $31.9 million, or 82%. This increase was primarily due to the July 2018 issuance of the 2023 Notes, the September 2019 issuance of the 2026 Notes and the September 2019 and October 2019 issuances of the 2024 Notes. For additional information regarding the convertible senior notes maturing in 2023 (“2023 Notes”), 2024 (“2024 Notes”) and 2026 (“2026 Notes”). For additional information on the loss on extinguishment of debt, see Note ~~15 in~~13 of our Notes to Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K.

Other ~~Income.~~ 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.

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 decreased $18 million, for the year ended December 31, 2021 as compared to the year ended December 31, 2020. The decrease was primarily due to a decrease of $16 million in corporate other income not directly attributable to our segments driven by lower cash and investment balances during the second half of the year ended December 31, 2021. There was also a decrease of $5 million of other income, net in our IMT segment related to the gain recognized on the sale of our October 2016 equity investment during the year ended December 31, 2020.

Interest Expense

Our corporate interest expense consists of interest and deferred issuance costs associated with our convertible senior notes. On January 1, 2022, we adopted guidance which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts in an entity’s own equity. Upon adoption, we de-recognized the remaining debt discounts on the convertible senior notes and no longer recognize amortization of debt discounts to interest expense. 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.

For our Mortgages segment, interest expense includes interest on the warehouse line of credit and interest on the master repurchase agreements related to our Zillow Home Loans business. For additional details related to our credit facilities, see Note 13 to our Notes to Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K.

Year Ended December 31, 2022 compared to year ended December 31, 2021

Interest expense decreased $93 million, or 73%, primarily due to a $91 million decrease in corporate interest expense not attributable to any of our segments. The decrease in corporate interest expense not attributable to any of our segments was ~~$38.2~~primarily due to the adoption of guidance which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, which, as discussed above, eliminated the debt discounts on the convertible senior notes that were previously amortized to interest expense prior to adoption. Additionally, the settlement of conversions and redemptions of the 2023 Notes, 2024 Notes and 2026 Notes during the year ended December 31, 2021 decreased the outstanding principal balances of our convertible senior notes upon which interest was incurred.

Year Ended December 31, 2021 compared to year ended December 31, 2020

Interest expense decreased $10 million, or 7%, due to a $13 million decrease in corporate interest expense not attributable to any of our segments, partially offset by a $3 million increase related to our Mortgages segment.

The decrease in corporate interest expense not attributable to any of our segments was primarily attributable to the settlement of the convertible senior notes due in 2020 (the “2020 Notes”) and the 2021 Notes during the year ended December 31, 2020 and the settlement of 2023 Notes, 2024 Notes and 2026 Notes during the year ended December 31, 2021, which decreased the outstanding principal balances of our convertible senior notes upon which interest was incurred. The decrease in

Table o f Contents

corporate interest expense was partially offset by the impact of additional interest for the May 2020 issuance of the convertible senior notes due in 2025 (the “2025 Notes”).

The increase in Mortgages segment interest expense was due to increased borrowings on our repurchase agreements and warehouse line of credit.

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. There is a reasonable possibility that within the next several years, sufficient positive evidence will become available to demonstrate that a significant portion of the valuation allowance against our U.S. net deferred tax assets will no longer be required. 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, ~~2019 compared to $19.0~~2022, primarily driven by state taxes. We recorded an income tax benefit of $1 million for the year ended December 31, ~~2018, an increase~~2021 that was comprised of ~~$19.2 million. This increase is primarily due to an increase~~a $3 million income tax benefit from a decrease in the ~~balance~~valuation allowance associated with our September 2021 acquisition of ShowingTime, partially offset by the recognition of $2 million of tax expense related to state and foreign income taxes. We recorded an income tax benefit of $8 million for the year ended December 31, 2020, primarily driven by a $10 million income tax benefit associated with the $72 million non-cash impairment we recorded during the year ended December 31, 2020. Refer to Note 10 of our ~~short-term investment portfolio generating an increase~~Notes to Consolidated Financial Statements in ~~interest income.~~Part II, Item 8 of this Annual Report on Form 10-K for additional information on this non-cash impairment charge.

Quarterly Results of Operations

The following tables set forth our unaudited quarterly statements of operations data for each of the periods presented below. In the opinion of management, the data has been prepared on the same basis as the audited consolidated financial statements included in this Annual Report on Form 10-K, and reflects all necessary adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the data. The results of historical periods are not necessarily indicative of the results of operations of any future ~~period.~~period, particularly given continued uncertainty surrounding the health of the housing market, interest rate environment and the COVID-19 pandemic. You should read the data together with our consolidated financial statements and the related notes included elsewhere in this Annual Report on Form 10-K. Amounts are in ~~thousands,~~millions, except per share data ~~unaudited.~~which are presented in thousands, unaudited, and we have presented the financial results of Zillow Offers as discontinued operations (see Note 3 in our Notes to Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K for additional details regarding discontinued operations).

4855

Table of o f Contents

Three Months Ended
December 31, 2019 September 30, 2019 June 30, 2019 March 31, 2019 December 31, 2018 September 30, 2018 June 30, 2018 March 31, 2018

Statement of Operations Data:
Revenue:
Homes $ 603,228 $ 384,626 $ 248,924 $ 128,472 $ 41,347 $ 11,018 $ — $ —
IMT 319,665 335,290 323,669 298,272 300,708 313,638 305,941 280,856
Mortgages 21,054 25,292 26,985 27,360 23,280 18,438 19,305 19,023
Total revenue 943,947 745,208 599,578 454,104 365,335 343,094 325,246 299,879
Cost of revenue (exclusive of amortization) (1)(2):
Homes 581,398 370,796 240,732 122,419 39,080 10,226 — 86
IMT 23,894 24,318 26,059 24,251 24,623 25,186 24,290 22,594
Mortgages 4,325 4,721 4,430 4,678 3,769 1,260 1,237 1,239
Total cost of revenue 609,617 399,835 271,221 151,348 67,472 36,672 25,527 23,919
Sales and marketing (1) 183,761 181,347 187,433 161,587 138,869 128,734 147,727 137,291
Technology and development (1) 125,273 123,974 120,330 107,770 111,195 105,314 100,376 93,933
General and administrative (1) 99,070 88,493 82,839 95,774 74,758 70,743 60,579 56,073
Impairment costs — — — — 69,000 10,000 — —
Acquisition-related costs — — — — 268 1,405 632 27
Integration costs — 5 293 352 1,492 523 — —
Total costs and expenses 1,017,721 793,654 662,116 516,831 463,054 353,391 334,841 311,243
Loss from operations (73,774) (48,446) (62,538) (62,727) (97,719) (10,297) (9,595) (11,364)
Other income 12,033 8,999 9,458 9,168 5,962 7,773 3,089 2,446
Interest expense (39,927) (26,502) (18,897) (16,466) (14,327) (12,668) (7,187) (7,073)
Loss before income taxes (101,668) (65,949) (71,977) (70,025) (106,084) (15,192) (13,693) (15,991)
Income tax benefit (expense) 458 1,300 — 2,500 8,402 14,700 10,600 (2,600)
Net loss $ (101,210) $ (64,649) $ (71,977) $ (67,525) $ (97,682) $ (492) $ (3,093) $ (18,591)
Net loss per share—basic and diluted $ (0.49) $ (0.31) $ (0.35) $ (0.33) $ (0.48) $ — $ (0.02) $ (0.10)
Weighted-average shares outstanding—basic and diluted 208,204 207,002 205,754 204,514 203,561 202,416 194,155 191,464
Other Financial Data:
Segment income (loss) before income taxes:
Homes segment $ (107,923) $ (87,870) $ (71,122) $ (45,205) $ (28,812) $ (16,428) $ (10,061) $ (4,390)
IMT segment $ 36,221 $ 42,053 $ 13,238 $ (11,452) $ (57,454) $ 6,322 $ 110 $ (6,616)
Mortgages segment $ (12,654) $ (12,254) $ (10,438) $ (9,616) $ (13,086) $ (623) $ 356 $ (358)
Adjusted EBITDA (3):
Homes segment $ (82,525) $ (67,825) $ (56,452) $ (34,524) $ (23,186) $ (13,409) $ (8,352) $ (3,513)
IMT segment 87,659 91,102 64,055 61,047 58,261 75,363 59,718 46,683
Mortgages segment (8,311) (7,435) (5,306) (2,601) (2,718) 4,211 4,634 3,140
Total Adjusted EBITDA $ (3,177) $ 15,842 $ 2,297 $ 23,922 $ 32,357 $ 66,165 $ 56,000 $ 46,310


	Three Months Ended
	December 31, 2022		September 30, 2022		June 30, 2022		March 31, 2022		December 31, 2021		September 30, 2021		June 30, 2021		March 31, 2021
Revenue	$	435	$	483	$	504	$	536	$	535	$	550	$	533	$	514
Gross profit	346		394		407		444		440		468		460		441
Income (loss) from continuing operations	(83)		(51)		5		36		32		55		55		97
Net income (loss) from continuing operations	(72)		(51)		10		25		6		18		19		59
Net income (loss)	(72)		(53)		8		16		(261)		(329)		10		52
Net income (loss) from continuing operations per share:
Basic	$	(0.31)	$	(0.21)	$	0.04	$	0.10	$	0.02	$	0.07	$	0.08	$	0.24
Diluted	$	(0.31)	$	(0.21)	$	0.04	$	0.10	$	0.02	$	0.07	$	0.07	$	0.23
Net income (loss) per share:
Basic	$	(0.31)	$	(0.22)	$	0.03	$	0.06	$	(1.03)	$	(1.29)	$	0.04	$	0.21
Diluted	$	(0.31)	$	(0.22)	$	0.03	$	0.06	$	(1.00)	$	(1.24)	$	0.04	$	0.20
Weighted-average shares outstanding:
Basic	236,246		240,080		243,942		248,542		254,013		254,074		248,152		243,234
Diluted	236,246		240,080		245,163		265,945		261,181		265,112		261,495		259,346

Three Months Ended
December 31, 2019 September 30, 2019 June 30, 2019 March 31, 2019 December 31, 2018 September 30, 2018 June 30, 2018 March 31, 2018

(1) Includes share-based compensation as follows:
Cost of revenue $ 1,099 $ 1,062 $ 936 $ 881 $ 947 $ 969 $ 1,256 $ 955
Sales and marketing 6,087 6,588 6,801 5,650 5,529 5,911 6,340 5,162
Technology and development 17,980 18,034 18,399 15,508 15,753 15,031 14,347 11,542
General and administrative 21,852 16,444 17,496 44,085 15,489 19,771 17,000 13,082
Total $ 47,018 $ 42,128 $ 43,632 $ 66,124 $ 37,718 $ 41,682 $ 38,943 $ 30,741
(2) Amortization of website development costs and intangible assets included in technology and development $ 17,046 $ 15,835 $ 14,656 $ 14,400 $ 17,575 $ 18,165 $ 21,020 $ 22,549
(3) See “Adjusted EBITDA” below for more information and for a reconciliation of Adjusted EBITDA to the most directly comparable financial measure calculated and presented in accordance with GAAP, which is net loss on a consolidated basis and income (loss) before income taxes for each segment.

~~Table of Contents~~

~~The following tables present our revenue by type and as a percentage of total revenue for the periods presented (in thousands, unaudited):~~

Three Months Ended
December 31, 2019 September 30, 2019 June 30, 2019 March 31, 2019 December 31, 2018 September 30, 2018 June 30, 2018 March 31, 2018

Revenue:
Homes $ 603,228 $ 384,626 $ 248,924 $ 128,472 $ 41,347 $ 11,018 $ — $ —
IMT Revenue:
Premier Agent 233,482 240,698 231,961 217,735 221,012 232,703 230,885 213,732
Rentals 39,235 44,430 42,670 37,838 34,917 37,319 33,288 29,063
Other 46,948 50,162 49,038 42,699 44,779 43,616 41,768 38,061
Total IMT Revenue 319,665 335,290 323,669 298,272 300,708 313,638 305,941 280,856
Mortgages 21,054 25,292 26,985 27,360 23,280 18,438 19,305 19,023
Total Revenue $ 943,947 $ 745,208 $ 599,578 $ 454,104 $ 365,335 $ 343,094 $ 325,246 $ 299,879

Three Months Ended
December 31, 2019 September 30, 2019 June 30, 2019 March 31, 2019 December 31, 2018 September 30, 2018 June 30, 2018 March 31, 2018
Percentage of Revenue:
Homes 64 % 52 % 42 % 28 % 11 % 3 % 0 % 0 %
IMT Revenue:
Premier Agent 25 32 39 48 60 68 71 71
Rentals 4 6 7 8 10 11 10 10
Other 5 7 8 9 12 13 13 13
Total IMT Revenue 34 45 54 66 82 91 94 94
Mortgages 2 3 5 6 6 5 6 6
Total Revenue 100 % 100 % 100 % 100 % 100 % 100 % 100 % 100 %

~~Table of Contents~~

Total revenue increased sequentially in all quarters presented, primarily due to our Homes business that launched in April 2018. Additionally, the increase in customer adoption of our mobile applications and websites in the years ended December 31, 2019 and December 31, 2018 was reflected in the growth in visits and unique users, which increase the likelihood of a lead, click, impression, connection or other event that we could monetize across our business segments.

~~Homes Segment~~

The sequential increases in Homes revenue were primarily attributable to an increase in the number of homes sold in each period as customer adoption of Zillow Offers increases in geographic areas in which it is currently operating and as Zillow Offers expands into new geographic markets.

~~IMT Segment~~

~~Premier Agent Revenue.~~ Premier Agent revenue increased sequentially in all quarters presented with the exception of the three months ended December 31, 2018 and 2019 and the three months ended March 31, 2019. We believe the decreases in revenue for these periods were driven by certain changes we made to the Premier Agent and Premier Broker programs in the second half of 2018 as discussed in the “Results of Operations” section above in this Item 7. Additionally, we believe seasonality contributed to the decreases in the three months ended December 31, 2018 and 2019 related to the normal cycles of the residential real estate market. For all other quarters, Premier Agent revenue increased, supported by consistent increases in the number of visits and unique users to our mobile applications and websites.

~~Rentals Revenue.~~ Rentals revenue increased sequentially in all quarters presented with the exception of the three months ended December 31, 2018 and 2019. The quarter over quarter rentals revenue trends are primarily attributable to the corresponding fluctuation in rentals listings, which increase the likelihood of a lead, lease, click or other event we monetize. Additionally, rentals revenue increased quarter over quarter as a result of the launch of our rental applications product in 2018 which allows prospective renters to submit rental applications online through Zillow.com for a flat service fee. We believe the sequential quarterly decreases in rentals revenue for the three months ended December 31, 2018 and 2019 were primarily driven by seasonality related to the residential real estate market.

~~Other Revenue.~~ ~~Other revenue increased sequentially~~decreased in all quarters presented with the exception of the three months ended March 31, ~~2019 and~~2022, which remained flat with the ~~three months ended December 31, 2019.~~preceding quarter. The sequential decreases in revenue ~~for these periods was driven by a decrease in display advertising sales and aligns~~throughout 2022 were attributable to the ~~seasonality of the residential real estate market. For all other quarters, other~~ongoing macro housing market factors, including interest rate and home price increases, as well as tight housing inventory levels. Total revenue increased ~~supported by increased advertising sales to new home builders through our new construction platform.~~

~~Mortgages Segment~~

~~We reported year-over-year quarterly growth~~sequentially in ~~mortgages revenue~~all quarters in ~~2019 for all quarters,~~2021 with the exception of the three months ended December 31, ~~2019.~~2021. The year-over-year quarterly growth was primarily a result of the addition of revenue generated by Zillow Home Loans, Zillow’s affiliated mortgage lender, which we acquired in the fourth quarter of 2018. We believe thesequential decrease in ~~mortgages~~ revenue for the three months ended December 31, ~~2019 compared~~2021 was attributable to a decrease in visits driven by seasonality related to the ~~three months ended December 31, 2018 is~~normal cycles of the residential real estate market coupled with tighter inventory due to ~~our focus on investing~~a new COVID-19 variant. Total revenue increased in ~~systems~~all other quarters throughout 2021 due primarily to increases in visits and ~~operations to seamlessly integrate the Zillow Home Loans platform into our offerings to enhance the customer experience.~~unique users and persistent low interest rates throughout 2021.

Seasonality

Portions of our business ~~may be~~are affected by seasonal fluctuations in the residential real estate market, advertising spending and other factors. ~~With respect~~We believe that customers’ responses to ~~our Homes segment, the~~macro housing market factors including interest rate ~~of revenue growth~~and home price increases and volatility as ~~we expand into new geographic markets~~well as tight housing inventory levels may mask seasonality in ~~revenue; we~~revenue. Although the impact of macroeconomic factors in 2022 and the COVID-19 pandemic impact during 2021 and 2022 may ~~for example, be able to more quickly sell homes~~have masked seasonality during the ~~spring and summer high seasons. Similarly, the rate of growth as~~last two years, we expand into new markets for Zillow Home Loans may mask seasonality in revenue within the Mortgages segment, as we may be able to originate more mortgages during the spring and summer high seasons. As our revenue growth rate related to our IMT segment slows, wewould generally expect ~~seasonal variances may continue to become more pronounced, causing our operating results to fluctuate. For example, we have begun to observe~~ Premier Agent and ~~Rentals~~rentals revenue ~~peaking~~to peak in the three months ended June 30th30th or September 30~~th,~~ ~~in line~~30th, consistent with ~~peak residential real estate activity in the spring and summer seasons. In addition,~~ the average ~~numbers~~number of visits and unique users which have historically peaked during the three months ended June 30th30th or September 30th~~, consistent~~30th, aligning with peak residential real estate activity in the spring and summer months. Because the number of visits and unique users impacts impression inventory, leads and connections to real estate professionals, clicks and other events we monetize, we believe this trend in the average number of visits and unique users has generally resulted in seasonal fluctuations in revenue in corresponding periods.

~~Table of Contents~~

~~Adjusted EBITDA~~

~~The following table sets forth a reconciliation of Adjusted EBITDA to net loss for each of~~ Within the ~~periods presented below. See “Adjusted EBITDA” under “Results of Operations” above~~Mortgages segment, we believe that seasonality would result in ~~this Item 7 for additional information about why we have included Adjusted EBITDA in this Annual Report on Form 10-K and how management uses Adjusted EBITDA. Amounts are in thousands, unaudited.~~

Three Months Ended
December 31, 2019 September 30, 2019 June 30, 2019 March 31, 2019 December 31, 2018 September 30, 2018 June 30, 2018 March 31, 2018

Reconciliation of Adjusted EBITDA to Net Loss
Net loss $ (101,210) $ (64,649) $ (71,977) $ (67,525) $ (97,682) $ (492) $ (3,093) $ (18,591)
Other income (12,033) (8,999) (9,458) (9,168) (5,962) (7,773) (3,089) (2,446)
Depreciation and amortization expense 23,579 22,160 21,203 20,525 23,090 23,375 26,020 26,906
Share-based compensation expense 47,018 42,128 43,632 66,124 37,718 41,682 38,943 30,741
Impairment costs — — — — 69,000 10,000 — —
Acquisition-related costs — — — — 268 1,405 632 27
Interest expense 39,927 26,502 18,897 16,466 14,327 12,668 7,187 7,073
Income tax (benefit) expense (458) (1,300) — (2,500) (8,402) (14,700) (10,600) 2,600
Adjusted EBITDA $ (3,177) $ 15,842 $ 2,297 $ 23,922 $ 32,357 $ 66,165 $ 56,000 $ 46,310

~~Visits~~

Refer to “Visits” above in this Item 7 for information about how we measure visits. The number of visits has historically peaked during the three months ended June 30 or September 30, consistent with seasonal variances of home sales which generally peakhigher purchase origination volumes in the spring and summer ~~months. The following table presents the number of visits for the periods presented (in millions, unaudited):~~

Three Months Ended
December 31, 2019 September 30, 2019 June 30, 2019 March 31, 2019 December 31, 2018 September 30, 2018 June 30, 2018 March 31, 2018

Visits 1,759.5 2,104.9 2,181.4 2,019.8 1,607.8 1,888.9 1,920.6 1,764.8

~~Unique Users~~

Refer to “Unique Users” above in this Item 7 for information about how we measure unique users. The average number of unique users has historically peaked during the three months ended June 30 or September 30, consistent withhigh seasons. Our Connect and Custom Quote mortgage marketing products display similar seasonal ~~variances of home sales which generally peak in the spring and summer months. The following table presents the average number of unique users for the periods presented (in millions, unaudited):~~

Average for the Three Months Ended
December 31, 2019 September 30, 2019 June 30, 2019 March 31, 2019 December 31, 2018 September 30, 2018 June 30, 2018 March 31, 2018

Unique Users 172.6 195.6 194.3 181.1 157.2 186.6 186.1 175.5

fluctuations.

Liquidity and Capital Resources

Our primary sources of liquidity and capital resources are cash flows from operations, debt financing and equity offerings. Our cash requirements consist principally of working capital, general corporate needs and mortgage loan originations. We generally reinvest available cash flows from operations into our business and to service our debt obligations.

Table o f Contents

Sources of Liquidity

As of December 31, ~~2019~~2022 and ~~December 31, 2018,~~2021, we had cash and cash equivalents, investments and restricted cash of ~~$2,511.9 million~~$3.4 billion and ~~$1,567.3 million,~~$2.8 billion, respectively. Cash and cash equivalents balances consist of operating cash on deposit with financial institutions and money market ~~funds, U.S. government agency securities, commercial paper, treasury bills, corporate notes and bonds and certificates of deposit.~~funds. Investments consist of fixed income securities, which include U.S. government treasury securities, U.S. government agency securities, investment grade corporate ~~notes~~securities, and ~~bonds,~~ commercial ~~paper, municipal securities, certificates of deposit and treasury bills.~~paper. Restricted cash primarily consists of ~~amounts funded to the reserve and collection accounts related to our credit facilities and~~ amounts held in escrow related to funding customer home purchases in our mortgage origination business. Amounts on deposit with third-party financial institutions exceed the Federal Deposit Insurance Corporation and the Securities Investor Protection Corporation

~~Table of Contents~~

insurance limits, as applicable. As of December 31, ~~2019,~~2022, Zillow Group and its subsidiaries were in compliance with all debt covenants specified in the facilities described below.

We continue to invest in the development and expansion of our operations. Ongoing investments include but are not limited to improvements in infrastructure, networking equipment and software, release improvements to our software code as well as investments in sales and marketing. To finance these investments as well as ongoing operations in the event that we require additional funding to support strategic business opportunities, we have issued convertible senior notes. The following table summarizes our convertible senior notes as of the periods presented (in thousands, except interest rates):

December 31, 2019 December 31, 2018
Maturity Date Aggregate Principal Amount Stated Interest Rate Carrying Value Fair Value Carrying Value Fair Value
September 1, 2026 $ 500,000 1.375 % $ 327,187 $ 597,380 $ — $ —
September 1, 2024 673,000 0.75 % 490,538 730,500 — —
July 1, 2023 373,750 1.50 % 310,175 356,464 294,738 321,855
December 1, 2021 460,000 2.00 % 415,502 514,312 394,645 446,200
December 15, 2020 9,637 2.75 % 9,637 16,842 9,637 16,744
Total $ 2,016,387 $ 1,553,039 $ 2,215,498 $ 699,020 $ 784,799

Refer to Note 15 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 convertible senior notes, including conversion rates, conversion and redemption dates and the related capped call transactions.

~~Homes~~

The expansion of Zillow Group’s purchase of homes through the Zillow Offers program and sale of homes on the open market continues to have a significant impact on our liquidity and capital resources as a cash and inventory intensive business. We primarily use debt financing through credit facilities to fund a portion of the purchase price of homes and certain related costs. The following table summarizes our credit facilities as of the periods presented (in thousands, except interest rates):

Lender Final Maturity Date Maximum Borrowing Capacity Outstanding Borrowings at
December 31, 2019 Outstanding Borrowings at
December 31, 2018 Weighted Average Interest Rate
Goldman Sachs Bank USA April 20, 2022 $ 500,000 $ 39,244 $ — 4.41 %
Citibank, N.A. January 31, 2022 500,000 296,369 — 5.54 %
Credit Suisse AG, Cayman Islands July 31, 2021 500,000 355,911 116,700 5.63 %
Total $ 1,500,000 $ 691,524 $ —

~~Refer to Note 15 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 credit facilities.~~

~~IMT~~

~~Our principal sources of liquidity for the IMT segment are cash flows from operations within the segment.~~

~~Mortgages~~

The October 31, 2018 acquisition of Zillow Home Loans continues to impact our liquidity and capital resources as a cash intensive business that funds mortgage loans originated for resale in the secondary market. We primarily use debt financing to fund the mortgage loan originations. The following table summarizes our warehouse lines of credit and master repurchase agreement as of the periods presented (in thousands, except interest rates):

~~Table of Contents~~

Lender Maturity Date Maximum Borrowing Capacity Outstanding Borrowings at
December 31, 2019 Outstanding Borrowings at
December 31, 2018 Weighted Average Interest Rate
Citibank, N.A. October 27, 2020 $ 75,000 $ 394 $ — 3.29 %
Comerica Bank June 27, 2020 50,000 30,033 18,892 4.22 %
People’s United Bank, N.A. October 15, 2019 50,000 — 14,125 4.89 %
Total $ 30,427 $ 33,017

~~Refer to Note 15 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 mortgage facilities.~~

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 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. See Note 3 in our Notes to Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K for additional information on discontinued operations, including supplemental cash flow information. The following table presents selected cash flow data for the periods presented (in ~~thousands)~~millions):

Year Ended December 31,
2019 2018
Cash Flow Data:
Net cash provided by (used in) operating activities $ (612,174) $ 3,850
Net cash used in investing activities (456,054) (622,639)
Net cash provided by financing activities 1,635,694 930,137


	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 and sales of mortgages originated by Zillow Home Loans.~~Offers. Our primary uses of cash from operating activities include ~~payments for homes purchased through Zillow Offers,~~ marketing and advertising activities, mortgages funded through Zillow Home Loans and employee compensation and benefits. Additionally, uses of cash from operating activities include costs associated with operating our mobile applications and websites and other general corporate expenditures. 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, ~~2019,~~2022, net cash provided by operating activities was $4.5 billion. 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 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. The changes in operating assets and liabilities are primarily related to a $3.9 billion decrease in inventory and an $82 million decrease in accounts receivable as we wound down Zillow Offers operations, a $66 million decrease in mortgage loans held for sale driven by increased interest rates which decreased demand for mortgages, a $6 million decrease in prepaid expenses and other current assets due to the timing of payments and a $7 million increase in other long-term liabilities primarily due to our outstanding warrant agreement. 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.

Table o f Contents

For the year ended December 31, 2021, net cash used in operating activities was ~~$612.2~~$3.2 billion. This was primarily driven by a net loss of $528 million, adjusted by an inventory valuation adjustment of $408 million, share-based compensation expense of $312 million, depreciation and amortization expense of $130 million, amortization of debt discount and debt issuance costs of $104 million, impairment and restructuring costs of $57 million, amortization of contract cost assets of $42 million, amortization of right of use assets of $23 million, a loss on extinguishment of debt of $17 million and $12 million in other adjustments to reconcile net loss to cash used in operating activities, including deferred income taxes. Changes in operating assets and liabilities offset these adjustments by $3.8 billion. The changes in operating assets and liabilities are primarily related to a $3.8 billion increase in inventory due to home purchases outpacing the sale of homes through Zillow Offers for the year ended December 31, 2021, an $82 million increase in accounts receivable due primarily to an increase in revenue from products and services billed in arrears, an $82 million increase in prepaid expenses and other current assets due to the timing of payments, a $29 million decrease in lease liabilities, a $26 million increase in contract cost assets due primarily to capitalized sales commissions and an $12 million decrease in other long-term liabilities. These changes were partially offset by a $224 million decrease in mortgage loans held for sale, a $61 million increase in accrued expenses and other liabilities driven by the timing of payments, $13 million in accrued compensation and benefits and a $5 million change in accounts payable.

For the year ended December 31, 2020, net cash provided by operating activities was $423 million. This was primarily driven by a net loss of ~~$305.4~~$162 million, adjusted by share-based compensation expense of ~~$198.9~~$197 million, depreciation and amortization expense of ~~$87.5~~$111 million, amortization of ~~the~~debt discount and debt issuance costs ~~on the 2021 Notes, 2023 Notes, 2024 Notes and 2026 Notes~~ of ~~$52.1~~$102 million, non-cash impairment costs of $77 million, amortization of contract cost assets of ~~$35.3~~$37 million, amortization of right of use assets of ~~$23.1 million, a loss on disposal of property and equipment of $7.2 million, accretion of bond discount of $6.3~~$24 million and $3 million in other adjustments to reconcile net loss to cash provided by operating activities. This was partially offset by a ~~$4.3 million change in deferred income taxes.~~gain on extinguishment of debt of $1 million. Changes in operating assets and liabilities increased cash ~~used in~~provided by operating activities by ~~$703.1~~$41 million. The changes in operating assets and liabilities are primarily ~~due~~related to a ~~$673.8~~$345 million ~~increase~~decrease in inventory due to the ~~purchase~~sale of homes and a decrease in home purchases through Zillow Offers during the year ended December 31, 2020 associated with our temporary pause in Zillow Offers home buying activity to preserve liquidity in response to COVID-19, a $34.7 million increase in contract cost assets due primarily to the capitalization of sales commissions and an $18.9 million decrease in lease liabilities due to scheduled lease payments, partially offset by a $19.6$15 million increase in accrued expenses and other ~~current~~ liabilities driven ~~primarily~~ by the timing of payments, a ~~$6.4~~$13 million increase in accounts payable, a $10 million increase in other long-term liabilities, a $10 million increase in accrued compensation and benefits and a ~~$5.7~~$9 million increase in deferred ~~revenue driven primarily~~revenue. These changes were partially offset by a ~~corresponding~~$294 million increase in ~~sales volumes.~~

~~For the year ended December 31, 2018, net cash provided by operating activities was $3.9 million. This was primarily driven by~~mortgage loans held for sale, a net loss of $119.9 million, adjusted by share-based compensation expense of $149.1 million, depreciation and amortization expense of $99.4 million, non-cash impairment charges totaling $79.0 million, amortization of contract cost assets of $36.0 million, a non-cash change in our deferred income taxes of $31.1 million, amortization of the discount and issuance costs on the 2023 Notes and 2021 Notes of $26.7 million, accretion of bond discount of $4.3 million, a loss on disposal of property and equipment of $3.6 million and a change in deferred rent of $2.0 million. Changes in operating assets and liabilities decreased cash provided by operating activities by $233.5 million. The changes in operating assets and liabilities are primarily due to a $162.8 million increase~~in inventory due to the purchase of homes through Zillow Offers, a $41.5~~$42 million increase in contract cost assets due primarily to the capitalization of sales commissions, a ~~$34.1~~$16 million increase in prepaid expenses and other current assets ~~driven~~due primarily ~~by the~~to timing of payments and growth in our contract assets, a ~~$12.6~~$7 million increase in accounts receivable due ~~primarily~~ to an

~~Table of Contents~~

increase in revenue from products and services billed in arrears and a ~~$11.3~~$2 million ~~increase~~decrease in ~~accrued compensation and benefits driven primarily by the timing of~~lease liabilities due to scheduled lease payments.

Cash Flows ~~Used In~~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.

For the year ended December 31, ~~2019,~~2022, net cash used in investing activities was ~~$456.1 million.~~$1.5 billion. This was primarily the result of ~~$369.4~~$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. 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. This was the result of $939 million of net purchases of investments in connection with investment of a portion of the net proceeds from our May 2020 issuance of the ~~2024~~2025 Notes and ~~2026 Notes and $86.6 million~~offering of ~~purchases for property and equipment and intangible assets.~~

For the year ended December 31, 2018, net cash used in investing activities was $622.6 million. This was primarily the result of $489.0 million of net purchases of investments in connection with investment of a portion of the net proceeds from our ~~July 2018 public offerings of~~ Class C capital stock, and ~~2023 Notes, $78.5~~$109 million of purchases for property and equipment and intangible assets, ~~and $55.1~~partially offset by $10 million in proceeds from the sale of ~~net cash paid for acquisitions, related to the October 2018 acquisition of Zillow Home Loans.~~an equity investment.

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, ~~and equity awards withheld for tax liabilities, net~~ proceeds from ~~the issuance of convertible notes, net~~our securitization transaction, proceeds from ~~equity offerings, proceeds from~~and repayments of borrowings on our credit facilities related to Zillow Offers and ~~proceeds from~~repayments of borrowings on the warehouse lines of credit and ~~the~~ master repurchase agreements related to Zillow Home Loans.

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. These cash outflows were partially offset by $46 million of proceeds from the exercise of option awards.

For the year ended December 31, 2021, cash provided by financing activities was $3.1 billion, which was primarily related to $1.8 billion of net borrowings on our credit facilities related to Zillow Offers, $1.1 billion in proceeds from the issuance of the 2021-1 and 2021-2 term loans, net of issuance costs, $545 million in proceeds from the sale of 3 million shares of Class C capital stock under our equity distribution agreement and $127 million of proceeds from the exercise of option awards. 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.

For the year ended December 31, ~~2019,~~2020, cash provided by financing activities was ~~$1,635.7 million,~~$1.2 billion, which was primarily ~~resulted from the~~related to net proceeds from the issuance of the ~~2024 Notes and 2026~~2025 Notes of ~~$1,157.7~~$553 million, $444 million of proceeds from the exercise of option awards, net proceeds from the public offering of our Class C capital stock of $412 million, and $279 million of net borrowings on our warehouse line of credit and master repurchase agreements related to Zillow Home Loans. These cash inflows were partially offset by ~~$159.7 million paid in premiums for the related capped call confirmations. Cash provided by financing activities also included $574.8~~$330 million of net ~~proceeds from~~repayments of borrowings on our credit facilities related to Zillow Offers and ~~$65.5~~$195 million of ~~proceeds~~cash paid for the extinguishment of our 2021 Notes.

Capital Resources

We continue to invest in the development and expansion of our continuing operations. Ongoing investments include, but are not limited to, improvements in our technology platforms, infrastructure and continued investments in sales and marketing. To finance these investments and ongoing operations, and in the event that we require additional funding to support strategic business opportunities, we have issued convertible senior notes. As of December 31, 2022, we have a total of $1.7 billion aggregate principal of convertible senior notes outstanding. The convertible notes are senior unsecured obligations, and interest on the convertible notes is paid semi-annually. The following table summarizes our convertible senior notes as of the periods presented (in millions, except interest rates):


					December 31, 2022		December 31, 2021
Maturity Date	Aggregate Principal Amount		Stated Interest Rate		Carrying Value		Carrying Value
September 1, 2026	$	499	1.375	%	$	495	$	369
May 15, 2025	565		2.75	%	560		443
September 1, 2024	608		0.75	%	605		507
Total	$	1,672			$	1,660	$	1,319

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 regarding our convertible senior notes, including conversion rates, conversion and redemption dates and the related capped call transactions.

On February 17, 2021, we entered into an equity distribution agreement with certain sales agents and/or principals (the “Managers”), pursuant to which we may offer and sell from time to time, through the ~~exercise~~Managers, shares of ~~option awards, partially offset~~our Class C capital stock, having an aggregate gross sales price of up to $1 billion, in such share amounts as we may specify by ~~$2.6 million of net repayments on our warehouse lines of credit related~~notice to ~~Zillow Home Loans.~~

~~For~~the Managers, in accordance with the terms and conditions set forth in the equity distribution agreement. During the year ended December 31, ~~2018, cash flows provided by financing activities includes $364.0~~2022, we did not sell any shares under the equity distribution agreement. During the year ended December 31, 2021, we issued and sold 3 million shares of ~~net proceeds from the issuance of the 2023 Notes and $360.3 million of net proceeds from~~ our Class C capital stock ~~public offering, partially offset by $29.4~~for total proceeds of $551 million and net proceeds of $545 million, after deducting $6 million of premiums paid for the related capped call confirmations. It also includes $120.1 million in proceeds from the exercise of option awards, $116.7 million of proceeds from borrowing on the credit facility related to Zillow Offerscommissions and $0.5 million of proceeds from borrowing on the warehouse lines of credit associated with our October 2018 acquisition of Zillow Home Loans, partially offset by $2.0 million of contingent consideration related to a prior period acquisition.

~~Off-Balance Sheet Arrangements~~

~~We did not have any off-balance sheet arrangements~~ other than outstanding surety bonds issued for our benefit of approximately $10.2 million and $8.9 million, respectively, as of December 31, 2019 and 2018. We do not believe that the surety bonds will have a material effect on our liquidity, capital resources, market risk support or credit risk support.offering expenses incurred. For additional information regarding the ~~surety bonds,~~equity distribution agreement, see Note 2015 in our Notes to Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K.

Table o f Contents

On December 2, 2021, Zillow Group’s Board of Directors authorized the repurchase of 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. 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. During the year ended December 31, 2021, we repurchased 4.9 million shares of Class C capital stock at an average price of $61.12 per share for an aggregate purchase price of $302 million. As of December 31, 2022, $500 million remained available for future repurchases pursuant to the Repurchase Authorizations, which repurchases decrease our liquidity and capital resources when effected. 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. For additional information on our Repurchase Authorizations, see Note 15 in our Notes to Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K.

IMT

Our principal sources of liquidity for the IMT segment are cash flows from operations within the segment.

Mortgages

Zillow Home Loans impacts our liquidity and capital resources as a cash intensive business that funds mortgage loans originated for resale in the secondary market. We primarily use debt financing to fund mortgage loan originations. 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.	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.

Homes

Prior to its wind down, Zillow Group’s purchase of homes through the Zillow Offers program had a significant impact on our liquidity and capital resources as a cash and inventory intensive business. We previously used credit facilities, and beginning in the third quarter of 2021, asset-backed securitizations, to fund a portion of the purchase price of homes and certain related costs. On November 2, 2021, the Board of Directors of Zillow Group made the determination to wind down Zillow Offers operations and as of September 30, 2022, the wind down was complete. As a result of the wind down, during the first half of 2022, certain wholly owned subsidiaries of Zillow Group repaid all amounts drawn on the Zillow Offers credit facilities and all principal on the securitization term loans. We incurred prepayment penalties of $6 million associated with the pay-down of our credit facilities and $8 million in connection with the pay-down of the securitizations. Refer to 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 on the Zillow Offers wind down.

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. Future interest payments associated with the convertible senior notes total $75 million, with $27 million payable within 12 months. 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 maturity dates, stated interest rates and additional information on our convertible senior notes.

Table o f Contents

Mortgages Segment Credit Facilities - Includes principal amounts due for amounts borrowed under the warehouse line of credit and master repurchase agreements to finance mortgages originated through Zillow Home Loans. As of December 31, 2022, we have outstanding principal amounts of $37 million. Amounts exclude an immaterial amount of estimated interest payments.

Operating Lease Obligations - Our lease portfolio primarily comprises operating leases for our office space. As of December 31, 2022, we have operating lease obligations totaling $229 million, with $42 million payable within 12 months. 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 under the subsection titled “Surety Bonds”.~~

~~Table of Contents~~

~~Contractual Obligations and Other Commitments~~

~~The following table provides a summary of our contractual obligations~~10-K. Additionally, as of December 31, ~~2019 (in thousands):~~

Payments Due By Period
Total Less Than 1 Year 1-3 Years 3-5 Years More Than 5 Years

Convertible senior notes (1) $ 2,016,387 $ 9,637 $ 460,000 $ 1,046,750 $ 500,000
Interest on convertible senior notes (2) 106,909 26,994 43,491 24,966 11,458
Homes segment credit facilities (3) 703,991 703,991 — — —
Operating lease obligations (4) 342,918 38,914 83,833 77,031 143,140
Homes under contract (5) 163,405 163,405 — — —
Purchase obligations (6) 98,896 65,375 33,014 507 —
Mortgages segment credit facilities (7) 30,427 30,427 — — —
Total contractual obligations $ 3,462,933 $ 1,038,743 $ 620,338 $ 1,149,254 $ 654,598
____________________
(1) Includes the aggregate principal amount of the convertible senior notes. Refer to Note 15 of our Notes to Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K for maturity dates, stated interest rates and additional information on our convertible senior notes.
(2) Includes the coupon interest on the convertible senior notes. Refer to Note 15 of our Notes to Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K for maturity dates, stated interest rates and additional information on our convertible senior notes.
(3) Includes principal amounts due for amounts borrowed under the credit facilities used to provide capital for our Zillow Offers business. Amounts include $12.5 million of estimated interest payments.
(4) For additional information regarding our operating leases, see Note 14 to our Notes to Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K.
(5) We have obligations to purchase homes under contract through our Zillow Offers business.
(6) We have noncancellable purchase obligations for content related to our mobile applications and websites and certain cloud computing costs. For additional information regarding our purchase obligations, see Note 20 to our Notes to Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K.
(7) Includes principal amounts due for amounts borrowed under the warehouse line of credit and master repurchase agreement to finance mortgages originated through Zillow Home Loans. Amounts exclude an immaterial amount of estimated interest payments.

~~As of December 31, 2019~~2022 and ~~2018,~~2021, we had outstanding letters of credit of approximately ~~$16.9~~$16 million, which secure our lease obligations in connection with certain of the operating leases of our office spaces.

In the course of business, we are required to provide financial commitments in the form of surety bonds to third parties as a guarantee of our performance on and our compliance with certain obligations. If we were to fail to perform or comply with these obligations, any draws upon surety bonds issued on our behalf would then trigger our payment obligation to the surety bond issuer.

Purchase Obligations - We have ~~outstanding surety bonds issued~~non-cancellable purchase obligations for content related to our ~~benefit of approximately $10.2 million~~mobile applications and ~~$8.9 million, respectively, as~~websites and certain cloud computing costs. As of December 31, ~~2019 and 2018.~~2022, we have purchase obligations totaling $111 million, with $79 million payable within 12 months. For additional information regarding our purchase obligations, seeNote 18 to our Notes to Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K.

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. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Our actual results could differ from these ~~estimates.~~

~~Table~~estimates, and the health of ~~Contents~~

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.

We believe that the ~~assumptions~~estimates, judgments and ~~estimates~~assumptions associated with accounting for certain revenue ~~recognition, the net realizable value of inventory,~~offerings, amortization period and recoverability of contract cost assets, website and software development costs, recoverability of ~~long-lived assets and~~ intangible assets with definite lives ~~share-based compensation,~~ and ~~the~~other long-lived assets, recoverability of goodwill, and ~~indefinite-lived intangible assets,~~share-based compensation have the greatest potential impact on our consolidated financial statements. Therefore, we consider these to be our critical accounting policies and estimates.

Accounting for Certain Revenue ~~Recognition~~

Accrued Revenue. We ~~recognize~~accrue revenue when or as we satisfy our performance obligations by transferring control of the promised products or services to our customers in an amount that reflects the consideration to which we expect to be entitled in exchange for ~~those products or services.~~

As a practical expedient, we do not adjust the promised amount of consideration for the effects of a significant financing component as the period between our transfer of a promised product or service to a customer and when the customer pays for that product or service is one year or less.

We do not disclose the transaction price related to remaining performance obligations for (i) contracts with an original expected duration of one year or less and (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for performance completed to date. The remaining durationcertain of our ~~performance obligations is generally less than one year.~~

~~In our Homes segment, we generate revenue from the resale of homes on the open market through our Zillow Offers program.~~

~~In our IMT segment, we generate revenue from the sale of advertising services and our suite of marketing software and technology solutions to businesses and professionals~~products, primarily associated with the residential real estate and rental industries. These professionals include real estate and rental professionals and brand advertisers. Our three primary revenue categories within our IMT segment are Premier Agent, Rentals and Other.

In our Mortgages segment, we generate revenue from the sale of advertising services to mortgage lenders and other mortgage professionals, mortgage originations and the related sale of mortgages on the secondary market through Zillow Home Loans, as well as Mortech mortgage software solutions.

~~Premier Agent Revenue.~~ ~~Premier Agent revenue is derived from~~ our Premier Agent Flex, rentals pay per lease (“Zillow Lease Connect”) and ~~Premier Broker programs. Our~~StreetEasy Experts offerings. With Premier Agent and Premier Broker programs offer a suite of marketing and business technology products and services to help real estate agents and brokers achieve their advertising goals, while growing and managing their businesses and brands. All Premier Agents and Premier Brokers receive access to a dashboard portal on our mobile application and website that provides individualized program performance analytics, our customer relationship management, or CRM, tool that captures detailed information about each contact made with a Premier Agent or Premier Broker through our mobile and web platforms and our account management tools. The marketing and business technology products and services promised to Premier Agents and Premier Brokers are delivered over time, as the customer simultaneously receives and consumes the benefit of the performance obligations.

~~Table of Contents~~

Premier Agent and Premier Broker advertising products, which include the delivery of impressions and validated consumer connections, or leads, are primarily offered on a share of voice basis. Payment is received prior to the delivery of impressions and connections. Impressions are delivered when an advertisement appears on pages viewed by users of our mobile applications and websites and connections are delivered when consumer contact information is provided to Premier Agents and Premier Brokers. We do not promise any minimum or maximum number of impressions or connections to customers, but instead control when and how many impressions to deliver based on a customer’s share of voice. We determine the number of impressions and connections to deliver to Premier Agents and Premier Brokers in each zip code using a market-based pricing method in consideration of the total amount spent by Premier Agents and Premier Brokers to purchase impressions and connections in the zip code during the month. This results in the delivery of impressions and connections over time in proportion to each Premier Agent’s and Premier Broker’s share of voice. A Premier Agent’s or Premier Broker’s share of voice in a zip code is determined by their proportional monthly prepaid spend in that zip code as a percentage of the total monthly prepaid spend of all Premier Agents and Premier Brokers in that zip code, and includes both the share of impressions delivered as advertisements appearing on pages viewed by users of our mobile applications and websites, as well as the proportion of consumer connections a Premier Agent or Premier Broker receives. The number of impressions and connections delivered for a given spend level is dynamic - as demand for advertising in a zip code increases or decreases, the number of impressions and connections delivered to a Premier Agent or Premier Broker in that zip code decreases or increases accordingly.

~~In October 2018, we began testing a new pricing model,~~ Flex, ~~for Premier Broker and Premier Agent advertising services in limited markets. With the Flex model, Premier Brokers and~~ Premier Agents are provided ~~with~~ validated leads at no ~~upfront~~initial cost and ~~they~~ pay a performance advertising fee only when a real estate transaction is closed with one of ~~their leads.~~the leads within two years. 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. ~~During this testing phase, we recognize revenue when we receive payment~~The transaction prices for ~~a real estate transaction closed with a Flex lead. We will continuously reevaluate this determination~~leases generated through Zillow Lease Connect and the point at which we may begin to estimate variable consideration and record revenue as performance obligations are transferred. Once we reach the point at which we may begin to estimate variable consideration associated with Flex, we will estimate the transaction price based on the consideration to which we expect to be entitled in exchange for transferring the validated Flex leads. This will include estimates associated with the probability that Flex leads provided will result in closed real estate transactions ~~and the expected value of those transactions.~~

~~Rentals Revenue.~~ Rentals revenue includes the sale of advertising and a suite of tools to rental professionals, landlords and other market participants. Rentals revenue primarily includes revenue generated by advertising sold to property managers, landlords and other rental professionals on a cost per lead, cost per click, cost per lease, cost per listing or cost per impression basis. We recognize revenue as leads, clicks and impressions are provided to rental professionals, or as rental listings are published on our mobile applications and websites, which is the amount for which we have the right to invoice. The number of leases generatedexecuted through our ~~rentals pay per lease~~StreetEasy Experts product ~~during the period is accounted for as~~also represent variable ~~consideration, and we~~consideration. We estimate the amount of variable consideration for Zillow Lease Connect based on the expected number of qualified leases to be secured ~~during~~and the ~~period.~~expected price per closed lease. We estimate the amount of variable consideration for StreetEasy Experts based on the number of validated leads that convert to real estate transactions and the value of those transactions. As of December 31, 2022, we had accrued $71 million in revenue associated with these products.

Although we do not believe that a significant reversal in the amount of cumulative revenue recognized will occur once the uncertainty related to the number of real estate transactions to be closed and qualified leases to be secured is ~~subsequently resolved.~~

~~Rentals~~resolved, judgment is required to determine the quantity and value of transactions and leases that are expected to be realized in a future period based on the number of leads delivered during the current period. Our estimated revenue also includes revenue generated from our rental applications product through which potential renters can submit applications to multiple rental properties over a 30-day period for a flat service fee. We recognize revenue for the rental applications productis based on a ~~straight-line basis during~~number of assumptions, which include estimating the ~~contractual period over which~~conversion rate of a lead to a real estate transaction or qualified lease, estimating the ~~customer has~~velocity of conversions and estimating the ~~right~~fee amounts likely to ~~access~~be received. Estimates are primarily developed based on historical data and ~~submit the rental application.~~our future expectations based on current market trends.

5861

Table of o f Contents

~~Other~~Mortgage Origination Revenue. Other revenue primarily includes revenue generated by new construction and display, as well as revenue from the sale of various other marketing and business products and services to real estate professionals. Our new construction marketing solutions allow home builders to showcase their available inventory to home shoppers. New construction revenue primarily includes revenue generated by advertising sold to builders on a cost per residential community basis, and revenue is recognized on a straight-line basis during the contractual period over which the communities are advertised on our mobile applications and websites. New construction revenue also includes revenue generated on a cost per impression basis whereby revenue is recognized on a straight-line basis during the contractual period over which the advertising impressions are delivered. Consideration for new construction products is billed in arrears. Display revenue primarily 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. We recognize display revenue as clicks occur or as impressions are delivered to users interacting with our mobile applications or websites, which is the amount for which we have the right to invoice.

For our Connect and Custom Quote cost per lead marketing products, participating qualified mortgage professionals typically make a prepayment to gain access to consumers interested in connecting with mortgage professionals. Mortgage professionals who exhaust their initial prepayment prepay additional funds to continue to participate in the marketplace. For our Connect subscription mortgage marketing product, participating qualified mortgage professionals generally prepay a monthly subscription fee, which they then allocate to desired geographic counties. In Zillow Group’s Connect platform, consumers answer a series of questions to find a local lender, and mortgage professionals receive consumer contact information, or leads, when the consumer chooses to share their information with a lender. Consumers who request rates for mortgage loans in Custom Quotes are presented with customized quotes from participating mortgage professionals.

For our cost per lead mortgages products, we recognize revenue when a user contacts a mortgage professional through our mortgages platform, which is the amount for which we have the right to invoice. For our subscription product, the opportunity to receive a consumer contact is based on the mortgage professional’s relative share of voice in a geographic county. When a consumer submits a contact, we contact a group of subscription mortgage professionals via text message, and the first mortgage professional to respond receives the consumer contact information. We recognize revenue based on the contractual spend recognized on a straight-line basis during the contractual period over which the service is provided. This methodology best depicts how we satisfy our performance obligation to subscription customers, as we continuously transfer control of the performance obligation to the customer throughout the contractual period.

~~Mortgage origination revenue~~ reflects ~~(1)~~ origination fees on purchase or refinance mortgages and ~~(2)~~ the corresponding sale, or expected future sale, of a loan. When an interest rate lock commitment is made to a customer, we record the expected gain on sale of the mortgage, plus the estimated earnings from the expected sale of the associated servicing rights, adjusted for a pull-through percentage (which ~~is defined as~~represents the ~~likelihood~~probability that an interest rate lock commitment will ~~be originated)~~ultimately result in a closed loan), as revenue. 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 ~~real estate~~purchase or refinance transactions are completed, usually upon the close of escrow and when we fund the purchase or refinance mortgage loans. Once funded, mortgage loans held for sale are recorded at fair value based on either sale commitments or current market quotes and are adjusted for subsequent changes in fair value until the loan is sold. Net origination costs and fees associated with mortgage loans are recognized as incurred. We sell substantially all of the mortgages we originate and the related servicing rights to third-party purchasers.

Mortgage loans are sold with limited recourse provisions, which can result in repurchases of loans previously sold to investors or payments to reimburse investors for loan losses. Based on historical experience, discussions with our mortgage purchasers, analysis of the volume of mortgages we originated and current housing and credit market conditions, we estimate and record a loss reserve for mortgage loans held in our portfolio and mortgage loans held for sale, as well as known and projected mortgage loan repurchase requests. These have historically not been significant to our financial statements, but could vary in future periods.

~~Inventory~~

~~Table of Contents~~

Inventory is comprised of homes acquired through our Zillow Offers program and is stated at the lower of cost or net realizable value. Homes are removed from inventory on a specific identification basis when they are resold. Stated cost includes consideration paid to acquire and update each home including associated allocated overhead costs. Work-in-progress inventory includes homes undergoing updates and finished goods inventory includes homes ready for resale. Unallocated overhead costs are expensed as incurred and included in cost of revenue. Selling costs include real estate commissions, escrow and title fees, and staging costs, as well as holding costs incurred during the period that homes are listed for sale, including utilities, taxes and maintenance.

Each quarter we review the value of homes held in inventory for indicators that net realizable value is lower than cost. The calculation of net realizable value is based on several estimates which may ultimately vary materially from actual results. Given the significant assumptions required and the possibility that actual conditions will differ, we consider the valuation of inventory a critical accounting estimate. When evidence exists that the net realizable value of inventory is lower than its cost, the difference is recognized in cost of revenue. We estimate that a 1% decrease in the lower of cost or net realizable value of our inventory balances as of December 31, 2019 and 2018 would increase our inventory valuation adjustment by $8.4 million and $1.6 million, respectively.

Contract Cost Assets

We capitalize certain incremental costs of obtaining contracts with customers ~~that~~which we expect to recover. These costs relate to commissions paid to sales personnel, primarily for our Premier Agent and Premier Broker programs. As a practical expedient, we recognize the incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset that we otherwise would have recognized is one year or less. Capitalized commission costs are recorded as contract cost assets in our consolidated balance sheets.program. Contract cost assets are amortized ~~to expense~~ on a straight-line basis over a period that is consistent with the transfer to the customer of the products or services to which the asset relates, generally the estimated life of the customer relationship. ~~Amortization expense related to contract cost assets is included in sales and marketing expenses in our consolidated statements of operations.~~ Our determination of the estimated life of the customer relationship involves significant judgment. In determining the estimated life of our customer relationships, we consider quantitative and qualitative data, including, but not limited to, historical customer data, recent changes or expected changes in product or service offerings, and changes in how we monetize our products and services. The amortization period for capitalized contract costs related to our Premier Agent ~~and Premier Broker programs ranges from two to~~program are approximately three years.

We monitor our contract cost assets for impairment and recognize an impairment loss in the statement of operations to the extent the carrying amount of the asset recognized exceeds the amount of consideration we expect to receive in the future and that we have received but have not recognized in revenue less the costs that relate directly to providing those goods or services that have not yet been recognized as expenses.

Website and Software Development Costs

The costs incurred in the preliminary stages of website and software development are expensed as incurred. Once an application has reached the development stage, internal and external costs, if direct and incremental and deemed by management to be significant, are capitalized in property and equipment and amortized on a straight-line basis over their estimated useful lives. Maintenance and enhancement costs, including those costs in the post-implementation stages, are typically expensed as incurred, unless such costs relate to substantial upgrades and enhancements to the website or software that result in added functionality, in which case the costs are capitalized and amortized on a straight-line basis over the estimated useful lives. ~~Amortization expense related to capitalized website and software development costs is included in technology and development expense.~~

Capitalized development activities placed in service are amortized over the expected useful lives of those releases, currently estimated at one to five years. The estimated useful lives of website and software development activities are reviewed frequently and adjusted as appropriate to reflect upcoming development activities that may include significant upgrades and/or enhancements to the existing functionality.

We exercise judgment in determining the point at which various projects may be capitalized, in assessing the ongoing value of the capitalized costs and in determining the estimated useful lives over which the costs are amortized. To the extent that we change the manner in which we develop and test new features and functionalities related to our mobile applications and websites, assess the ongoing value of capitalized assets, or determine the estimated useful lives over which the costs are amortized, the amount of website and software development costs we capitalize and amortize could change in future periods.

Recoverability of Intangible Assets with Definite Lives and Other Long-Lived Assets

~~Table of Contents~~

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. 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. ~~If this comparison indicates impairment, the amount of impairment to be recognized is calculated as the difference between the carrying value and the fair value of the asset group.~~

Unforeseen events, changes in circumstances and market conditions and material differences in estimates of future cash flows could adversely affect the fair value of our assets and could result in an impairment charge. Fair value can be estimated utilizing a number of techniques including quoted market prices, prices for comparable assets, or other valuation processes involving estimates of cash flows, multiples of earnings or revenues, and we may make various assumptions and estimates when performing our impairment assessments, particularly as it relates to cash flow projections. Cash flow estimates are by their nature subjective and include assumptions regarding factors such as recent and forecasted operating performance, revenue

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.

~~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. 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. For restricted stock units and restricted units, we use the market value of our Class A common stock and Class C capital stock, as applicable, on the date of grant to determine the fair value of the award, and we recognize compensation expense on a straight-line basis over the awards’ vesting period.

Determining the fair value of option awards at the grant date requires judgment. 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.

~~Risk-free interest rate.~~ ~~Risk-free interest rates are derived from U.S. 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 A common stock and Class C capital stock is estimated using our historical volatility.~~

~~Expected term.~~ ~~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 and expected terms utilized for our share-based compensation expense calculations on a prospective basis. Actual results, and future changes in estimates, may differ substantially from management’s current estimates. As we continue to accumulate additional data related to our Class A common stock and Class C capital stock, we may have refinements to the estimates of our expected volatility and expected terms, which could materially impact our future share-based compensation expense. In future periods, we expect our share-based compensation expense to increase as a result of our existing, unrecognized share-based compensation that will be recognized as the awards vest, and as we grant additional share-based awards to attract and retain employees.

Recoverability of Goodwill ~~and Indefinite-Lived Intangible Assets~~

Goodwill ~~represents~~is measured as the excess of ~~the cost of~~consideration transferred for an acquired business over the net of the acquisition date fair value of the assets acquired ~~at the date of acquisition,~~and liabilities assumed, and is not amortized. 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 ~~typically~~ first perform a qualitative assessment to determine whether the carrying value of each reporting unit is greater than its fair value. 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.

~~Table of Contents~~

~~Our indefinite-lived intangible asset is not amortized, and we assess the asset for impairment on an annual basis,~~We exercise judgment in our fourth quarter, or whenever events or changes in circumstances indicate that the asset may be impaired. On an interim basis, we consider if there are any events and circumstances that could affect the significant inputs used to determine the fair value of the indefinite-lived intangible asset, including, but not limited to, costs that could have a negative effect on future expected earnings and cash flows, changes in certain key performance metrics, and changes in management, key personnel, strategy or customers. In our evaluation of our trade names and trademarks indefinite-lived intangible asset, we typically first perform a qualitative assessment to determinedetermining whether the fair value of the indefinite-lived intangible asset is more likely than not impaired. If so, we perform a quantitative assessment and an impairment charge is recorded in our statements of operations for the excess of the carrying value of the indefinite-lived intangible assets over their fair value.

During the year ended December 31, 2019, we first performed a qualitative assessment to determine whether the carrying value of the indefinite-lived intangible asset was greater than the fair value. In doing so, we determined that it is ~~not~~ more likely than not that the ~~indefinite-lived intangible asset~~carrying value of each reporting unit is ~~impaired~~greater than its fair value. The following events and ~~therefore did~~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 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. ~~In connection with this~~

Commencing in the first quarter of 2023, our operating structure will be realigned into one reportable segment. This change may result in the identification of new reporting units, which may require us to perform a goodwill impairment test for each reporting unit immediately before and after the segment change. While we believe the assumptions used in our 2022 impairment analysis are reasonable and representative of expected results for our 2022 reporting unit structure, we ~~evaluated our planned future use~~may recognize a goodwill impairment charge immediately after the segment change as the reassigned carrying values of the Trulia trade names and trademarks intangible asset and concluded that it remains appropriate to consider this asset to have an indefinite life. While we used our best estimates and assumptions for the analysis, our estimates are inherently uncertain and require judgment. To the extent there is a shortfall in actual revenue attributable to the Trulia brand as compared to our estimates and assumptions additional impairment could be recorded in future periods.

~~During the year ended~~reporting units may exceed their respective estimated fair values. At December 31, ~~2018, we recognized a non-cash impairment charge~~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 ~~$69.0 million related~~grant and recognize compensation expense over the service period for awards expected to our indefinite-lived Trulia trade names and trademarks intangible asset. The impairment charge is included in Impairment costs within our IMT and Mortgages segments for $65.0 million and $4.0 million, respectively. In connection with our annual budgeting process that was substantially completed duringvest. We use the three months ended December 31, 2018, we identified factors that led us to conclude it was more likely than not that the $177.0 million carrying value of the asset exceeded its fair value. The most significant of such factors was a shortfall in projected revenue related to the Trulia brand compared to projections at the time the intangible asset was remeasured as of October 1, 2017. Accordingly, with the assistance of a third-party valuation specialist, we performed a quantitative analysisBlack-Scholes-Merton option-pricing model to determine the fair value offor option awards and recognize compensation expense on a straight-line basis over the intangible asset and concluded that our best estimate of its fair value was $108.0 million. The valuation was prepared using an income approach based on the relief-from-royalty method and relied on inputs with unobservable market prices including the assumed revenue growth rates, royalty rate, discount rate, and estimated tax rate, and therefore is considered a Level 3 measurement underoption awards’ vesting period.

Determining the fair value ~~hierarchy. Fair~~of option awards at the grant date requires judgment. 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. When determining the grant date fair value ~~can be~~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.

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 ~~utilizing~~using our historical volatility.

Table o f Contents

Expected term. 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 ~~number~~prospective basis. We will also continue to use judgment when determining whether an adjustment is required to the observable market price or volatility as a result of ~~techniques including quoted market prices, prices for comparable assets, or other valuation processes involving~~material non-public information. Actual results, and future changes in estimates, may differ substantially from management’s current estimates. As we continue to accumulate additional data related to our Class C capital stock, we may have refinements to the estimates of ~~cash flows, multiples~~our expected volatility and expected terms, which could materially impact our future share-based compensation expense. In future periods, we expect our share-based compensation expense to increase as a result of ~~earnings or revenues,~~our existing, unrecognized share-based compensation that will be recognized as the awards vest, and as we ~~may make various assumptions~~grant additional share-based awards to attract and estimates when performing our impairment assessments, particularly as it relates to cash flow projections. 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. Changes in these estimates could result in future material impairment losses related to the Trulia trade names and trademarks intangible asset.retain employees.

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.

Table of o f Contents

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

We are exposed to market risks in the ordinary course of our business. These risks primarily consist of fluctuations in interest rates.

Interest Rate Risk

Under our current investment policy, we invest our excess cash in money market funds, ~~certificates of deposit,~~U.S. government treasury securities, U.S. government agency securities, ~~treasury bills, commercial paper, foreign government securities, municipal~~investment grade corporate securities and ~~corporate notes and bonds.~~commercial paper. Our current investment policy seeks first to preserve ~~principal,~~capital, second to provide sufficient liquidity for our operating and capital needs and third to maximize yield without putting our principal at risk.

Our short-term investments are exposed to market risk due to the fluctuation of prevailing interest rates that may reduce the yield on our investments or their fair value. AsFor our investment portfolio, ~~is short-term in nature,~~ we do not believe an immediate 10% increase in interest rates would have a material effect on the fair market value of our portfolio.

~~Our~~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. All outstanding convertible senior notes bear fixed rates of interest ~~at fixed rates. Thus, we have no related direct~~and, therefore, do not expose us to financial statement risk associated with changes in interest rates. ~~However, the~~The fair values of the convertible senior notes change primarily when the market price of our stock fluctuates or interest rates change. ~~The following table summarizes our outstanding convertible senior notes as of December 31, 2019 (in thousands, except interest rates):~~

Maturity Date Aggregate Principal Amount Stated Interest Rate
September 1, 2026 $ 500,000 1.375 %
September 1, 2024 673,000 0.75 %
July 1, 2023 373,750 1.50 %
December 1, 2021 460,000 2.00 %
December 15, 2020 9,637 2.75 %
$ 2,016,387

We are subject to market risk by way of changes in interest rates on borrowings under our credit facilities that provide capital for Zillow Offers. As of December 31, 2019 and December 31, 2018, we had outstanding $691.5 million and $116.7 million, respectively, of borrowings on these credit facilities which bear interest at a floating rate based on the one-month London Interbank Offered Rate (“LIBOR”) plus an applicable margin, which increase was primarily driven by the growth of our Zillow Offers business and the addition of two credit facilities in 2019. Accordingly, fluctuations in market interest rates may increase or decrease our interest expense. Assuming no change in the outstanding borrowings on our revolving credit facilities, we estimate that a one percentage point increase in LIBOR would increase our annual interest expense by approximately $6.9 million for the year ended December 31, 2019 compared to an increase of $1.2 million for the year ended December 31, 2018.

We are also subject to market risk ~~by way of changes in~~which may impact our mortgage loan origination volume and associated revenue and the net interest ~~rates on~~margin derived from borrowings under our warehouse line of credit and master repurchase ~~agreement~~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. As of December 31, ~~2019~~2022 and December 31, ~~2018,~~2021, we had ~~outstanding $30.4~~$37 million and ~~$33.0~~$113 million, respectively, of outstanding borrowings on our warehouse line of credit and master repurchase ~~agreement~~agreements which bear interest either at a floating rate based on ~~LIBOR~~Secured Overnight Financing Rate (“SOFR”) plus an applicable ~~margin.~~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. We manage the interest rate risk associated with our mortgage loan origination services through the use of forward sales of mortgage-backed securities. Assuming no change in the outstanding borrowings on the warehouse line of credit and master repurchase ~~agreement,~~agreements, we estimate that a one percentage point increase in ~~LIBOR~~SOFR or BSBY, as applicable, would ~~increase~~not have a material effect on our annual interest expense associated with the warehouse line of credit and master repurchase ~~agreement by an insignificant amount for~~agreements as of December 31, 2022 and December 31, 2021.

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.

Inflation Risk

The macroeconomic environment in the ~~years~~United States has experienced, and continues to experience, significant inflationary pressures, including the highest levels of inflation in nearly four decades. 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, ~~2019~~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. These 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, ~~2018.~~

~~Inflation Risk~~

~~We do not believe that inflation has~~in turn, had ~~a material effect~~an adverse impact on ~~our business,~~the results of operations ~~or financial condition.~~ for our Mortgages segment during 2022.

If the inflation rate continues to increase, our costs, ~~were~~in particular labor, marketing and hosting costs, will continue to ~~become~~be subject to significant inflationary pressures and we may not be able to fully offset such higher costs through price increases. In addition, uncertain or changing economic and market conditions, including inflation or deflation, may continue to affect demand for our products and services and the housing markets in which we operate. Our inability or failure to ~~do so~~quickly respond to inflation could harm our business, results of operations and financial condition. We cannot predict the duration or magnitude of these inflationary pressures, or how they may change over time, but we expect to see continued impacts on the residential real estate industry, our customers and our company. 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.

6365

Table of 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. 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.

Table of o f Contents

Item 8. Financial Statements and Supplementary Data.

Index to Consolidated Financial Statements



			Page
Report of Deloitte & Touche LLP, Independent Registered Public Accounting Firm (PCAOB ID No. 34)			6668
Consolidated Balance Sheets			6970
Consolidated Statements of Operations			7071
Consolidated Statements of Comprehensive Loss			7172
Consolidated Statements of Shareholders’ Equity			7273
Consolidated Statements of Cash Flows			7374
Notes to Consolidated Financial Statements			7475

The supplementary financial information required by this Item 8 is included in Item 7 under the caption “Quarterly Results of Operations” in this Annual Report on Form 10-K.

Table of o f Contents

REPORT OF ~~DELOITTE & TOUCHE LLP,~~ INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

~~The~~To the shareholders and the Board of Directors ~~and Shareholders~~ of Zillow Group, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Zillow Group, Inc. (the “Company”) as of December 31, ~~2019~~2022 and ~~2018,~~2021, the related consolidated statements of operations, comprehensive loss, shareholders’ equity, and cash flows, for each of the three years in the period ended December 31, ~~2019,~~2022, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, ~~2019~~2022 and ~~2018,~~2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, ~~2019,~~2022, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, ~~2019,~~2022, based on criteria established in Internal Control -— Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February ~~19, 2020~~15, 2023 expressed an unqualified opinion on the Company’s internal control over financial reporting.

~~Change in Accounting Principle~~

~~As discussed in Note 2 to the financial statements, the Company changed its method of accounting for leases as of January 1, 2019 due to the adoption of Accounting Standards Codification (ASC) 842,~~ ~~Leases~~.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit ~~Matters~~Matter

The critical audit ~~matters~~matter communicated below ~~are matters~~is a matter arising from the ~~current period~~current-period audit of the ~~consolidated~~ financial statements that ~~were~~was communicated or required to be communicated to the audit committee and that (1) ~~relate~~relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit ~~matters~~matter below, providing a separate ~~opinions~~opinion on the critical audit ~~matters~~matter or on the accounts or disclosures to which ~~they relate.~~

~~Debt - Convertible Senior Notes — Refer to Note 15 in the Notes to Consolidated Financial Statements~~

~~Critical Audit Matter Description~~

On September 9, 2019, the Company issued $600.0 million aggregate principal amount of Convertible Senior Notes due 2024 (the “Initial 2024 Notes”) and $500.0 million aggregate principal amount of Convertible Senior Notes due 2026 (the “2026 Notes”) in a private offering to qualified institutional buyers. The net proceeds from the issuance of the Initial 2024 Notes and 2026 Notes were approximately $592.2 million and $493.5 million, respectively, in each case after deducting fees and expenses payable by the Company. The Company used approximately $75.2 million and $75.4 million, respectively, of the net proceeds from the issuance of the Initial 2024 Notes and the 2026 Notes to pay the cost of the capped call transactions entered into in connection with the issuances. On October 9, 2019, the Company issued $73.0 million aggregate principal amount of

~~Table of Contents~~

0.75% Convertible Senior Notes due 2024 (the “Additional Notes” and, together with the Initial 2024 Notes, the “2024 Notes”). The Additional Notes were sold pursuant to the initial purchasers’ partial exercise of their option to purchase such notes, granted in connection with the offering of the Initial 2024 Notes. The Additional Notes have the same terms, and were issued under the same indenture, as the Initial 2024 Notes. The net proceeds from the offering of the Additional Notes were approximately $72.0 million, after deducting fees and expenses payable by the Company. The Company used approximately $9.1 million of the net proceeds from the issuance of the Additional Notes to pay the cost of the capped call transactions entered into in connection with the issuance of the Additional Notes. The 2024 Notes and 2026 Notes are convertible into cash, shares of Class C capital stock or a combination thereof, at the Company’s election. In accounting for the issuance of the 2024 Notes and 2026 Notes, the Company separated proceeds into liability and equity components. The carrying amount of the liability component for each of the 2024 Notes and 2026 Notes was calculated by measuring the fair value of a similar liability that does not have an associated convertible feature. The carrying amount of the equity component, representing the conversion option, was determined by deducting the fair value of the liability component from the par value of the 2024 Notes and 2026 Notes, respectively.

Given the complexity in accounting for convertible debt issuances and the related capped call transactions, the required involvement of professionals with specialized expertise, as well as the degree of judgment required in evaluating the significant assumptions related to volatility, implied yield, and synthetic credit rating in determining the fair value of the liability, we considered the audit of such conclusions to be a critical audit matter.

~~How the Critical Audit Matter Was Addressed in the Audit~~

Our audit procedures related to the accounting for the 2024 Notes and 2026 Notes and the related capped call transactions, including management’s judgments and calculations related to the determination of the fair value of the liability component of the 2024 Notes and 2026 Notes, involved the following procedures, among others:

•We tested the design and operating effectiveness of the Company’s internal controls over the accounting for the 2024 Notes and 2026 Notes and related capped call transactions, and over the determination of the fair value of the liability component of the 2024 Notes and 2026 Notes, including the significant assumptions related to volatility, implied yield, and synthetic credit rating.

•~~We evaluated the reasonableness of management’s business and accounting assumptions used in the fair value measurement by:~~

◦~~Assessing the reasonableness of the expected dividend yield by evaluating the Company’s history and future plans;~~

◦~~Validating the amount of outstanding 2024 Notes and 2026 Notes as of the estimate date;~~

◦~~Validating the senior unsecured nature of the 2024 Notes and 2026 Notes; and~~

◦~~Considering the impact of events and transactions that have occurred after December 31, 2019 but before the completion of the audit on the conclusions reached.~~

•With the assistance of our fair value specialists, we audited the valuation methodology and key assumptions used to determine the fair value of the liability component of the 2024 Notes and 2026 Notes by:

◦~~Evaluating the appropriateness of the valuation model and techniques used in determining the fair value; and~~

◦Assessing whether valuation assumption inputs, including synthetic credit rating, volatility and implied yield are consistent with those that would be used by market participants through the testing of source information, checking the mathematical accuracy of the calculation, and developing a range of independent estimates and comparing to those selected by management, where applicable.

•We evaluated management’s conclusions regarding the accounting applied to the 2024 Notes and 2026 Notes and the related capped call transactions through consideration of possible alternatives under accounting principles generally accepted in the United States of America.

it relates.

Revenue – Highly Automated Revenue Systems in the Internet, Media and Technology Segment — Refer to Note 2 and Note ~~24 in~~20 to the ~~Notes to Consolidated~~ Financial Statements

Critical Audit Matter Description

The Company’s Internet, Media & Technology (IMT) segment, which includes the financial results for the Premier Agent ~~Rentals,~~ and ~~new construction~~rentals marketplaces, as well as ~~dotloop, display,~~Other IMT, which includes the new construction marketplace and revenue from the sale of ~~various~~ other ~~marketing~~advertising and business ~~products and services to~~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, derives substantially all of its revenue from the sale of advertising services and a suite of marketing software and technology solutions to businesses and professionals primarily associated with the residential real estate, rental and residential construction industries. ~~The total~~Total revenue for the IMT segment for the year ended

~~Table of Contents~~

December 31, ~~2019~~2022 was ~~$1.3~~approximately $1.8 billion. The Company operates multiple mobile applications and websites to deliver each of its products to end users, and the revenue for each product consists of a significant volume of transactions utilizing multiple systems.

The process to calculate, aggregate, and record revenue across the IMT segment product offerings is highly automated, relies on multiple internally developed tools and systems, and involves interfacing significant volumes of data across the systems. Given

Table o f Contents

the complexity of the information technology (IT) environment, the required involvement of professionals with expertise in IT to identify, test, and evaluate the revenue data flows, systems, and automated controls, we considered the audit of the Company’s ~~revenue generating~~revenue-generating transactions within the IMT segment to be a critical audit matter.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the Company’s relevant revenue transactions within the IMT segment included the following, among others:

•With the assistance of our IT specialists, we:

◦Identified the relevant systems used to calculate and record revenue ~~transactions;~~transactions.

◦Tested the general IT controls over ~~each of these~~the relevant systems, including testing of user access controls, change management controls, and IT operations ~~controls; and~~controls.

◦Performed testing of system interface controls and automated controls within the relevant revenue streams.

•We tested controls within the relevant business ~~process controls~~processes, including those in place to reconcile the various systems to the Company’s general ~~ledgers.~~ledgers and to reconcile transactional data to relevant revenue systems.

We•For a sample of revenue transactions, we performed detail ~~transaction~~ testing of transactions by agreeing the amounts recognized to source documents and testing the mathematical accuracy of the recorded revenue.

/s/ DELOITTE & TOUCHE LLP

Seattle, Washington

February ~~19, 2020~~15, 2023

We have served as the Company’s auditor since 2016.

Table of o f Contents

ZILLOW GROUP, INC.

CONSOLIDATED BALANCE SHEETS

(in ~~thousands,~~millions, except share data)

December 31,
2019 2018
Assets
Current assets:
Cash and cash equivalents $ 1,141,263 $ 651,058
Short-term investments 1,280,989 903,867
Accounts receivable, net of allowance for doubtful accounts of $4,522 and $4,838 at December 31, 2019 and 2018, respectively 67,005 66,083
Mortgage loans held for sale 36,507 35,409
Inventory 836,627 162,829
Prepaid expenses and other current assets 58,117 61,067
Restricted cash 89,646 12,385
Total current assets 3,510,154 1,892,698
Contract cost assets 45,209 45,819
Property and equipment, net 170,489 135,172
Right of use assets 212,153 —
Goodwill 1,984,907 1,984,907
Intangible assets, net 190,567 215,904
Other assets 18,494 16,616
Total assets $ 6,131,973 $ 4,291,116
Liabilities and shareholders’ equity
Current liabilities:
Accounts payable $ 8,343 $ 7,471
Accrued expenses and other current liabilities 85,442 63,101
Accrued compensation and benefits 37,805 31,388
Borrowings under credit facilities 721,951 149,718
Deferred revenue 39,747 34,080
Deferred rent, current portion — 1,740
Lease liabilities, current portion 17,592 —
Convertible senior notes, current portion 9,637 —
Total current liabilities 920,517 287,498
Deferred rent, net of current portion — 19,945
Lease liabilities, net of current portion 220,445 —
Long-term debt 1,543,402 699,020
Deferred tax liabilities and other long-term liabilities 12,188 17,474
Total liabilities 2,696,552 1,023,937
Commitments and contingencies (Note 20)
Shareholders’ equity:
Preferred stock, $0.0001 par value; 30,000,000 shares authorized; no shares issued and outstanding — —
Class A common stock, $0.0001 par value; 1,245,000,000 shares authorized; 58,739,989 and 58,051,448 shares issued and outstanding as of December 31, 2019 and 2018, respectively 6 6
Class B common stock, $0.0001 par value; 15,000,000 shares authorized; 6,217,447 shares issued and outstanding as of December 31, 2019 and 2018 1 1
Class C capital stock, $0.0001 par value; 600,000,000 shares authorized; 144,109,419 and 139,635,370 shares issued and outstanding as of December 31, 2019 and 2018, respectively 14 14
Additional paid-in capital 4,412,200 3,939,842
Accumulated other comprehensive income (loss) 340 (905)
Accumulated deficit (977,140) (671,779)
Total shareholders’ equity 3,435,421 3,267,179
Total liabilities and shareholders’ equity $ 6,131,973 $ 4,291,116


	December 31,
	2022		2021
Assets
Current assets:
Cash and cash equivalents	$	1,466	$	2,315
Short-term investments	1,896		514
Accounts receivable, net of allowance for doubtful accounts	72		77
Mortgage loans held for sale	41		107
Prepaid expenses and other current assets	126		140
Restricted cash	2		1
Current assets of discontinued operations	—		4,526
Total current assets	3,603		7,680
Contract cost assets	23		35
Property and equipment, net	271		215
Right of use assets	126		130
Goodwill	2,374		2,374
Intangible assets, net	154		176
Other assets	12		3
Noncurrent assets of discontinued operations	—		82
Total assets	$	6,563	$	10,695
Liabilities and shareholders’ equity
Current liabilities:
Accounts payable	$	20	$	11
Accrued expenses and other current liabilities	90		89
Accrued compensation and benefits	48		61
Borrowings under credit facilities	37		113
Deferred revenue	44		51
Lease liabilities, current portion	31		24
Current liabilities of discontinued operations	—		3,533
Total current liabilities	270		3,882
Lease liabilities, net of current portion	139		148
Convertible senior notes	1,660		1,319
Other long-term liabilities	12		5
Total liabilities	2,081		5,354
Commitments and contingencies (Note 18)
Shareholders’ equity:
Preferred stock, $0.0001 par value; authorized — 30,000,000 shares; no shares issued and outstanding	—		—
Class A common stock, $0.0001 par value; authorized — 1,245,000,000 shares; issued and outstanding — 57,494,698 and 61,513,634 shares, respectively	—		—
Class B common stock, $0.0001 par value; authorized — 15,000,000 shares; issued and outstanding — 6,217,447 shares	—		—
Class C capital stock, $0.0001 par value; authorized — 600,000,000 shares; issued and outstanding — 170,555,565 and 182,898,987 shares, respectively	—		—
Additional paid-in capital	6,109		7,001
Accumulated other comprehensive income (loss)	(15)		7
Accumulated deficit	(1,612)		(1,667)
Total shareholders’ equity	4,482		5,341
Total liabilities and shareholders’ equity	$	6,563	$	10,695

See accompanying notes to consolidated financial statements.

Table of o f Contents

ZILLOW GROUP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions, except share data, which are presented in thousands, ~~except~~and per share data)

Year Ended December 31,
2019 2018 2017
Revenue:
Homes $ 1,365,250 $ 52,365 $ —
IMT 1,276,896 1,201,143 996,203
Mortgages 100,691 80,046 80,591
Total revenue 2,742,837 1,333,554 1,076,794
Cost of revenue (exclusive of amortization) (1):
Homes 1,315,345 49,392 —
IMT 98,522 96,693 80,310
Mortgages 18,154 7,505 4,893
Total cost of revenue 1,432,021 153,590 85,203
Sales and marketing 714,128 552,621 448,201
Technology and development 477,347 410,818 319,985
General and administrative 366,176 262,153 210,816
Impairment costs — 79,000 174,000
Acquisition-related costs — 2,332 463
Integration costs 650 2,015 —
Total costs and expenses 2,990,322 1,462,529 1,238,668
Loss from operations (247,485) (128,975) (161,874)
Other income 39,658 19,270 5,385
Interest expense (101,792) (41,255) (27,517)
Loss before income taxes (309,619) (150,960) (184,006)
Income tax benefit 4,258 31,102 89,586
Net loss $ (305,361) $ (119,858) $ (94,420)
Net loss per share — basic and diluted $ (1.48) $ (0.61) $ (0.51)
Weighted-average shares outstanding — basic and diluted 206,380 197,944 186,453
____________________
(1) Amortization of website development costs and intangible assets included in technology and development $ 61,937 $ 79,309 $ 94,349


	Year Ended December 31,
	2022		2021		2020
Revenue	$	1,958	$	2,132	$	1,624
Cost of revenue	367		323		255
Gross profit	1,591		1,809		1,369
Operating expenses:
Sales and marketing	664		715		535
Technology and development	498		421		324
General and administrative	498		414		324
Impairment and restructuring costs	24		10		77
Acquisition-related costs	—		9		—
Integration costs	—		1		—
Total operating expenses	1,684		1,570		1,260
Income (loss) from continuing operations	(93)		239		109
Gain (loss) on extinguishment of debt	—		(17)		1
Other income, net	43		7		25
Interest expense	(35)		(128)		(138)
Income (loss) from continuing operations before income taxes	(85)		101		(3)
Income tax benefit (expense)	(3)		1		8
Net income (loss) from continuing operations	(88)		102		5
Net loss from discontinued operations, net of income taxes	(13)		(630)		(167)
Net loss	$	(101)	$	(528)	$	(162)
Net income (loss) from continuing operations per share:
Basic	$	(0.36)	$	0.41	$	0.02
Diluted	$	(0.36)	$	0.39	$	0.02
Net loss per share:
Basic	$	(0.42)	$	(2.11)	$	(0.72)
Diluted	$	(0.42)	$	(2.02)	$	(0.70)
Weighted-average shares outstanding:
Basic	242,163		249,937		223,848
Diluted	242,163		261,826		231,435

See accompanying notes to consolidated financial statements.

Table of o f Contents

ZILLOW GROUP, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(in ~~thousands)~~

Year Ended December 31,
2019 2018 2017
Net loss $ (305,361) $ (119,858) $ (94,420)
Other comprehensive income (loss):
Unrealized gains (losses) on investments 1,377 144 (858)
Currency translation adjustments (132) 51 —
Total other comprehensive income (loss) 1,245 195 (858)
Comprehensive loss $ (304,116) $ (119,663) $ (95,278)
millions)


	Year Ended December 31,
	2022		2021		2020
Net loss	$	(101)	$	(528)	$	(162)
Other comprehensive income (loss):
Unrealized gains (losses) on investments	(22)		7		—
Total other comprehensive income (loss)	(22)		7		—
Comprehensive loss	$	(123)	$	(521)	$	(162)

See accompanying notes to consolidated financial statements.

Table of o f Contents

ZILLOW GROUP, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(in ~~thousands,~~millions, except share ~~data)~~data, which are presented in thousands)


		Class A Common Stock, Class B Common Stock and Class C Capital Stock							Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)				Total Shareholders’ Equity		Class A Common Stock, Class B Common Stock and Class C Capital Stock					Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Total Shareholders’ Equity
																															Class A Common Stock, Class B Common Stock and Class C Capital Stock	Additional Paid-In Capital	Accumulated Deficit	Accumulated Other Comprehensive Income (Loss)	Total Shareholders’ Equity
			Shares			Amount
Balance at December 31, 2016		182,458,718		$	18		$	3,030,854					$	(497,043)			$	(242)		$	2,533,587
Cumulative-effect adjustment from adoption of guidance on accounting for share-based payment transactions		—		—			780		(780)		—		—
Balance at January 1, 2020															Balance at January 1, 2020	209,067			$	—		$	4,412	$	(977)	$	—	$	3,435
Issuance of common and capital stock upon exercise of stock options	Issuance of common and capital stock upon exercise of stock options	6,202,421		2			98,070		—		—		98,072		Issuance of common and capital stock upon exercise of stock options	13,745			—			444		—		—		444
Vesting of restricted stock units	Vesting of restricted stock units	1,463,825		—			—		—		—		—		Vesting of restricted stock units	3,013			—			—		—		—		—
Shares and value of restricted stock units withheld for tax liability		(9,816)		—			(365)		—		—		(365)
Share-based compensation expense	Share-based compensation expense	—		—			124,807		—		—		124,807		Share-based compensation expense	—			—			214		—		—		214
Issuance of Class C capital stock in connection with equity offering, net of issuance costs															Issuance of Class C capital stock in connection with equity offering, net of issuance costs	8,800			—			412		—		—		412
Equity component of issuance of convertible senior notes maturing in 2025, net of issuance costs															Equity component of issuance of convertible senior notes maturing in 2025, net of issuance costs	—			—			155		—		—		155
Settlement of convertible senior notes															Settlement of convertible senior notes	6,219			—			244		—		—		244
Unwind of capped call transactions															Unwind of capped call transactions	(318)			—			—		—		—		—
Net loss															Net loss	—			—			—		(162)		—		(162)

Balance at December 31, 2020															Balance at December 31, 2020	240,526			—			5,881		(1,139)		—		4,742
Issuance of common and capital stock upon exercise of stock options															Issuance of common and capital stock upon exercise of stock options	3,304			—			127		—		—		127
Vesting of restricted stock units															Vesting of restricted stock units	2,982			—			—		—		—		—
Restricted stock units withheld for tax liability															Restricted stock units withheld for tax liability	(1)			—			—		—		—		—
Share-based compensation expense															Share-based compensation expense	—			—			347		—		—		347
Issuance of Class C capital stock in connection with equity offering, net of issuance costs															Issuance of Class C capital stock in connection with equity offering, net of issuance costs	3,164			—			545		—		—		545
Settlement of convertible senior notes															Settlement of convertible senior notes	6,265			—			403		—		—		403
Unwind of capped call transactions															Unwind of capped call transactions	(666)			—			—		—		—		—
Repurchases of Class C capital stock															Repurchases of Class C capital stock	(4,944)			—			(302)		—		—		(302)
Net loss															Net loss	—			—			—		(528)		—		(528)
Other comprehensive income															Other comprehensive income	—			—			—		—		7		7
Balance at December 31, 2021															Balance at December 31, 2021	250,630			—			7,001		(1,667)		7		5,341
Cumulative-effect adjustment from adoption of guidance on accounting for convertible instruments and contracts in an entity’s own equity															Cumulative-effect adjustment from adoption of guidance on accounting for convertible instruments and contracts in an entity’s own equity	—			—			(492)		156		—		(336)
Issuance of common and capital stock upon exercise of stock options															Issuance of common and capital stock upon exercise of stock options	1,129			—			45		—		—		45
Vesting of restricted stock units															Vesting of restricted stock units	4,722			—			—		—		—		—
Share-based compensation expense															Share-based compensation expense	—			—			502		—		—		502
Repurchases of Class A common stock and Class C capital stock															Repurchases of Class A common stock and Class C capital stock	(22,213)			—			(947)		—		—		(947)
Net loss	Net loss	—		—			—		(94,420)		—		(94,420)		Net loss	—			—			—		(101)		—		(101)
Other comprehensive loss	Other comprehensive loss	—		—			—		—		(858)		(858)		Other comprehensive loss	—			—			—		—		(22)		(22)
Balance at December 31, 2017		190,115,148		20			3,254,146		(592,243)		(1,100)		2,660,823
Cumulative-effect adjustment from adoption of guidance on revenue from contracts with customers		—		—			—		40,322		—		40,322
Issuance of common and capital stock upon exercise of stock options		5,472,728		—			120,074		—		—		120,074
Vesting of restricted stock units		1,740,134		—			—		—		—		—
Shares and value of restricted stock units withheld for tax liability		(1,489)		—			(70)		—		—		(70)
Share-based compensation expense		—		—			157,674		—		—		157,674
Portion of conversion recorded in additional paid-in-capital in connection with partial conversion of convertible senior notes maturing in 2020		20,727		—			500		—		—		500
Issuance of Class C capital stock in connection with equity offering, net of issuance costs of $13,425		6,557,017		1			360,345		—		—		360,346
Premiums paid for capped call confirmations		—		—			(29,414)		—		—		(29,414)
Equity component of issuance of 2023 Notes, net of issuance costs of $2,047		—		—			76,587		—		—		76,587
Net loss		—		—			—		(119,858)		—		(119,858)
Other comprehensive income		—		—			—		—		195		195
Balance at December 31, 2018		203,904,265		21			3,939,842		(671,779)		(905)		3,267,179
Issuance of common and capital stock upon exercise of stock options		2,918,053		—			65,465		—		—		65,465
Vesting of restricted stock units		2,244,631		—			—		—		—		—
Shares and value of restricted stock units withheld for tax liability		(94)		—			(3)		—		—		(3)
Share-based compensation expense		—		—			210,849		—		—		210,849
Premiums paid for capped call confirmations		—		—			(159,677)		—		—		(159,677)
Equity component of issuance of 2024 Notes and 2026 Notes, net of issuance costs of $4,725		—		—			355,724		—		—		355,724
Net loss		—		—			—		(305,361)		—		(305,361)
Other comprehensive income		—		—			—		—		1,245		1,245
Balance at December 31, 2019		209,066,855		$	21		$	4,412,200	$	(977,140)	$	340	$	3,435,421
Balance at December 31, 2022															Balance at December 31, 2022	234,268			$	—		$	6,109	$	(1,612)	$	(15)	$	4,482

See accompanying notes to ~~the~~ consolidated financial statements.

Table of o f Contents

ZILLOW GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in ~~thousands)~~

Year Ended December 31,
2019 2018 2017
Operating activities
Net loss $ (305,361) $ (119,858) $ (94,420)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization 87,467 99,391 110,155
Share-based compensation expense 198,902 149,084 113,571
Amortization of right of use assets 23,142 — —
Amortization of contract cost assets 35,323 36,013 —
Amortization of discount and issuance costs on 2021 Notes, 2023 Notes, 2024 Notes and 2026 Notes 52,097 26,672 18,012
Impairment costs — 79,000 174,000
Deferred income taxes (4,258) (31,102) (89,586)
Loss on disposal of property and equipment and other assets 7,174 3,617 5,678
Bad debt expense 2,772 869 7,349
Deferred rent — (2,045) 7,085
Amortization (accretion) of bond premium (discount) (6,344) (4,313) 431
Changes in operating assets and liabilities:
Accounts receivable (3,694) (12,556) (21,203)
Mortgage loans held for sale (1,098) (1,161) —
Inventory (673,798) (162,829) —
Prepaid expenses and other assets (978) (34,068) 10,807
Lease liabilities (18,940) — —
Contract cost assets (34,713) (41,510) —
Accounts payable (496) 1,311 (373)
Accrued expenses and other current liabilities 19,573 1,920 19,000
Accrued compensation and benefits 6,417 11,291 (4,948)
Deferred revenue 5,667 2,162 2,633
Other long-term liabilities (1,028) 1,962 —
Net cash provided by (used in) operating activities (612,174) 3,850 258,191
Investing activities
Proceeds from maturities of investments 1,126,058 399,228 259,227
Purchases of investments (1,495,477) (901,761) (407,032)
Proceeds from sales of investments — 13,567 —
Purchases of property and equipment (67,044) (66,054) (66,728)
Purchases of intangible assets (19,591) (12,481) (11,907)
Purchases of equity investments — — (10,000)
Proceeds from divestiture of business — — 579
Cash paid for acquisitions, net — (55,138) (11,533)
Net cash used in investing activities (456,054) (622,639) (247,394)
Financing activities
Proceeds from issuance of convertible notes, net of issuance costs 1,157,675 364,020 —
Premiums paid for capped call confirmations (159,677) (29,414) —
Proceeds from issuance of Class C capital stock, net of issuance costs — 360,345 —
Proceeds from borrowings on credit facilities 688,489 116,700 —
Repayments of borrowings on credit facilities (113,665) — —
Net borrowings (repayments) on warehouse lines of credit and Repurchase Agreement (2,590) 482 —
Proceeds from exercise of stock options 65,465 120,074 98,071
Value of equity awards withheld for tax liability (3) (70) (365)
Contingent merger consideration — (2,000) —
Net cash provided by financing activities 1,635,694 930,137 97,706
Net increase in cash, cash equivalents and restricted cash during period 567,466 311,348 108,503
Cash, cash equivalents and restricted cash at beginning of period 663,443 352,095 243,592
Cash, cash equivalents and restricted cash at end of period $ 1,230,909 $ 663,443 $ 352,095
Supplemental disclosures of cash flow information
Cash paid for interest $ 42,156 $ 15,473 $ 9,198
Noncash transactions:
Capitalized share-based compensation $ 11,947 $ 8,590 $ 11,236
Write-off of fully depreciated property and equipment $ 36,159 $ 22,364 $ 15,004
Write-off of fully amortized intangible assets $ 9,999 $ 12,999 $ 5,473
Property and equipment purchased on account $ 8,775 $ 3,844 $ 4,268
millions)


	Year Ended December 31,
	2022		2021		2020
Operating activities
Net loss	$	(101)	$	(528)	$	(162)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	157		130		111
Share-based compensation	451		312		197
Amortization of right of use assets	23		23		24
Amortization of contract cost assets	30		42		37
Amortization of debt discount and debt issuance costs	26		104		102
Loss (gain) on extinguishment of debt	21		17		(1)
Impairment and restructuring costs	—		57		77
Inventory valuation adjustment	9		408		—
Other adjustments to reconcile net loss to net cash provided by (used in) operating activities	(3)		12		(3)
Changes in operating assets and liabilities:
Accounts receivable	82		(82)		(7)
Mortgage loans held for sale	66		224		(294)
Inventory	3,904		(3,827)		345
Prepaid expenses and other assets	6		(82)		(16)
Contract cost assets	(18)		(26)		(42)
Lease liabilities	(21)		(29)		(2)
Accounts payable	3		5		13
Accrued expenses and other current liabilities	(71)		61		15
Accrued compensation and benefits	(60)		13		10
Deferred revenue	(7)		1		9
Other long-term liabilities	7		(12)		10
Net cash provided by (used in) operating activities	4,504		(3,177)		423
Investing activities
Proceeds from maturities of investments	802		2,206		2,232
Proceeds from sales of investments	—		—		116
Purchases of investments	(2,191)		(516)		(3,287)
Purchases of property and equipment	(115)		(74)		(85)
Purchases of intangible assets	(25)		(31)		(24)
Proceeds from sale of equity investment	—		—		10
Cash paid for acquisitions, net	(4)		(497)		—
Net cash provided by (used in) investing activities	(1,533)		1,088		(1,038)
Financing activities
Proceeds from issuance of convertible senior notes, net of issuance costs	—		—		553
Proceeds from issuance of Class C capital stock, net of issuance costs	—		545		412
Proceeds from issuance of term loan, net of issuance costs	—		1,138		—
Proceeds from borrowings on credit facilities	—		3,618		349
Repayments of borrowings on credit facilities	(2,206)		(1,780)		(679)
Net borrowings (repayments) on warehouse line of credit and repurchase agreements	(76)		(197)		279
Repurchases of Class A common stock and Class C capital stock	(947)		(302)		—
Settlement of long-term debt	(1,158)		(1)		(195)
Proceeds from exercise of stock options	46		127		444
Net cash provided by (used in) financing activities	(4,341)		3,148		1,163
Net increase (decrease) in cash, cash equivalents and restricted cash during period	(1,370)		1,059		548
Cash, cash equivalents and restricted cash at beginning of period	2,838		1,779		1,231
Cash, cash equivalents and restricted cash at end of period	$	1,468	$	2,838	$	1,779
Supplemental disclosures of cash flow information
Cash paid for interest	$	50	$	109	$	51
Cash paid for taxes	6		—		—
Noncash transactions:
Write-off of fully amortized intangible assets	$	203	$	58	$	63
Write-off of fully depreciated property and equipment	53		49		115
Capitalized share-based compensation	51		30		17
Issuance (settlement) of beneficial interests in securitizations	(79)		63		—

See accompanying notes to consolidated financial statements.

Table of o f Contents

ZILLOW GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Organization and Description of Business

Our portfolio of consumer brands includes Zillow now offers a fully integrated home shopping experience that includes access to for sale and rental listings, Zillow Offers, which provides a hassle-free way to buy and sell eligible homes directly through Zillow, and beginning in October 2018,Premier Agent, Zillow Home Loans, ~~(formerly Mortgage Lenders of America, L.L.C.), Zillow’s affiliated~~our affiliate lender, ~~that provides an easy way to receive mortgage pre-approvals and financing. Other consumer brands include~~Zillow Closing Services, Zillow Rentals, Trulia, StreetEasy, HotPads ~~Naked Apartments~~ and Out East. In addition, Zillow Group provides a comprehensive suite of marketing software and technology solutions ~~to help~~for the real estate ~~partners maximize business opportunities and connect with millions of customers. Zillow Group business brands for real estate, rental and mortgage professionals,~~industry which include Mortech, ~~dotloop,~~New Home Feed and ShowingTime+, which houses ShowingTime, Bridge Interactive, dotloop and ~~New Home Feed.~~interactive floor plans.

In the fourth quarter of 2021, we began to wind down the operations of Zillow ~~Inc.~~Offers, our iBuying business which purchased and sold homes directly in markets across the country. The wind down was ~~incorporated as a Washington corporation~~completed in ~~December 2004,~~the third quarter of 2022, and we ~~launched~~have presented the initial version of our website, Zillow.com, in February 2006. Zillow Group, Inc. was incorporated as a Washington corporation in July 2014 in connection with our acquisition of Trulia, Inc. (“Trulia”). Upon the closing of the Trulia acquisition in February 2015, eachfinancial results of Zillow ~~Inc. and Trulia became wholly owned subsidiaries of Zillow Group.~~Offers as discontinued operations in our consolidated financial statements for all periods presented. See Note 3 for additional information.

Certain Significant Risks and Uncertainties

We operate in a dynamic industry and, accordingly, can be affected by a variety of factors. For example, we believe that changes in any of the following areas could have a significant negative effect on us in terms of our future financial position, results of operations or cash flows: current and future health and stability of the economy, financial conditions, and residential housing market; changes in general economic and financial conditions (including federal monetary policy, interest rates, ~~of revenue growth; our ability to manage advertising~~inflation, home price fluctuations, housing inventory, ~~or pricing; engagement~~labor shortages and ~~usage of our products;~~supply chain issues); our investment of resources to pursue strategies and develop new products and services that may not prove ~~effective; competition in our market; the stability of the residential~~effective or that are not attractive for customers and real estate ~~market~~partners or that do not allow us to compete successfully; our compliance with multiple listing service rules and ~~the impact of interest rate changes; changes in technology, products, markets or services by us or our competitors; addition or loss of significant customers; our ability~~requirements to access and use listing data, and to maintain or establish relationships with listings and data providers; our ability to obtain or maintain licenses and permits to support our current and future businesses; ~~actual or anticipated changes~~our ability to operate and grow our mortgage origination business, including the ability to obtain sufficient financing and resell originated mortgages on the secondary market; the duration and impact of natural disasters and other catastrophic events (including public health crises) on our ability to operate, demand for our products or services or general economic conditions; our ability to realize the benefits of our past or future strategic partnerships, acquisitions, joint ventures, capital-raising activities, investments or other corporate transactions or commitments; our ability to manage advertising inventory or pricing; effectivity of our technology and ~~services;~~information security systems, or those of third parties on which we rely; changes in laws or government regulation affecting our business; outcomes of legal proceedings; ~~natural disasters and catastrophic events; scaling and adaptation of existing technology and network infrastructure; management of our growth;~~ our ability to attract and retain qualified employees and key personnel; ~~our ability to successfully integrate and realize the benefits of our past or future strategic acquisitions or investments;~~ protection of customers’ information and other privacy concerns; protection of our brand and intellectual property; and intellectual property infringement and other claims, among other things.

Note 2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements include Zillow Group, Inc. and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. These consolidated financial statements have been prepared in conformity with ~~U.S.~~United States generally accepted accounting principles (“GAAP”). We have presented the financial results of Zillow Offers as discontinued operations in our consolidated financial statements for all periods presented. See Note 3 for additional information.

Table o f Contents

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and the related disclosures at the date of the financial statements, as well as the reported amounts of revenue and expenses during the periods presented. On an ongoing basis, we evaluate our estimates, including those related to the ~~net realizable value of inventory,~~accounting for certain revenue offerings, restructuring costs, amortization period and recoverability of contract cost assets, website and software development costs, recoverability of long-lived assets and intangible assets, ~~with definite lives,~~ share-based compensation, income taxes, the presentation of discontinued and continuing operations, business combinations and the recoverability of goodwill, ~~and indefinite-lived intangible assets,~~ among others. To the extent there are material differences between these estimates, judgments or assumptions and actual results, our financial statements will be affected. The health of the residential housing market, interest rate environment and the COVID-19 pandemic (including variants) have introduced significant additional uncertainty with respect to estimates, judgments and assumptions, which may materially impact the estimates previously listed, among others.

Concentrations of Credit Risk

Financial instruments, which potentially subject us to concentrations of credit risk, consist primarily of cash and cash equivalents, investments, accounts receivable and mortgage loans held for sale. We place cash and cash equivalents and investments with major financial institutions, which management assesses to be of high credit quality, in order to limit exposure of our investments.

~~Table of Contents~~

Credit risk with respect to accounts receivable is dispersed due to the large number of customers. There were no customers that comprised 10% or more of our total accounts receivable as of December 31, ~~2019~~2022 and ~~2018.~~2021. Further, our credit risk on accounts receivable is mitigated by the relatively short payment terms that we offer. Collateral is not required for accounts receivable. We maintain an allowance for doubtful accounts such that receivables are stated at net realizable value.

Similarly, our credit risk on mortgage loans held for sale is dispersed due to a large number of ~~customers. Further, our credit risk on mortgage loans held for sale~~customers and is mitigated by the fact that we typically sell mortgages on the secondary market within a relatively short period of time after the loan is originated.

Cash and Cash Equivalents

Cash includes demand deposits with banks or financial institutions. Cash equivalents include short-term, highly liquid investments that are both readily convertible to known amounts of cash, and so near their maturity that they present minimal risk of changes in value because of changes in interest rates. Our cash equivalents include only investments with original maturities of three months or less. We regularly maintain cash in excess of federally insured limits at financial institutions.

Short-term Investments

Our investments consist of fixed income securities, which include U.S. government treasury securities, U.S. government agency securities, investment grade corporate ~~notes and bonds, commercial paper, treasury bills, municipal~~ securities, and ~~certificates of deposit, and are classified as available-for-sale securities. As the~~commercial paper. The investments are available to support current operations ~~our available-for-sale securities~~and are classified as short-term ~~investments. Available-for-sale~~investments measured at fair value. Our investment policy only allows for purchases of investment-grade securities and provides guidelines on concentrations to ensure minimum risk of loss. We evaluate whether unrealized losses on available-for-sale debt securities are ~~carried at fair value with~~the result of credit worthiness of the securities held or other non-credit related factors. If an unrealized ~~gains and~~loss is the result of credit quality factors, we recognize an allowance reflective of our current estimate of credit losses reported as a component of accumulated other comprehensive income (loss) in shareholders’ equity, while realized gains and losses and other-than-temporary impairments are reported as a component of net loss based on specific identification. An impairment charge is recorded in the consolidated statements of operations for declines in fair value below the cost of an individual investment that are deemedexpected to be ~~other than temporary. We assess whether~~incurred over the life of the financial instrument on a ~~decline~~specific identification basis upon initial recognition and at each reporting period. If a reduction in value is ~~temporary based on~~a result of other factors, we continue to classify the ~~length~~losses as a reduction of ~~time that the fair market value has been below cost, the severity of the decline and the intent and ability~~comprehensive loss unless either we intend to ~~hold or~~ sell the ~~investment.~~security or it is more likely than not we will be required to sell the security. We did 0tnot identify any ~~investments as other-than-temporarily impaired~~unrealized loss positions in our available-for-sale securities that were the result of credit losses as of December 31, ~~2019~~2022 or ~~2018.~~2021. Additionally, we have the ability to hold to maturity and more likely than not will not be required to sell the securities before a recovery of the amortized cost basis has occurred.

Restricted Cash

Restricted cash primarily consists of ~~amounts funded to the reserve and collection accounts related to our credit facilities (see Note 15) and~~ amounts held in escrow related to funding customer home purchases in our mortgage ~~originations~~origination business.

~~Accounts Receivable and Allowance for Doubtful Accounts~~

Accounts receivable represent our unconditional right to consideration. Accounts receivable are generally due within 30 days and are recorded net of the allowance for doubtful accounts. We consider accounts outstanding longer than the contractual terms past due. We review accounts receivable on a regular basis and estimate an amount of losses for uncollectible accounts based on our historical collections experience, age of the receivable, knowledge of the customer and the condition of the general economy and industry as a whole. We record changes in our estimate to the allowance for doubtful accounts through bad debt expense and relieve the allowance when accounts are ultimately determined to be uncollectible. Bad debt expense is included in general and administrative expenses.Table o f Contents

Mortgage Loans Held for Sale

Mortgage loans held for sale include residential mortgages originated for sale in the secondary market in connection with ~~our October 2018 acquisition of~~ Zillow Home Loans. We have elected the fair value option for all mortgage loans held for sale as election of this option allows for a better offset of the changes in fair values of the loans and the derivative instruments used to economically hedge them without having to apply complex hedge accounting provisions. Mortgage loans held for sale are initially recorded at fair value based on either sale commitments or current market quotes and are adjusted for subsequent changes in fair value until the loans are sold. Net origination costs and fees associated with mortgage loans are recognized as incurred. We sell substantially all of the mortgages we originate and the related servicing rights to third-party purchasers. Interest income is earned from the date a mortgage loan is originated until the loan is sold and is classified within ~~Other~~other income, net in the consolidated statements of operations.

~~Table of Contents~~

Substantially all of the mortgage loans originated are sold within a short period of time in the secondary mortgage market on a servicing released, nonrecourse basis, which limits exposure to nonperformance by loan buyer ~~counterparties although~~counterparties. However, we remain liable for certain limited representations and warranties related to loan sales, such as non-compliance with defined loan origination or documentation standards, including misstatement in the loan documents, early payoff or default on early payments. Mortgage investors could seek to have us buy back loans or compensate them for losses incurred on mortgages we have sold based on claims that we breached our limited representations and warranties. We ~~have established reserves~~record a reserve for probable ~~losses.~~losses in connection with the sale of mortgage loans within other long-term liabilities in the consolidated balance sheet.

Loan Commitments and Related Derivatives

We are party to interest rate lock commitments (“IRLCs”), which are extended to borrowers who have applied for loan funding and meet defined credit and underwriting criteria in connection with our ~~October 2018 acquisition of~~ Zillow Home ~~Loans.~~Loans mortgage origination business. IRLCs are accounted for as derivative instruments recorded at fair value with gains and losses recognized in revenue in the consolidated statements of operations. We manage our interest rate risk related to IRLCs and mortgage loans held for sale through the use of derivative instruments, generally forward contracts on mortgage-backed securities (“~~MBS”~~MBSs”), which are commitments to either purchase or sell a specified financial instrument at a specified future date for a specified price, and mandatory loan commitments, which are an obligation by an investor to buy loans at a specified price within a specified time period. We do not enter into or hold derivatives for trading or speculative purposes, and our derivatives are not designated as hedging instruments. Changes in the fair value of our derivative financial instruments are recognized in revenue in our consolidated statements of operations, and the fair values are reflected in other current assets or other current liabilities, as applicable. ~~The net change in fair value was not significant~~Refer to Note 4 to our consolidated financial statements for ~~the years ended December 31, 2019~~additional information regarding IRLCs and ~~2018.~~related derivatives.

There are no credit-risk-related contingent features within our derivative agreements, and counterparty risk is considered minimal. Gains and losses on IRLCs are substantially offset by corresponding gains or losses on forward contracts on ~~mortgage-backed securities~~MBSs and mandatory loan commitments. We are generally not exposed to variability in cash flows of derivative instruments for more than approximately 90 days.

~~Inventory~~Contract Balances

~~Inventory is comprised~~Accounts receivable represent our unconditional right to consideration. Accounts receivable are generally due within 30 days and are recorded net of ~~homes acquired through~~the allowance for doubtful accounts. We have an allowance for doubtful accounts for our ~~Zillow Offers program and is stated at~~accounts receivable balances, which represents our estimate of expected credit losses over the ~~lower~~contractual life of ~~cost or net realizable value. Homes are removed from inventory~~the accounts receivable. To evaluate the adequacy of our allowance for doubtful accounts each reporting period, we analyze the accounts receivable balances with similar risk characteristics on a ~~specific identification~~collective basis, ~~when they~~considering factors such as the aging of receivable balances, payment terms, historical loss experience, current information and future expectations. Changes to the allowance for doubtful accounts are resold. Stated cost includes consideration paid to acquire and update each home including associated allocated overhead costs. Work-in-progress inventory includes homes undergoing updates and finished goods inventory includes homes ready for resale. Unallocated overhead costs are expensed as incurred andadjusted through credit loss expense, which is included in ~~cost of revenue. For our Homes segment, selling costs, such as real estate agent commissions, escrow~~general and title fees, and staging costs, as well as holding costs incurred during the period that homes are listed for sale, including utilities, taxes and maintenance are expensed as incurred and classified within sales and marketingadministrative expenses in the consolidated statements of operations.

Contract assets represent our right to consideration in exchange for goods and services that we have transferred to the customer when that right is conditional on something other than the passage of time. Contract assets are primarily related to our Premier Agent Flex, Zillow Lease Connect and StreetEasy Experts offerings, whereby we estimate variable consideration based on the expected number of real estate transactions to be closed for Premier Agent Flex and StreetEasy Experts, and qualified leases to be secured for Zillow Lease Connect. We recognize revenue when we satisfy our performance obligations under the corresponding contracts. The current portion of contract assets are recorded ~~$22.6 million~~within prepaid expenses and ~~$1.9 million~~other current assets and the long-term portion of contract assets are recorded within other assets in ~~holding costs for the years ended December 31, 2019~~our consolidated balance sheets.

Table o f Contents

Contract liabilities consist of deferred revenue, which relates to payments received in advance of performance under a revenue contract. Deferred revenue is primarily related to prepaid advertising fees received or billed in advance of satisfying our performance obligations and ~~2018, respectively.~~

Each quarter we review the value of homes held in inventory for indicators that net realizable value is lower than cost. When evidence exists that the net realizable value of inventory is lower than its cost, the differenceprepaid but unrecognized subscription revenue. Deferred revenue is recognized ~~in cost of revenue and the value of the corresponding asset is reduced.~~when or as we satisfy our obligations under contracts with customers.

Contract Cost Assets

We capitalize certain incremental costs of obtaining contracts with customers which we expect to recover. These costs relate to commissions paid to sales personnel, primarily for our Premier Agent ~~and Premier Broker programs.~~program. As a practical expedient, we recognize the incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset that we otherwise would have recognized is one year or less. Capitalized commission costs are recorded as contract cost assets in our consolidated balance sheets. Contract cost assets are amortized to expense on a straight-line basis over a period that is consistent with the transfer to the customer of the products or services to which the asset relates, generally the estimated life of the customer relationship. Amortization expense related to contract cost assets is included in sales and marketing expenses in our consolidated statements of operations. In determining the estimated life of our customer relationships, we consider quantitative and qualitative data, including, but not limited to, historical customer data, recent changes or expected changes in product or service offerings and changes in how we monetize our products and services. The amortization period for capitalized contract costs related to our Premier Agent ~~and Premier Broker programs ranges from~~ ~~two~~ toprogram is approximately three years.

We monitor our contract cost assets for impairment and recognize an impairment loss in the consolidated statements of operations to the extent the carrying amount of the asset recognized exceeds the amount of consideration that we expect to

~~Table of Contents~~

receive in the future and that we have received but have not recognized in revenue less the costs that relate directly to providing those goods or services that have not yet been recognized as expenses. ~~Write-offs of contract cost assets were not material for the years ended December 31, 2019 and December 31, 2018.~~ Refer to Note 7 of our consolidated financial statements for more information regarding contract cost assets.

Property and Equipment

Property and equipment is recorded at cost and depreciated using the straight-line method over the estimated useful lives of the related assets. The useful lives are as follows:


Computer equipment						2 to 3 years
Office equipment, furniture and fixtures						5 to 7 years
Leasehold improvements						Shorter of expected useful life or lease term

Maintenance and repair costs are charged to expense as incurred. Major improvements, which extend the useful life of the related asset, are capitalized. Upon disposal of a fixed asset, we record a gain or loss based on the difference between the proceeds received and the net book value of the disposed asset. We remove fully depreciated property and equipment from the cost and accumulated depreciation amounts disclosed.

Website and Software Development Costs

The costs incurred in the preliminary stages of website and software development are expensed as incurred. Once an application has reached the development stage, internal and external costs, if direct and incremental and deemed by management to be significant, are capitalized in property and equipment and amortized on a straight-line basis over their estimated useful lives. Maintenance and enhancement costs, including those costs in the post-implementation stages, are typically expensed as incurred, unless such costs relate to substantial upgrades and enhancements to the website or software that result in added functionality, in which case the costs are capitalized and amortized on a straight-line basis over the estimated useful lives. Amortization expense related to capitalized website and software development costs is included in ~~technology and development expense.~~cost of revenue in our consolidated statements of operations.

Construction-in-progress primarily consists of website development costs that are capitalizable, but for which the associated applications ~~had~~have not been placed in service.

Table o f Contents

Leases

Our lease portfolio is primarily composed of operating leases for our office space. We determine whether a contract is or contains a lease at inception of the contract. Our operating leases are included in right of use assets and lease liabilities on our consolidated balance sheets. We do not have any material financing leases.

We have lease agreements that include both lease components (e.g., fixed rent) and non-lease components (e.g., common area maintenance). For such leases, we account for the lease and non-lease components as a single component. For leases with an initial term of 12 months or less, we recognize the associated lease payments in the consolidated statements of operations on a straight-line basis over the lease term.

Right of use assets represent our right to use an underlying asset during the lease term and lease liabilities represent our obligation to make lease payments. Right of use assets and lease liabilities are recognized at the lease commencement date based on the present value of the total lease payments not yet paid, including lease incentives not yet received, with the right of use assets further adjusted for any prepaid or accrued lease payments, lease incentives received and/or initial direct costs incurred. Certain lease arrangements also include variable payments for costs such as common-area maintenance, utilities, taxes or other operating costs, which are based on a percentage of actual expenses incurred or a fluctuating rate which is unknown at the inception of the contract. These variable lease payments are excluded from the measurement of the right of use assets and lease liabilities.

Our leases have remaining lease terms ranging from less than one year to ten years, most of which include one or more options to extend the lease term. The renewal options can generally extend the lease term for up to an additional five to ten years. When determining if a renewal option is reasonably certain of being exercised at lease commencement, we consider several factors, including but not limited to, contract-based, asset-based and entity-based factors. We reassess the term of existing leases if there is a significant event or change in circumstances within our control that affects whether we are reasonably certain to exercise an option to extend a lease. Examples of such events or changes include construction of significant leasehold improvements or other modifications or customizations to the underlying asset, relevant business decisions or subleases. As of December 31, 2022, we have concluded that our renewal options are not reasonably certain of being exercised, therefore, renewals are not included in the right of use assets and lease liabilities.

As our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at the lease commencement date in determining the present value of the lease payments. We apply a portfolio approach for determining the incremental borrowing rate based on the applicable lease terms and the current economic environment.

We recognize lease expense for operating leases on a straight-line basis over the lease term. Variable lease payments are generally recognized when incurred. These expenses are included in general and administrative expenses in the consolidated statements of operations.

From time to time, we may enter into sublease agreements with third parties. Our subleases generally do not relieve us of our primary obligations under the corresponding head lease. As a result, we account for the head lease based on the original assessment at lease inception. We determine if the sublease arrangement is either a sales-type, direct financing, or operating lease at inception of the sublease. If the total remaining lease cost on the head lease for the term of the sublease is greater than the anticipated sublease income, the right of use asset is assessed for impairment. Our subleases are generally operating leases and we recognize sublease income on a straight-line basis over the sublease term.

Recoverability of Goodwill ~~and Indefinite-Lived Intangible Assets~~

Goodwill ~~represents~~is measured as the excess of ~~the cost of~~consideration transferred for an acquired business over the net of the acquisition date fair ~~value~~values of the assets acquired atand the ~~date of acquisition,~~liabilities assumed, and is not amortized. 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 ~~typically first~~initially perform a qualitative assessment to determine whether the existence of events or circumstances indicates that it is more likely than not that the carrying value of each reporting unit is greater than its fair value. 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.

During the years ended December 31, ~~2019, 2018,~~2022, 2021 and ~~2017~~2020, we did not record any impairments related to goodwill. Refer to Note 10 for additional information related to goodwill.

Our trade names and trademarks indefinite-lived intangible asset is not amortized, and we assess the asset for impairment on an annual basis, in our fourth quarter, or whenever events or changes in circumstances indicate that the asset may be impaired. On an interim basis we consider if there are any events and circumstances that could affect the significant inputs used to determine the fair value of the indefinite-lived intangible asset, including, but not limited to, costs that could have a negative effect on future expected earnings and cash flows, changes in certain key performance metrics, and changes in management, key personnel, strategy or customers. In our evaluation of our trade names and trademarks indefinite-lived intangible asset, we typically first perform a qualitative assessment to determine whether the fair value of the indefinite-lived intangible asset is more likely than not impaired. If so, we perform a quantitative assessment and an impairment charge is recorded in our statements of operations for the excess of the carrying value of the indefinite-lived intangible asset over its fair value.

7779

Table of o f Contents

We did 0t record any non-cash impairments related to the indefinite-lived Trulia trade names and trademarks intangible asset during the year ended December 31, 2019. During the years ended December 31, 2018 and 2017, we recorded non-cash impairments for $69.0 million and $174.0 million, respectively, related to the indefinite-lived Trulia trade names and trademarks intangible asset. For additional information about the non-cash impairments, see Note 11 to our consolidated financial statements.

Intangible Assets

We purchase and license data content from multiple data providers. This data content consists of ~~U.S.~~United States county data about home details ~~(e.g., the number of bedrooms, bathrooms, square footage)~~ and other information relating to the purchase price of homes, both current and historical, as well as imagery, mapping and parcel data that is displayed on our mobile applications and websites. Our home details data not only provides information about a home and its related transactions which is displayed on our mobile applications and websites, but is also used in our proprietary valuation algorithms to produce Zestimates, Rent Zestimates and Zillow Home Value Indexes. License agreement terms vary by vendor. In some instances, we retain perpetual rights to this information after ~~the~~our contract with a vendor ends; in other instances, the information and data are licensed only during the fixed term of the agreement. Additionally, certain data license agreements provide for uneven payment amounts throughout the contract term.

We capitalize payments made to third parties for data licenses that we expect to recover through generation of revenue and margins. For data license contracts that include uneven payment amounts, we capitalize the payments as they are made as an intangible asset and the total contract value is typically amortized on a straight-line basis over the term of the contract, which is equivalent to the estimated useful life of the asset. ~~We evaluate data content contracts for potential capitalization at the inception of the arrangement as well as each time periodic payments to third parties are made.~~

The amortization period for the capitalized purchased content is based on our best estimate of the useful life of the asset, which ~~is approximately five~~ranges from three to seven years. The determination of the useful life includes consideration of a variety of factors including, but not limited to, our assessment of the expected use of the asset and contractual provisions that may limit the useful life, as well as an assessment of when the data is expected to become obsolete based on our estimates of the diminishing value of the data over time. We evaluate the useful life of the capitalized purchased data content each reporting period to determine whether events and circumstances warrant a revision to the remaining useful life. If we determine the estimate of the asset’s useful life requires modification, the carrying amount of the asset is amortized prospectively over the revised useful life. The capitalized purchased data content is amortized on a straight-line basis as the pattern of delivery of the economic benefits of the data cannot reliably be determined because we do not have the ability to reliably predict future traffic to our mobile applications and websites.

Under certain other data agreements, the underlying data is obtained on a subscription basis with consistent monthly or quarterly recurring payment terms over the contractual period. Upon the expiration of such arrangements, we no longer have the right to access the related data, and therefore, the costs incurred under such contracts are not capitalized and are expensed as payments are made. ~~We would immediately lose rights to data under these arrangements if we were to cancel the subscription and/or cease making payments under the subscription arrangements.~~

We also capitalize costs related to the license of certain internal-use software from third parties, including certain licenses of software in cloud computing arrangements. Additionally, we capitalize costs incurred during the application development stage related to the development of internal-use software and enterprise cloud computing services. We expense costs as incurred related to the planning and post-implementation phases of development. Capitalized internal-use software costs are amortized on a straight-line basis over the estimated useful life of the asset, which is currently one to five years.

Intangibles-in-progress consist of purchased content and software that are capitalizable but have not been placed in service.

We also have intangible assets for developed technology, customer relationships, and trade names and trademarks ~~and advertising relationships~~ which we recorded in connection with acquisitions. Purchased intangible assets with a determinable economic life are carried at cost less accumulated amortization. These intangible assets are amortized over the estimated useful life of the asset on a straight-line basis.

For each of the intangible assets described above, we have removed fully amortized assets from the cost and accumulated amortization amounts disclosed.

Recoverability of Intangible Assets with Definite Lives and Other Long-Lived Assets

~~Table of Contents~~

which identifiable cash flows of the asset group are largely independent of the cash flows of the other groups of assets and liabilities. If this comparison indicates impairment, the amount of impairment to be recognized is calculated as the difference between the carrying value and the fair value of the asset group.

~~Deferred Revenue~~

Deferred revenue consists of prepaid advertising fees received or billed in advance of satisfying our performance obligations and prepaid but unrecognized subscription revenue. Deferred revenue is recognized when or as we satisfy our obligations under contracts with customers.

Business Combinations

We recognize identifiable assets acquired and liabilities assumed at their acquisition date fair values. Goodwill as of the acquisition date is measured as the excess of consideration transferred over the net of the acquisition date fair values of the assets acquired and the liabilities assumed. While we use our best estimates and assumptions for the purchase price allocation process to value assets acquired and liabilities assumed at the acquisition date, our estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, we record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill to the extent that we identify adjustments to the preliminary purchase price allocation. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to our consolidated statements of operations. We recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined.

Table o f Contents

Revenue Recognition

We recognize revenue when or as we satisfy our performance obligations by transferring control of the promised products or services to our customers in an amount that reflects the consideration to which we expect to be entitled in exchange for those products or services.

We do not disclose the transaction price related to remaining performance obligations for (i) contracts with an original expected duration of one year or less ~~and~~or (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for performance completed to date. The remaining duration ofover which we satisfy our performance obligations is generally less than one year.

~~In our Homes segment, we generate revenue from the resale of homes on the open market through our Zillow Offers program.~~

~~In our~~ IMT segment, we generate revenue from the sale of advertising services and our suite of marketing software and technology solutions to businesses and professionals primarily associated with the residential real estate and rental industries. These professionals include real estate and rental professionals and brand advertisers. Our three primary revenue categories within our IMT segment are Premier Agent, Rentals and Other.

Premier Agent Revenue. Premier Agent revenue is derived from our Premier Agent ~~and Premier Broker programs.~~program. Our Premier Agent ~~and Premier Broker programs offer~~program offers a suite of marketing and business technology products and services to help real estate agents and brokers achieve their advertising goals while growing and managing their businesses and brands. All Premier Agents ~~and Premier Brokers~~ receive access to a dashboard portal on our mobile application and website that provides individualized program performance analytics, our customer relationship management, or CRM, tool that captures detailed information about each contact made with a Premier Agent ~~or Premier Broker~~ through our mobile and web platforms and our

~~Table of Contents~~

account management tools. The marketing and business technology products and services promised to Premier Agents ~~and Premier Brokers~~ are delivered over time, as the customer simultaneously receives and consumes the benefit of the performance obligations.

Premier Agent ~~and Premier Broker~~ advertising products, which include the delivery of ~~impressions and~~ validated consumer connections, or leads, are primarily offered on a share of voice basis. Payment is received prior to the delivery of ~~impressions and~~ connections. ~~Impressions are delivered when an advertisement appears on pages viewed by users of our mobile applications and websites and connections~~Connections are delivered when consumer contact information is provided to Premier ~~Agents and Premier Brokers.~~Agents. We do not promise any minimum or maximum number of ~~impressions or~~ connections to customers, but instead control when and how many ~~impressions~~connections to deliver based on a customer’s share of voice. We determine the number of ~~impressions and~~ connections to deliver to Premier Agents ~~and Premier Brokers~~ in each zip code using a market-based pricing method in consideration of the total amount spent by Premier Agents ~~and Premier Brokers~~ to purchase ~~impressions and~~ connections in the zip code during the month. This results in the delivery of ~~impressions and~~ connections over time in proportion to each Premier Agent’s ~~and Premier Broker’s~~ share of voice. A Premier Agent’s ~~or Premier Broker’s~~ share of voice in a zip code is determined by their proportional monthly prepaid spend in that zip code as a percentage of the total monthly prepaid spend of all Premier Agents ~~and Premier Brokers~~ in that zip code, and ~~includes both the share of impressions delivered as advertisements appearing on pages viewed by users of our mobile applications and websites, as well as~~determines the proportion of consumer connections a Premier Agent ~~or Premier Broker~~ receives. The number of ~~impressions and~~ connections delivered for a given spend level is dynamic - as demand for advertising in a zip code increases or decreases, the number of ~~impressions and~~ connections delivered to a Premier Agent ~~or Premier Broker~~ in that zip code decreases or increases accordingly.

We primarily recognize revenue related to the Premier Agent ~~and Premier Broker~~ products and services based on the monthly prepaid spend recognized on a straight-line basis during the monthly billing period over which the products and services are provided. This methodology best depicts how we satisfy our performance obligations to customers, as we continuously transfer control of the performance obligations to the customer over time. Given a Premier Agent ~~or Premier Broker~~ typically prepays their monthly spend and the monthly spend is refunded on a pro-rata basis upon cancellation of the contract by a customer, ~~at any point in time,~~ we have determined that Premier Agent ~~and Premier Broker~~ contracts are effectively daily contracts, and each performance obligation is satisfied over time as each day lapses. We have not allocated the transaction price to each performance obligation within our Premier Agent ~~and Premier Broker~~ arrangements, as the amounts recognized would be the same irrespective of any allocation.

~~In October 2018, we began testing~~We also offer a ~~new~~pay for performance pricing model ~~Flex,~~called “Flex” for Premier Agent ~~and Premier Broker~~ advertising services in ~~limited~~certain markets. Flex is available to select partners alongside our legacy market-based pricing model. With the Flex model, Premier Agents ~~and Premier Brokers~~ are provided with validated leads at no ~~upfront~~initial cost and ~~they~~ pay a performance advertising fee only when a real estate transaction is closed with one of ~~their leads.~~the leads within two years. 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. ~~During this testing phase, we recognize revenue when we receive payment for a real estate transaction closed with a Flex lead.~~ We ~~will continuously reevaluate this determination and the point at which we may begin to~~ estimate variable consideration and record revenue as performance obligations, or validated leads, are transferred. We do not believe that a significant reversal in the amount of cumulative revenue recognized will occur once the uncertainty related to the number of transactions closed is subsequently resolved. We record a corresponding contract asset for the estimate of variable consideration for Flex when the right to the consideration is conditional. When the right to consideration becomes unconditional, we reclassify amounts to accounts receivable.

Table o f Contents

Rentals Revenue.Rentals revenue includes the sale of advertising and a suite of tools to rental professionals, landlords and other market ~~participants.~~participants under the Zillow and StreetEasy brands. Rentals revenue ~~primarily~~ includes revenue generated by advertising sold to property managers, landlords and other rental professionals on a cost per lead, ~~cost per~~ click, ~~cost per~~ lease, ~~cost per~~ listing or ~~cost per~~ impression ~~basis.~~basis or for a fixed fee for certain advertising packages. 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. We recognize revenue as leads, clicks and impressions are provided to rental professionals, or as rental listings are published on our mobile applications and websites, which is the amount for which we have the right to invoice. We recognize revenue related to our fixed fee rentals product on a straight-line basis over the contract term as the performance obligations, rental listings on our mobile applications and websites, are satisfied over time based on time elapsed. The number of leases generated through our rentals pay per lease product, Zillow Lease Connect, during the period is accounted for as variable consideration, and we estimate the amount of variable consideration based on the expected number of qualified leases secured during the period. We do not believe that a significant reversal in the amount of cumulative revenue recognized will occur once the uncertainty related to the number of leases secured is subsequently resolved. We record a corresponding contract asset for the estimate of variable consideration for Zillow Lease Connect when the right to the consideration is conditional. When the right to consideration becomes unconditional, we reclassify amounts to accounts receivable.

Rentals revenue also includes revenue generated from our rental applications product through which potential renters can submit applications to multiple rental properties over a 30-day period for a flat service fee. We recognize revenue for the rental applications product on a straight-line basis during the contractual period over which the customer has the right to access and submit the rental application.

~~Table of Contents~~

Other Revenue. Other IMT revenue primarily includes revenue generated by our new construction marketplace and ~~display, as well as~~ revenue from the sale of ~~various~~ other ~~marketing~~advertising and business ~~products and services to~~technology solutions for real estate ~~professionals.~~ professionals, including display, StreetEasy for-sale product offerings and ShowingTime+, which houses ShowingTime, Bridge Interactive, dotloop and interactive floor plans.

Our new construction marketing solutions allow home builders to showcase their available inventory to home shoppers. New construction revenue primarily includes revenue generated by advertising sold to builders on a cost per residential community basis ~~and~~whereby we recognize revenue ~~is recognized~~ on a straight-line basis during the contractual period over which the communities are advertised on our mobile applications and websites. New construction revenue also includes revenue generated on a cost per impression basis whereby we recognize revenue as impressions are delivered to users interacting with our mobile applications and websites, which is the amount for which we have the right to invoice. Consideration for new construction products is billed in arrears.

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 revenue is primarily billed in advance on a monthly basis and recognized ratably over the contract period which aligns to our satisfaction of performance obligations.

StreetEasy for-sale revenue primarily consists of our pay for performance pricing model available in the New York City market for which agents and brokers are provided with leads at no initial cost and pay a performance referral fee only when a real estate purchase transaction is closed with one of the leads. Under the StreetEasy pricing model, 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 real estate transactions and the value of those transactions. We estimate variable consideration based on the expected number of closed transactions during the period. We do not believe that a significant reversal in the amount of cumulative revenue recognized will occur once the uncertainty related to the number of transactions closed is subsequently resolved. We record a corresponding contract asset for the estimate of variable consideration for StreetEasy Experts when the right to the consideration is conditional. When the right to consideration becomes unconditional, we reclassify amounts to accounts receivable.

Our dotloop real estate transaction management software-as-a-service solution is primarily billed in advance on a monthly basis and revenue is recognized ratably over the contract period which aligns to our satisfaction of performance obligations.

Display revenue primarily 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. We recognize display revenue as clicks occur or as impressions are delivered to users interacting with our mobile applications or websites, which is the amount for which we have the right to invoice.

Table o f Contents

Mortgages Segment

Mortgages Revenue. Mortgages revenue primarily includes revenue generated by Zillow Home Loans, our affiliated mortgage lender, and marketing products sold to mortgage professionals on a cost per lead basis, including our Custom Quote and Connect services.

Mortgage origination revenue recorded within our Mortgages segment reflects origination fees on purchase or refinance mortgages and the corresponding sale, or expected future sale, of a ~~portion~~loan. When an IRLC is made to a customer, we record the expected gain on sale of the mortgage, plus the estimated earnings from the expected sale of the associated servicing rights, adjusted for a pull-through percentage (which is defined as the likelihood that an interest rate lock commitment will be originated), as revenue. 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. Once funded, mortgage loans held for sale are recorded at fair value based on either sale commitments or current market quotes and are adjusted for subsequent changes in fair value until the loan is sold. Origination costs associated with originating mortgage loans are recognized as incurred. We sell substantially all of the mortgages we originate and the related servicing rights to third-party purchasers.

Mortgage loans are sold with limited recourse provisions, which can result in repurchases of loans previously sold to investors or payments to reimburse investors for loan losses. Based on historical experience, discussions with our ~~Connect services,~~mortgage purchasers, analysis of the volume of mortgages we originated and oncurrent housing and credit market conditions, we estimate and record a ~~subscription basis, including a portion of~~loss reserve for mortgage loans held in our ~~Connect service,~~portfolio and ~~beginning in the fourth quarter of 2018, also includes revenue generated by Zillow Home Loans,~~mortgage loans held for sale, as well as known and projected mortgage loan repurchase requests. These have historically not been significant to our ~~affiliated mortgage lender, and revenue generated by Mortech.~~financial statements.

Zillow Group operates Custom Quote and Connect through its wholly owned subsidiary, Zillow Group Marketplace, Inc., a licensed mortgage broker. For our Connect and Custom Quote cost per lead marketing products, participating qualified mortgage professionals typically make a prepayment to gain access to consumers interested in connecting with mortgage professionals. Mortgage professionals who exhaust their initial prepayment prepay additional funds to continue to participate in the marketplace. For our Connect subscription mortgage marketing product, participating qualified mortgage professionals generally prepay a monthly subscription fee, which they then allocate to desired geographic counties. In Zillow Group’s Connect platform, consumers answer a series of questions to find a local lender, and mortgage professionals receive consumer contact information, or leads, when the consumer chooses to share their information with a lender. Consumers who request rates for mortgage loans in Custom Quotes are presented with customized quotes from participating mortgage professionals.

Homes Segment

Zillow Closing Services. Zillow Closing Services offers title and escrow services to receive a consumer contact is based on the mortgage professional’s relative share of voice in a geographic county. When a consumer submits a contact, we contact a group of subscription mortgage professionals via text message,home buyers and the first mortgage professional to respond receives the consumer contact information. We recognize revenue based on the contractual spend recognized on a straight-line basis during the contractual period over which the service is provided. This methodology best depicts how we satisfy our performance obligation to subscription customers, as we continuously transfer control of the performance obligation to the customer throughout the contractual period.

Mortgage origination revenue reflects both origination fees and the corresponding sale, or expected future sale, of a loan. When an interest rate lock commitment is made to a customer, we record the expected gain on sale of the mortgage, plus the estimated earnings from the expected sale of the associated servicing rights, adjustedsellers, including title search procedures for a pull-through percentage (which is defined as the likelihood that an interest rate lock commitment will be originated), as revenue. Revenue from loan origination fees is recognized at the time the related real estate transactions are completed, usually upon the close oftitle insurance policies, escrow and ~~when we fund mortgage loans. Once funded, mortgage loans held for sale are~~other closing services. Title insurance, which is recorded ~~at fair value based on either sale commitments or current market quotes~~net of amounts remitted to third-party underwriters, and ~~are adjusted for subsequent changes in fair value until the loan is sold. Net origination costs associated with mortgage loans~~title and escrow closing fees, are recognized as ~~incurred. We sell substantially all~~revenue upon closing of the ~~mortgages we originate and the related servicing rights to third-party purchasers.~~

Mortgage loans are sold with limited recourse provisions, which can result in repurchases of loans previously sold to investors or payments to reimburse investors for loan losses. Based on historical experience, discussions with our mortgage purchasers, analysis of the volume of mortgages we originated and the current housing and credit conditions, we estimate and record a loss reserve for mortgage loans held in our portfolio and mortgage loans held for sale, as well as known and projected mortgage loan repurchase requests on loans previously sold. These have historically not been significant to our financial statements.

Mortgage revenue also includes revenue generated by Mortech, which provides subscription-based mortgage software solutions, including a product and pricing engine and lead management platform, for which we recognize revenue on a straight-line basis during the contractual period over which the services are provided.

~~Table of Contents~~underlying real estate transaction.

There were no customers that generated 10% or more of our total revenue in the years ended December 31, ~~2019, 2018~~2022, 2021 or ~~2017.~~2020.

Cost of ~~Revenue~~

~~Our cost~~Revenue. Cost of revenue consists of expenses related to operating our mobile applications and websites, including associated ~~headcount~~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. ~~For our Homes segment, our cost~~Cost of revenue also ~~consists~~includes amortization costs related to capitalized website and development activities, amortization of ~~the consideration paid~~software, amortization of certain intangible assets and other costs to ~~acquire~~obtain data used to populate our mobile applications and ~~make~~websites, and amortization of certain ~~repairs and updates to each home,~~intangible assets recorded in connection with acquisitions, including ~~associated overhead costs, as well as inventory valuation adjustments.~~developed technology. 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, ~~our~~ cost of revenue also consists of ~~lead acquisition costs and~~ direct costs to originate loans, including underwriting and processing costs.

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. For our Mortgages segment, sales and marketing expenses include headcount-related expenses for loan officers and specialists supporting Zillow Home Loans.

Table o f Contents

Advertising costs are expensed as incurred. For the years ended December 31, 2022, 2021 and 2020, expenses attributable to advertising totaled $144 million, $206 million and $112 million, respectively.

Technology and ~~Development~~

Development. Technology and development expenses consist of ~~headcount~~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. Finally, technology and development expenses include amortization costs related to capitalized website and development activities, amortization of software, amortization of certain intangibles and other data agreement costs related to the purchase of data used to populate our mobile applications and websites, and amortization of intangible assets recorded in connection with acquisitions, including developed technology and customer relationships, amongst others.

Research and development costs are expensed as incurred and are recorded in technology and development expenses. For the years ended December 31, ~~2019, 2018~~2022, 2021 and ~~2017,~~2020, expenses attributable to research and development for our business totaled ~~$343.7~~$495 million, ~~$298.1~~$358 million and ~~$193.0~~$283 million, respectively.

Share-Based ~~Compensation~~

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 on a straight-line basis for awards expected to vest.

We use the Black-Scholes-Merton option-pricing model to determine the fair value for option awards. In valuing our option awards, we make assumptions about risk-free interest rates, dividend yields, volatility and weighted-average expected lives. We account for forfeitures as they occur. Risk-free interest rates are derived from U.S. Treasury securities as of the option award grant date. Expected dividend yield is based on our historical cash dividend payments, which have been zero to date. The expected volatility for our Class A common stock and Class C capital stock is estimated using our historical volatility. The weighted-average expected life of the option awards is estimated based on our historical exercise data.

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 the Company’s Class C capital stock used in the valuation as a result of material non-public information.

For issuances of restricted stock ~~units and restricted~~ units, we determine the fair value of the award based on the market value of our Class ~~A common stock or Class~~ C capital stock, as applicable, at the date of grant.

~~Advertising Costs~~

~~Advertising~~Restructuring Costs. The main components of our restructuring costs recorded within impairment and restructuring costs in our consolidated statement of operations relate to employee termination costs, contract termination costs, and charges attributable to the wind down of Zillow Offers operations and additional cost actions to streamline our operations and prioritize investments. One-time employee termination benefits are recognized when the plan of termination has been communicated to employees and certain other criteria are met. Other severance and employee costs, primarily pertaining to ongoing employee benefit arrangements, are recognized when it is probable that the employees are entitled to the severance benefits and the amounts can be reasonably estimated. Contract termination costs are ~~expensed~~recognized when a contract is terminated in accordance with its terms or at the cease-use date. Asset write-offs are recognized upon their cease-use date. The cumulative effect of a change resulting from a revision to either the timing or the amount of estimated cash flows for restructuring is recognized as ~~incurred. For~~an adjustment to the ~~years ended December 31, 2019, 2018 and 2017, expenses attributable to advertising totaled $185.2 million, $193.5 million and $166.5 million, respectively. Advertising costs are recorded~~liability in ~~sales and marketing expenses.~~the period of the change.

Income Taxes

We use the asset and liability approach for accounting and reporting income taxes, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial statement and tax bases of assets and liabilities at the applicable enacted tax rates. A valuation allowance against deferred tax assets would be established if, based on the weight of available evidence, it is more likely than not (a likelihood of more than 50%) that some or all of the deferred tax assets are not expected to be realized.

We establish reserves for tax-related uncertainties based on estimates of whether, and the extent to which, additional taxes will be due. We adjust these reserves in light of changing facts and circumstances, such as the closing of a tax audit, new tax legislation or the change of an estimate. To the extent that the final tax outcome of these matters is different than the

~~Table of Contents~~

amounts recorded, such differences will affect the provision for income taxes in the period in which such determination is made. Interest and penalties related to unrecognized tax benefits are recorded as income tax expense.

Table o f Contents

Recently Adopted Accounting Standards

In ~~February 2018,~~August 2020, the Financial Accounting Standards Board (“FASB”) issued guidance ~~on income tax~~which simplifies the accounting ~~related to~~for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts in an entity’s own equity. Among other changes, the ~~Tax Cuts~~guidance removes the liability and ~~Jobs Act (the “Tax Act”). This~~equity separation models for convertible instruments. Instead, entities must account for convertible debt instruments wholly as debt unless convertible instruments contain features that require bifurcation as a derivative or that result in substantial premiums accounted for as paid-in capital. The guidance ~~permits a reclassification from accumulated other comprehensive income (loss) to accumulated deficit for~~also requires the ~~adjustment of deferred taxes due to the reduction~~application of the ~~historical corporate income tax rate~~if-converted method to calculate the ~~newly enacted corporate income tax rate under the Tax Act. It also requires certain disclosures regarding these reclassifications.~~impact of convertible instruments on diluted earnings per share. The guidance iswas effective for ~~interim and annual reporting periods~~fiscal years beginning after December 15, ~~2018, and~~2021, with early adoption ~~is permitted. This guidance must~~permitted for fiscal years beginning after December 15, 2020, and could be ~~applied~~adopted on either on a ~~prospective basis in the period of adoption~~retrospective or ~~retrospectively to each period in which the effect of the change in the corporate income tax rate is recognized.~~modified retrospective basis. We adopted this guidance on January 1, ~~2019. The~~2022 using the modified retrospective approach whereby amounts previously reported have not been revised. Upon adoption we recognized a decrease to additional paid-in capital of $492 million, an increase to long-term debt of $336 million and a cumulative-effect adjustment to accumulated deficit of $156 million.

In October 2021, the FASB issued guidance requiring contract assets and contract liabilities acquired in a business combination to be recognized and measured in accordance with guidance governing revenue from contracts with customers. Prior to the adoption of this guidance, ~~did not~~we recognized contract assets and contract liabilities at the acquisition date based on fair value estimates, which resulted in a reduction to unearned revenue on the balance sheet, and therefore, a reduction to revenue that would have ~~a material impact on our financial position, results of operations or cash flows.~~

~~In March 2017, the FASB issued~~otherwise been recorded as an independent entity. The guidance related to the premium amortization on purchased callable debt securities. This guidance shortens the amortization period for certain callable debt securities purchased at a premium by requiring that the premium be amortized to the earliest call date. This guidance iswas effective for interim and annual ~~reporting~~ periods beginning after December 15, ~~2018, and~~2022 on a prospective basis, with early adoption is permitted. ~~This guidance must be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption.~~ We adopted this guidance ~~on January~~effective April 1, ~~2019. The adoption of this guidance did not have a material impact on our financial position, results of operations or cash flows.~~

~~In February 2016, the FASB issued guidance on leases. This guidance requires the recognition of a right of use asset~~2022, and lease liability on the balance sheet for all leases. This guidance also requires more detailed disclosures to enable users of financial statements to understand the amount, timing, and uncertainty of cash flows arising from leases. This guidance is effective for interim and annual reporting periods beginning after December 15, 2018. In July 2018, the FASB issued certain targeted improvements to the accounting and disclosure requirements for leases, including an additional optional transition method that allows entities to initially apply the new standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption without restating prior periods. When adopting the lease guidance, an entity may elect a practical expedient package, under which it need not reassess (a) whether any expired or existing contracts are or contain leases; (b) the lease classification for any expired or existing leases; and (c) initial direct costs for any existing leases. These three practical expedients mustwill be ~~elected as a package and must be consistently~~ applied to all ~~existing leases at the date of adoption.~~business combinations after that date. We ~~adopted the new guidance on leases on January 1, 2019 using the optional transition method and elected to adopt the practical expedient package. Under this approach, we~~ did not ~~restate~~enter into any material business combinations during the ~~prior financial statements presented. Based on our lease portfolio as of~~year ended December 31, 2018, we recorded on our consolidated balance sheet right of use assets of $106.5 million as well as operating lease liabilities of $129.0 million, and we removed the existing deferred rent balance of $22.5 million. The adoption of the standard did not have a material impact on our consolidated statements of operations and cash flows.2022.

Recently Issued Accounting Standards Not Yet Adopted

In ~~August 2018,~~June 2022, the FASB issued guidance ~~related~~ to a customer’s accounting for implementation costs incurred in hosting arrangements. The guidance conforms the requirements for capitalizing implementation costs incurred in cloud computing arrangements that are service contracts with the accounting guidance that provides for the capitalization of costs incurred to develop or obtain internal-use software. Under the guidance, implementation costs that are capitalized should be characterized in financial statements in the same manner as other service costsimprove existing measurement and assets related to service costs and amortized over the term of the hosting arrangement. This guidance is effective for interim and annual reporting periods beginning after December 15, 2019, and early adoption is permitted. Entities are permitted to apply either a retrospective or prospective transition approach to adopt this guidance. We adopted this guidance on January 1, 2020 using the prospective transition approach under which we apply the guidance to all eligible costs incurred subsequent to adoption. Under this new guidance, we record the implementation costs incurred in cloud computing arrangements that are service contracts within prepaid expenses and other current assets or other long-term assets in our consolidated balance sheets, depending on the length of the underlying cloud computing contract. We amortize these costs on a straight-line basis over the term of the hosting arrangement unless another systematic and rational basis is more representative of the pattern in which we expect to benefit from access to the hosted software. We do not expect the adoption of this guidance to have a material impact on our financial position, results of operations or cash flows.

~~Table of Contents~~

~~In August 2018, the FASB issued guidance related to~~ disclosure requirements for ~~fair value measurements. This guidance removes, modifies and adds disclosures related~~equity securities that are subject to certain assets and liabilities measured at fair value. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim and annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date.a contractual sale restriction. This guidance is effective for interim and annual periods beginning after December 15, ~~2019, and~~2023 on a prospective basis, with early adoption is permitted. We ~~adopted~~expect to adopt this guidance on January 1, ~~2020.~~2024. We have not ~~historically recorded material amounts of Level 3 assets and liabilities or material transfers of assets or liabilities between levels within~~yet determined the ~~fair value hierarchy and therefore do not anticipate~~impact the adoption of this guidance towill have ~~any impact on our financial statement disclosures.~~

In June 2016, and subsequently amended in April 2019, May 2019 and November 2019, the FASB issued guidance on the measurement of credit losses on financial assets. This guidance will require an entity to measure and recognize expected credit losses for certain financial instruments and financial assets, including trade receivables. This guidance requires an entity to recognize an allowance that reflects the entity’s current estimate of credit losses expected to be incurred over the life of the financial instrument on initial recognition and at each reporting period, whereas current guidance employs an incurred loss methodology. This guidance is effective for interim and annual periods beginning after December 15, 2019, and early adoption is permitted for interim and annual reporting periods beginning after December 15, 2018. The adoption of this guidance requires a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. We adopted this guidance on January 1, 2020. We have substantially completed our evaluation of the necessary changes to our accounting policies, processes and systems as a result of the adoption of the guidance and determined that the standard will primarily impact our trade accounts receivable and certain available-for-sale investments. Upon adoption, we expect to record a cumulative-effect adjustment to accumulated deficit as of January 1, 2020 to reflect estimated credit losses for trade receivables that are not currently aged. We do not expect the adoption of this guidance to have a material impact on our financial position, results of operations orand cash flows.

Note 3. Discontinued Operations

Zillow Offers Wind Down

In November 2021, the Board of Directors of Zillow Group made the determination to wind down Zillow Offers operations. This decision was made in light of home pricing unpredictability, capacity constraints and other operational challenges faced by Zillow Offers that were exacerbated by an unprecedented housing market, a global pandemic and a difficult labor and supply chain environment, all of which led us to conclude that, despite its initial promise in earlier quarters, Zillow Offers was unlikely to be a sufficiently stable line of business to meet our goals going forward.

Historically Zillow Offers has been reported within our Homes segment. The wind down of Zillow Offers was completed in the third quarter of 2022, at which time Zillow Offers met the criteria for discontinued operations. Accordingly, we have presented the assets and liabilities and results of operations, excluding allocation of any general corporate expenses, of Zillow Offers for all periods presented as discontinued operations in our consolidated financial statements. No assets or liabilities were classified as discontinued operations as of December 31, 2022.

Table o f Contents

The following table presents the major classes of assets and liabilities of discontinued operations as of December 31, 2021 (in millions):


Assets
Current assets:
Cash and cash equivalents	$	296
Accounts receivable, net	78
Inventory	3,913
Prepaid expenses and other current assets	13
Restricted cash	226
Total current assets of discontinued operations	4,526
Intangible assets, net	4
Other assets	78
Total assets of discontinued operations	$	4,608
Liabilities
Current liabilities:
Accounts payable	$	6
Accrued expenses and other current liabilities	72
Accrued compensation and benefits	47
Borrowings under credit facilities	2,199
Securitization term loans	1,209
Total current liabilities of discontinued operations	$	3,533

The following table presents the major classes of line items of the discontinued operations included in the consolidated statements of operations for the periods presented (in millions):


	Year Ended December 31,
	2022		2021		2020
Revenue	$	4,249	$	6,015	$	1,716
Cost of revenue	4,023		6,071		1,611
Gross profit (loss)	226		(56)		105
Operating expenses:
Sales and marketing	153		361		156
Technology and development	6		53		66
General and administrative	10		35		33
Impairment and restructuring costs	25		62		—
Total operating expenses	194		511		255
Income (loss) from discontinued operations	32		(567)		(150)
Loss on extinguishment of debt	(21)		—		—
Other income, net	13		3		—
Interest expense	(36)		(64)		(17)
Loss from discontinued operations before income taxes	(12)		(628)		(167)
Income tax benefit (expense)	(1)		(2)		—
Net loss from discontinued operations	$	(13)	$	(630)	$	(167)
Net loss from discontinued operations per share:
Basic	$	(0.05)	$	(2.52)	$	(0.75)
Diluted	$	(0.05)	$	(2.41)	$	(0.72)

Table o f Contents

The following table presents significant non-cash items and capital expenditures of the discontinued operations for the periods presented (in millions):


	Year Ended December 31,
	2022		2021		2020
Amortization of debt discount and debt issuance costs	$	21	$	11	$	—
Loss on debt extinguishment	21		—		—
Share-based compensation	16		40		27
Inventory valuation adjustment	9		408		—
Depreciation and amortization	7		10		6
Capital expenditures	1		6		8
Issuance (settlement) of beneficial interests in securitizations	(79)		63		—

Restructuring

The following table presents a summary of restructuring charges attributable to discontinued operations for the periods presented (in millions):


		Year Ended December 31,
	Line Item of Discontinued Operations	2022		2021		Cumulative Amount Recognized
Inventory write-down	Cost of revenue	$	9	$	408	N/A
Other charges:
Employee termination costs	Impairment and restructuring costs	$	20	$	52	$	72
Financing-related charges	Interest expense and Loss on debt extinguishment	37		6		43
Contract termination costs	Impairment and restructuring costs	4		10		14
Accelerated depreciation and amortization	Cost of revenue	14		5		19
Asset write-offs	Impairment and restructuring costs	—		1		1
Other charges	Impairment and restructuring costs	1		—		1
Total other charges		76		74		150
Total		$	85	$	482	$	567

Restructuring charges attributable to continued operations relate to employee termination costs within our IMT and Mortgages segments and certain indirect costs of the Homes segment that do not qualify as discontinued operations. These costs totaled $12 million, $4 million and $8 million, respectively, for the year ended December 31, 2022. Cumulative restructuring charges attributable to continued operations as of December 31, 2022 totaled $33 million, $10 million of which pertained to employee cost actions that occurred during the fourth quarter of 2022 that did not relate to the Zillow Offers wind down. The remaining liability balance associated with such restructuring charges as of December 31, 2022 is not material.

Note 3.4. Fair Value Measurements

We apply fair value measurements on a recurring and, as otherwise required, on a nonrecurring basis. Accounting standards define fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market in an orderly transaction between market participants on the measurement date. The standards also establish a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. There are three levels of inputs that may be used to measure fair value:

Table o f Contents

•Level 1—1 — Quoted prices in active markets for identical assets or liabilities.

•Level 2—2 — Assets and liabilities valued based on observable market data for similar instruments, such as quoted prices for similar assets or liabilities.

•Level 3—3 — Unobservable inputs that are supported by little or no market activity; instruments valued based on the best available data, some of which is internally developed, and considers risk premiums that a market participant would require.

We ~~applied~~apply the following methods and assumptions in estimating our fair value ~~measurements:~~measurements on a recurring basis:

Cash equivalents — The fair value measurement of money market funds is based on quoted market prices in active ~~markets.~~markets (Level 1). The fair value measurement of ~~corporate notes and bonds, commercial paper, U.S. government agency securities, treasury bills and certificates of deposit~~other cash equivalents is based on observable market-based inputs ~~or inputs that are~~principally derived ~~principally~~ from or corroborated by observable market data ~~by correlation or other means.~~(Level 2).

Short-term investments — The fair value measurement of our short-term investments is based on observable market-based inputs or inputs that are derived principally from or corroborated by observable market data by correlation or other ~~means.~~means (Level 2).

Restricted cash — Restricted cash consists of cash received from the resale of homes through Zillow Offers which may be used to repay amounts borrowed on our credit facilities (see Note 15) and amounts held in escrow related to funding home purchases in our mortgage origination business. The carrying value of restricted cash approximates fair value due to the short period of time amounts ~~borrowed on the revolving credit facilities~~ are ~~outstanding.~~held in escrow (Level 1).

Mortgage loans held for sale — The fair value of mortgage loans held for sale is generally calculated by reference to quoted prices in secondary markets for commitments to sell mortgage loans with similar ~~characteristics.~~characteristics (Level 2).

~~Table~~Forward contracts — The fair value of ~~Contents~~mandatory loan sales commitments and derivative instruments such as forward sales of mortgage-backed securities that are utilized as economic hedging instruments is calculated by reference to quoted prices for similar assets (Level 2).

Interest rate lock commitments — The fair value of IRLCs is calculated by reference to quoted prices in secondary markets for commitments to sell mortgage loans with similar characteristics. Expired commitments are excluded from the fair value measurement. ~~We generally only issue IRLCs for products that meet specific purchaser guidelines.~~ Since not all IRLCs will become closed loans, we adjust our fair value measurements for the estimated amount of IRLCs that will not close. This adjustment is effected through the pull-through rate, which represents the probability that an IRLC will ultimately result in a closed loan. For IRLCs that are cancelled or expire, any recorded gain or loss is reversed at the end of the commitment period (Level 3).

~~Forward contracts~~ — The pull-through rate is based on estimated changes in market conditions, loan stage and historical borrower behavior. Pull-through rates are directly related to the fair value of ~~mandatory loan sales commitments~~IRLCs as an increase in the pull-through rate, in isolation, would result in an increase in the fair value measurement. Conversely, a decrease in the pull-through rate, in isolation, would result in a decrease in the fair value measurement. Changes in the fair value of IRLCs are included within Mortgages revenue in our consolidated statements of operations.

The following table presents the range and ~~derivative instruments such~~weighted average pull-through rates used in determining the fair value of IRLCs as ~~forward sales~~ of ~~mortgage-backed securities that are utilized as economic hedging instruments are calculated by reference to quoted prices for similar assets.~~the dates presented:


	December 31, 2022	December 31, 2021
Range	47% - 100%	42% - 100%
Weighted average	87%	85%

Table o f Contents

The following tables present the balances of assets and liabilities measured at fair value on a recurring basis, by level within the fair value hierarchy, as of the dates presented (in ~~thousands)~~millions):

December 31, 2019
Total Level 1 Level 2
Cash equivalents:
Money market funds $ 872,431 $ 872,431 $ —
U.S. government agency securities 35,009 — 35,009
Commercial paper 31,113 — 31,113
Treasury bills 6,441 — 6,441
Corporate notes and bonds 1,065 — 1,065
Certificates of deposit 249 — 249
Short-term investments:
U.S. government agency securities 862,154 — 862,154
Corporate notes and bonds 159,431 — 159,431
Commercial paper 150,267 — 150,267
Treasury bills 80,003 — 80,003
Municipal securities 27,889 — 27,889
Certificates of deposit 1,245 — 1,245
Mortgage origination-related:
Mortgage loans held for sale 36,507 — 36,507
IRLCs 937 — 937
Forward contracts - other current assets 7 — 7
Forward contracts - other current liabilities (60) — (60)
Total $ 2,264,688 $ 872,431 $ 1,392,257


	December 31, 2022
	Total		Level 1		Level 2		Level 3
Cash equivalents:
Money market funds	$	1,338	$	1,338	$	—	$	—
Short-term investments:
U.S. government treasury securities	1,716		—		1,716		—
Corporate bonds	161		—		161		—
Commercial paper	10		—		10		—
U.S. government agency securities	9		—		9		—
Mortgage origination-related:
Mortgage loans held for sale	41		—		41		—
Forward contracts - other current assets	1		—		1		—
Total	$	3,276	$	1,338	$	1,938	$	—


		December 31, 2018											December 31, 2021
		Total		Level 1		Level 2			Total		Level 1		Level 2		Level 3
Cash equivalents:	Cash equivalents:							Cash equivalents:
Money market funds	Money market funds	$	541,575	$	541,575	$	—	Money market funds	$	2,132	$	2,132	$	—	$	—
Short-term investments:								Short-term investments:
U.S. government treasury securities								U.S. government treasury securities	471		—		471		—
Corporate bonds								Corporate bonds	33		—		33		—
Commercial paper	Commercial paper	3,999		—		3,999		Commercial paper	10		—		10		—
Short-term investments:
U.S. government agency securities		646,496		—		646,496
Corporate notes and bonds		112,933		—		112,933
Commercial paper		85,506		—		85,506
Municipal securities		39,306		—		39,306
Foreign government securities		14,915		—		14,915
Certificates of deposit		4,711		—		4,711
Mortgage origination-related:	Mortgage origination-related:							Mortgage origination-related:
Mortgage loans held for sale	Mortgage loans held for sale	35,409		—		35,409		Mortgage loans held for sale	107		—		107		—
IRLCs		847		—		847
Forward contracts - other current liabilities		(125)		—		(125)
IRLCs - other assets								IRLCs - other assets	5		—		—		5
Total	Total	$	1,485,572	$	541,575	$	943,997	Total	$	2,758	$	2,132	$	621	$	5

~~Table of Contents~~The following table presents the changes in our IRLCs for the periods presented (in millions):


	Year Ended December 31, 2022		Year Ended December 31, 2021
Balance, beginning of the period	$	5	$	12
Issuances	15		70
Transfers	(17)		(78)
Fair value changes recognized in earnings	(3)		1
Balance, end of period	$	—	$	5

At December 31, ~~2019,~~2022, the notional amounts of the hedging instruments related to our mortgage loans held for sale were ~~$34.3~~$62 million and ~~$64.7~~$90 million for our IRLCs and forward contracts, respectively. At December 31, ~~2018,~~2021, the notional amounts of the hedging instruments related to our mortgage loans held for sale were ~~$26.7~~$305 million and ~~$28.8~~$388 million for our IRLCs and forward contracts, respectively. We do not have the right to offset our forward contract derivative positions.

See Note 1513 for the carrying amount and estimated fair value of ~~the Company’s~~our convertible senior notes.

~~We did 0t have any Level 3 assets as of December 31, 2019 or 2018. There were 0 material liabilities measured at fair value as of December 31, 2019 or 2018.~~

Table o f Contents

Note 4.5. Cash and Cash Equivalents, ~~Short-term~~ Investments and Restricted Cash

The following ~~tables present~~table presents the amortized cost ~~gross unrealized gains and losses~~ and estimated fair market value of our cash and cash equivalents, ~~available-for-sale~~ investments, and restricted cash as of the dates presented (in ~~thousands)~~millions):

December 31, 2019
Amortized
Cost Gross
Unrealized
Gains Gross
Unrealized
Losses Estimated
Fair Market
Value
Cash $ 194,955 $ — $ — $ 194,955
Cash equivalents:
Money market funds 872,431 — — 872,431
U.S. government agency securities 35,011 — (2) 35,009
Commercial paper 31,113 — — 31,113
Treasury bills 6,441 — — 6,441
Corporate notes and bonds 1,065 — — 1,065
Certificates of deposit 249 — — 249
Short-term investments:
U.S. government agency securities 861,862 365 (73) 862,154
Corporate notes and bonds 159,382 91 (42) 159,431
Commercial paper 150,267 — — 150,267
Treasury bills 79,989 14 — 80,003
Municipal securities 27,836 56 (3) 27,889
Certificates of deposit 1,245 — — 1,245
Restricted cash 89,646 — — 89,646
Total $ 2,511,492 $ 526 $ (120) $ 2,511,898

~~Table of Contents~~

December 31, 2018
Amortized
Cost Gross
Unrealized
Gains Gross
Unrealized
Losses Estimated
Fair Market
Value
Cash $ 105,484 $ — $ — $ 105,484
Cash equivalents:
Money market funds 541,575 — — 541,575
Commercial paper 3,999 — — 3,999
Short-term investments:
U.S. government agency securities 647,266 51 (821) 646,496
Corporate notes and bonds 113,109 1 (177) 112,933
Commercial paper 85,506 — — 85,506
Municipal securities 39,316 23 (33) 39,306
Foreign government securities 14,929 — (14) 14,915
Certificates of deposit 4,711 1 (1) 4,711
Restricted cash 12,385 — — 12,385
Total $ 1,568,280 $ 76 $ (1,046) $ 1,567,310


	December 31, 2022				December 31, 2021
	Amortized Cost		Estimated Fair Market Value		Amortized Cost		Estimated Fair Market Value
Cash	$	128	$	128	$	183	$	183
Cash equivalents:
Money market funds	1,338		1,338		2,132		2,132
Short-term investments:
U.S. government treasury securities (1)	1,731		1,716		473		471
Corporate bonds (2)	162		161		33		33
Commercial paper	10		10		10		10
U.S. government agency securities	9		9		—		—
Restricted cash	2		2		1		1
Total	$	3,380	$	3,364	$	2,832	$	2,830

(1) The estimated fair market value includes $15 million and $2 million of gross unrealized losses as of December 31, 2022 and December 31, 2021, respectively.
(2) The estimated fair market value includes $1 million of gross unrealized losses as of December 31, 2022.

The following table presents available-for-sale investments by contractual maturity date as of December 31, ~~2019~~2022 (in ~~thousands)~~millions):

Amortized Cost Estimated Fair Market Value
Due in one year or less $ 1,254,763 $ 1,255,186
Due after one year through two years 25,818 25,803
Total $ 1,280,581 $ 1,280,989


	Amortized Cost		Estimated Fair Market Value
Due in one year or less	$	1,159	$	1,150
Due after one year	753		746
Total	$	1,912	$	1,896

Note ~~5. Accounts Receivable, net~~6. Contract Balances

~~The following table presents the detail of accounts receivable~~Contract assets were $71 million and $78 million as of December 31, 2022 and December 31, 2021, respectively.

For the ~~dates presented (in thousands):~~

December 31,
2019 2018
Accounts receivable $ 60,579 $ 61,134
Unbilled accounts receivable 10,948 9,787
Less: allowance for doubtful accounts (4,522) (4,838)
Accounts receivable, net $ 67,005 $ 66,083

~~The following table presents the changes~~years ended December 31, 2022 and 2021, we recognized revenue of $51 million and $48 million, respectively, that was included in the ~~allowance for doubtful accounts for~~deferred revenue balance at the ~~periods presented (in thousands):~~

Year Ended December 31,
2019 2018 2017
Allowance for doubtful accounts:
Balance, beginning of period $ 4,838 $ 5,341 $ 1,337
Additions charged to expense 2,772 869 7,349
Less: write-offs, net of recoveries and other adjustments (3,088) (1,372) (3,345)
Balance, end of period $ 4,522 $ 4,838 $ 5,341

~~Table of Contents~~

~~Note 6. Inventory~~

~~The following table presents the components of inventory, net of applicable lower of cost or net realizable value adjustments, as~~beginning of the ~~dates presented (in thousands):~~

December 31,
2019 2018
Work-in-process $ 152,171 $ 45,943
Finished goods 684,456 116,886
Inventory $ 836,627 $ 162,829

related period.

Note 7. Contract Cost Assets

As of December 31, ~~2019~~2022 and ~~December 31, 2018,~~2021, we had ~~$45.2~~$23 million and ~~$45.8~~$35 million, respectively, of contract cost assets. ~~Write-offs of contract cost assets that we determined were not recoverable during~~For the years ended December 31, ~~2019~~2022 and ~~2018 were~~2021, we did not ~~material.~~ record any material impairment losses to our contract cost assets.

We recorded amortization expense related to contract cost assets of ~~$35.3~~$30 million, $42 million and ~~$36.0~~$37 million during the years ended December 31, ~~2019~~2022, 2021 and ~~2018,~~2020, respectively.

Table o f Contents

Note 8. Property and Equipment, net

The following table presents the detail of property and equipment as of the dates presented (in ~~thousands)~~millions):

December 31,
2019 2018
Website development costs $ 149,648 $ 149,891
Leasehold improvements 81,981 65,012
Construction-in-progress 45,337 29,037
Office equipment, furniture and fixtures 36,582 39,510
Computer equipment 31,942 22,477
Property and equipment 345,490 305,927
Less: accumulated amortization and depreciation (175,001) (170,755)
Property and equipment, net $ 170,489 $ 135,172


	December 31,
	2022		2021
Website development costs	$	291	$	175
Leasehold improvements	90		107
Office equipment, furniture and fixtures	24		26
Computer equipment	18		19
Construction-in-progress	7		7
Property and equipment	430		334
Less: accumulated amortization and depreciation	(159)		(119)
Property and equipment, net	$	271	$	215

We recorded depreciation expense related to property and equipment (other than website development costs) of ~~$24.9~~$25 million, ~~$19.5~~$26 million and ~~$15.6~~$31 million ~~respectively,~~ during the years ended December 31, ~~2019, 2018~~2022, 2021 and ~~2017.~~2020, respectively.

We capitalized ~~$42.3~~$143 million, ~~$34.1~~$82 million and ~~$49.9~~$53 million ~~respectively,~~ in website development costs during the years ended December 31, ~~2019, 2018~~2022, 2021 and ~~2017.~~2020, respectively. Amortization expense for website development costs included in ~~technology and development expenses~~cost of revenue was ~~$17.0~~$67 million, ~~$28.6~~$36 million and ~~$40.0~~$25 million ~~respectively,~~ for the years ended December 31, ~~2019, 2018~~2022, 2021 and ~~2017.~~2020, respectively.

Note 9. ~~Acquisitions and Equity Investments~~Acquisition

Acquisition of ~~Mortgage Lenders of America~~ShowingTime.com, Inc.

On ~~October 31, 2018,~~September 30, 2021, Zillow ~~Group’s wholly owned subsidiary, ZGM Holdco,~~Group acquired ShowingTime.com, Inc.~~, acquired the outstanding equity of Mortgage Lenders of America, L.L.C.~~ (“~~MLOA”~~ShowingTime”)~~, a national mortgage lender headquartered~~ in ~~Overland Park, Kansas~~exchange for approximately ~~$66.7~~$512 million in cash.

Our acquisition of ~~MLOA was~~ShowingTime has been accounted for as a business combination, and assets acquired and liabilities assumed were recorded at their estimated fair values as of ~~October 31, 2018.~~September 30, 2021. Goodwill, which represents the expected synergies from combining the acquired assets and the operations of the acquirer, as well as intangible assets that do not qualify for separate recognition, is measured as of the acquisition date as the excess of consideration transferred, which is also measured at fair value, and the net of the fair values of the assets acquired and the liabilities assumed as of the acquisition date. The goodwill recognized in conjunction with this business combination was initially allocated to our Internet, Media & Technology (“IMT”) segment. However, beginning January 1, 2019, we have 3 operating and reportable segments, which have been identified

~~Table of Contents~~

based on the way in which our chief operating decision-maker manages our business, makes operating decisions and evaluates operating performance. In conjunction with this segment change, we reallocated goodwill to each segment based on the relative fair value of the segments impacted by the change. Refer to Note 10 for the allocation of goodwill to each of our reportable segments.

The total ~~consideration paid upon acquisition was~~purchase price has been allocated to the assets acquired and liabilities assumed, including identifiable intangible assets, based on their respective fair values at the acquisition date. ~~Based upon the fair values determined by us, in which we considered or relied in part upon a valuation report of a third-party expert, the total~~The purchase price was allocated as follows (in ~~thousands)~~millions):


Cash and cash equivalents	$	~~10,796~~15
~~Restricted cash~~	~~753~~
~~Mortgage loans available for sale~~	~~34,248~~
~~Property, plant and equipment~~	~~1,315~~
~~Intangible~~Identifiable intangible assets	~~2,600~~111
Goodwill	~~53,831~~389
Other acquired assets	~~3,079~~6
~~Accounts payable~~Deferred tax liability	~~(1,953)~~(4)
~~Accrued expenses~~	~~(2,591)~~
~~Warehouse lines of credit~~	~~(32,536)~~
Other assumed liabilities	~~(2,855)~~(5)
Total purchase price	$	~~66,687~~512

Table o f Contents

The fair value of identifiable intangible assets acquired and associated useful lives consisted of the following (in millions):


	Estimated Fair Value		Estimated Weighted-Average Useful Life (in years)
Customer relationships	$	55	8
Developed technology	47		4
Trade names and trademarks	9		10
Total	$	111

We used an income approach to measure the fair value of the customer relationships based on the excess earnings method, whereby the fair value is estimated based upon the present value of cash flows that the applicable asset is expected to generate. We used an income approach to measure the fair value of the developed technology and the trade names and trademarks based on the relief-from-royalty method. These fair value measurements were based on Level 3 inputs under the fair value hierarchy.

Acquisition-related costs incurred, which primarily included legal, accounting ~~regulatory~~ and other external costs directly related to the acquisition, are included within ~~Acquisition-related~~acquisition-related costs ~~within~~in our consolidated statements of operations and were expensed as ~~incurred and were not material.~~incurred.

The results of operations related to the acquisition of MLOA have been included in our consolidated financial statements since the date of acquisition. On an unaudited pro forma basis, revenue would have been approximately 3.0% higher for the year ended December 31, 2018 and 5.0% higher for the year-ended December 31, 2017 if the acquisition would have been consummated as of January 1, 2017. Unaudited pro forma earnings information has not been presented as the effects were not material to our consolidated financial statements.

~~Equity Investments~~

~~In June 2017, we purchased an equity interest in a privately held corporation for approximately $10.0 million.~~

In October 2016, we purchased a 10% equity interest in a privately held variable interest entity within the real estate industry for $10.0 million. The entity is financed through its business operations. We are not the primary beneficiary of the entity, as we do not direct the activities that most significantly impact the entity’s economic performance. Therefore, we do not consolidate the entity. Our maximum exposure to loss is $10.0 million, the carrying amount of the investment as of December 31, 2019.

These investments are equity securities without readily determinable fair values which we account for at cost minus any impairment, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments of the same issuer. During the year ended December 31, 2018, we recognized a non-cash impairment charge of $10.0 million related to our June 2017 investment. The impairment charge is included in Impairment costs within our consolidated statements of operations. During the third quarter of 2018, in connection with our quarterly qualitative assessment of this investment for impairment indicators, we identified factors that led us to conclude that the investment was impaired and the fair value of the investment was less than the carrying value. The most significant of such factors was related to the business prospects of the investee. Accordingly, we performed an analysis to determine the fair value of the investment and concluded that our best estimate of its fair value was $0.0 million. This is considered a Level 3 measurement under the fair value hierarchy.

There has been 0 impairment or upward or downward adjustments to our October 2016 equity investment as of December 31, 2019 that would impact the carrying amount of the investment. The equity investment is classified within other assets in the consolidated balance sheets.

~~Table of Contents~~

Note 10. Goodwill and Intangible Assets, net

Beginning January 1, 2019, we have 3 operating and reportable segments, which have been identified based on the way in which our chief operating decision-maker manages our business, makes operating decisions and evaluates operating performance. In conjunction with this segment change, we reallocated goodwill to each reporting unit based on the relative fair value of the reporting units impacted by the segment change. The following table presents goodwill by reportable segment as of ~~the period presented~~December 31, 2022 and 2021 (in ~~thousands)~~millions):


	~~December 31, 2019~~
~~Homes~~IMT	$	—2,175
~~IMT~~	~~1,786,416~~
Mortgages	~~198,491~~199
Total	$	~~1,984,907~~2,374

~~There was no change in the total balance of goodwill during 2019.~~

The goodwill ~~balance as~~recorded in connection with the acquisition of ~~December 31, 2018 was fully attributable to our~~ShowingTime, which includes intangible assets that do not qualify for separate recognition, is not deductible for tax purposes and is included within the IMT segment.

~~Note 11. Intangible Assets, net~~

The following tables present the detail of intangible assets ~~subject to amortization~~ as of the dates presented (in ~~thousands)~~millions):


		December 31, 2019											December 31, 2022
		Cost		Accumulated Amortization		Net			Cost		Accumulated Amortization		Net
Customer relationships	Customer relationships	$	102,600	$	(73,770)	$	28,830	Customer relationships	$	59	$	(10)	$	49
Software								Software	54		(15)		39
Developed technology	Developed technology	107,200		(81,383)		25,817		Developed technology	49		(15)		34
Trade names and trademarks								Trade names and trademarks	45		(15)		30
Purchased content	Purchased content	47,298		(40,636)		6,662		Purchased content	8		(6)		2
Intangibles-in-progress		6,391		—		6,391
Software		35,527		(20,843)		14,684
Lender licenses		400		(217)		183
Total	Total	$	299,416	$	(216,849)	$	82,567	Total	$	215	$	(61)	$	154

Table o f Contents


		December 31, 2018											December 31, 2021
		Cost		Accumulated Amortization		Net			Cost		Accumulated Amortization		Net
Customer relationships	Customer relationships	$	103,900	$	(60,733)	$	43,167	Customer relationships	$	139	$	(84)	$	55
Developed technology	Developed technology	111,980		(72,788)		39,192		Developed technology	133		(86)		47
Purchased content		42,110		(30,477)		11,633
Trade names and trademarks								Trade names and trademarks	45		(9)		36
Software	Software	24,296		(13,925)		10,371		Software	53		(18)		35
Intangibles-in-progress	Intangibles-in-progress	2,941		—		2,941		Intangibles-in-progress	2		—		2
Lender licenses		400		(17)		383
Trade names and trademarks		4,900		(4,683)		217
Purchased content								Purchased content	4		(3)		1
Total	Total	$	290,527	$	(182,623)	$	107,904	Total	$	376	$	(200)	$	176


Washington						47-1645716
(State or other jurisdiction of						(I.R.S. Employer
incorporation or organization)						Identification No.)


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A Common Stock, par value $0.0001 per share	ZG	The Nasdaq Global Select Market
Class C Capital Stock, par value $0.0001 per share	Z	The Nasdaq Global Select Market


Residential real estate industry transaction fees13	$	96
U.S. mortgage origination revenue 14	76
Title and escrow services transaction fees 15	20
Rentals advertising spend16	11
Property management software revenue17	7
TAM	$	210


Home insurance18	$	121
Home renovation services19	657
Moving services20	19
Home appraisal services21	10


☒			ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


	Year Ended December 31,
	2019		2018		2017		2016		2015

Statement of Operations Data:
Revenue:
Homes	$	1,365,250	$	52,365	$	—	$	—	$	—
IMT	1,276,896		1,201,143		996,203		775,456		600,414
Mortgages	100,691		80,046		80,591		71,133		44,263
Total revenue	2,742,837		1,333,554		1,076,794		846,589		644,677
Cost of revenue (exclusive of amortization) (1)(2):
Homes	1,315,345		49,392		—		—		—
IMT	98,522		96,693		80,310		64,446		55,946
Mortgages	18,154		7,505		4,893		4,816		4,181
Total cost of revenue	1,432,021		153,590		85,203		69,262		60,127
Sales and marketing (1)	714,128		552,621		448,201		382,419		308,125
Technology and development (1)	477,347		410,818		319,985		255,583		184,477
General and administrative (1)	366,176		262,153		210,816		332,007		184,984
Impairment and restructuring costs (1)	—		79,000		174,000		—		35,551
Acquisition-related costs	—		2,332		463		1,423		16,576
Integration costs	650		2,015		—		—		—
Loss (gain) on divestiture of businesses	—		—		—		(1,251)		4,368
Total costs and expenses	2,990,322		1,462,529		1,238,668		1,039,443		794,208
Loss from operations	(247,485)		(128,975)		(161,874)		(192,854)		(149,531)
Loss on debt extinguishment	—		—		—		(22,757)		—
Other income	39,658		19,270		5,385		2,711		1,501
Interest expense	(101,792)		(41,255)		(27,517)		(7,408)		(5,489)
Loss before income taxes	(309,619)		(150,960)		(184,006)		(220,308)		(153,519)
Income tax benefit (expense)	4,258		31,102		89,586		(130)		4,645
Net loss	$	(305,361)	$	(119,858)	$	(94,420)	$	(220,438)	$	(148,874)
Net loss per share—basic and diluted	$	(1.48)	$	(0.61)	$	(0.51)	$	(1.22)	$	(0.88)
Weighted average shares outstanding—basic and diluted	206,380		197,944		186,453		180,149		169,767
(1) Includes share-based compensation as follows:
Cost of revenue	$	3,978	$	4,127	$	3,884	$	3,550	$	2,384
Sales and marketing	25,126		22,942		22,735		23,320		25,391
Technology and development	69,921		56,673		39,938		31,466		26,849
General and administrative	99,877		65,342		47,014		48,582		50,590
Impairment and restructuring costs	—		—		—		—		14,859
Total	$	198,902	$	149,084	$	113,571	$	106,918	$	120,073
(2) Amortization of website development costs and intangible assets included in technology and development	$	61,937	$	79,309	$	94,349	$	87,060	$	63,189


	At December 31,
	2019		2018		2017		2016		2015

Balance Sheet Data:
Cash, cash equivalents and investments	$	2,422,252	$	1,554,925	$	762,539	$	507,515	$	520,289
Working capital	2,589,637		1,605,200		723,138		485,617		493,672
Property and equipment, net	170,489		135,172		112,271		98,288		85,523
Total assets	6,131,973		4,291,116		3,230,517		3,149,677		3,135,700
Long-term debt	1,543,402		699,020		385,416		367,404		230,000
Other long-term liabilities	232,633		37,419		65,890		151,444		146,225
Total shareholders’ equity	3,435,421		3,267,179		2,660,823		2,533,587		2,679,053


	Year Ended December 31,							2018 to 2019 % Change	2017 to 2018 % Change
	2019	2018	2017

Visits	8,065.5	7,182.1	6,314.4	12	%	14	%


	Three Months Ended December 31,							2018 to 2019 % Change	2017 to 2018 % Change
	2019	2018	2017

Average Monthly Unique Users	172.6	157.2	151.6	10	%	4	%


	Year Ended December 31, 2019
	Homes		IMT		Mortgages		Corporate Items (2)		Consolidated
Reconciliation of Adjusted EBITDA to Net Loss and Income (Loss) Before Income Taxes:
Net loss (1)	N/A		N/A		N/A		N/A		$	(305,361)
Income tax benefit	N/A		N/A		N/A		N/A		(4,258)
Income (loss) before income taxes	$	(312,120)	$	80,060	$	(44,962)	$	(32,597)	$	(309,619)
Other income	—		—		(1,409)		(38,249)		(39,658)
Depreciation and amortization expense	8,414		73,369		5,684		—		87,467
Share-based compensation expense	32,390		150,434		16,078		—		198,902
Interest expense	29,990		—		956		70,846		101,792
Adjusted EBITDA	$	(241,326)	$	303,863	$	(23,653)	$	—	$	38,884


	Year Ended December 31, 2018
	Homes		IMT		Mortgages		Corporate Items (2)		Consolidated
Reconciliation of Adjusted EBITDA to Net Loss and Loss Before Income Taxes:
Net loss (1)	N/A		N/A		N/A		N/A		$	(119,858)
Income tax benefit	N/A		N/A		N/A		N/A		(31,102)
Loss before income taxes	$	(59,691)	$	(57,638)	$	(13,711)	$	(19,920)	$	(150,960)
Other income	—		—		(244)		(19,026)		(19,270)
Depreciation and amortization expense	1,323		91,232		6,836		—		99,391
Share-based compensation expense	7,731		131,404		9,949		—		149,084
Impairment costs	—		75,000		4,000		—		79,000
Acquisition-related costs	—		27		2,305		—		2,332
Interest expense	2,177		—		132		38,946		41,255
Adjusted EBITDA	$	(48,460)	$	240,025	$	9,267	$	—	$	200,832


	Year Ended December 31, 2017
	Homes		IMT		Mortgages		Corporate Items (2)		Consolidated
Reconciliation of Adjusted EBITDA to Net Loss and Loss Before Income Taxes:
Net loss (1)	N/A		N/A		N/A		N/A		$	(94,420)
Income tax benefit	N/A		N/A		N/A		N/A		(89,586)
Loss before income taxes	$	—	$	(151,747)	$	(10,127)	$	(22,132)	$	(184,006)
Other income	—		—		—		(5,385)		(5,385)
Depreciation and amortization expense	—		103,648		6,507		—		110,155
Share-based compensation expense	—		105,434		8,137		—		113,571
Impairment costs	—		161,850		12,150		—		174,000
Acquisition-related costs	—		463		—		—		463
Interest expense	—		—		—		27,517		27,517
Adjusted EBITDA	$	—	$	219,648	$	16,667	$	—	$	236,315


	Three Months Ended
	December 31, 2019		September 30, 2019		June 30, 2019		March 31, 2019		December 31, 2018		September 30, 2018		June 30, 2018		March 31, 2018

Statement of Operations Data:
Revenue:
Homes	$	603,228	$	384,626	$	248,924	$	128,472	$	41,347	$	11,018	$	—	$	—
IMT	319,665		335,290		323,669		298,272		300,708		313,638		305,941		280,856
Mortgages	21,054		25,292		26,985		27,360		23,280		18,438		19,305		19,023
Total revenue	943,947		745,208		599,578		454,104		365,335		343,094		325,246		299,879
Cost of revenue (exclusive of amortization) (1)(2):
Homes	581,398		370,796		240,732		122,419		39,080		10,226		—		86
IMT	23,894		24,318		26,059		24,251		24,623		25,186		24,290		22,594
Mortgages	4,325		4,721		4,430		4,678		3,769		1,260		1,237		1,239
Total cost of revenue	609,617		399,835		271,221		151,348		67,472		36,672		25,527		23,919
Sales and marketing (1)	183,761		181,347		187,433		161,587		138,869		128,734		147,727		137,291
Technology and development (1)	125,273		123,974		120,330		107,770		111,195		105,314		100,376		93,933
General and administrative (1)	99,070		88,493		82,839		95,774		74,758		70,743		60,579		56,073
Impairment costs	—		—		—		—		69,000		10,000		—		—
Acquisition-related costs	—		—		—		—		268		1,405		632		27
Integration costs	—		5		293		352		1,492		523		—		—
Total costs and expenses	1,017,721		793,654		662,116		516,831		463,054		353,391		334,841		311,243
Loss from operations	(73,774)		(48,446)		(62,538)		(62,727)		(97,719)		(10,297)		(9,595)		(11,364)
Other income	12,033		8,999		9,458		9,168		5,962		7,773		3,089		2,446
Interest expense	(39,927)		(26,502)		(18,897)		(16,466)		(14,327)		(12,668)		(7,187)		(7,073)
Loss before income taxes	(101,668)		(65,949)		(71,977)		(70,025)		(106,084)		(15,192)		(13,693)		(15,991)
Income tax benefit (expense)	458		1,300		—		2,500		8,402		14,700		10,600		(2,600)
Net loss	$	(101,210)	$	(64,649)	$	(71,977)	$	(67,525)	$	(97,682)	$	(492)	$	(3,093)	$	(18,591)
Net loss per share—basic and diluted	$	(0.49)	$	(0.31)	$	(0.35)	$	(0.33)	$	(0.48)	$	—	$	(0.02)	$	(0.10)
Weighted-average shares outstanding—basic and diluted	208,204		207,002		205,754		204,514		203,561		202,416		194,155		191,464
Other Financial Data:
Segment income (loss) before income taxes:
Homes segment	$	(107,923)	$	(87,870)	$	(71,122)	$	(45,205)	$	(28,812)	$	(16,428)	$	(10,061)	$	(4,390)
IMT segment	$	36,221	$	42,053	$	13,238	$	(11,452)	$	(57,454)	$	6,322	$	110	$	(6,616)
Mortgages segment	$	(12,654)	$	(12,254)	$	(10,438)	$	(9,616)	$	(13,086)	$	(623)	$	356	$	(358)
Adjusted EBITDA (3):
Homes segment	$	(82,525)	$	(67,825)	$	(56,452)	$	(34,524)	$	(23,186)	$	(13,409)	$	(8,352)	$	(3,513)
IMT segment	87,659		91,102		64,055		61,047		58,261		75,363		59,718		46,683
Mortgages segment	(8,311)		(7,435)		(5,306)		(2,601)		(2,718)		4,211		4,634		3,140
Total Adjusted EBITDA	$	(3,177)	$	15,842	$	2,297	$	23,922	$	32,357	$	66,165	$	56,000	$	46,310


	Average for the Three Months Ended
	December 31, 2019	September 30, 2019	June 30, 2019	March 31, 2019	December 31, 2018	September 30, 2018	June 30, 2018	March 31, 2018

Unique Users	172.6	195.6	194.3	181.1	157.2	186.6	186.1	175.5


Lender	Final Maturity Date	Maximum Borrowing Capacity		Outstanding Borrowings at December 31, 2019		Outstanding Borrowings at December 31, 2018		Weighted Average Interest Rate
Goldman Sachs Bank USA	April 20, 2022	$	500,000	$	39,244	$	—	4.41	%
Citibank, N.A.	January 31, 2022	500,000		296,369		—		5.54	%
Credit Suisse AG, Cayman Islands	July 31, 2021	500,000		355,911		116,700		5.63	%
	Total	$	1,500,000	$	691,524	$	—


	Payments Due By Period
	Total		Less Than 1 Year		1-3 Years		3-5 Years		More Than 5 Years

Convertible senior notes (1)	$	2,016,387	$	9,637	$	460,000	$	1,046,750	$	500,000
Interest on convertible senior notes (2)	106,909		26,994		43,491		24,966		11,458
Homes segment credit facilities (3)	703,991		703,991		—		—		—
Operating lease obligations (4)	342,918		38,914		83,833		77,031		143,140
Homes under contract (5)	163,405		163,405		—		—		—
Purchase obligations (6)	98,896		65,375		33,014		507		—
Mortgages segment credit facilities (7)	30,427		30,427		—		—		—
Total contractual obligations	$	3,462,933	$	1,038,743	$	620,338	$	1,149,254	$	654,598
____________________ (1) Includes the aggregate principal amount of the convertible senior notes. Refer to Note 15 of our Notes to Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K for maturity dates, stated interest rates and additional information on our convertible senior notes. (2) Includes the coupon interest on the convertible senior notes. Refer to Note 15 of our Notes to Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K for maturity dates, stated interest rates and additional information on our convertible senior notes. (3) Includes principal amounts due for amounts borrowed under the credit facilities used to provide capital for our Zillow Offers business. Amounts include $12.5 million of estimated interest payments. (4) For additional information regarding our operating leases, see Note 14 to our Notes to Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K. (5) We have obligations to purchase homes under contract through our Zillow Offers business. (6) We have noncancellable purchase obligations for content related to our mobile applications and websites and certain cloud computing costs. For additional information regarding our purchase obligations, see Note 20 to our Notes to Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K. (7) Includes principal amounts due for amounts borrowed under the warehouse line of credit and master repurchase agreement to finance mortgages originated through Zillow Home Loans. Amounts exclude an immaterial amount of estimated interest payments.


	December 31, 2019
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Market Value
Cash	$	194,955	$	—	$	—	$	194,955
Cash equivalents:
Money market funds	872,431		—		—		872,431
U.S. government agency securities	35,011		—		(2)		35,009
Commercial paper	31,113		—		—		31,113
Treasury bills	6,441		—		—		6,441
Corporate notes and bonds	1,065		—		—		1,065
Certificates of deposit	249		—		—		249
Short-term investments:
U.S. government agency securities	861,862		365		(73)		862,154
Corporate notes and bonds	159,382		91		(42)		159,431
Commercial paper	150,267		—		—		150,267
Treasury bills	79,989		14		—		80,003
Municipal securities	27,836		56		(3)		27,889
Certificates of deposit	1,245		—		—		1,245
Restricted cash	89,646		—		—		89,646
Total	$	2,511,492	$	526	$	(120)	$	2,511,898


	Amortized Cost		Estimated Fair Market Value
Due in one year or less	$	1,254,763	$	1,255,186
Due after one year through two years	25,818		25,803
Total	$	1,280,581	$	1,280,989


2020	$	43,986
2021	36,867
2022	7,231
2023	587
Total future amortization expense	$	88,671


~~Operating lease cost~~	$	~~35,837~~
~~Variable lease cost~~	~~11,231~~
~~Total lease cost~~	$	~~47,068~~


	Year Ended December 31,
	2022			2021 (1)			2020
Cash paid for amounts included in the measurement of operating lease liabilities, net of lease incentives of $9, $— and $19 for the years ended December 31, 2022, 2021 and 2020, respectively	$	34		$	43		$	18
Right of use assets obtained in exchange for new operating lease obligations	$	19		$	(36)		$	—
Weighted average remaining lease term for operating leases	7 years			7 years			8 years
Weighted average discount rate for operating leases	8.2		%	7.2		%	6.5		%

(1) During the year ended December 31, 2021, we modified our existing office space lease for our corporate headquarters in Seattle, Washington, whereby the renewal options for certain existing office space which we had previously included in the measurement of the lease liability and right of use asset were removed and we partially terminated our lease early for certain existing office space, resulting in a reduction of the lease liability and right of use asset of approximately $44 million and $42 million, respectively. The lease term for certain other existing leased office space in Seattle was extended such that it now expires in 2032 and retains the two five-year renewal options, partially offsetting the reduction of the lease liability and right of use asset described above.


2019	$	29,085
2020	38,060
2021	40,099
2022	37,721
2023	36,458
All future years	85,462
Total future minimum lease payments	$	266,885


	Year Ended December 31, 2021								Year Ended December 31, 2020
	2023 Notes		2024 Notes		2026 Notes		Total		2021 Notes
Aggregate principal amount settled	$	374	$	65	$	1	$	440	$	460
Cash paid	1		—		—		1		195
Shares of Class C capital stock issued	4,752		1,485		28		6,265		5,820
Total fair value of consideration transferred (1)	$	572	$	200	$	4	$	776	$	783
(Gain) loss on extinguishment of debt:
Consideration allocated to the liability component (2)	$	349	$	53	$	1	$	403	$	430
Carrying value of the liability component, net of unamortized debt discount and debt issuance costs	334		51		1		386		431
(Gain) loss on extinguishment of debt	$	15	$	2	$	—	$	17	$	(1)
Consideration allocated to the equity component	$	223	$	147	$	3	$	373	$	353

(1) For convertible senior notes converted by note holders, the total fair value of consideration transferred includes the value of shares transferred to note holders using the daily volume weighted-average price of our Class C capital stock on the conversion date and an immaterial amount of cash paid in lieu of fractional shares. For convertible senior notes redeemed, the total fair value of consideration transferred comprises cash transferred to note holders to settle the related notes. For convertible senior notes repurchased in the year ended December 31, 2020, the total value of consideration transferred includes the value of shares transferred to note holders using the daily volume weighted-average price of our Class C capital stock on the date of transfer as well as cash transferred to note holders to settle the related notes.

(2) Consideration allocated to the liability component is based on the fair value of the liability component immediately prior to settlement, which was calculated using a discounted cash flow analysis with a market interest rate of a similar liability that does not have an associated convertible feature.


Maturity Date	Initial Cap Price		Cap Price Premium
September 1, 2026	$	80.5750	150	%
September 1, 2024	72.5175		125	%
July 1, 2023	105.45		85��	%
December 1, 2021	69.19		85	%


Balance at January 1, ~~2017~~2020	$	~~15,395~~40
Gross increases—~~prior and~~ current period tax positions	~~5,216~~9
Balance at December 31, 2020	$	49
Gross increases—current period tax positions	17
Gross increases—prior period tax positions	~~1,002~~9
Balance at December 31, ~~2017~~2021	$	~~21,613~~75
Gross increases—current period tax positions	~~6,421~~17
Gross increases—prior period tax positions	~~591~~4
Gross decreases—prior period tax positions	(6)
Balance at December 31, ~~2018~~2022	$	~~28,625~~90
~~Gross increases—current period tax positions~~	~~9,021~~
~~Gross increases—prior period tax positions~~	~~1,786~~
~~Balance at December 31, 2019~~	$	~~39,432~~


	December 31, 2019	December 31, 2018
Option awards outstanding	29,634,296	27,310,110
Restricted stock units outstanding	7,052,767	5,266,324
Class A common stock and Class C capital stock available for grant under 2011 Plan	1,466,856	3,675,082
Class C capital stock available for grant under the 2019 Equity Inducement Plan	7,898,167	—
Shares issuable upon conversion of outstanding Class B common stock	6,217,447	6,217,447
Total	52,269,533	42,468,963


Shares of Class C capital stock issued	3,164
Weighted-average issuance price per share	$	174.05
Gross proceeds (1)	$	551


	Number of Shares Subject to Existing Options (in thousands)	Weighted- Average Exercise Price Per Share		Weighted- Average Remaining Contractual Life (Years)	Aggregate Intrinsic Value (in millions)
Outstanding at January 1, 2022	25,746	$	72.86	7.48	$	354
Granted	7,527	45.22
Exercised	(1,129)	39.97
Forfeited or cancelled	(3,546)	83.46
Outstanding at December 31, 2022	28,598	44.90		7.08	15
Vested and exercisable at December 31, 2022	16,813	44.67		5.98	14


	Restricted Stock Units	Weighted- Average Grant- Date Fair Value
Unvested outstanding at January 1, 2019	5,266,324	$	42.19
Granted	5,313,377	38.18
Vested	(2,244,631)	40.04
Forfeited or cancelled	(1,282,303)	41.35
Unvested outstanding at December 31, 2019	7,052,767	40.01


	Restricted Stock Units (in thousands)	Weighted- Average Grant- Date Fair Value
Unvested outstanding at January 1, 2022	6,074	$	66.51
Granted	12,066	41.72
Vested	(4,722)	52.39
Forfeited	(2,488)	59.48
Unvested outstanding at December 31, 2022	10,930	46.85


Maturity Date	Shares	Conversion Price per Share
September 1, 2026	11,464	$	43.51
May 15, 2025	8,408	67.20
September 1, 2024	13,983	43.51


Maturity Date	Conversion Spread	Conversion Price per Share
September 1, 2026	11,492	$	43.51
September 1, 2024	15,468	43.51
July 1, 2023	4,769	78.37
December 1, 2021	8,785	52.36


	Purchase Obligations
2023	$	79
2024	21
2025	9
2026	2
Total future purchase commitments	$	111