UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


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

For the quarterly period ended ~~June 30, 2020~~March 31, 2021


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

Commission File Number: 001-36853

ZILLOW GROUP, INC.

(Exact name of registrant as specified in its charter)


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

1301 Second Avenue, Floor 31,

Seattle, Washington 98101

(Address of principal executive offices) (Zip Code)

(206) 470-7000

~~@ZillowGroup~~

(Registrant’s telephone number, including area code)

_____________________________________________________

Securities registered pursuant to Section 12(b) of the Act:


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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~July 30, 2020, 60,002,842~~April 27, 2021, 61,335,992 shares of Class A common stock, 6,217,447 shares of Class B common stock, and ~~160,765,729~~180,104,154 shares of Class C capital stock were outstanding.

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ZILLOW GROUP, INC.

Quarterly Report on Form 10-Q

For the Three Months Ended ~~June 30, 2020~~March 31, 2021

TABLE OF CONTENTS

Table of Contents

As used in this Quarterly Report on Form 10-Q, the terms “Zillow Group,” “the Company,” “we,” “us” and “our” refer to Zillow Group, Inc., unless the context indicates otherwise.

NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, including Part I, Item 2 (Management’s Discussion and Analysis of Financial Condition and Results of Operations), contains forward-looking statements based on our management’s beliefs and assumptions and on information currently available to our management. Forward-looking statements include all statements that are not historical facts and generally may be identified by terms such as “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “could,” “would,” “project,” “plan,” “expect” or the negative or plural of these words or similar expressions.

These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those risks, uncertainties and assumptions described in Part I, Item 1A (Risk Factors) in our Annual Report on Form 10-K for the year ended December 31, ~~2019 and in Part II, Item 1A (Risk Factors) in this Quarterly Report on Form 10-Q,~~2020, including, but not limited to:

•the impact of the ~~novel coronavirus (“COVID-19”)~~COVID-19 pandemic or other public health crises and any associated economic downturn on our future financial position, operations and financial performance;

•the magnitude, duration and severity of the COVID-19 ~~pandemic;~~pandemic and the availability and widespread distribution and use of effective vaccines;

•the impact of actions taken by governments, businesses and individuals in response to the COVID-19 ~~pandemic;~~pandemic, including changes in laws or regulations that limit our ability to operate;

•the current and future health and stability of the economy, financial conditions and residential housing market, including any extended slowdown in the real estate markets as a result of ~~COVID-19;~~the COVID-19 pandemic;

•changes in laws or regulations applicable to our business, employees, products or services, including current and future laws, regulations and orders that limit our ability to operate in light of ~~COVID-19;~~the COVID-19 pandemic;

•the satisfaction of conditions precedent to the closing of Zillow Group’s proposed acquisition of ShowingTime.com, Inc., including expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Act;

•changes in general economic and financial conditions that reduce demand for our products and services, lower our ~~profit margins~~profitability or reduce our access to credit;

•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;

•acquisitions, strategic partnerships, joint ventures, capital-raising activities or other corporate transactions or commitments by us or our competitors;

•actual or anticipated changes in technology, products, markets or services by us or our competitors;

•ability to obtain or maintain licenses and permits to support our current and future businesses;

•~~actual or anticipated changes~~ability to ~~our products~~comply with MLS rules and ~~services;~~

•~~ability~~requirements to access and use listing data, and to maintain or establish relationships with listings and data providers;

•ability to operate our mortgage originations business, including the ability to obtain sufficient financing;

•fluctuations in the valuation of companies perceived by investors to be comparable to us;

•the impact of natural disasters and other catastrophic events;

•the impact of pending or future litigation; and

•issuance of new or updated research or reports by securities analysts.

Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the effect of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this report may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

You should not rely on forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. Moreover, except as required by law, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements, and we undertake no obligation to update publicly any forward-looking statements for any reason after the date of this report to conform these statements to actual results or to changes in our expectations.

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WHERE YOU CAN FIND MORE INFORMATION

Our filings with the Securities and Exchange Commission, or SEC, including our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports, are available on the “Investors” section of our website at www.zillowgroup.com, free of charge, as soon as reasonably practicable after the electronic filing of these reports with the SEC. The information contained on our website is not a part of this ~~quarterly report~~Quarterly Report on Form 10-Q or any other document we file with the SEC.

Investors and others should note that Zillow Group announces material financial information to its investors using its press releases, SEC filings and public conference calls and webcasts. Zillow Group intends to also use the following channels as a means of disclosing information about Zillow Group, its services and other matters and for complying with its disclosure obligations under Regulation FD:

•Zillow Group Investor Relations Webpage (http://investors.zillowgroup.com)

•Zillow Group Investor Relations Blog (http://www.zillowgroup.com/ir-blog)

•Zillow Group Twitter Account (https://twitter.com/zillowgroup)

The information Zillow Group posts through these channels may be deemed material. Accordingly, investors should monitor these channels, in addition to following Zillow Group’s press releases, SEC filings and public conference calls and webcasts. This list may be updated from time to time. The information we post through these channels is not a part of this ~~quarterly report~~Quarterly Report on Form 10-Q or any other document we file with the SEC, and the inclusion of our website addresses and Twitter account are as inactive textual references only.

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PART I – FINANCIAL INFORMATION

Item 1. Financial Statements (unaudited)

ZILLOW GROUP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share data, unaudited)


		June 30, 2020		December 31, 2019			March 31, 2021		December 31, 2020
Assets	Assets					Assets
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	2,045,474	$	1,141,263	Cash and cash equivalents	$	3,401,762	$	1,703,130
Short-term investments	Short-term investments	1,491,167		1,280,989		Short-term investments	1,294,051		2,218,108
Accounts receivable, net of allowance for doubtful accounts of $2,282 and $4,522 at June 30, 2020 and December 31, 2019, respectively		66,878		67,005
Accounts receivable, net of allowance for doubtful accounts of $3,460 and $3,427 at March 31, 2021 and December 31, 2020, respectively						Accounts receivable, net of allowance for doubtful accounts of $3,460 and $3,427 at March 31, 2021 and December 31, 2020, respectively	82,461		69,940
Mortgage loans held for sale	Mortgage loans held for sale	75,021		36,507		Mortgage loans held for sale	274,319		330,758
Inventory	Inventory	135,401		836,627		Inventory	472,397		491,293
Prepaid expenses and other current assets	Prepaid expenses and other current assets	56,373		58,117		Prepaid expenses and other current assets	107,877		75,846
Restricted cash	Restricted cash	33,620		89,646		Restricted cash	120,713		75,805
Total current assets	Total current assets	3,903,934		3,510,154		Total current assets	5,753,580		4,964,880
Contract cost assets	Contract cost assets	47,747		45,209		Contract cost assets	50,182		50,719
Property and equipment, net	Property and equipment, net	195,747		170,489		Property and equipment, net	190,234		196,152
Right of use assets	Right of use assets	199,422		212,153		Right of use assets	180,610		187,960
Goodwill	Goodwill	1,984,907		1,984,907		Goodwill	1,984,907		1,984,907
Intangible assets, net	Intangible assets, net	106,990		190,567		Intangible assets, net	87,711		94,767
Other assets	Other assets	11,041		18,494		Other assets	8,678		7,175
Total assets	Total assets	$	6,449,788	$	6,131,973	Total assets	$	8,255,902	$	7,486,560
Liabilities and shareholders’ equity	Liabilities and shareholders’ equity					Liabilities and shareholders’ equity
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	14,307	$	8,343	Accounts payable	$	17,044	$	18,974
Accrued expenses and other current liabilities	Accrued expenses and other current liabilities	74,646		85,442		Accrued expenses and other current liabilities	121,692		94,487
Accrued compensation and benefits	Accrued compensation and benefits	34,520		37,805		Accrued compensation and benefits	49,844		47,666
Borrowings under credit facilities	Borrowings under credit facilities	187,032		721,951		Borrowings under credit facilities	662,175		670,209
Deferred revenue	Deferred revenue	44,514		39,747		Deferred revenue	54,192		48,995
Lease liabilities, current portion	Lease liabilities, current portion	22,789		17,592		Lease liabilities, current portion	28,465		28,310
Convertible senior notes, current portion		9,637		9,637
Total current liabilities	Total current liabilities	387,445		920,517		Total current liabilities	933,412		908,641
Lease liabilities, net of current portion	Lease liabilities, net of current portion	214,752		220,445		Lease liabilities, net of current portion	200,762		207,723
Convertible senior notes, net of current portion		1,810,341		1,543,402
Deferred tax liabilities and other long-term liabilities		14,192		12,188
Convertible senior notes						Convertible senior notes	1,597,205		1,613,523
Other long-term liabilities						Other long-term liabilities	14,485		14,857
Total liabilities	Total liabilities	2,426,730		2,696,552		Total liabilities	2,745,864		2,744,744
Commitments and contingencies (Note 17)
Commitments and contingencies (Note 16)						Commitments and contingencies (Note 16)	0		0
Shareholders’ equity:	Shareholders’ equity:					Shareholders’ equity:
Preferred stock, $0.0001 par value; 30,000,000 shares authorized; 0 shares issued and outstanding	Preferred stock, $0.0001 par value; 30,000,000 shares authorized; 0 shares issued and outstanding	—		—		Preferred stock, $0.0001 par value; 30,000,000 shares authorized; 0 shares issued and outstanding	0		0
Class A common stock, $0.0001 par value; 1,245,000,000 shares authorized; 59,850,004 and 58,739,989 shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively		6		6
Class A common stock, $0.0001 par value; 1,245,000,000 shares authorized; 61,335,992 and 61,101,303 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively						Class A common stock, $0.0001 par value; 1,245,000,000 shares authorized; 61,335,992 and 61,101,303 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively	6		6
Class B common stock, $0.0001 par value; 15,000,000 shares authorized; 6,217,447 shares issued and outstanding	Class B common stock, $0.0001 par value; 15,000,000 shares authorized; 6,217,447 shares issued and outstanding	1		1		Class B common stock, $0.0001 par value; 15,000,000 shares authorized; 6,217,447 shares issued and outstanding	1		1
Class C capital stock, $0.0001 par value; 600,000,000 shares authorized; 159,974,485 and 144,109,419 shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively		16		14
Class C capital stock, $0.0001 par value; 600,000,000 shares authorized; 179,754,423 and 173,207,170 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively						Class C capital stock, $0.0001 par value; 600,000,000 shares authorized; 179,754,423 and 173,207,170 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively	18		17
Additional paid-in capital	Additional paid-in capital	5,246,371		4,412,200		Additional paid-in capital	6,596,850		5,880,883
Accumulated other comprehensive income	Accumulated other comprehensive income	1,525		340		Accumulated other comprehensive income	454		164
Accumulated deficit	Accumulated deficit	(1,224,861)		(977,140)		Accumulated deficit	(1,087,291)		(1,139,255)
Total shareholders’ equity	Total shareholders’ equity	4,023,058		3,435,421		Total shareholders’ equity	5,510,038		4,741,816
Total liabilities and shareholders’ equity	Total liabilities and shareholders’ equity	$	6,449,788	$	6,131,973	Total liabilities and shareholders’ equity	$	8,255,902	$	7,486,560

See accompanying notes to the condensed consolidated financial statements.

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ZILLOW GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data, unaudited)


		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended March 31,
		2020		2019		2020		2019			2021		2020
Revenue:	Revenue:									Revenue:
Homes	Homes	$	454,252	$	248,924	$	1,224,125	$	377,396	Homes	$	704,152	$	769,873
IMT	IMT	280,339		323,669		611,005		621,941		IMT	446,328		330,666
Mortgages	Mortgages	33,761		26,985		59,043		54,345		Mortgages	67,960		25,282
Total revenue	Total revenue	768,352		599,578		1,894,173		1,053,682		Total revenue	1,218,440		1,125,821
Cost of revenue (exclusive of amortization) (1):	Cost of revenue (exclusive of amortization) (1):									Cost of revenue (exclusive of amortization) (1):
Homes	Homes	431,788		240,732		1,163,987		363,151		Homes	640,618		732,199
IMT	IMT	23,387		26,059		47,705		50,310		IMT	28,016		24,318
Mortgages	Mortgages	5,896		4,430		11,051		9,108		Mortgages	18,396		5,155
Total cost of revenue	Total cost of revenue	461,071		271,221		1,222,743		422,569		Total cost of revenue	687,030		761,672
Sales and marketing	Sales and marketing	155,598		187,433		360,246		349,020		Sales and marketing	193,593		204,648
Technology and development	Technology and development	128,857		120,330		263,775		228,100		Technology and development	148,856		134,918
General and administrative	General and administrative	85,511		82,839		177,796		178,613		General and administrative	100,551		92,285
Impairment costs	Impairment costs	—		—		76,800		—		Impairment costs	0		76,800
Integration costs		—		293		—		645
Acquisition-related costs										Acquisition-related costs	817		0
Total costs and expenses	Total costs and expenses	831,037		662,116		2,101,360		1,178,947		Total costs and expenses	1,130,847		1,270,323
Loss from operations		(62,685)		(62,538)		(207,187)		(125,265)
Gain on partial extinguishment of 2021 Notes		6,391		—		6,391		—
Income (loss) from operations										Income (loss) from operations	87,593		(144,502)
Loss on extinguishment of debt										Loss on extinguishment of debt	(1,403)		0
Other income	Other income	10,115		9,458		19,708		18,626		Other income	2,439		9,593
Interest expense	Interest expense	(37,590)		(18,897)		(75,182)		(35,363)		Interest expense	(39,555)		(37,592)
Loss before income taxes		(83,769)		(71,977)		(256,270)		(142,002)
Income tax benefit (expense)		(679)		—		8,549		2,500
Net loss		$	(84,448)	$	(71,977)	$	(247,721)	$	(139,502)
Net loss per share — basic and diluted		$	(0.38)	$	(0.35)	$	(1.15)	$	(0.68)
Weighted-average shares outstanding — basic and diluted		219,467		205,754		215,070		205,137
Income (loss) before income taxes										Income (loss) before income taxes	49,074		(172,501)
Income tax benefit										Income tax benefit	2,890		9,228
Net income (loss)										Net income (loss)	$	51,964	$	(163,273)
Net income (loss) per share:										Net income (loss) per share:
Basic										Basic	$	0.21	$	(0.78)
Diluted										Diluted	$	0.20	$	(0.78)
Weighted-average shares outstanding:										Weighted-average shares outstanding:
Basic										Basic	243,234		210,674
Diluted										Diluted	259,346		210,674
____________________ (1) Amortization of website development costs and intangible assets included in technology and development	____________________ (1) Amortization of website development costs and intangible assets included in technology and development	$	18,857	$	14,656	$	36,041	$	29,056	____________________ (1) Amortization of website development costs and intangible assets included in technology and development	$	20,838	$	17,184

See accompanying notes to the condensed consolidated financial statements.

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ZILLOW GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE ~~LOSS~~INCOME (LOSS)

(in thousands, unaudited)

Three Months Ended
June 30, Six Months Ended
June 30,
2020 2019 2020 2019
Net loss $ (84,448) $ (71,977) $ (247,721) $ (139,502)
Other comprehensive income (loss):
Unrealized gains (losses) on investments (2,806) 751 796 1,895
Reclassification adjustment for net investment (gains) losses included in net loss (62) — 372 —
Net unrealized gains (losses) on investments (2,868) 751 1,168 1,895
Currency translation adjustments 107 (52) 17 (94)
Total other comprehensive income (loss) (2,761) 699 1,185 1,801
Comprehensive loss $ (87,209) $ (71,278) $ (246,536) $ (137,701)


	Three Months Ended March 31,
	2021		2020
Net income (loss)	$	51,964	$	(163,273)
Other comprehensive income:
Unrealized gains on investments	261		3,602
Reclassification adjustment for net investment gains included in net income (loss)	0		434
Net unrealized gains on investments	261		4,036
Currency translation adjustments	29		(90)
Total other comprehensive income	290		3,946
Comprehensive income (loss)	$	52,254	$	(159,327)

See accompanying notes to the condensed consolidated financial statements.

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ZILLOW GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(in thousands, except share data, unaudited)

Class A Common
Stock, Class B
Common Stock and
Class C Capital Stock Additional
Paid-In
Capital Accumulated
Deficit Accumulated
Other
Comprehensive
Income Total
Shareholders’
Equity
Shares Amount
Balance at April 1, 2020 212,913,139 $ 22 $ 4,551,866 $ (1,140,413) $ 4,286 $ 3,415,761
Issuance of common and capital stock upon exercise of stock options 3,117,483 — 92,783 — — 92,783
Vesting of restricted stock units 775,249 — — — — —
Shares and value of restricted stock units withheld for tax liability (6) — — — — —
Share-based compensation expense — — 57,171 — — 57,171
Issuance of Class C capital stock in connection with equity offering, net of issuance costs of $10,877 8,800,000 1 411,522 — — 411,523
Equity component of issuance of 2025 Notes, net of issuance costs of $3,279 — — 154,813 — — 154,813
Partial repurchase of 2021 Notes 753,936 — (21,784) — — (21,784)
Partial unwind of capped call transactions for 2021 Notes (317,865) — — — — —
Net loss — — — (84,448) — (84,448)
Other comprehensive loss — — — — (2,761) (2,761)
Balance at June 30, 2020 226,041,936 $ 23 $ 5,246,371 $ (1,224,861) $ 1,525 $ 4,023,058


	Class A Common Stock, Class B Common Stock and Class C Capital Stock			Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Income		Total Shareholders’ Equity

	Shares	Amount
Balance at January 1, 2021	240,525,920	$	24	$	5,880,883	$	(1,139,255)	$	164	$	4,741,816
Issuance of common and capital stock upon exercise of stock options	1,602,896	0		61,149		—		—		61,149
Vesting of restricted stock units	813,471	—		—		—		—		—
Restricted stock units withheld for tax liability	(622)	—		(124)		—		—		(124)
Share-based compensation expense	—	—		67,386		—		—		67,386
Issuance of Class C capital stock in connection with equity offering, net of issuance costs of $6,054	3,163,502	1		544,557		—		—		544,558
Conversion of convertible senior notes	1,202,720	—		42,999		—		—		42,999
Unwind of capped call transactions	(25)	—		—		—		—		—
Net income	—	—		—		51,964		—		51,964
Other comprehensive income	—	—		—		—		290		290
Balance at March 31, 2021	247,307,862	$	25	$	6,596,850	$	(1,087,291)	$	454	$	5,510,038

~~Table of Contents~~

Class A Common
Stock, Class B
Common Stock and
Class C Capital Stock Additional
Paid-In
Capital Accumulated
Deficit
Accumulated
Other
Comprehensive
Income
Total
Shareholders’
Equity
Shares Amount
Balance at January 1, 2020 209,066,855 $ 21 $ 4,412,200 $ (977,140) $ 340 $ 3,435,421
Issuance of common and capital stock upon exercise of stock options 6,324,858 1 184,984 — — 184,985
Vesting of restricted stock units 1,414,158 — — — — —
Shares and value of restricted stock units withheld for tax liability (6) — — — — —
Share-based compensation expense — — 104,636 — — 104,636
Issuance of Class C capital stock in connection with equity offering, net of issuance costs of $10,877 8,800,000 1 411,522 — — 411,523
Equity component of issuance of 2025 Notes, net of issuance costs of $3,279 — — 154,813 — — 154,813
Partial repurchase of 2021 Notes 753,936 — (21,784) — — (21,784)
Partial unwind of capped call transactions for 2021 Notes (317,865) — — — — —
Net loss — — — (247,721) — (247,721)
Other comprehensive income — — — — 1,185 1,185
Balance at June 30, 2020 226,041,936 $ 23 $ 5,246,371 $ (1,224,861) $ 1,525 $ 4,023,058


		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		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	Total Shareholders’ Equity
			Shares			Amount
Balance at January 1, 2019		203,904,265		$	21		$	3,939,842					$	(671,779)			$	(905)		$	3,267,179
Balance at January 1, 2020															Balance at January 1, 2020	209,066,855			$	21		$	4,412,200	$	(977,140)	$	340	$	3,435,421
Issuance of common and capital stock upon exercise of stock options	Issuance of common and capital stock upon exercise of stock options	1,543,850		—			32,997		—		—		32,997		Issuance of common and capital stock upon exercise of stock options	3,207,375			1			92,201		—		—		92,202
Vesting of restricted stock units	Vesting of restricted stock units	1,065,607		—			—		—		—		—		Vesting of restricted stock units	638,909			—			—		—		—		—
Shares and value of restricted stock units withheld for tax liability		(86)		—			(3)		—		—		(3)
Share-based compensation expense	Share-based compensation expense	—		—			115,634		—		—		115,634		Share-based compensation expense	—			—			47,465		—		—		47,465
Net loss	Net loss	—		—			—		(139,502)		—		(139,502)		Net loss	—			—			—		(163,273)		—		(163,273)
Other comprehensive income	Other comprehensive income	—		—			—		—		1,801		1,801		Other comprehensive income	—			—			—		—		3,946		3,946
Balance at June 30, 2019		206,513,636		$	21		$	4,088,470	$	(811,281)	$	896	$	3,278,106
Balance at March 31, 2020															Balance at March 31, 2020	212,913,139			$	22		$	4,551,866	$	(1,140,413)	$	4,286	$	3,415,761

See accompanying notes to the condensed consolidated financial statements.

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ZILLOW GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands, unaudited)


		Six Months Ended June 30,							Three Months Ended March 31,
		2020		2019			2021		2020
Operating activities	Operating activities					Operating activities
Net loss		$	(247,721)	$	(139,502)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Net income (loss)						Net income (loss)	$	51,964	$	(163,273)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:						Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	Depreciation and amortization	55,199		41,728		Depreciation and amortization	28,899		29,026
Share-based compensation expense	Share-based compensation expense	96,146		109,756		Share-based compensation expense	63,673		43,795
Amortization of right of use assets	Amortization of right of use assets	12,731		10,572		Amortization of right of use assets	7,350		6,465
Amortization of contract cost assets	Amortization of contract cost assets	17,070		17,880		Amortization of contract cost assets	10,130		8,415
Amortization of discount and issuance costs on convertible senior notes maturing in 2021, 2023, 2024, 2025 and 2026		47,746		17,799
Gain on partial extinguishment of 2021 Notes		(6,391)		—
Amortization of debt discount and debt issuance costs						Amortization of debt discount and debt issuance costs	25,271		22,547
Loss on extinguishment of debt						Loss on extinguishment of debt	1,403		0
Impairment costs	Impairment costs	76,800		—		Impairment costs	0		76,800
Deferred income taxes	Deferred income taxes	(8,549)		(2,500)		Deferred income taxes	(2,890)		(9,228)
(Gain) loss on disposal of property and equipment and other assets		(2,658)		3,878
Loss on disposal of property and equipment and other assets						Loss on disposal of property and equipment and other assets	4,418		1,952
Credit loss expense	Credit loss expense	1,614		706		Credit loss expense	128		558
Net loss on investment securities	Net loss on investment securities	372		—		Net loss on investment securities	0		434
Accretion of bond discount		(303)		(3,695)
Amortization (accretion) of bond premium (discount)						Amortization (accretion) of bond premium (discount)	4,014		(473)
Changes in operating assets and liabilities:	Changes in operating assets and liabilities:					Changes in operating assets and liabilities:
Accounts receivable	Accounts receivable	(1,487)		(16,884)		Accounts receivable	(12,649)		(5,335)
Mortgage loans held for sale	Mortgage loans held for sale	(38,514)		(3,244)		Mortgage loans held for sale	56,439		(341)
Inventory	Inventory	701,145		(389,994)		Inventory	18,893		302,593
Prepaid expenses and other assets	Prepaid expenses and other assets	(771)		(2,015)		Prepaid expenses and other assets	(28,643)		(2,916)
Contract cost assets						Contract cost assets	(9,593)		(9,771)
Lease liabilities	Lease liabilities	(495)		(11,946)		Lease liabilities	(6,806)		(1,625)
Contract cost assets		(19,608)		(18,332)
Accounts payable	Accounts payable	7,504		1,256		Accounts payable	(2,235)		7,673
Accrued expenses and other current liabilities	Accrued expenses and other current liabilities	(8,741)		6,952		Accrued expenses and other current liabilities	24,889		4,588
Accrued compensation and benefits	Accrued compensation and benefits	(3,285)		613		Accrued compensation and benefits	2,178		(4,967)
Deferred revenue	Deferred revenue	4,767		3,000		Deferred revenue	5,197		(4,400)
Other long-term liabilities	Other long-term liabilities	10,049		149		Other long-term liabilities	(372)		(527)
Net cash provided by (used in) operating activities		692,620		(373,823)
Net cash provided by operating activities						Net cash provided by operating activities	241,658		301,990
Investing activities	Investing activities					Investing activities
Proceeds from maturities of investments	Proceeds from maturities of investments	701,266		539,312		Proceeds from maturities of investments	920,304		296,272
Proceeds from sales of investments	Proceeds from sales of investments	116,394		—		Proceeds from sales of investments	0		53,997
Purchases of investments	Purchases of investments	(1,026,233)		(302,891)		Purchases of investments	0		(58,459)
Purchases of property and equipment	Purchases of property and equipment	(54,653)		(29,672)		Purchases of property and equipment	(11,485)		(32,966)
Purchases of intangible assets	Purchases of intangible assets	(11,408)		(8,927)		Purchases of intangible assets	(4,485)		(4,503)
Proceeds from sale of equity investment		10,000		—
Net cash provided by (used in) investing activities		(264,634)		197,822
Net cash provided by investing activities						Net cash provided by investing activities	904,334		254,341
Financing activities	Financing activities					Financing activities
Proceeds from issuance of 2025 Notes, net of issuance costs		553,282		—
Proceeds from issuance of Class C capital stock, net of issuance costs	Proceeds from issuance of Class C capital stock, net of issuance costs	411,522		—		Proceeds from issuance of Class C capital stock, net of issuance costs	544,557		0
Partial extinguishment of 2021 Notes		(194,670)		—
Proceeds from borrowings on credit facilities	Proceeds from borrowings on credit facilities	43,200		293,099		Proceeds from borrowings on credit facilities	126,010		34,460
Repayments of borrowings on credit facilities	Repayments of borrowings on credit facilities	(617,506)		—		Repayments of borrowings on credit facilities	(88,340)		(294,150)
Net borrowings (repayments) on warehouse lines of credit and repurchase agreement		39,387		(2,961)
Net borrowings (repayments) on warehouse line of credit and repurchase agreements						Net borrowings (repayments) on warehouse line of credit and repurchase agreements	(45,704)		4,386
Proceeds from exercise of stock options	Proceeds from exercise of stock options	184,984		32,997		Proceeds from exercise of stock options	61,149		92,202
Value of equity awards withheld for tax liability	Value of equity awards withheld for tax liability	—		3		Value of equity awards withheld for tax liability	(124)		0
Net cash provided by financing activities		420,199		323,138
Net cash provided by (used in) financing activities						Net cash provided by (used in) financing activities	597,548		(163,102)
Net increase in cash, cash equivalents and restricted cash during period	Net increase in cash, cash equivalents and restricted cash during period	848,185		147,137		Net increase in cash, cash equivalents and restricted cash during period	1,743,540		393,229
Cash, cash equivalents and restricted cash at beginning of period	Cash, cash equivalents and restricted cash at beginning of period	1,230,909		663,443		Cash, cash equivalents and restricted cash at beginning of period	1,778,935		1,230,909
Cash, cash equivalents and restricted cash at end of period	Cash, cash equivalents and restricted cash at end of period	$	2,079,094	$	810,580	Cash, cash equivalents and restricted cash at end of period	$	3,522,475	$	1,624,138
Supplemental disclosures of cash flow information	Supplemental disclosures of cash flow information					Supplemental disclosures of cash flow information
Cash paid for interest	Cash paid for interest	$	29,201	$	16,616	Cash paid for interest	$	14,191	$	17,038
Noncash transactions:	Noncash transactions:					Noncash transactions:
Capitalized share-based compensation	Capitalized share-based compensation	$	8,490	$	5,878	Capitalized share-based compensation	$	3,713	$	3,670
Write-off of fully depreciated property and equipment	Write-off of fully depreciated property and equipment	$	6,942	$	9,867	Write-off of fully depreciated property and equipment	$	11,603	$	4,143
Write-off of fully amortized intangible assets	Write-off of fully amortized intangible assets	$	—	$	3,311	Write-off of fully amortized intangible assets	$	1,300	$	0
Property and equipment purchased on account	Property and equipment purchased on account	$	5,305	$	2,408	Property and equipment purchased on account	$	905	$	9,445

See accompanying notes to the condensed consolidated financial statements.

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ZILLOW GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 1. Organization and Description of Business

Zillow Group, Inc.~~, the largest portfolio of~~ is reimagining real estate ~~brands on mobile and~~to make it easier to unlock life’s next chapter. As the ~~web, is building a trusted, on-demand~~most visited real estate ~~experience. Whether~~website in the United States, Zillow and its affiliates offer customers an on-demand experience for selling, buying, renting or financing ~~customers can turn to the Zillow family of businesses to find~~with transparency and ~~get into their next home with speed, certainty and ease.~~

~~In addition to Zillow’s for-sale and rental listings,~~nearly seamless end-to-end service. Zillow Offers buys and sells homes directly in dozens of markets across the country, allowing sellers control over their timeline. ~~Zillow Closing Services offers customers title and escrow services to support a more seamless transaction experience.~~ Zillow Home Loans, our affiliate lender, provides our customers with an easy option to get pre-approved and secure financing for their next home purchase. In September 2020, Zillow launched Zillow Homes, Inc., a licensed brokerage entity, to streamline Zillow Offers transactions.

Other consumer brands include Trulia, StreetEasy, HotPads ~~Naked Apartments~~ and Out East. In addition, Zillow Group provides a comprehensive suite of marketing software and technology solutions which include Mortech, dotloop, Bridge Interactive and New Home Feed. Zillow, Inc. was incorporated as a Washington corporation in December 2004, and we launched 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~~, and upon the closing of the Trulia acquisition in February 2015, each of Zillow, Inc. and Trulia became wholly owned subsidiaries of Zillow ~~Group.~~Group, Inc.

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: public health crises, like the COVID-19 ~~pandemic;~~pandemic and the availability and widespread distribution and use of effective vaccines; rates of revenue growth; our ability to successfully integrate and realize the benefits of our past or future strategic acquisitions or investments; the satisfaction of conditions precedent to the closing of our proposed acquisition of ShowingTime.com, Inc., including expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Act; our ability to manage advertising inventory or pricing; engagement and usage of our products; our investment of resources to pursue strategies that may not prove effective; competition in our market; the stability of the residential real estate market 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 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 to our products and services; changes in 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 condensed consolidated financial statements include Zillow Group, Inc. and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. These condensed consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Accordingly, these interim condensed consolidated financial statements should be read in conjunction with the audited financial statements and accompanying notes included in Zillow Group, Inc.’s Annual Report on Form 10-K for the year ended December 31, ~~2019,~~2020, which was filed with the SEC on February ~~19, 2020.~~12, 2021. The condensed consolidated balance sheet as of December 31, ~~2019,~~2020, included herein, was derived from the audited financial statements of Zillow Group, Inc. as of that date.

The unaudited condensed consolidated interim financial statements, in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments, necessary to present fairly our financial position as of ~~June 30, 2020,~~March 31, 2021 and our results of operations, comprehensive ~~loss and~~income (loss), shareholders’ equity ~~for the three~~ and ~~six month periods ended June 30, 2020 and 2019, and our~~ cash flows for the ~~six month periods~~three months ended ~~June 30, 2020~~March 31, 2021 and ~~2019.~~2020. The results offor the three ~~and six month periods~~months ended ~~June 30, 2020~~March 31, 2021 are not necessarily indicative of the results to be expected for the year ending December 31, ~~2020~~2021 or for any interim period or for any other future year.

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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 accounting for certain revenue offerings, the net realizable value of inventory, 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, business combinations and the recoverability of goodwill, 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 COVID-19 pandemic has introduced significant additional uncertainty with respect to estimates, judgments and assumptions, which may materially impact the estimates previously listed, among others.

Recently Adopted Accounting Standards

In December 2019, the Financial Accounting Standards Board (“FASB”) issued guidance which is intended to simplify the accounting for income taxes. It removes certain exceptions to the general principles and clarifies and amends existing guidance to improve consistent application. This guidance is effective for interim and annual periods beginning after December 15, 2020, and early adoption is permitted. We adopted this guidance on January 1, 2021. The method of adoption for this guidance varies based on the amendment, however the relevant amendments have been applied on a prospective basis. The adoption of this guidance did not have a material impact on our financial position, results of operations or cash flows.

Recently Issued Accounting Standards Not Yet Adopted

In August 2020, the FASB issued 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. Among other changes, the guidance removes the liability and equity separation models for convertible instruments. Instead, entities will 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 also requires the application of the if-converted method to calculate the impact of convertible instruments on diluted earnings per share. The guidance is effective for fiscal years beginning after December 15, 2021, with early adoption permitted for fiscal years beginning after December 15, 2020, and can be adopted on either a retrospective or modified retrospective basis. We expect to adopt this guidance on January 1, 2022. Although we continue to evaluate the method of adoption and impact of this guidance on our financial position, results of operations and cash flows, upon adoption we expect this guidance to result in a reclassification of conversion feature balances from additional paid-in capital to debt and to decrease reported interest expense for our convertible senior notes.

In March 2020, the ~~Financial Accounting Standards Board (“FASB”)~~FASB issued guidance which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions that reference the London Inter-Bank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued because of reference rate reform. This guidance is optional for a limited period of time to ease the potential burden in accounting for, or recognizing the effects of, reference rate reform on financial reporting. This guidance is effective from March 12, 2020 through December 31, 2022. Entities may elect to adopt the amendments for contract modifications as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020, up to the date that the financial statements are available to be issued. We expect to apply some of the expedients and exceptions provided in this guidance to our credit facilities, warehouse line of credit and master repurchase ~~agreement,~~agreements, all of which reference the one-month LIBOR in the applicable interest ~~rate. While~~rate, as publication of the one-month LIBOR is expected to cease after June 30, 2023. We expect to amend our facility agreements prior to that date. As the goal of the reference rate reform transition is for it to be economically neutral to entities, we ~~have~~do not ~~yet determined the impact~~believe the adoption of this guidance will have a material impact on our financial position, results of operations or cash flows.

Note 3. Fair Value Measurements

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:

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

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

•Level 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 the following methods and assumptions in estimating our fair value measurements:

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 ~~treasury bills are~~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).

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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 12) 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 credit facilities are outstanding and amounts are held in ~~escrow.~~escrow (Level 1).

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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).

Interest rate lock commitments — The fair value of interest rate lock commitments (“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 interest rate lock commitment will ultimately result in a closed ~~loan.~~

~~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 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 condensed consolidated statements of operations.(Level 3).

The following table presents the range and ~~weighted average~~weighted-average pull-through rates used in determining the fair value of IRLCs as of the ~~periods~~dates presented:


		June 30, 2020	December 31, 2019		March 31, 2021	December 31, 2020
Range	Range	40% - 100%	56% - 100%	Range	50% - 100%	47% - 100%
Weighted average		70%	78%
Weighted-average				Weighted-average	81%	75%

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

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):


		June 30, 2020															March 31, 2021
		Total		Level 1		Level 2		Level 3			Total		Level 1		Level 2		Level 3
Cash equivalents:	Cash equivalents:									Cash equivalents:
Money market funds	Money market funds	$	1,784,896	$	1,784,896	$	—	$	—	Money market funds	$	3,074,175	$	3,074,175	$	0	$	0
Short-term investments:										Short-term investments:
U. S. government agency securities										U. S. government agency securities	988,774		0		988,774		0
Treasury bills	Treasury bills	70,189		—		70,189		—		Treasury bills	298,984		0		298,984		0
Short-term investments:
Treasury bills		963,231		—		963,231		—
U.S. government agency securities		465,715		—		465,715		—
Corporate notes and bonds		30,213		—		30,213		—
Municipal securities	Municipal securities	16,538		—		16,538		—		Municipal securities	6,044		0		6,044		0
Commercial paper		14,972		—		14,972		—
Certificates of deposit	Certificates of deposit	498		—		498		—		Certificates of deposit	249		0		249		0
Restricted cash										Restricted cash	120,713		120,713		0		0
Mortgage origination-related:	Mortgage origination-related:									Mortgage origination-related:
Mortgage loans held for sale	Mortgage loans held for sale	75,021		—		75,021		—		Mortgage loans held for sale	274,319		0		274,319		0
IRLCs	IRLCs	5,091		—		—		5,091		IRLCs	5,002		0		0		5,002
Forward contracts - other current assets										Forward contracts - other current assets	4,946		0		4,946		0
Forward contracts - other current liabilities	Forward contracts - other current liabilities	961		—		961		—		Forward contracts - other current liabilities	(16)		0		(16)		0
Total	Total	$	3,427,325	$	1,784,896	$	1,637,338	$	5,091	Total	$	4,773,190	$	3,194,888	$	1,573,300	$	5,002

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		December 31, 2019											December 31, 2020
		Total		Level 1		Level 2			Total		Level 1		Level 2		Level 3
Cash equivalents:	Cash equivalents:							Cash equivalents:
Money market funds	Money market funds	$	872,431	$	872,431	$	—	Money market funds	$	1,486,384	$	1,486,384	$	0	$	0
U.S. government agency securities		35,009		—		35,009
Commercial paper		31,113		—		31,113
Municipal securities								Municipal securities	3,228		0		3,228		0
Short-term investments:								Short-term investments:
Treasury bills	Treasury bills	6,441		—		6,441		Treasury bills	1,163,813		0		1,163,813		0
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
U. S. government agency securities								U. S. government agency securities	1,037,577		0		1,037,577		0
Municipal securities	Municipal securities	27,889		—		27,889		Municipal securities	16,220		0		16,220		0
Certificates of deposit	Certificates of deposit	1,245		—		1,245		Certificates of deposit	498		0		498		0
Restricted cash								Restricted cash	75,805		75,805		0		0
Mortgage origination-related:	Mortgage origination-related:							Mortgage origination-related:
Mortgage loans held for sale	Mortgage loans held for sale	36,507		—		36,507		Mortgage loans held for sale	330,758		0		330,758		0
IRLCs	IRLCs	937		—		937		IRLCs	12,342		0		0		12,342
Forward contracts - other current assets		7		—		7
Forward contracts - other current liabilities	Forward contracts - other current liabilities	(60)		—		(60)		Forward contracts - other current liabilities	(2,608)		0		(2,608)		0
Total	Total	$	2,264,688	$	872,431	$	1,392,257	Total	$	4,124,017	$	1,562,189	$	2,549,486	$	12,342

The following table presents the changes in our IRLCs during the three ~~and six month periods~~months ended ~~June 30, 2020~~March 31, 2021 (in thousands):


		Three Months Ended June 30, 2020		Six Months Ended June 30, 2020 (1)			Three Months Ended March 31, 2021		Three Months Ended March 31, 2020
Balance, beginning of the period	Balance, beginning of the period	$	2,225	$	937	Balance, beginning of the period	$	12,342	$	937
Issuances	Issuances	10,142		15,507		Issuances	18,301		5,208
Transfers	Transfers	(8,586)		(13,142)		Transfers	(24,398)		(5,349)
Fair value changes recognized in earnings	Fair value changes recognized in earnings	1,310		1,789		Fair value changes recognized in earnings	(1,243)		1,429
Balance, end of period	Balance, end of period	$	5,091	$	5,091	Balance, end of period	$	5,002	$	2,225
(1) Beginning balance represents transfers of IRLCs from Level 2 to Level 3 within the fair value hierarchy as of January 1, 2020.

At ~~June 30,~~March 31, 2021, the notional amounts of the hedging instruments related to our mortgage loans held for sale were $336.2 million and $560.0 million for our IRLCs and forward contracts, respectively. At December 31, 2020, the notional amounts of the hedging instruments related to our mortgage loans held for sale were ~~$168.9~~$378.1 million and $214.9 million for our IRLCs and forward contracts, respectively. At December 31, 2019, the notional amounts of the hedging instruments related to our mortgage loans held for sale were $34.3 million and $64.7$652.1 million for our IRLCs and forward contracts, respectively. We do not have the right to offset our ~~forward contract~~ derivative positions.

See Note 1211 for the carrying amount and estimated fair value of our convertible senior notes.

1211

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Note 4. Cash and Cash Equivalents, Short-term Investments and Restricted Cash

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


		June 30, 2020															March 31, 2021
		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Market Value			Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Market Value
Cash	Cash	$	190,389	$	—	$	—	$	190,389	Cash	$	327,587	$	—	$	—	$	327,587
Cash equivalents:	Cash equivalents:									Cash equivalents:
Money market funds	Money market funds	1,784,896		—		—		1,784,896		Money market funds	3,074,175		—		—		3,074,175
Short-term investments:										Short-term investments:
U. S. government agency securities										U. S. government agency securities	988,478		303		(7)		988,774
Treasury bills	Treasury bills	70,189		—		—		70,189		Treasury bills	298,953		31		0		298,984
Short-term investments:
Treasury bills		963,200		41		(10)		963,231
U.S. government agency securities		463,806		1,909		—		465,715
Corporate notes and bonds		30,094		119		—		30,213
Municipal securities	Municipal securities	16,519		19		—		16,538		Municipal securities	6,046		0		(2)		6,044
Commercial paper		14,972		—		—		14,972
Certificates of deposit	Certificates of deposit	498		—		—		498		Certificates of deposit	249		0		0		249
Restricted cash	Restricted cash	33,620		—		—		33,620		Restricted cash	120,713		—		—		120,713
Total	Total	$	3,568,183	$	2,088	$	(10)	$	3,570,261	Total	$	4,816,201	$	334	$	(9)	$	4,816,526

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


	December 31, 2020
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Market Value
Cash	$	213,518	$	—	$	—	$	213,518
Cash equivalents:
Money market funds	1,486,384		—		—		1,486,384
Municipal securities	3,229		—		(1)		3,228
Short-term investments:
Treasury bills	1,163,748		65		0		1,163,813
U.S. government agency securities	1,037,572		57		(52)		1,037,577
Municipal securities	16,226		0		(6)		16,220
Certificates of deposit	498		0		0		498
Restricted cash	75,805		—		—		75,805
Total	$	3,996,980	$	122	$	(59)	$	3,997,043

All ~~available-for-sale~~short-term investments as of ~~June 30, 2020~~March 31, 2021 have a contractual maturity date of one year or less.

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Note 5. ~~Accounts Receivable, net~~

~~The following table presents the changes in the allowance for doubtful accounts for the six months ended June 30, 2020 (in thousands):~~


~~Balance as of January 1, 2020~~	$	~~4,522~~
~~Credit loss expense~~	~~1,614~~
~~Less: write-offs, net of recoveries and other adjustments~~	~~(3,854)~~
~~Balance as of June 30, 2020~~	$	~~2,282~~

~~Note 6.~~ Inventory

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


		June 30, 2020		December 31, 2019			March 31, 2021		December 31, 2020
Finished goods						Finished goods	$	341,887	$	339,372
Work-in-process	Work-in-process	$	12,164	$	152,171	Work-in-process	130,510		151,921
Finished goods		123,237		684,456
Inventory	Inventory	$	135,401	$	836,627	Inventory	$	472,397	$	491,293

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Note 6. Contract Balances

Contract assets were $34.3 million and $20.8 million as of March 31, 2021 and December 31, 2020, respectively. Contract assets are recorded within prepaids and other current assets in our condensed consolidated balance sheets.

For the three months ended March 31, 2021 and 2020, we recognized revenue of $46.5 million and $36.0 million, respectively, that was included in the deferred revenue balance at the beginning of the related period.

Note 7. Contract Cost Assets

As of March 31, 2021 and December 31, 2020, we had $50.2 million and $50.7 million, respectively, of contract cost assets. During the three months ended March 31, 2021 and ~~six month periods ended June 30,~~ 2020, ~~and 2019,~~ we did 0t incur any impairment losses to our contract cost assets. We recorded amortization expense related to contract cost assets of ~~$8.7~~$10.1 million and ~~$9.2~~$8.4 million during the three months ended ~~June 30,~~March 31, 2021 and 2020, ~~and 2019, respectively, and $17.1 million and $17.9 million during the six months ended June 30, 2020 and 2019,~~ respectively.

Note 8. Property and Equipment, net

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


		June 30, 2020		December 31, 2019			March 31, 2021		December 31, 2020
Website development costs	Website development costs	$	157,468	$	149,648	Website development costs	$	110,971	$	95,466
Leasehold improvements	Leasehold improvements	107,139		81,981		Leasehold improvements	102,632		110,280
Office equipment, furniture and fixtures						Office equipment, furniture and fixtures	34,561		39,607
Construction-in-progress	Construction-in-progress	51,482		45,337		Construction-in-progress	32,553		44,151
Office equipment, furniture and fixtures		42,236		36,582
Computer equipment	Computer equipment	31,801		31,942		Computer equipment	20,209		20,433
Property and equipment	Property and equipment	390,126		345,490		Property and equipment	300,926		309,937
Less: accumulated amortization and depreciation	Less: accumulated amortization and depreciation	(194,379)		(175,001)		Less: accumulated amortization and depreciation	(110,692)		(113,785)
Property and equipment, net	Property and equipment, net	$	195,747	$	170,489	Property and equipment, net	$	190,234	$	196,152

We recorded depreciation expense related to property and equipment (other than website development costs) of ~~$7.1~~$7.9 million and ~~$6.4~~$11.8 million during the three months ended ~~June 30,~~March 31, 2021 and 2020, ~~and 2019, respectively, and $18.9 million and $12.4 million during the six months ended June 30, 2020 and 2019,~~ respectively.

We capitalized ~~$15.4~~$12.4 million and ~~$10.3~~$12.5 million in website development costs during the three months ended ~~June 30,~~March 31, 2021 and 2020, ~~and 2019, respectively, and $27.9 million and $20.3 million during the six months ended June 30, 2020 and 2019,~~ respectively. Amortization expense for website development costs included in technology and development expenses was ~~$6.0~~$8.0 million and ~~$3.6~~$5.4 million during the three months ended ~~June 30,~~March 31, 2021 and 2020, ~~and 2019, respectively, and $11.4 million and $7.0 million during the six months ended June 30, 2020 and 2019,~~ respectively.

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Note 9. Equity Investment

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. In March 2020, we recognized a non-cash impairment charge of $5.3 million related to this investment. The impairment charge is included in ~~Impairment~~impairment costs within our IMT segment for the ~~six~~three months ended ~~June 30,~~March 31, 2020. In connection with our assessment of the investment for impairment indicators as a result of COVID-19’s significant adverse impact on the real estate industry, 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 related to the future expected cash flows 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 $4.7 million. In June 2020, weWe sold our 10% equity interest ~~for $10.0 million~~ in ~~cash. We recorded a gain on the sale of the investment of $5.3 million for the three and six month periods ended~~ June ~~30, 2020 which is classified within Other income in our condensed consolidated statements of operations.~~2020.

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Note 10. Intangible Assets, net

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


		June 30, 2020											March 31, 2021
		Cost		Accumulated Amortization		Net			Cost		Accumulated Amortization		Net
Trade names and trademarks	Trade names and trademarks	$	36,500	$	(1,274)	$	35,226	Trade names and trademarks	$	36,500	$	(5,105)	$	31,395
Software								Software	33,764		(13,155)		20,609
Developed technology								Developed technology	86,064		(73,507)		12,557
Customer relationships	Customer relationships	102,600		(81,372)		21,228		Customer relationships	87,600		(76,429)		11,171
Developed technology		107,200		(87,340)		19,860
Software		40,744		(25,031)		15,713
Intangibles-in-progress	Intangibles-in-progress	10,054		—		10,054		Intangibles-in-progress	9,886		0		9,886
Purchased content	Purchased content	50,552		(45,726)		4,826		Purchased content	49,565		(47,472)		2,093
Lender licenses		400		(317)		83
Total	Total	$	348,050	$	(241,060)	$	106,990	Total	$	303,379	$	(215,668)	$	87,711


		December 31, 2019											December 31, 2020
		Cost		Accumulated Amortization		Net			Cost		Accumulated Amortization		Net
Trade names and trademarks								Trade names and trademarks	$	36,500	$	(3,822)	$	32,678
Software								Software	28,515		(11,483)		17,032
Developed technology								Developed technology	86,064		(70,270)		15,794
Customer relationships	Customer relationships	$	102,600	$	(73,770)	$	28,830	Customer relationships	87,600		(73,301)		14,299
Developed technology		107,200		(81,383)		25,817
Software		35,527		(20,843)		14,684
Intangibles-in-progress								Intangibles-in-progress	11,863		0		11,863
Purchased content	Purchased content	47,298		(40,636)		6,662		Purchased content	47,930		(44,829)		3,101
Intangibles-in-progress		6,391		—		6,391
Lender licenses		400		(217)		183
Total	Total	$	299,416	$	(216,849)	$	82,567	Total	$	298,472	$	(203,705)	$	94,767

Amortization expense recorded for intangible assets for the three months ended ~~June 30,~~March 31, 2021 and 2020 ~~and 2019~~ was ~~$13.1~~$12.9 million and ~~$11.0~~$11.8 million, ~~respectively, and $24.9 million and $22.0 million for the six months ended June 30, 2020 and 2019,~~ respectively. These amounts are included in technology and development expenses.

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We did 0t record any impairment costs related to our intangible assets for the three months ended March 31, 2021. During the three months ended March 31, 2020, we recognized a non-cash impairment charge of $71.5 million related to our Trulia trade names and trademarks intangible asset, which historically had not been subject to amortization. The impairment charge is included in ~~Impairment~~impairment costs within our IMT and Mortgages ~~segments for the six months ended June 30, 2020.~~segments. In March 2020, we identified factors directly related to the COVID-19 pandemic that led us to conclude it was more likely than not that the $108.0 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 previous projections used to determine the carrying value of the intangible asset, primarily driven by a reduction in expected future marketing and advertising spend for Trulia. Accordingly, with the assistance of a third-party valuation specialist, we performed a quantitative analysis to determine the fair value of the intangible asset and concluded that our best estimate of its fair value was $36.5 million. The ~~valuation was prepared using an income approach based on~~remaining carrying value of the relief-from-royalty method and relied on inputs with unobservable market prices including projected revenue, royalty rate, discount rate, and estimated tax rate, and therefore is considered a Level 3 measurement under the fair value hierarchy. In connection with this impairment analysis, we evaluated our expected future reduced marketing and advertising spend related to the Trulia trade names and trademarks intangible asset ~~and concluded that this asset no longer has an indefinite life. During the three months ended June 30, 2020 we began amortizing the remaining $36.5 million carrying value~~will be amortized on an accelerated basis commensurate with the projected cash flows expected to be generated by the intangible asset over a useful life of 10 years. The carrying value of the Trulia trade names and trademarks intangible asset was ~~$35.2~~$31.4 million and $32.7 million as of ~~June 30, 2020~~March 31, 2021 and ~~$108.0 million as of~~ December 31, ~~2019.~~

2020, respectively. For additional details regarding this impairment, see Note ~~11. Deferred Revenue~~

~~The following tables present~~11 in the ~~changes~~Notes to Consolidated Financial Statements included in ~~deferred revenue~~our Annual Report on Form 10-K for the ~~periods presented (in thousands):~~


	Three Months Ended June 30, 2020
~~Balance as of April 1, 2020~~	$	~~35,347~~
~~Deferral of revenue~~	~~222,895~~
~~Less: Revenue recognized~~	~~(213,728)~~
~~Balance as of June 30, 2020~~	$	~~44,514~~

fiscal year ended December 31, 2020.


	~~Six Months Ended~~ ~~June 30, 2020~~
~~Balance as of January 1, 2020~~	$	~~39,747~~
~~Deferral of revenue~~	~~476,624~~
~~Less: Revenue recognized~~	~~(471,857)~~
~~Balance as of June 30, 2020~~	$	~~44,514~~

During the three months ended June 30, 2020 we recognized as revenue a total of $33.8 million pertaining to amounts that were recorded in deferred revenue as of April 1, 2020. During the six months ended June 30, 2020 we recognized as revenue a total of $36.6 million pertaining to amounts that were recorded in deferred revenue as of January 1, 2020.

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Note ~~12.~~11. Debt

The following table presents the carrying values of Zillow Group’s debt as of the ~~periods~~dates presented (in thousands):


		June 30, 2020		December 31, 2019			March 31, 2021		December 31, 2020
Homes Segment
Homes segment						Homes segment
Credit facilities:	Credit facilities:					Credit facilities:
Goldman Sachs Bank USA	Goldman Sachs Bank USA	$	19,632	$	39,244	Goldman Sachs Bank USA	$	190,176	$	145,825
Citibank, N.A.	Citibank, N.A.	33,037		296,369		Citibank, N.A.	109,732		87,103
Credit Suisse AG, Cayman Islands	Credit Suisse AG, Cayman Islands	64,549		355,911		Credit Suisse AG, Cayman Islands	98,928		128,238
Total Homes Segment debt		117,218		691,524
Mortgages Segment
Repurchase agreement:
Total Homes segment debt						Total Homes segment debt	398,836		361,166
Mortgages segment						Mortgages segment
Repurchase agreements:						Repurchase agreements:
Credit Suisse AG, Cayman Islands						Credit Suisse AG, Cayman Islands	132,001		149,913
Citibank, N.A.	Citibank, N.A.	33,918		394		Citibank, N.A.	50,546		90,227
Warehouse line of credit:	Warehouse line of credit:					Warehouse line of credit:
Comerica Bank	Comerica Bank	35,896		30,033		Comerica Bank	80,792		68,903
Total Mortgages Segment debt		69,814		30,427
Convertible Senior Notes
Total Mortgages segment debt						Total Mortgages segment debt	263,339		309,043
Convertible senior notes						Convertible senior notes
1.375% convertible senior notes due 2026	1.375% convertible senior notes due 2026	337,171		327,187		1.375% convertible senior notes due 2026	352,077		347,566
2.75% convertible senior notes due 2025	2.75% convertible senior notes due 2025	401,786		—		2.75% convertible senior notes due 2025	421,770		414,888
0.75% convertible senior notes due 2024	0.75% convertible senior notes due 2024	507,039		490,538		0.75% convertible senior notes due 2024	493,044		524,273
1.50% convertible senior notes due 2023	1.50% convertible senior notes due 2023	318,348		310,175		1.50% convertible senior notes due 2023	330,314		326,796
2.00% convertible senior notes due 2021		245,997		415,502
2.75% convertible senior notes due 2020		9,637		9,637
Total convertible senior notes	Total convertible senior notes	1,819,978		1,553,039		Total convertible senior notes	1,597,205		1,613,523
Total		$	2,007,010	$	2,274,990
Total debt						Total debt	$	2,259,380	$	2,283,732

Homes Segment

To provide capital for Zillow Offers, we utilize credit facilities that are classified as current liabilities in our condensed consolidated balance sheets. We classify these credit facilities as current liabilities as amounts drawn to purchase homes are typically ~~repaid~~due as homes are sold, which we expect to be within one year. The following table summarizes certain details related to our credit facilities (in thousands, except interest rates):


Lender	Lender	Final Maturity Date	Maximum Borrowing Capacity		Weighted Average Interest Rate		Lender	Final Maturity Date	Maximum Borrowing Capacity		Weighted-Average Interest Rate
Goldman Sachs Bank USA	Goldman Sachs Bank USA	April 20, 2022	$	500,000	3.91	%	Goldman Sachs Bank USA	April 20, 2022	$	500,000	3.15	%
Citibank, N.A.	Citibank, N.A.	January 31, 2022	500,000		4.69	%	Citibank, N.A.	November 30, 2021	500,000		2.86	%
Credit Suisse AG, Cayman Islands	Credit Suisse AG, Cayman Islands	July 31, 2021	500,000		4.62	%	Credit Suisse AG, Cayman Islands	December 31, 2022	500,000		2.86	%
		Total	$	1,500,000				Total	$	1,500,000

On January 6, 2021, certain wholly owned subsidiaries of Zillow Group amended the Credit Suisse AG, Cayman Islands credit agreement previously maturing on July 31, 2021 such that it now matures on December 31, 2022.

Undrawn amounts available under the credit facilities included in the table above are not committed, meaning the applicable lender is not committed to, but may in its discretion, advance loan funds in excess of the outstanding borrowings. The final maturity dates are inclusive of extensions which are subject to agreement by the respective lender.

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On February 23, 2021, certain wholly owned subsidiaries of Zillow Group ~~formed certain~~amended and restated the Citibank, N.A. credit agreement in order to facilitate a titling trust structure. In March 2021, Zillow Group, through Zillow Offers, began buying and selling homes through a titling trust. The titling trust facilitates the allocation of beneficial ownership of properties to special purpose entities (each, an “SPE”), which special purpose entities are then party to agreements to finance the properties. Zillow Group initially formed these SPEs to purchase and sell residential properties through Zillow ~~Offers.~~Offers, and subsequent to the creation of the titling trust, these SPEs hold beneficial interests in homes purchased by the titling trust, which the SPEs subsequently finance. Each SPE is a wholly owned subsidiary of Zillow Group and a separate legal entity, and neither the assets nor credit of any such SPE are available to satisfy the debts and other obligations of any affiliate or other entity. The credit facilities are secured by the assets and equity of one or more SPEs. These SPEs and titling trust are variable interest entities and Zillow Group is the primary beneficiary as it has the power to control the activities that most significantly impact the SPEs’ and titling trust’s economic performance and the obligation to absorb losses of the SPEs and titling trust or the right to receive benefits ~~from the SPEs~~ that could potentially be significant to the ~~SPEs.~~SPEs and titling trust. The SPEs and titling trust are consolidated within Zillow Group’s condensed consolidated financial statements. ~~The collective~~As of March 31, 2021 and December 31, 2020, the total assets of the SPEs and titling trust were $573.6 million and $551.2 million, respectively, of which $471.9 million and $491.3 million are inventory, respectively, $83.2 million and $53.0 million are restricted cash, respectively, and $16.4 million and $3.9 million are accounts receivable, respectively. As of March 31, 2021 and December 31, 2020, the total liabilities of the SPEs and titling trust were $411.6 million and $372.5 million, respectively, of which $398.8 million and $361.2 million are credit facility borrowings, ~~of the SPEs were $135.4~~respectively, and $9.9 million and ~~$117.2~~$10.8 million ~~respectively, as of June 30, 2020, and $836.6 million and $691.5 million, respectively, as of December 31, 2019.~~are accrued expenses, respectively.

Outstanding amounts drawn under each credit facility are required to be repaid on the facility maturity date or earlier if accelerated due to an event of default. Further, each SPE is required to repay any resulting shortfall if the value of the eligible properties owned by such SPE falls below a certain percentage of the principal amount outstanding under the applicable credit facility. Continued inclusion of properties in each credit facility is subject to various eligibility criteria. For example, aging criteria limit the inclusion in the borrowing base of properties owned longer than a specified number of days, and properties owned for longer than one year are generally ineligible.

The stated interest rate on our credit facilities is one-month LIBOR plus an applicable margin, and in certain cases include a LIBOR floor, as defined in the respective credit agreements. Our credit facilities include customary representations and warranties, provisions regarding events of default and covenants. The terms of these credit facilities and related financing documents require Zillow Group and certain of its subsidiaries, as applicable, to comply with a number of customary financial and other covenants, such as maintaining certain levels of liquidity, tangible net worth and leverage ratios. As of ~~June 30, 2020,~~March 31, 2021, Zillow Group was in compliance with all financial covenants and no event of default had occurred. Except for certain limited circumstances, the credit facilities are non-recourse to Zillow Group. Our credit facilities require that we establish, maintain and in certain circumstances that Zillow Group fund specified reserve accounts. These reserve accounts include, but are not limited to, interest reserves, insurance reserves, tax reserves, renovation cost reserves and reserves for specially permitted liens. Amounts funded to these reserve accounts and the collection accounts have been classified within our condensed consolidated balance sheets as restricted cash.

Mortgages Segment

To provide capital for Zillow Home Loans, we utilize master repurchase agreements and a warehouse line of credit ~~and a master repurchase agreement~~ which are classified as current liabilities in our condensed consolidated balance sheets. The repurchase agreements and warehouse line of credit ~~and repurchase agreement~~ provide short-term financing between the issuance of a mortgage loan and when Zillow Home Loans sells the loan to an ~~investor.~~investor or directly to an agency. The following table summarizes certain details related to our repurchase agreements and warehouse line of credit ~~and repurchase agreement~~ (in thousands, except interest rates):


Lender	Lender	Maturity Date	Maximum Borrowing Capacity		Weighted Average Interest Rate		Lender	Maturity Date	Maximum Borrowing Capacity		Weighted-Average Interest Rate
Credit Suisse AG, Cayman Islands							Credit Suisse AG, Cayman Islands	March 18, 2022	$	300,000	2.50	%
Citibank, N.A.	Citibank, N.A.	October 27, 2020	$	75,000	1.88	%	Citibank, N.A.	October 26, 2021	100,000		1.86	%
Comerica Bank	Comerica Bank	June 26, 2021	50,000		2.81	%	Comerica Bank	June 26, 2021	100,000		3.01	%
		Total	$	125,000				Total	$	500,000

On ~~June 27, 2020,~~March 19, 2021, Zillow Home Loans amended its ~~warehouse line~~Credit Suisse AG, Cayman Islands (“Credit Suisse”) master repurchase agreement to increase the uncommitted total maximum borrowing capacity to $300.0 million with a maturity date of ~~credit with Comerica Bank previously maturing on June 27, 2020 to extend the term of the original agreement for one year through June 26, 2021.~~

~~The warehouse line of credit with Comerica Bank is committed.~~March 18, 2022. The repurchase agreement with Citibank, N.A. includes a committed amount of $25.0 million.

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In accordance with the master repurchase agreements, Credit Suisse and Citibank, N.A. (together the “Lenders”) have agreed to pay Zillow Home Loans a negotiated purchase price for eligible loans, and Zillow Home Loans has simultaneously agreed to repurchase such loans from the Lenders under a specified timeframe at an agreed upon price that includes interest. The master repurchase agreements contain margin call provisions that provide the Lenders with certain rights in the event of a decline in the market value of the assets purchased under the master repurchase agreements. As of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019, $33.9~~2020, $189.9 million and ~~$0.4~~$240.1 million, respectively, in mortgage loans held for sale were pledged as collateral under the ~~facility.~~master repurchase agreements.

On February 4, 2021, Zillow Home Loans amended its Comerica Bank warehouse line of credit to increase the total maximum borrowing capacity to $100.0 million with a maturity date of June 26, 2021. The warehouse line of credit with Comerica Bank is committed.

Borrowings on the repurchase agreements and warehouse line of credit ~~and repurchase agreement~~ bear interest at the one-month LIBOR plus an applicable margin, and in certain cases include a LIBOR floor, as defined in the governing agreements, and are secured by residential mortgage loans held for sale. The repurchase ~~agreement contains margin call provisions that provide Citibank, N.A. with certain rights in the event of a decline in the market value of the assets purchased under the repurchase agreement.~~

~~The~~agreements and warehouse line of credit ~~and repurchase agreement~~ include customary representations and warranties, covenants and provisions regarding events of default. As of ~~June 30, 2020,~~March 31, 2021, Zillow Home Loans was in compliance with all financial covenants and no event of default had occurred. The repurchase agreements and warehouse line of credit ~~and repurchase agreement~~ are recourse to Zillow Home Loans, and have no recourse to Zillow Group or any of its other subsidiaries.

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For additional details related to our warehouse line of credit and repurchase ~~agreement,~~agreements, see Note 1514 in the Notes to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2019.~~2020.

Convertible Senior Notes

The following tables summarize certain details related to our outstanding convertible senior notes as of the dates presented or for the periods ~~presented~~ended (in thousands, except interest rates):


										June 30, 2020						December 31, 2019															March 31, 2021				December 31, 2020
Maturity Date	Maturity Date	Aggregate Principal Amount		Stated Interest Rate		Effective Interest Rate		First Interest Payment Date	Semi-Annual Interest Payment Dates	Unamortized Debt Discount and Debt Issuance Costs		Fair Value		Unamortized Debt Discount and Debt Issuance Costs		Fair Value		Maturity Date	Aggregate Principal Amount		Stated Interest Rate		Effective Interest Rate		First Interest Payment Date	Semi-Annual Interest Payment Dates	Unamortized Debt Discount and Debt Issuance Costs		Fair Value		Unamortized Debt Discount and Debt Issuance Costs		Fair Value
September 1, 2026	September 1, 2026	$	500,000	1.375	%	8.10	%	March 1, 2020	March 1; September 1	$	162,829	$	705,000	$	172,813	$	597,380	September 1, 2026	$	498,800	1.375	%	8.10	%	March 1, 2020	March 1; September 1	$	146,723	$	1,476,837	$	152,434	$	1,508,675
May 15, 2025	May 15, 2025	565,000		2.75	%	10.32	%	November 15, 2020	May 15; November 15	163,214		659,756		—		—		May 15, 2025	565,000		2.75	%	10.32	%	November 15, 2020	May 15; November 15	143,230		1,172,674		150,112		1,168,855
September 1, 2024	September 1, 2024	673,000		0.75	%	7.68	%	March 1, 2020	March 1; September 1	165,961		957,659		182,462		819,378		September 1, 2024	622,382		0.75	%	7.69	%	March 1, 2020	March 1; September 1	129,338		1,854,113		148,727		2,023,280
July 1, 2023	July 1, 2023	373,750		1.50	%	6.99	%	January 1, 2019	January 1; July 1	55,402		388,113		63,575		356,464		July 1, 2023	372,825		1.50	%	6.99	%	January 1, 2019	January 1; July 1	42,511		611,522		46,954		633,039
December 1, 2021		265,330		2.00	%	7.43	%	June 1, 2017	June 1; December 1	19,333		326,688		44,498		514,312
December 15, 2020		9,637		2.75	%	N/A		N/A	June 15; December 15	—		16,842		—		16,842
Total	Total	$	2,386,717							$	566,739	$	3,054,058	$	463,348	$	2,304,376	Total	$	2,059,007							$	461,802	$	5,115,146	$	498,227	$	5,333,849

Three Months Ended June 30, 2020 Three Months Ended June 30, 2019
Maturity Date Contractual Coupon Interest Amortization of Debt Discount Amortization of Debt Issuance Costs Interest Expense Contractual Coupon Interest Amortization of Debt Discount Amortization of Debt Issuance Costs Interest Expense
September 1, 2026 $ 1,719 $ 4,922 $ 120 $ 6,761 $ — $ — $ — $ —
May 15, 2025 2,007 3,148 168 5,323 — — — —
September 1, 2024 1,262 8,095 278 9,635 — — — —
July 1, 2023 1,402 3,749 366 5,517 1,402 3,496 342 5,240
December 1, 2021 1,803 3,945 408 6,156 2,300 4,677 484 7,461
December 15, 2020 66 — — 66 66 — — 66
Total $ 8,259 $ 23,859 $ 1,340 $ 33,458 $ 3,768 $ 8,173 $ 826 $ 12,767

Six Months Ended June 30, 2020 Six Months Ended June 30, 2019
Maturity Date Contractual Coupon Interest Amortization of Debt Discount Amortization of Debt Issuance Costs Interest Expense Contractual Coupon Interest Amortization of Debt Discount Amortization of Debt Issuance Costs Interest Expense
September 1, 2026 $ 3,438 $ 9,746 $ 238 $ 13,422 $ — $ — $ — $ —
May 15, 2025 2,007 3,148 168 5,323 — — — —
September 1, 2024 2,510 15,956 545 19,011 — — — —
July 1, 2023 2,804 7,446 727 10,977 2,804 6,933 678 10,415
December 1, 2021 4,103 8,856 916 13,875 4,600 9,268 959 14,827
December 15, 2020 132 — — 132 132 — — 132
Total $ 14,994 $ 45,152 $ 2,594 $ 62,740 $ 7,536 $ 16,201 $ 1,637 $ 25,374

The convertible notes are senior unsecured obligations. The convertible senior notes maturing in 2026, 2025, 2024, 2023 and 2021 (the “Notes”) are classified as long-term debt based on their contractual maturity dates in our condensed consolidated balance sheets. The convertible senior notes maturing in 2020 are classified within current liabilities.


	Three Months Ended March 31, 2021								Three Months Ended March 31, 2020
Maturity Date	Contractual Coupon Interest		Amortization of Debt Discount		Amortization of Debt Issuance Costs		Interest Expense		Contractual Coupon Interest		Amortization of Debt Discount		Amortization of Debt Issuance Costs		Interest Expense
September 1, 2026	$	1,717	$	5,226	$	128	$	7,071	$	1,719	$	4,824	$	118	$	6,661
May 15, 2025	3,884		6,533		349		10,766		0		0		0		0
September 1, 2024	1,238		8,410		289		9,937		1,248		7,861		267		9,376
July 1, 2023	1,401		3,950		386		5,737		1,402		3,697		361		5,460
December 1, 2021	0		0		0		0		2,300		4,911		508		7,719
December 15, 2020	0		0		0		0		66		0		0		66
Total	$	8,240	$	24,119	$	1,152	$	33,511	$	6,735	$	21,293	$	1,254	$	29,282

1917

Table of Contents

For more than 20 trading days during the 30 consecutive trading days ended June 30, 2020, the last reported sale price of our Class C capital stock exceeded 130% of the conversion price of the convertible senior notes due in 2024 and 2026 (the “2024 Notes” and “2026 Notes”, respectively). Accordingly, the 2024 Notes and 2026 Notes became convertible at the option of the holders from July 1 through September 30, 2020. The convertible notes are senior ~~notes maturing~~unsecured obligations and are classified as long-term debt in ~~2025, 2023 and 2021 are not redeemable or convertible as of June 30, 2020. The convertible senior notes maturing in 2020 are convertible, at the option of the holder, and redeemable, at~~ our ~~option, as of June 30, 2020.~~

condensed consolidated balance sheets based on their contractual maturity dates. Interest on the convertible notes is paid semi-annually in arrears. The estimated fair value of the convertible senior notes was determined through consideration of quoted market prices. The fair value is classified as Level 3 due to the limited trading activity for each of the convertible senior notes.

The ~~Notes~~convertible senior notes maturing in 2026 (“2026 Notes”), 2025 (“2025 Notes”), 2024 (“2024 Notes”) and 2023 (“2023 Notes”) (together, the “Notes”) are convertible into cash, shares of Class C capital stock or a combination thereof, at our election, and may be settled as described below. The Notes will mature on their respective maturity date, unless earlier repurchased, redeemed or converted in accordance with their terms.

The following table summarizes the conversion and redemption options with respect to the Notes:

Maturity Date

Early Conversion Date

Conversion Rate

Conversion Price

Optional Redemption Date

Maturity Date

Early Conversion Date

Conversion Rate

Conversion Price

Optional Redemption Date

September 1, 2026

March 1, 2026

22.9830

43.51

September 5, 2023

September 1, 2026

March 1, 2026

22.9830

43.51

September 5, 2023

May 15, 2025

November 15, 2024

14.8810

67.20

May 22, 2023

May 15, 2025

November 15, 2024

14.8810

67.20

May 22, 2023

September 1, 2024

March 1, 2024

22.9830

43.51

September 5, 2022

September 1, 2024

March 1, 2024

22.9830

43.51

September 5, 2022

July 1, 2023

April 1, 2023

12.7592

78.37

July 6, 2021

July 1, 2023

April 1, 2023

12.7592

78.37

July 6, 2021

December 1, 2021

September 1, 2021

19.0985

52.36

December 6, 2019

The following table summarizes certain details related to the capped call confirmations with respect to certain of the convertible senior notes:


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	%

On May 15, 2020, we issued $500.0 million aggregate principal amount of 2.75% Convertible Senior Notes due 2025 (the “Initial 2025 Notes”) and on May 19, 2020 we issued $65.0 million aggregate principal amount of 2.75% Convertible Senior Notes due 2025 (the “Additional Notes” and, together with the Initial 2025 Notes, the “2025 Notes”). The Additional Notes were sold pursuant to the underwriters’ option to purchase additional 2025 Notes granted in connection with the offering of the Initial 2025 Notes.

The net proceeds from the issuance of the 2025 Notes were approximately $553.3 million, after deducting underwriting discounts and commissions and offering expenses paid by Zillow Group. We used a portion of the net proceeds from the issuance of the 2025 Notes to repurchase $194.7 million aggregate principal of the convertible senior notes due 2021 (the “2021 Notes”) in privately negotiated transactions. The 2021 Notes were repurchased for $194.7 million in cash and 753,936 shares of Class C capital stock for an aggregate purchase price of $230.9 million. The repurchase of the 2021 Notes was accounted for as a debt extinguishment. We allocated $172.9 million of the repurchase price to the liability component based on the fair value of the liability component immediately prior to settlement. The fair value of the liability component 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. The remaining consideration of $58.0 million was allocated to the equity component. As a result, we recognized a $179.3 million reduction to long-term debt representing the carrying value of the liability component as of the date of the partial repurchase of the 2021 Notes, a $58.0 million reduction to additional paid-in capital representing the equity component of the partially repurchased 2021 Notes and a $6.4 million gain on partial extinguishment of 2021 Notes representing the excess of the carrying value of the liability component over the fair value of the liability component of the repurchased 2021 Notes.

2018

Table of Contents

~~In connection with the repurchase of a portion~~Each series of the Notes was convertible during the three months ended March 31, 2021, ~~Notes, we partially terminated~~at the ~~capped call transactions entered into in connection with the issuance~~option of the ~~2021~~holders. The following table summarizes the conversion activity for the Notes for ~~an amount corresponding to~~ the ~~aggregate principal amount of~~period presented (in thousands, except for share amounts):


	Three Months Ended March 31, 2021
	2023 Notes		2024 Notes		2026 Notes		Total
Aggregate principal amount converted	$	925	$	50,618	$	1,200	$	52,743
Shares of Class C capital stock issued upon conversion	11,789		1,163,352		27,579		1,202,720
Total fair value of consideration transferred (1)	$	1,643	$	153,925	$	4,204	$	159,772
Loss on extinguishment of debt:
Consideration allocated to the liability component (2)	$	841	$	41,267	$	883	$	42,991
Carrying value of the liability component, net of unamortized debt discount and debt issuance costs	818		39,927		843		41,588
Loss on extinguishment of debt	$	23	$	1,340	$	40	$	1,403
Consideration allocated to the equity component	$	802	$	112,658	$	3,321	$	116,781

(1) 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.

(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.

For more than 20 trading days during the 30 consecutive trading days ended March 31, 2021, ~~Notes that were repurchased. As a result of~~ the ~~partial settlement of the capped call transactions, we received 317,865 shares of our Class C capital stock equal to a value of approximately $14.8 million based on the trading~~last reported sale price of our Class C capital stock ~~at the time~~exceeded 130% of the ~~unwind. Under applicable Washington State law, the acquisition~~conversion price of a corporation’s own shares is not disclosed separately as treasury stock in the financial statements and such shares are treated as authorized but unissued shares. We record acquisitions of our shares of capital stock as a reduction to capital stock at the par valueeach series of the shares reacquired, then to additional paid-in capital until it is depleted to a nominal amount, with any further excess recorded to retained earnings. We recorded an offsetting increase to additional paid-in capital for the partial unwindNotes. Accordingly, each series of the ~~capped call transactions.~~

~~We intend to use the remainder of the net proceeds from the 2025~~ Notes ~~for general corporate purposes, which may include general and administrative matters and capital expenditures.~~

~~Prior to the close of business on the business day immediately preceding November 15, 2024, the 2025 Notes are~~is convertible at the option of the holders offrom April 1 through June 30, 2021. The 2026 Notes and 2024 Notes were first convertible during the 2025 Notes only under certain conditions. On or after November 15, 2024, until the close of business on the second scheduled trading day immediately preceding May 15, 2025, holders of the 2025 Notes may convert the 2025 Notes at their option at the conversion rate then in effect, irrespective of these conditions. Zillow Group will settle conversions of the 2025 Notes by paying or delivering, as the case may be, cash, shares of its Class C capital stock, or a combination of cashthree months ended September 30, 2020, and shares of its Class C capital stock, at its election. The conversion rate will initially be 14.8810 shares of Class C capital stock per $1,000 principal amount of 2025 Notes (equivalent to an initial conversion price of approximately $67.20 per share of Class C capital stock). The conversion rate and the corresponding initial conversion price are subject to customary adjustments upon the occurrence of certain events. Zillow Group may redeem for cash all or part of the 2025 Notes, at its option, on or after May 22, 2023, under certain circumstances, at a redemption price equal to 100% of the principal amount of the 2025 Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date (as defined in the indenture governing the 2025 Notes, the “Indenture”). We may not redeem the 2025 Notes prior to May 22, 2023. We may redeem, for cash, all or any portion of the 2025 Notes, at our option, on or after May 22, 2023 if the last reported sale price per share of our Class C capital stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period. The conversion option does not meet the criteria for separate accounting as a derivative as it is indexed to our own stock.

If Zillow Group undergoes a fundamental change (as defined in the Indenture), holders of the 2025 Notes may require us to repurchase for cash all or part of their 2025 Notes at a repurchase price equal to 100% of the principal amount of the 2025 Notes to be purchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date (as defined in the Indenture). In addition, if certain fundamental changes occur or if Zillow Group delivers a notice of redemption, we may be required, in certain circumstances, to increase the conversion rate for any 2025 Notes converted in connection with such fundamental changes or notice of redemption by a specified number of shares of our Class C capital stock. Certain events are also considered “Events of Default,” which may result in the acceleration of the maturity of the 2025 Notes, as described in the Indenture. There are no financial covenants associated with the 2025 Notes.

In accounting for the issuance of the 2025 Notes, we separated the 2025 Notes into liability and equity components. The carrying amount of the liability component 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 2025 Notes. The difference between the principal amount of the 2025 Notes and 2023 Notes were first convertible during the liability component represents the debt discount, which is recorded as a direct deduction from the related debt liability in the condensed consolidated balance sheet and amortized to interest expense using the effective interest method over the term of the 2025 Notes. The equity component of the 2025 Notes of approximately $154.8 million, net of issuance costs of $3.3 million, is included in additional paid-in capital in the condensed consolidated balance sheet and is not remeasured as long as it continues to meet the conditions for equity classification.three months ended March 31, 2021.

For additional details related to our convertible senior notes, see Note 1514 in the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2019.~~2020.

~~Table of Contents~~

Note ~~13.~~12. Income Taxes

We are subject to federal and state income taxes in the ~~United States~~U.S. and federal and provincial income taxes in Canada. As of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, 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. Therefore, no material current tax liability or expense has been recorded in the condensed consolidated financial statements. We have accumulated federal tax losses of approximately ~~$1,137.6 million~~$1.7 billion as of December 31, ~~2019,~~2020, which are available to reduce future taxable income. We have accumulated state tax losses of approximately ~~$34.3~~$53.2 million (tax effected) as of December 31, ~~2019.~~2020.

We recorded an income tax ~~expense~~benefit of ~~$0.7~~$2.9 million for the three months ended ~~June 30, 2020 and~~March 31, 2021, primarily related to state income taxes. We recorded an income tax benefit of ~~$8.5~~$9.2 million for the ~~six~~three months ended ~~June 30, 2020. The income tax benefit for the six months ended June 30,~~March 31, 2020 ~~was~~ primarily as a result of a $9.7 million income tax benefit related to the $71.5 million non-cash impairment we recorded during the three months ended March 31, 2020 related to the Trulia trade names and trademarks intangible asset. For additional information about the non-cash impairment, see Note 10 toof our condensed consolidated financial statements. ~~This income tax benefit was partially offset by an immaterial amount of state income tax expense recorded for the six months ended June 30, 2020.~~

Note ~~14.~~13. Shareholders’ Equity

Preferred Stock

Our board of directors has the authority to fix and determine and to amend the number of shares of any series of preferred stock that is wholly unissued or to be established and to fix and determine and to amend the designation, preferences, voting powers and limitations and the relative, participating, optional or other rights, of any series of shares of preferred stock that is wholly unissued or to be established, subject in each case to certain approval rights of holders of our outstanding Class B common stock. There was 0 preferred stock issued and outstanding as of ~~June 30, 2020~~March 31, 2021 or December 31, ~~2019.~~2020.

Common and Capital Stock

Our Class A common stock has no preferences or privileges and is not redeemable. Holders of Class A common stock are entitled to 1 vote for each share.

Our Class B common stock has no preferences or privileges and is not redeemable. At any time after the date of issuance, each share of Class B common stock, at the option of the holder, may be converted into 1 share of Class A common stock, or automatically converted into Class A common stock upon the affirmative vote by or written consent of holders of a majority of the shares of the Class B common stock. Holders of Class B common stock are entitled to 10 votes for each share.

Our Class C capital stock has no preferences or privileges, is not redeemable and, except in limited circumstances, is non-voting.

Equity Distribution Agreement

On ~~May 15, 2020, Zillow Group issued and sold 8,000,000 shares of Class C capital stock, and on May 19, 2020, issued and sold~~February 17, 2021, we entered into an ~~additional 800,000 shares of Class C capital stock~~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 of the underwriters’ option to purchase additional shares. The 8,800,000 shares of Class C capital stock were issued and sold at a public offering price of $48.00 per share. We received net proceeds of $411.5 million after deducting underwriting discounts and commissions and offering expenses paid by us.

In connection with the partial repurchase of the 2021 Notes, we issued 753,936 shares of Class C capital stock at a price of $48.00 per share with a total value of $36.2 million to settle the conversion spread for the notes repurchased. Additionally, we unwound a portion of the capped call transactions related to the 2021 Notes whereby we received 317,865Managers, shares of our Class C capital stock, ~~equal to a value of approximately $14.8 million based on the trading~~having an aggregate gross sales price of ~~our Class C capital stock at~~up to $1.0 billion, in such share amounts as we may specify by notice to the ~~time~~Managers, in accordance with the terms and conditions set forth in the equity distribution agreement.

The following table summarizes the activity pursuant to the equity distribution agreement for the period presented (in thousands, except share and per share amounts):


	Three Months Ended March 31, 2021
Shares of Class C capital stock issued	3,163,502
Weighted-average issuance price per share	$	174.0511
Gross proceeds (1)	$	550,611

(1) Net proceeds were $544.6 million after deducting $6.1 million of ~~the unwind. See Note 12 for further discussion of the partial repurchase of the 2021 Notes~~commissions and ~~the corresponding capped call unwind.~~

other offering expenses incurred.

~~Table of Contents~~

Note ~~15.~~14. Share-Based Awards

~~Zillow Group, Inc. 2020 Incentive Plan~~

On June 9, 2020, the Zillow Group, Inc. 2020 Incentive Plan (the “2020 Plan”) became effective, which replaces the Zillow Group, Inc. Amended and Restated 2011 Incentive Plan (the “2011 Plan”). 12,400,000 shares of Class C capital stock are authorized and available for issuance under the 2020 Plan. In addition, shares previously available for new grants under the 2011 Plan as of June 9, 2020 and shares subject to outstanding awards under the 2011 Plan as of June 9, 2020 that on or after that date cease to be subject to such awards (other than by reason of exercise or settlement of the awards in vested or nonforfeitable shares) are also available for issuance under the 2020 Plan. The number of shares authorized under the 2020 Plan will be increased on the first day of each calendar year, beginning January 1, 2021 and ending on (and including) January 1, 2030, by an amount equal to the lesser of (a) 5% of our outstanding Class A common stock, Class B common stock and Class C capital stock on a fully diluted basis as of the end of the immediately preceding calendar year and (b) a number of shares determined by our board of directors. The 2020 Plan is administered by the compensation committee of the board of directors. Under the terms of the 2020 Plan, the compensation committee may grant equity awards, including incentive stock options, nonqualified stock options, restricted stock, restricted stock units, restricted units, stock appreciation rights, performance shares or performance units to employees, officers, directors, consultants, agents, advisors and independent contractors of Zillow Group and its subsidiaries. The board of directors has also authorized certain senior executive officers to grant equity awards under the 2020 Plan, within limits prescribed by our board of directors. The 2020 Plan provides that in the event of a stock dividend, stock split or similar event, the maximum number and kind of securities available for issuance under the plan will be proportionally adjusted.

Options under the 2020 Plan are granted with an exercise price per share not less than 100% of the fair market value of our Class C capital stock on the grant date, with the exception of substituted option awards granted in connection with acquisitions, and are exercisable at such times and under such conditions as determined by the compensation committee. Any portion of an option that is not vested and exercisable on the date of a participant’s termination of service expires on such date. Employees generally forfeit their rights to exercise vested options 3 months following their termination of employment or 12 months following termination by reason of death, disability or retirement. Options granted under the 2020 Plan expire no later than ten years from the grant date and typically vest either 25% after 12 months and quarterly thereafter over the next three years or quarterly over a period of four years.

Restricted stock units granted under the 2020 Plan typically vest either 25% after 12 months and quarterly thereafter over the next three years or quarterly over a period of four years. Any portion of a restricted stock unit that is not vested on the date of a participant’s termination of service expires on such date.

~~Options and restricted stock units that remain outstanding under the 2011 Plan have vesting and exercisability terms consistent with those described above for awards granted under the 2020 Plan.~~

Option Awards

The following table summarizes option award activity for the ~~six~~three months ended ~~June 30, 2020:~~March 31, 2021:


		Number of Shares Subject to Existing Options	Weighted- Average Exercise Price Per Share		Weighted- Average Remaining Contractual Life (Years)	Aggregate Intrinsic Value (in thousands)			Number of Shares Subject to Existing Options	Weighted- Average Exercise Price Per Share		Weighted- Average Remaining Contractual Life (Years)	Aggregate Intrinsic Value (in thousands)
Outstanding at January 1, 2020		29,634,296	$	35.95	6.28	$	331,107
Outstanding at January 1, 2021								Outstanding at January 1, 2021	20,051,051	$	42.68	7.22	$	1,751,105
Granted	Granted	4,833,605	49.24					Granted	8,226,833	133.88
Exercised	Exercised	(6,324,858)	29.25					Exercised	(1,602,896)	38.15
Forfeited or cancelled	Forfeited or cancelled	(674,462)	40.76					Forfeited or cancelled	(373,388)	47.58
Outstanding at June 30, 2020		27,468,581	39.71		6.74	493,801
Vested and exercisable at June 30, 2020		14,708,916	35.84		4.96	320,951
Outstanding at March 31, 2021								Outstanding at March 31, 2021	26,301,600	71.41		7.99	1,580,222
Vested and exercisable at March 31, 2021								Vested and exercisable at March 31, 2021	9,411,270	39.23		6.05	851,494

2320

Table of Contents

The fair value of options granted is estimated at the date of grant using the Black-Scholes-Merton option-pricing model, assuming no dividends and with the following assumptions for the periods presented:


		Three Months Ended June 30,			Six Months Ended June 30,				Three Months Ended March 31,
		2020	2019	2020	2019		2021	2020
Expected volatility	Expected volatility	51%	45%	45%-51%	45%-47%	Expected volatility	52%-55%	45%-48%
Expected dividend yield	Expected dividend yield	—	—	—	—	Expected dividend yield	0	0
Risk-free interest rate	Risk-free interest rate	0.33%	2.00%	0.33%-0.93%	2.00%-2.53%	Risk-free interest rate	0.57%-0.90%	0.87%-0.93%
Weighted-average expected life	Weighted-average expected life	5.00 years	5.00 years	5.00-5.50 years	4.75-5.25 years	Weighted-average expected life	4.50-5.75 years	5.00-5.50 years
Weighted-average fair value of options granted	Weighted-average fair value of options granted	$20.21	$16.96	$20.69	$16.79	Weighted-average fair value of options granted	$59.74	$20.75

As of ~~June 30, 2020,~~March 31, 2021, there was a total of ~~$218.2~~$638.0 million in unrecognized compensation cost related to unvested stock options.

Restricted Stock Units

The following table summarizes activity for restricted stock units for the ~~six~~three months ended ~~June 30, 2020:~~March 31, 2021:


		Restricted Stock Units	Weighted- Average Grant- Date Fair Value			Restricted Stock Units	Weighted- Average Grant- Date Fair Value
Unvested outstanding at January 1, 2020		7,052,767	$	40.01
Unvested outstanding at January 1, 2021					Unvested outstanding at January 1, 2021	7,316,557	$	48.14
Granted	Granted	3,665,016	49.30		Granted	930,831	138.13
Vested	Vested	(1,414,158)	40.65		Vested	(813,471)	44.96
Forfeited	Forfeited	(513,401)	41.62		Forfeited	(162,972)	48.73
Unvested outstanding at June 30, 2020		8,790,224	43.69
Unvested outstanding at March 31, 2021					Unvested outstanding at March 31, 2021	7,270,945	60.01

As of ~~June 30, 2020,~~March 31, 2021, there was a total of ~~$356.6~~$411.1 million in unrecognized compensation cost related to unvested restricted stock units.

Share-Based Compensation Expense

The following table presents the effects of share-based compensation expense in our condensed consolidated statements of operations during the periods presented (in thousands):


		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended March 31,
		2020		2019		2020		2019			2021		2020
Cost of revenue	Cost of revenue	$	1,119	$	936	$	2,292	$	1,816	Cost of revenue	$	2,386	$	1,173
Sales and marketing	Sales and marketing	9,116		6,801		16,109		12,451		Sales and marketing	9,887		6,993
Technology and development	Technology and development	21,666		18,399		40,583		33,908		Technology and development	26,393		18,917
General and administrative	General and administrative	20,450		17,496		37,162		61,581		General and administrative	25,007		16,712
Total	Total	$	52,351	$	43,632	$	96,146	$	109,756	Total	$	63,673	$	43,795

On February 21, 2019, Zillow Group announced the appointment of Richard N. Barton as Zillow Group’s Chief Executive Officer, effective February 21, 2019. Mr. Barton succeeds Spencer Rascoff, who served as Zillow Group’s Chief Executive Officer since 2010. In connection with Mr. Rascoff’s resignation as Chief Executive Officer, Zillow Group entered into an Executive Departure Agreement and Release (the “Agreement”) with Mr. Rascoff. Pursuant to the Agreement, Mr. Rascoff received, among other things, a change in the exercise period of his vested stock options outstanding as well as accelerated vesting of outstanding stock options, which have been accounted for as equity modifications. We recorded $26.4 million of share-based compensation expense associated with the modifications during the six months ended June 30, 2019. For additional details, see Note 18 in the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019.

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Note ~~16.~~15. Net ~~Loss~~Income (Loss) Per Share

Basic net income (loss) per share is computed by dividing net income (loss) by the weighted-average number of shares (including Class A common stock, Class B common stock and Class C capital stock) outstanding during the period. In the calculation of basic net income (loss) per share, undistributed earnings are allocated assuming all earnings during the period were distributed.

Diluted net income (loss) per share is computed by dividing net income (loss) by the weighted-average number of shares (including Class A common stock, Class B common stock and Class C capital stock) outstanding during the period and potentially dilutive Class A common stock and Class C capital stock equivalents, except in cases where the effect of the Class A common stock or Class C capital stock equivalent would be antidilutive. Potential Class A common stock and Class C capital stock equivalents consist of Class A common stock and Class C capital stock issuable upon exercise of stock options and Class A common stock and Class C capital stock underlying unvested restricted stock units using the treasury stock method. Potential Class A common stock equivalents also include Class A common stock issuable upon conversion of the convertible notes due in 2020 using the if-converted method through the date of their last conversion in December 2020.

Prior to the second half of 2020, we intended to settle the principal amount of our outstanding convertible senior notes in cash and therefore used the treasury stock method to calculate any potential dilutive effect of the conversion spread on diluted net income per share, if applicable.

Effective July 1, 2020, we can no longer assume cash settlement of the principal amount of these outstanding convertible notes, therefore share settlement is now presumed. On a prospective basis we have applied the if-converted method for calculating any potential dilutive effect of the conversion of the outstanding convertible notes on diluted net income per share, if applicable. The following table presents the maximum number of shares and conversion price per share of Class C capital stock for each of the Notes based on the aggregate principal amount outstanding as of March 31, 2021 (in thousands, except per share amounts):


Maturity Date	Shares	Conversion Price per Share
September 1, 2026	11,464	$	43.51
May 15, 2025	8,408	67.20
September 1, 2024	14,304	43.51
July 1, 2023	4,757	78.37

For the periods presented, the following table reconciles the denominators used in the basic and diluted net income (loss) per share calculations (in thousands):


	Three Months Ended March 31,
	2021	2020
Denominator for basic calculation	243,234	210,674
Effect of dilutive securities:
Option awards	12,437	0
Unvested restricted stock units	3,675	0
Denominator for dilutive calculation	259,346	210,674

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For the periods presented, the following Class A common stock and Class C capital stock equivalents were excluded from the calculations of diluted net ~~loss~~income (loss) per share because their effect would have been antidilutive (in thousands):

Three Months Ended
June 30, Six Months Ended
June 30,
2020 2019 2020 2019
Weighted-average Class A common stock and Class C capital stock option awards outstanding 25,202 19,502 22,649 19,656
Weighted-average Class A common stock and Class C capital stock restricted stock units outstanding 9,086 7,230 8,354 6,548
Class A common stock issuable upon conversion of the convertible notes maturing in 2020 400 411 400 411
Class C capital stock issuable upon conversion of the convertible notes maturing in 2021, 2024 and 2026 7,232 — 7,316 —
Total Class A common stock and Class C capital stock equivalents 41,920 27,143 38,719 26,615

Since we expect to settle the principal amount of the outstanding Notes in cash, we use the treasury stock method for calculating any potential dilutive effect of the conversion spread on diluted net income per share, if applicable. The conversion spread for each of the notes has a dilutive impact on diluted net income per share when the market price of the Company’s Class C capital stock at the end of the period exceeds the conversion price per share. The following table presents the conversion spread and conversion price per share of Class C capital stock for each of the convertible senior notes (in thousands, except per share amounts):

Maturity Date Conversion Spread Conversion Price per Share
September 1, 2026 11,492 $ 43.51
May 15, 2025 8,408 67.20
September 1, 2024 15,468 43.51
July 1, 2023 4,769 78.37
December 1, 2021 5,067 52.36


	Three Months Ended March 31,
	2021	2020
Weighted-average Class A common stock and Class C capital stock option awards outstanding	2,546	23,663
Weighted-average Class C capital stock restricted stock units outstanding	303	7,623
Class A common stock issuable upon conversion of the convertible notes maturing in 2020	0	407
Class C capital stock issuable upon conversion of the 2023 Notes, 2024 Notes, 2025 Notes and 2026 Notes	39,834	0
Total Class A common stock and Class C capital stock equivalents	42,683	31,693

Note ~~17.~~16. Commitments and Contingencies

Interest Rate Lock Commitments

We have entered into IRLCs with prospective borrowers under our mortgage origination business whereby we commit to lend a certain loan amount under specific terms and at a specific interest rate to the borrower. These commitments are treated as derivatives and are carried at fair value. For additional information regarding our IRLCs, see Note 3 of our Notes to Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q.

Lease Commitments

We have entered into various non-cancelable operating lease agreements for certain of our office space and equipment with original lease periods expiring between ~~2020~~2021 and 2030. For additional information regarding our lease agreements, see Note 1413 in ~~our~~the Notes to the Consolidated Financial Statements in ~~the~~our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2019.~~

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2020.

Purchase Commitments

Purchase commitments primarily include various non-cancelable agreements to purchase content related to our mobile applications and websites and certain cloud computing services as well as homes we are under contract to purchase through Zillow Offers but that have not closed as of the respective date. ~~The amounts due for non-cancelable purchase commitments, excluding homes under contract, as of June 30, 2020, are as follows (in thousands):~~

Purchase Obligations
2020 $ 8,254
2021 17,627
2022 3,043
2023 507
Total future purchase commitments $ 29,431

As of ~~June 30, 2020,~~March 31, 2021, the value of homes under contract that have not closed was ~~$51.9~~$511.3 million.

Letters of Credit

As of ~~June 30, 2020,~~March 31, 2021, we have outstanding letters of credit of approximately $16.9 million, which secure our lease obligations in connection with certain of our office space operating leases.

Surety Bonds

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. We have outstanding surety bonds issued for our benefit of approximately ~~$9.8~~$10.4 million and ~~$10.2~~$10.1 million, respectively, as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019.~~2020.

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Legal Proceedings

We are involved in a number of legal proceedings concerning matters arising in connection with the conduct of our business activities, some of which are at preliminary stages and some of which seek an indeterminate amount of damages. We regularly evaluate the status of legal proceedings in which we are involved to assess whether a loss is probable or there is a reasonable possibility that a loss or additional loss may have been incurred to determine if accruals are appropriate. We further evaluate each legal proceeding to assess whether an estimate of possible loss or range of loss can be made if accruals are not appropriate. For certain cases described below, management is unable to provide a meaningful estimate of the possible loss or range of possible loss because, among other reasons, (i) the proceedings are in preliminary stages; (ii) specific damages have not been sought; (iii) damages sought are, in our view, unsupported and/or exaggerated; (iv) there is uncertainty as to the outcome of pending appeals or motions; (v) there are significant factual issues to be resolved; and/or (vi) there are novel legal issues or unsettled legal theories presented. For these cases, however, management does not believe, based on currently available information, that the outcomes of these proceedings will have a material effect on our financial position, results of operations or cash flow. For the matters discussed below, we have not recorded any material accruals as of ~~June 30, 2020~~March 31, 2021 or December 31, ~~2019.~~2020.

In July 2015, VHT, Inc. (“VHT”) filed a complaint against us in the ~~United States~~U.S. District Court for the Western District of Washington alleging copyright infringement of VHT’s images on the Zillow Digs site. In January 2016, VHT filed an amended complaint alleging copyright infringement of VHT’s images on the Zillow Digs site as well as the Zillow listing site. In December 2016, the court granted a motion for partial summary judgment that dismissed VHT’s claims with respect to the Zillow listing site. ~~A federal jury trial began on January 23, 2017, and on~~On February 9, 2017, ~~the~~a jury trial returned a verdict finding that the Company had infringed VHT’s copyrights in images displayed or saved to the Digs site. The jury awarded VHT $79,875 in actual damages and approximately $8.2 million in statutory damages. ~~In March 2017, the Company filed motions in the district court seeking judgment for the Company on certain claims that are the subject of the verdict, and for a new trial on others.~~ On June 20, 2017, the ~~judge ruled and~~District Court granted ~~in part~~certain of our post-trial motions, finding that VHT failed to present sufficient evidence to prove direct copyright infringement for a portion of the images, reducing the total damages to approximately $4.1 million. On March 15, 2019, after we filed an appeal with the Ninth Circuit Court of Appeals seeking review of the final judgment and certain prior rulings entered by the District Court, the Ninth Circuit Court of Appeals issued an opinion that, among other things, (i) affirmed the District Court’s grant of summary judgment in favor of Zillow on direct infringement of images on Zillow’s listing site, (ii) affirmed the district court’s grant in favor of Zillow of judgment notwithstanding the verdict on certain images that were displayed on the Zillow Digs site, (iii) remanded consideration of the

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issue whether VHT’s images on the Zillow Digs site were part of a compilation or individual photos, and (iv) vacated the jury’s finding of willful infringement. On October 7, 2019, the ~~United States~~U.S. Supreme Court denied VHT’s petition for writ of certiorari seeking review of certain rulings by the Ninth Circuit Court of Appeals. On December 6, 2019, the Company filed a motion for summary judgment with the District Court seeking a ruling that VHT’s images are a compilation, or in the alternative, seeking a dismissal of the case based on a recent ~~United States~~U.S. Supreme Court ruling. On May 8, 2020, the District Court denied the Company’s motion for summary judgment and granted VHT’s motion for summary judgment on the issue of whether the remaining photos were a compilation. On March 10, 2021, the District Court ordered a new trial relating to 2,700 images that the jury previously found that the Company had willfully infringed, and for which the court did not enter judgment, on the question of (i) whether the Company’s infringement was innocent, and (2) statutory damages. A trial date has been scheduled during the third quarter of 2021. We do not believe there is a reasonable possibility that a material loss will be incurred related to this lawsuit.

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In August and September 2017, 2 purported class action lawsuits were filed against us and certain of our executive officers, alleging, among other things, violations of federal securities laws on behalf of a class of those who purchased our common stock between February 12, 2016 and August 8, 2017. One of those purported class actions, captioned Vargosko v. Zillow Group, Inc. et al, was brought in the U.S. District Court for the Central District of California. The other purported class action lawsuit, captioned Shotwell v. Zillow Group, Inc. et al, was brought in the U.S. District Court for the Western District of Washington. The complaints allege, among other things, that during the period between February 12, 2016 and August 8, 2017, we issued materially false and misleading statements regarding our business practices. The complaints seek to recover, among other things, alleged damages sustained by the purported class members as a result of the alleged misconduct. In November 2017, an amended complaint was filed against us and certain of our executive officers in the Shotwell v. Zillow Group purported class action lawsuit, extending the beginning of the class period to November 17, 2014. In January 2018, the Vargosko v. Zillow Group purported class action lawsuit was transferred to the U.S. District Court for the Western District of Washington and consolidated with the Shotwell v. Zillow Group purported class action lawsuit. In February 2018, the plaintiffs filed a consolidated amended complaint, and in April 2018, we filed our motion to dismiss the consolidated amended complaint. In October 2018, our motion to dismiss was granted without prejudice, and in November 2018, the plaintiffs filed a second consolidated amended complaint, which we moved to dismiss in December 2018. On April 19, 2019, our motion to dismiss the second consolidated amended complaint was denied, and we filed our answer to the second amended complaint on May 3, 2019. On October 11, 2019, plaintiffs filed a motion for class certification ~~and we filed~~which was granted by the District Court on October 28, 2020. On February 17, 2021, the Ninth Circuit Court of Appeals denied our ~~motion in opposition on March 20, 2020. The plaintiffs filed a reply in further support~~petition for review of ~~their motion on May 29, 2020.~~that decision. We have denied the allegations of wrongdoing and intend to vigorously defend the claims in this lawsuit. We do not believe that there is a reasonable possibility that a material loss will be incurred related to this ~~lawsuit is probable.~~lawsuit.

In October and November 2017 and January and February 2018, 4 shareholder derivative lawsuits were filed in the U.S. District Court for the Western District of Washington and the Superior Court of the State of Washington, King County, against certain of our executive officers and directors seeking unspecified damages on behalf of the Company and certain other relief, such as reform to corporate governance practices. The plaintiffs in the derivative suits (in which the Company is a nominal defendant) allege, among other things, that the defendants breached their fiduciary duties in connection with oversight of the Company’s public statements and legal compliance, and as a result of the breach of such fiduciary duties, the Company was damaged, and defendants were unjustly enriched. Certain of the plaintiffs also allege, among other things, violations of Section 14(a) of the Securities Exchange Act of 1934 and waste of corporate assets. On February 5, 2018, the U.S. District Court for the Western District of Washington consolidated the 2 federal shareholder derivative lawsuits pending in that court. On February 16, 2018, the Superior Court of the State of Washington, King County, consolidated the ~~two~~2 shareholder derivative lawsuits pending in that court. All 4 of the shareholder derivative lawsuits were stayed until our motion to dismiss the second consolidated amended complaint in the securities class action lawsuit discussed above was denied in April 2019. On July 8, 2019, the plaintiffs in the consolidated federal derivative lawsuit filed a consolidated shareholder derivative complaint, which we moved to dismiss on August 22, 2019. On February 28, 2020, our motion to dismiss the consolidated federal shareholder derivative complaint was denied. On May 18, 2020, we filed an answer in the consolidated federal derivative lawsuit. ~~Our~~On August 24, 2020, we filed an answer in the consolidated state derivative matter. On February 16, 2021, the court in the consolidated state derivative matter ~~is due~~stayed the action. On March 5, 2021, a new shareholder derivative lawsuit was filed in the U.S. District Court for the Western District of Washington against certain of our executive officers and directors seeking unspecified damages on ~~August 24, 2020.~~behalf of the Company and certain other relief, such as reform to corporate governance practices, alleging, among other things, violations of federal securities laws. The defendants intend to deny the allegations of wrongdoing and vigorously defend the claims in this lawsuit. We do not believe that there is a reasonable possibility that a material loss ~~is probable~~will be incurred related to these ~~lawsuits.~~derivative matters.

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On September 17, 2019, International Business Machines Corporation (“IBM”) filed a complaint against us in the ~~United States~~U.S. District Court for the Central District of California, alleging, among other things, that the Company has infringed and continues to willfully infringe ~~seven~~7 patents held by IBM and seeks unspecified damages, including a request that the amount of compensatory damages be trebled, injunctive relief and costs and reasonable attorneys’ fees. On November 8, 2019, we filed a motion to transfer venue and/or to dismiss the complaint. On December 2, 2019, IBM filed an amended ~~complaint. On~~complaint, and on December 16, 2019, we filed a renewed motion to transfer venue and/or to dismiss the complaint. The Company’s motion to transfer venue to the ~~United States~~U.S. District Court for the Western District of Washington was granted on May 28, 2020. We filed our answer with counterclaims in response to the amended complaint on June 11, 2020. On July 2, 2020, IBM filed a motion to dismiss our counterclaims. In response to IBM’s motion, on July 22, 2020, we filed an amended answer with counterclaims. On August 12, 2020, IBM filed its answer to our counterclaims. On September 18, 2020, we filed 4 inter partes review (“IPR”) petitions before the U.S. Patent and Trial Appeal Board (“PTAB”) seeking the Board’s review of the patentability with respect to 3 of the patents asserted by IBM in the lawsuit. On March 15, 2021, the PTAB instituted inter partes review proceedings with respect to 2 of the 3 patents for which we filed petitions. On March 22, 2021, the PTAB denied institution with respect to the last of the 3 patents for which we filed an IPR. On April 21, 2021, we filed a request for rehearing of the PTAB decision denying institution. On January 22, 2021, the court partially stayed the action with respect to all patents for which we filed an IPR and set forth a motion schedule. On March 8, 2021, IBM filed its second amended complaint. On March 25, 2021, we filed an amended motion for judgment on the pleadings. We deny the allegations of any wrongdoing and intend to vigorously defend the claims in the lawsuit. There is a reasonable possibility that a loss may be incurred related to ~~this complaint;~~these IBM complaints; however, the possible loss or range of loss is not estimable.

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On July 21, 2020, IBM filed a second action against us in the ~~United States~~U.S. District Court for the Western District of Washington, alleging, among other things that the Company has infringed and continues to willfully infringe ~~five~~5 patents held by IBM and seeks unspecified damages. On September 14, 2020, we filed a motion to dismiss the complaint filed in the action, to which IBM responded by the filing of an amended complaint on November 5, 2020. On December 18, 2020, we filed a motion to dismiss IBM’s first amended complaint. On December 23, 2020, the Court issued a written order staying this case in full. We deny the allegations of any wrongdoing and intend to vigorously defend the claims in the lawsuit. ~~We do not believe~~There is a reasonable possibility that a loss may be incurred related to ~~this lawsuit~~these IBM complaints; however, the possible loss or range of loss is ~~probable.~~not estimable.

In addition to the matters discussed above, from time to time, we are involved in litigation and claims that arise in the ordinary course of business. Although we cannot be certain of the outcome of any such litigation or claims, nor the amount of damages and exposure that we could incur, we currently believe that the final disposition of such matters will not have a material effect on our business, financial position, results of operations or cash flow. Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.

Indemnifications

In the ordinary course of business, we enter into contractual arrangements under which we agree to provide indemnification of varying scope and terms to business partners and other parties with respect to certain matters, including, but not limited to, losses arising out of the breach of such agreements and out of intellectual property infringement claims made by third parties. In addition, we have agreements that indemnify certain issuers of surety bonds against losses that they may incur as a result of executing surety bonds on our behalf. For our indemnification arrangements, payment may be conditional on the other party making a claim pursuant to the procedures specified in the particular contract. Further, our obligations under these agreements may be limited in terms of time and/or amount, and in some instances, we may have recourse against third parties for certain payments. In addition, we have indemnification agreements with certain of our directors and executive officers that require us, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors or officers. The terms of such obligations may vary.

Note ~~18.~~17. Employee Benefit Plan

We have a defined contribution 401(k) retirement plan covering Zillow Group employees who have met certain eligibility requirements (the “Zillow Group 401(k) Plan”). Eligible employees may contribute pretax compensation up to a maximum amount allowable under the Internal Revenue Service limitations. Employee contributions and earnings thereon vest immediately. We currently match up to 4% of employee contributions under the Zillow Group 401(k) Plan. The total expense related to the Zillow Group 401(k) Plan was ~~$6.4~~$7.7 million and ~~$5.2~~$6.4 million, respectively, for the three months ended ~~June 30, 2020~~March 31, 2021 and ~~2019, and $12.8 million and $10.1 million, respectively, for the six months ended June 30, 2020 and 2019.~~2020.

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Note ~~19.~~18. Segment Information and Revenue

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. The chief executive officer acts as the chief operating decision-maker and reviews financial and operational information for the Homes, Internet, Media & Technology (“IMT”) and Mortgages segments.

The Homes segment includes the financial results from Zillow Group’s purchase and sale of homes directly through Zillow Offers and the financial results from title and escrow services through Zillow Closing Services. The IMT segment includes the financial results for the Premier Agent, rentals and new construction marketplaces, dotloop and display, as well as revenue from the sale of various other marketing and business products and services to real estate professionals. The Mortgages segment primarily includes financial results for ~~advertising sold to mortgage lenders and other mortgage professionals,~~ mortgage originations ~~through Zillow Home Loans~~ and the sale of mortgages on the secondary market ~~as well as Mortech~~through Zillow Home Loans and advertising sold to mortgage ~~software solutions.~~lenders and other mortgage professionals.

Revenue and costs are directly attributed to our segments when possible. However, due to the integrated structure of our business, certain costs incurred by one segment may benefit the other segments. These costs primarily include headcount-related expenses, general and administrative expenses including executive, finance, accounting, legal, human resources, recruiting and facilities costs, product development and data acquisition costs, costs related to operating our mobile applications and websites, and marketing and advertising costs. These costs are allocated to each segment based on the estimated benefit each segment receives from such expenditures.

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The chief executive officer reviews information about our revenue categories as well as statement of operations data inclusive of income (loss) before income taxes by segment. This information is included in the following ~~tables~~table for the periods presented (in thousands):


		Three Months Ended June 30, 2020										Three Months Ended June 30, 2019											Three Months Ended March 31, 2021				Three Months Ended March 31, 2020
		Homes		IMT		Mortgages		Homes		IMT		Mortgages			Homes		IMT		Mortgages		Homes		IMT		Mortgages
Revenue:	Revenue:													Revenue:
Zillow Offers	Zillow Offers	$	453,816	$	—	$	—	$	248,924	$	—	$	—	Zillow Offers	$	700,974	$	0	$	0	$	769,112	$	0	$	0
Premier Agent	Premier Agent	—		191,962		—		—		231,961		—		Premier Agent	0		334,318		0		0		242,106		0
Other	Other	436		88,377		—		—		91,708		—		Other	3,178		112,010		0		761		88,560		0
Mortgages	Mortgages	—		—		33,761		—		—		26,985		Mortgages	0		0		67,960		0		0		25,282
Total revenue	Total revenue	454,252		280,339		33,761		248,924		323,669		26,985		Total revenue	704,152		446,328		67,960		769,873		330,666		25,282
Costs and expenses:	Costs and expenses:													Costs and expenses:
Cost of revenue	Cost of revenue	431,788		23,387		5,896		240,732		26,059		4,430		Cost of revenue	640,618		28,016		18,396		732,199		24,318		5,155
Sales and marketing	Sales and marketing	47,877		96,026		11,695		37,409		135,440		14,584		Sales and marketing	55,025		113,298		25,270		71,589		120,173		12,886
Technology and development	Technology and development	28,918		93,176		6,763		18,198		94,261		7,871		Technology and development	37,139		101,893		9,824		32,538		95,028		7,352
General and administrative	General and administrative	21,902		53,884		9,725		17,808		54,671		10,360		General and administrative	25,532		58,729		16,290		23,421		58,754		10,110
Integration costs		—		—		—		—		—		293
Total costs and expenses		530,485		266,473		34,079		314,147		310,431		37,538
Impairment costs														Impairment costs	0		0		0		0		73,900		2,900
Acquisition-related costs														Acquisition-related costs	0		817		0		0		0		0
Total costs and expenses (1)														Total costs and expenses (1)	758,314		302,753		69,780		859,747		372,173		38,403
Income (loss) from operations	Income (loss) from operations	(76,233)		13,866		(318)		(65,223)		13,238		(10,553)		Income (loss) from operations	(54,162)		143,575		(1,820)		(89,874)		(41,507)		(13,121)
Segment other income	Segment other income	—		5,300		385		—		—		402		Segment other income	0		0		1,732		0		0		202
Segment interest expense	Segment interest expense	(3,825)		—		(307)		(5,899)		—		(287)		Segment interest expense	(4,312)		0		(1,732)		(8,084)		0		(226)
Income (loss) before income taxes (1)		$	(80,058)	$	19,166	$	(240)	$	(71,122)	$	13,238	$	(10,438)
Income (loss) before income taxes (2)														Income (loss) before income taxes (2)	$	(58,474)	$	143,575	$	(1,820)	$	(97,958)	$	(41,507)	$	(13,145)

(1) The following table presents depreciation and amortization expense and share-based compensation expense for each of our segments for the periods presented (in thousands):

Six Months Ended
June 30, 2020 Six Months Ended
June 30, 2019
Homes IMT Mortgages Homes IMT Mortgages
Revenue:
Zillow Offers $ 1,222,928 $ — $ — $ 377,396 $ — $ —
Premier Agent — 434,068 — — 449,696 —
Other 1,197 176,937 — — 172,245 —
Mortgages — — 59,043 — — 54,345
Total revenue 1,224,125 611,005 59,043 377,396 621,941 54,345
Costs and expenses:
Cost of revenue 1,163,987 47,705 11,051 363,151 50,310 9,108
Sales and marketing 119,466 216,199 24,581 58,271 262,094 28,655
Technology and development 61,456 188,204 14,115 30,479 182,230 15,391
General and administrative 45,323 112,638 19,835 32,165 125,521 20,927
Impairment costs — 73,900 2,900 — — —
Integration costs — — — — — 645
Total costs and expenses 1,390,232 638,646 72,482 484,066 620,155 74,726
Income (loss) from operations (166,107) (27,641) (13,439) (106,670) 1,786 (20,381)
Segment other income — 5,300 587 — — 715
Segment interest expense (11,909) — (533) (9,657) — (388)
Income (loss) before income taxes (1) $ (178,016) $ (22,341) $ (13,385) $ (116,327) $ 1,786 $ (20,054)


	Three Months Ended March 31, 2021						Three Months Ended March 31, 2020
	Homes		IMT		Mortgages		Homes		IMT		Mortgages
Depreciation and amortization expense	$	4,293	$	22,799	$	1,807	$	3,575	$	23,777	$	1,674
Share-based compensation expense	$	15,921	$	41,392	$	6,360	$	11,304	$	29,547	$	2,944

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~~(1)~~

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

Three Months Ended
June 30, Six Months Ended
June 30,
2020 2019 2020 2019
Total segment loss before income taxes $ (61,132) $ (68,322) $ (213,742) $ (134,595)
Corporate interest expense (33,458) (12,711) (62,740) (25,318)
Corporate other income 4,430 9,056 13,821 17,911
Gain on partial extinguishment of 2021 Notes 6,391 — 6,391 —
Consolidated loss before income taxes $ (83,769) $ (71,977) $ (256,270) $ (142,002)


	Three Months Ended March 31,
	2021		2020
Total segment income (loss) before income taxes	$	83,281	$	(152,610)
Corporate interest expense	(33,511)		(29,282)
Corporate other income	707		9,391
Loss on extinguishment of debt	(1,403)		0
Consolidated income (loss) before income taxes	$	49,074	$	(172,501)

Certain corporate items are not directly attributable to any of our segments, including the ~~gain~~loss on ~~the partial~~ extinguishment of ~~the 2021 Notes,~~debt, interest income earned on our short-term investments included in ~~Other~~other income and interest costs on our convertible senior notes included in ~~Interest~~interest expense.

Note 19. Subsequent Events

Acquisition of ShowingTime.com, Inc.

As previously disclosed, in February 2021, we entered into a definitive agreement to acquire ShowingTime.com, Inc. (“ShowingTime”), a real estate showing software provider, for $500.0 million in cash, subject to certain adjustments, payable upon the closing of the acquisition. On April 19, 2021, each of Zillow Group and ShowingTime received a request from the U.S. Federal Trade Commission (the “FTC”) for additional information and documentary material (commonly referred to as a “Second Request”) pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the “HSR Act”) in connection with our proposed acquisition of ShowingTime. The FTC’s Second Request extends the waiting period imposed under the HSR Act until 30 days after both Zillow Group and ShowingTime have substantially complied with the Second Request, unless the waiting period is terminated earlier by the FTC or voluntarily extended through an agreement among Zillow Group, ShowingTime and the FTC. We continue to cooperate with the FTC in its review of the proposed acquisition.

Amendment of Credit Facility Agreements

On April 7, 2021, certain wholly owned subsidiaries of Zillow Group amended and restated the credit agreement with Credit Suisse AG, Cayman Islands, in order to facilitate a titling trust structure. The credit facility will continue to be classified within current liabilities in our condensed consolidated balance sheets.

On April 14, 2021, certain wholly owned subsidiaries of Zillow Group amended and restated the credit agreement with Goldman Sachs Bank USA previously maturing on April 20, 2022 in order to facilitate a titling trust structure and extend the maturity date to October 21, 2022. The credit facility will continue to be classified within current liabilities in our condensed consolidated balance sheets.

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Item 2. 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 condensed consolidated financial statements and the related notes included elsewhere in this Quarterly Report on Form 10-Q. 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 Quarterly Report on Form 10-Q, including in the section titled “Note Regarding Forward-Looking Statements,” and also those factors discussed in Part I, Item 1A (Risk Factors) of our Annual Report on Form 10-K for the year ended December 31, ~~2019 as well as in Part II, Item 1A (Risk Factors) of this Quarterly Report on Form 10-Q.~~2020.

Overview of our Business

Reportable Segments and Revenue Overview

Zillow Group has three reportable segments: the Homes segment, the Internet, Media & Technology (“IMT”) segment and the Mortgages segment. The Homes segment includes the financial results from Zillow Group’s purchase and sale of homes directly through the Zillow Offers service and the financial results from the title and escrow services provided through Zillow Closing Services. The IMT segment includes the financial results for the Premier Agent, ~~Rentals~~rentals and new construction marketplaces, as well as dotloop, display and other advertising and business software solutions. 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.~~professionals.

The Homes segment primarily generates revenue through our Zillow Offers service from the resale of ~~homes on the open market. We began buying homes through Zillow Offers in April 2018, and we began selling homes in July 2018.~~homes. Other Homes revenue relates to revenue associated with title and escrow services provided through Zillow Closing ~~Services which launched in the second half of 2019.~~Services.

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 Premier Broker programs. Premier Agent and Premier Broker advertising products, which include the delivery of impressions and validated consumer connections, or leads, are primarily ~~sold~~offered on a share of voice basis. Impressions and 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. Impressions 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 contact information is provided to Premier Agents and Premier Brokers. Connections and impressions are each provided as part of our advertising services for Premier Agent and Premier Brokers; we do not charge a separate fee for these consumer 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 ~~plan to continue testing~~offer this pricing model into select ~~markets with high-performing~~ partners ~~in the future, including offering~~and provide it alongside our legacy market-based pricing model. With the Flex model, Premier Agents and Premier Brokers are provided with ~~impressions and connections~~validated leads at no upfront cost and ~~they~~ pay a performance advertising fee only when a real estate transaction is closed with one of ~~those~~the leads.

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Other IMT revenue includes revenue generated by rentals, new construction and display advertising, as well as revenue from the sale of various other advertising and business technology solutions for real estate professionals, including dotloop. Rentals revenue includes 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 ~~listing~~impression basis. 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. New construction revenue primarily includes advertising services sold to home builders on a cost per residential community or cost per impression basis. Display revenue consists of graphical mobile and web advertising sold on a cost per impression or cost per click basis to advertisers promoting their brands on our mobile applications and websites.

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

As of March 31, 2021, we had 5,868 full-time employees compared to 5,504 full-time employees as of December 31, 2020.

Financial Highlights

During the three months ended ~~June 30,~~March 31, 2021, and 2020, we generated total revenue of ~~$768.4 million, as compared to $599.6 million~~$1.2 billion and $1.1 billion, respectively, representing year-over-year growth of 8%. The increase in ~~the three months ended June 30, 2019, an increase of $168.8 million, or 28%. As further described below, our~~total revenue was ~~negatively impacted by the effects of COVID-19 during the three months ended June 30, 2020. This increase was~~ primarily the result of a $205.3 million, or 82%, increase in Homes segment revenue, and a $6.8 million, or 25%, increase in Mortgages segment revenue. These increases were partially offset by a $43.3 million, or 13%, decrease in IMT segment revenue driven by a $40.0 million, or 17%, decrease in attributable to:

•Premier Agent revenue ~~primarily due~~increased by $92.2 million to temporary discounts offered to support our customers and real estate partners in response to the COVID-19 pandemic, and a $3.3 million, or 4%, decrease in Other IMT revenue. Visits increased 14% to 2,491.1$334.3 million for the three months ended ~~June 30, 2020 from 2,181.4~~March 31, 2021 compared to $242.1 million for the three months ended ~~June 30, 2019. There~~March 31, 2020.

•Other IMT revenue increased by $23.5 million to $112.0 million for the year ended March 31, 2021 compared to $88.6 million for the three months ended March 31, 2020, primarily due to a 46% increase in rentals revenue.

•Mortgages segment revenue increased by $42.7 million to $68.0 million for the three months ended March 31, 2021 compared to $25.3 million for the three months ended March 31, 2020, primarily due to an increase in revenue generated by Zillow Home Loans.

•Zillow Offers revenue decreased by $68.1 million to $701.0 million for the three months ended March 31, 2021 due to the sale of 1,965 homes at an average selling price of $356.7 thousand per home. For the three months ended March 31, 2020, Zillow Offers revenue was $769.1 million due to the sale of 2,394 homes at an average selling price of $321.3 thousand per home. As of March 31, 2021, Zillow Offers was operating in 25 metropolitan areas.

•Visits for the three months ended March 31, 2021 and 2020 were ~~approximately 218.1~~2,511.2 million ~~average~~and 2,117.6 million, respectively, representing year-over-year growth of 19%. The increase in visits increased the number of events we monetized across our revenue categories.

•Average monthly unique users of our mobile applications and websites for the three months ended ~~June 30,~~March 31, 2021 and 2020 were 220.5 million and 192.5 million, respectively, representing year-over-year growth of ~~12%~~15%. ~~The number of homes sold through Zillow Offers increased 83% to 1,437 for the three months ended June 30, 2020 from 786 for the three months ended June 30, 2019.~~

On May 15, 2020, we issued $500.0 million aggregate principal amount of 2.75% Convertible Senior Notes due 2025 (the “Initial 2025 Notes”) and issued and sold 8,000,000 shares of our Class C capital stock. On May 19, 2020, we issued an additional $65.0 million aggregate principal amount of 2.75% Convertible Senior Notes due 2025 (the “Additional Notes” and, together with the Initial 2025 Notes, the “2025 Notes”) and issued and sold an additional 800,000 shares of our Class C capital stock, both pursuant to the underwriters’ option to purchase additional 2025 Notes and Class C capital stock, respectively. The net proceeds from the issuances of the 2025 Notes and our Class C capital stock were approximately $553.3 million and $411.5 million, respectively, after deducting underwriting discounts and commissions and offering expenses paid by Zillow Group. We used a portion of the net proceeds from the issuance of the 2025 Notes to repurchase $194.7 million aggregate principal of the convertible senior notes due 2021 (the “2021 Notes”) in privately negotiated transactions. The 2021 Notes were repurchased for $194.7 million in cash and 753,936 shares of Class C capital stock. In connection with the repurchase of a portion of the 2021 Notes, we partially terminated the capped call transactions related to the 2021 Notes whereby we received 317,865 shares of our Class C capital stock. We intend to use the remainder of the net proceeds from the 2025 Notes and the net proceeds from the equity issuance for general corporate purposes, which may include general and administrative matters and capital expenditures.

~~As of June 30, 2020, we had 5,344 full-time employees compared to 5,249 full-time employees as of December 31, 2019.~~

COVID-19 Impact

In December 2019, ~~a novel strain of coronavirus,~~ COVID-19 was reported and subsequently spread worldwide. On March 11, 2020, the World Health Organization declared COVID-19 a pandemic. The COVID-19 pandemic and resulting global and economic disruptions have affected our business, as well as those of our customers and real estate partners. In response to the COVID-19 pandemic, we have taken certain measures intended to serve the needs of our customers and real estate partners, while also protecting our business and the safety of our employees, our customers and the communities in which we operate.

We have taken meaningful actions to support our customers and partners ~~including implementing~~throughout the pandemic. In 2020, we implemented a variety of relief initiatives to help them navigate their financial challenges. ~~Effective March 23, 2020, we began offering~~This included discounts provided to our Premier Agent advertisers who participate in our market-based pricing program a 50% discount on their subsequent monthly bill. This discount also applied to any new bookings through April 22, 2020. Additionally, we provided other targeted market-based discounts and ~~offered temporary discounts~~ on certain of our other IMT and Mortgage marketplace ~~products throughout the second quarter.~~

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~~On March 23, 2020,~~products. In addition, we ~~announced that Zillow Offers would~~ temporarily ~~pause~~paused home buying in early 2020 in all markets in response to local public health orders and to help protect the safety and health of our employees, customers and partners. ~~Where able,~~By early August 2020, we ~~continued to make updates to, list and sell homes in inventory. On May 18, 2020, we~~had resumed home buying in ~~certain~~all paused Zillow Offers markets with enhanced health and safety protocols and increased usage of virtual technology. For ~~example, buyers can virtually walk through Zillow-owned homes through proprietary 3D home tours, which are available~~more details on ~~all listings. In some markets, buyers can use self-tour technology to visit a home unassisted. As~~these initiatives, see Part II Item 7 (Management’s Discussion and Analysis of ~~June 30, 2020, we had resumed home buying in 15~~Financial Condition and Results of Operations) of our ~~24 markets~~Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

We have also taken action to promote the health and ~~are now active~~safety of our employees during the COVID-19 pandemic and we quickly transitioned the majority of our employees to work remotely and announced that most employees will have flexibility to work from home indefinitely. We have started re-opening our offices to employees on an as-needed basis and will begin welcoming employees to use certain office locations more widely in ~~all 24 markets beginning~~September 2021. We believe our offices will continue to provide our distributed workforce with a place to work, learn and collaborate in ~~August 2020.~~the future.

To preserve our liquidity in response to the COVID-19 pandemic, we temporarily paused hiring for non-critical roles, paused the majority of our advertising spending and reduced other discretionary ~~spending. However,~~spending during the first half of 2020. As our financial position has strengthened, we ~~expect to increase~~have gradually increased our hiring and marketing and advertising activities, ~~throughout the remainder~~and on March 11, 2021, we announced our plan to hire more than 2,000 employees nationwide in 2021.

Table of 2020 to support our strategic business initiatives. In May of 2020 we strengthened our financial position through our issuance of $565.0 million aggregate principle amount of 2025 Notes for net proceeds of $553.3 million, of which we used $194.7 million to repurchase certain of our 2021 Notes, and we issued 8,800,000 shares of Class C capital stock for net proceeds of $411.5 million, as further described above. In addition, we expect ourContents

Our liquidity ~~to be~~has also been positively impacted by certain provisions included in the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) that was signed into law on March 27, 2020 and provides tax provisions and other stimulus measures to affected companies. ~~The impact of the CARES Act has not been material to our results of operations for the three and six month periods ended June 30, 2020. However, under~~Under the CARES Act, we ~~expect~~are able to defer certain 2020 employer payroll tax payments until the fourth quarter of 2021 and 2022. ~~We deferred a total of $10.6 million of such payments as of June 30, 2020.~~

We have also taken action to promote the health and safety of our employees during the COVID-19 pandemic, and we quickly transitioned the vast majority of our employees to work remotely in March 2020 and subsequently announced that most employees will have flexibility to work from home indefinitely. We expect office re-openings to be a gradual process over many months beginning in the second half of 2020 and that our offices will continue to provide our distributed workforce with a place to work, learn and collaborate.

As reflected in the discussion below, the impact of the pandemic and actions taken in response to it had varying effects on our key metrics and results of operations for the three and six month periods ended June 30, 2020. The effect ~~of the COVID-19 pandemic will not be fully reflected in our results of operations~~ and ~~overall financial performance until future periods as the~~ extent of the impact of the COVID-19 pandemic on our business continues to be uncertain and difficult to predict. While we have ~~begun to see~~seen recovery in our business and the business of our customers and real estate partners ~~recover~~ from the initial economic effects of the pandemic, ~~we expect~~ the impact of the COVID-19 pandemic tomay continue to affect our financial results ~~for the foreseeable future.~~in 2021. The extent to which COVID-19 continues to impact our results and financial position will depend on future developments, which are uncertain and ~~cannot be predicted,~~difficult to predict, including new information that may emerge concerning the severity of the COVID-19 pandemic, ~~and the~~ actions taken to contain it or ~~treat~~address its ~~impact.~~impact and the availability and widespread distribution and use of effective vaccines.

Key Metrics

Management has identified visits, unique users, ~~and~~ the number of homes sold through Zillow Offers 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. ~~Although there was an increase in both~~Both visits and unique users increased for the three months ended ~~June 30, 2020~~March 31, 2021 as compared to the three months ended ~~June 30, 2019, both metrics were adversely impacted by~~March 31, 2020, reflecting the continued stabilization of the real estate market and our business. However, as the COVID-19 pandemic ~~beginning in March 2020, although they subsequently improved beginning in April 2020. COVID-19~~is ongoing, it may adversely impact the number of visits and unique users to our mobile applications and websites in ~~future periods.~~

~~As discussed above, on March 23, 2020, we announced that Zillow Offers would temporarily pause home buying in all markets in response to local public health orders and to help protect~~ the safety and health of our employees, customers and partners. Where able, we continued to make updates to, list and sell homes in inventory. We began resuming the purchase of homes in certain markets in May of 2020, had resumed home buying in 15 of our 24 markets as of June 30, 2020 and are now active in all 24 markets beginning in August 2020. While we have resumed home buying in certain Zillow Offers markets, we expect the decline in home buying and other potential effects of COVID-19 on residential real estate transactions may adversely impact the number of homes sold in future periods, which we expect would result in a decline in revenue in future periods.future.

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 our Zillow Offers program, use Zillow Homes Loans or be transaction-ready real estate market participants and therefore are more sought-after by our Premier Agent and Premier Broker real estate partners.

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We define a visit as a group of interactions by users with the Zillow, Trulia and StreetEasy 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.

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):

Three Months Ended
June 30, 2019 to 2020
% Change
2020 2019
Visits 2,491.1 2,181.4 14 %


	Three Months Ended March 31,		2020 to 2021 % Change
	2021	2020
Visits	2,511.2	2,117.6	19	%

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Unique Users

Measuring unique users is important to us because much of our revenue depends in part on our ability to connect home buyers and sellers, renters and individuals with or looking for a mortgage to real estate, rental and mortgage professionals, products and services. 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 and Mortgages segment revenue ~~depends~~depend in part on users accessing our mobile applications and websites to engage in the sale, purchase and ~~purchase~~financing of homes with Zillow Offers and Zillow Home Loans, and our Premier Agent 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):

Three Months Ended
June 30, 2019 to 2020
% Change
2020 2019
Average Monthly Unique Users 218.1 194.3 12 %

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	Three Months Ended March 31,		2020 to 2021 % Change
	2021	2020
Average monthly unique users	220.5	192.5	15	%

Homes Sold

The number of homes sold through Zillow Offers is an important metric as it is an indicator of customers’ adoption of the Zillow Offers service as well as our ability to generate revenue through the service. Growth in the number of homes sold through Zillow Offers suggests increased adoption of the service by home buyers and generally results in growth in ~~the amount of our~~ Homes segment revenue.

The following table presents the number of homes sold through Zillow Offers for the periods presented:

Three Months Ended
June 30, 2019 to 2020
% Change
2020 2019
Number of Homes Sold 1,437 786 83 %


	Three Months Ended March 31,		2020 to 2021 % Change
	2021	2020
Number of homes sold	1,965	2,394	(18)	%

~~Basis of Presentation~~

~~Revenue~~

We recognize revenue when or as we satisfy our performance obligations by transferring control of 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.

In our Homes segment, we generate revenue from the resale of homes on the open market and through our title and escrow services. Our two revenue categories within our Homes segment are Zillow Offers and Other.

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 two revenue categories within our IMT segment are Premier Agent 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.

~~Homes Segment~~

~~Zillow Offers Revenue.~~ Zillow Offers revenue is derived from the resale of homes on the open market. We recognize revenue 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 full 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.

~~Other Revenue.~~ Other Homes revenue is primarily generated through Zillow Closing Services, which offers title and escrow services to home buyers and sellers, including title search procedures for title insurance policies, escrow and other closing services. Title search, which is recorded net of amounts remitted to third-party insurance underwriters, and title and escrow closing fees, are recognized as revenue upon closing of the underlying real estate transaction.

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~~IMT Segment~~Loan Origination Volume

~~Premier Agent Revenue.~~ ~~Premier Agent revenue~~Loan origination volume is ~~derived from our Premier Agent~~an important metric as it is a measure of how successful we are at growing originations and ~~Premier Broker programs. Our Premier Agent and Premier Broker programs offer a suite~~subsequent sales of ~~marketing and business technology~~mortgage loan 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~~mortgage origination 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.

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~~Other Revenue.~~ Other IMT revenue primarily includes revenue generated by rentals, new construction and display, as well as revenue from the sale of various other marketing and business products and services to real estate professionals. 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 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 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 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.

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 Segment~~

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

~~Mortgage origination revenue recorded within~~directly impacts our Mortgages segment ~~reflects both~~revenue. Loan origination ~~fees and~~volume represents the ~~corresponding sale, or expected future sale,~~total value 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 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.

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.

~~Table of Contents~~

~~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, including the customer connections team, 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. During the six months ended June 30, 2020, Homes segment expenses also include certain expenses attributable to our efforts to pause home buying in response to the COVID-19 pandemic. 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 trade names and trademarks, 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~~. Impairment costs for the six months ended June 30, 2020 consist of a $71.5 million non-cash impairment related to the Trulia trade names and trademarks intangible asset and a $5.3 million non-cash impairment related to our October 2016 equity investment. For additional information about the impairments, see Note 9 and Note 10 to our condensed consolidated financial statements.

~~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 three and six month periods ended June 30, 2019, integration costs primarily include consulting-related expenses incurred in connection with the integration of Zillow Home Loans.

~~Gain on Partial Extinguishment of 2021 Notes~~

The gain on the partial extinguishment of the 2021 Notes recorded for the three and six month periods ended June 30, 2020 relates to the partial repurchase of the 2021 Notes in May 2020 in connection with the issuance of the 2025 Notes. For additional information on the repurchase, see Note 12 to our condensed consolidated financial statements.

~~Other Income~~

Other income consists primarily of interest income earned on our cash, cash equivalents and short-term investments. For the six months ended June 30, 2020, Other income for our IMT segment included a $5.3 million gain on the sale of our October 2016 equity investment. For additional information on the sale, see Note 9 to our condensed consolidated financial statements. 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 that we guaranteed in connection with our February 2015 acquisition of Trulia and interest on the convertible senior notes due in 2021, 2023, 2024, 2025 and 2026. Our corporate interest expense also includes the amortization of the debt discount and deferred issuance costs for the convertible senior notes due in 2021, 2023, 2024, 2025 and 2026. Refer to Note 12 of our Notes to Condensed Consolidated Financial Statements in Part I of this Quarterly Report on Form 10-Q 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 the credit facilities related to our Zillow Offers business. Borrowings on these 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~~originations closed through Zillow Home Loans ~~business. Borrowings on~~during the ~~warehouse lines of credit and master repurchase agreement bear interest at the one-month LIBOR plus an applicable margin,~~period.

The following table presents loan origination volume by purpose and in ~~certain cases are subject to a LIBOR floor, 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 June 30, 2020 and December 31, 2019, 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. Therefore, no material current tax liability or expense has been recorded in the condensed 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 income tax expense of $0.7 million~~total for Zillow Home Loans for the ~~three months ended June 30, 2020~~periods presented (in thousands):


	Three Months Ended March 31,				2020 to 2021 % Change
	2021		2020
Purchase loan origination volume	$	115,238	$	112,221	3	%
Refinance loan origination volume	1,051,807		24,809		4,140	%
Total loan origination volume	$	1,167,045	$	137,030	752	%

As we began presenting loan origination volume by purpose and ~~an income tax benefit of $8.5 million~~in total for the six months ended June 30, 2020. The income tax benefit for the six months ended June 30, 2020 was primarily a result of a $9.7 million income tax benefit related to the $71.5 million non-cash impairment we recorded during the three months ended March 31, ~~2020 related to~~2021, the ~~Trulia trade names and trademarks intangible asset. For additional information about~~following table sets forth select historical loan origination data for each of the non-cash impairment, see Note 10 to our condensed consolidated financial statements. This income tax benefit was partially offset by an immaterial amount of state income tax expense recorded for the six months ended June 30, 2020.periods presented (in thousands):


	Three Months Ended
	December 31, 2020		September 30, 2020		June 30, 2020
Purchase loan origination volume	$	143,549	$	163,728	$	120,831
Refinance loan origination volume	687,104		353,360		147,475
Total loan origination volume	$	830,653	$	517,088	$	268,306

~~Table of Contents~~

Results of Operations

Given the remaining uncertainty surrounding the COVID-19 ~~including the unknown duration and severity of the~~ pandemic, ~~and related economic disruption and the unknown overall impact on customer demand, we are unable to forecast the full impact on our business. As a result,~~ financial performance for prior and current periods may not be indicative of future performance.

~~The following tables present our results of operations for the periods indicated and as a percentage of total revenue (in thousands, except per share and percentage data, unaudited):~~Revenue

Three Months Ended
June 30, Six Months Ended
June 30,
2020 2019 2020 2019
Statements of Operations Data:
Revenue:
Homes $ 454,252 $ 248,924 $ 1,224,125 $ 377,396
IMT 280,339 323,669 611,005 621,941
Mortgages 33,761 26,985 59,043 54,345
Total revenue 768,352 599,578 1,894,173 1,053,682
Cost of revenue (exclusive of amortization) (1)(2):
Homes 431,788 240,732 1,163,987 363,151
IMT 23,387 26,059 47,705 50,310
Mortgages 5,896 4,430 11,051 9,108
Total cost of revenue 461,071 271,221 1,222,743 422,569
Sales and marketing (1) 155,598 187,433 360,246 349,020
Technology and development (1) 128,857 120,330 263,775 228,100
General and administrative (1) 85,511 82,839 177,796 178,613
Impairment costs — — 76,800 —
Integration costs — 293 — 645
Total costs and expenses 831,037 662,116 2,101,360 1,178,947
Loss from operations (62,685) (62,538) (207,187) (125,265)
Gain on partial extinguishment of 2021 Notes 6,391 — 6,391 —
Other income 10,115 9,458 19,708 18,626
Interest expense (37,590) (18,897) (75,182) (35,363)
Loss before income taxes (83,769) (71,977) (256,270) (142,002)
Income tax benefit (expense) (679) — 8,549 2,500
Net loss $ (84,448) $ (71,977) $ (247,721) $ (139,502)
Net loss per share — basic and diluted $ (0.38) $ (0.35) $ (1.15) $ (0.68)
Weighted-average shares outstanding — basic and diluted 219,467 205,754 215,070 205,137
Other Financial Data:
Segment income (loss) before income taxes:
Homes segment $ (80,058) $ (71,122) $ (178,016) $ (116,327)
IMT segment 19,166 13,238 (22,341) 1,786
Mortgages segment (240) (10,438) (13,385) (20,054)
Total segment loss before income taxes $ (61,132) $ (68,322) $ (213,742) $ (134,595)
Adjusted EBITDA (3):
Homes segment $ (60,908) $ (56,452) $ (135,903) $ (90,976)
IMT segment 71,862 64,055 157,579 125,102
Mortgages segment 4,885 (5,306) (718) (7,907)
Total Adjusted EBITDA $ 15,839 $ 2,297 $ 20,958 $ 26,219


									% of Total Revenue
	Three Months Ended March 31,				2020 to 2021				Three Months Ended March 31,
	2021		2020		$ Change		% Change		2021		2020

	(in thousands, unaudited)
Revenue:
Homes segment:
Zillow Offers	$	700,974	$	769,112	$	(68,138)	(9)	%	58	%	68	%
Other	3,178		761		2,417		318		—		—
Total Homes segment revenue	704,152		769,873		(65,721)		(9)		58		68
IMT segment:
Premier Agent	334,318		242,106		92,212		38		27		22
Other	112,010		88,560		23,450		26		9		8
Total IMT segment revenue	446,328		330,666		115,662		35		37		29
Mortgages segment	67,960		25,282		42,678		169		6		2
Total revenue	$	1,218,440	$	1,125,821	$	92,619	8	%	100	%	100	%

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Three Months Ended
June 30, Six Months Ended
June 30,
2020 2019 2020 2019
(1) Includes share-based compensation as follows:
Cost of revenue $ 1,119 $ 936 $ 2,292 $ 1,816
Sales and marketing 9,116 6,801 16,109 12,451
Technology and development 21,666 18,399 40,583 33,908
General and administrative 20,450 17,496 37,162 61,581
Total $ 52,351 $ 43,632 $ 96,146 $ 109,756
(2) Amortization of website development costs and intangible assets included in technology and development $ 18,857 $ 14,656 $ 36,041 $ 29,056
(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.
Total revenue increased $92.6 million, or 8%, to $1,218.4 million:

•IMT segment revenue increased 35% to $446.3 million due to a $92.2 million, or 38%, increase in Premier Agent revenue and a $23.5 million, or 26%, increase in Other IMT revenue. Premier Agent revenue was positively impacted by an increase in visits, which increased 19% to 2,511.2 million. Premier Agent revenue per visit increased by 16% to $0.133 for the three months ended March 31, 2021 from $0.114 for the three months ended March 31, 2020. We calculate Premier Agent revenue per visit by dividing the revenue generated by our Premier Agent and Premier Broker programs by the number of visits in the period. The increase in Premier Agent revenue per visit was driven primarily by continued strong demand across the residential real estate industry and increased consumer engagement across our mobile applications and websites. Additionally, in response to the COVID-19 pandemic, effective March 23, 2020 we offered Premier Agent advertisers who participated in our market-based pricing program a 50% discount on their next monthly bill. These discounts had the impact of decreasing Premier Agent revenue per visit for the three months ended March 31, 2020. Other IMT revenue increased primarily due to a 46% increase in revenue generated by our rentals marketplace. This was attributable to increased revenue from our pay per listing, pay per contact and rental applications products. We expect IMT segment revenue to increase in absolute dollars in future periods as a result of the expected continued expansion of our Flex pricing model and rentals products.

•Mortgages segment revenue increased 169% to $68.0 million primarily due to growth in mortgage originations revenue which drove 82% of the increase in Mortgages segment revenue, while growth in our Custom Quote and Connect advertising services revenue accounted for 18% of the increase in Mortgages segment revenue. The increase in mortgage originations revenue was primarily driven by an increase in loan origination volume from $137.0 million to $1.2 billion, or 752%, as well as a 6% increase in gain on sale margin. We believe low interest rates have supported strong refinance activity during the three months ended March 31, 2021. In the event interest rates increase in future periods, refinance activity may decrease as a percentage of total loan origination volume which may result in a decrease in absolute dollars in mortgage segment revenue in future periods. Gain on sale margin represents the net gain on sale of mortgage loans divided by total loan origination volume for the period. Net gain on sale of mortgage loans includes all components related to the origination and sale of mortgage loans, including the net gain on sale of loans into the secondary market, loan origination fees, unrealized gains and losses associated with changes in fair value of 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 increase in our Custom Quote and Connect advertising revenue was primarily due to a 46% increase in leads generated from marketing products sold to mortgage professionals.

•Homes segment revenue decreased 9% to $704.2 million, primarily due to a decrease of $68.1 million, or 9%, in Zillow Offers revenue. Zillow Offers revenue declined to $701.0 million due to the sale of 1,965 homes at an average selling price of $356.7 thousand per home, as compared to the sale of 2,394 homes at an average selling price of $321.3 thousand per home in the comparable prior year period. While we have resumed home buying in all Zillow Offers markets following our temporary pause in the first half of 2020, we are continuing to rebuild our inventory available for resale. We expect Zillow Offers revenue to increase in future periods as we expect to continue to increase our home buying and home selling activities across all markets.

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Income (Loss) Before Income Taxes


									% of Revenue
	Three Months Ended March 31,				2020 to 2021				Three Months Ended March 31,
	2021		2020		$ Change		% Change		2021		2020

	(in thousands, unaudited)
Income (loss) before income taxes:
Homes segment	$	(58,474)	$	(97,958)	$	39,484	40	%	(8)	%	(13)	%
IMT segment	143,575		(41,507)		185,082		446		32		(13)
Mortgages segment	(1,820)		(13,145)		11,325		86		(3)		(52)
Corporate items (1)	(34,207)		(19,891)		(14,316)		(72)		N/A		N/A
Total income (loss) before income taxes	$	49,074	$	(172,501)	$	221,575	128	%	4	%	(15)	%

Three Months Ended
June 30, Six Months Ended
June 30,
2020 2019 2020 2019
Percentage of Revenue:
Revenue:
Homes 59 % 42 % 65 % 36 %
IMT 36 54 32 59
Mortgages 4 5 3 5
Total revenue 100 100 100 100
Cost of revenue (exclusive of amortization):
Homes 56 40 61 34
IMT 3 4 3 5
Mortgages 1 1 1 1
Total cost of revenue 60 45 65 40
Sales and marketing 20 31 19 33
Technology and development 17 20 14 22
General and administrative 11 14 9 17
Impairment costs 0 0 4 0
Integration costs 0 — 0 —
Total costs and expenses 108 110 111 112
Loss from operations (8) (10) (11) (12)
Gain on partial extinguishment of 2021 Notes 1 0 — 0
Other income 1 2 1 2
Interest expense (5) (3) (4) (3)
Loss before income taxes (11) (12) (14) (13)
Income tax benefit (expense) — 0 — —
Net loss (11) % (12) % (13) % (13) %
(1) Certain corporate items are not directly attributable to any of our segments, including the loss on extinguishment of debt, interest income earned on our short-term investments included in other income and interest costs on our convertible senior notes included in interest expense.

Income (loss) before income taxes increased by $221.6 million, or 128%, to income of $49.1 million, driven by:

•An increase in IMT segment income before income taxes of $185.1 million, or 446%, primarily due to an increase in IMT segment revenue of $115.7 million, as discussed above, and a decrease in impairment costs of $73.9 million, due to $68.6 million of the $71.5 million non-cash impairment recorded to the IMT segment related to the Trulia trade names and trademarks intangible asset and the $5.3 million non-cash impairment related to our October 2016 equity investment recognized during the three months ended March 31, 2020. The increase in IMT segment income before income taxes was also attributable to a decrease in data acquisition costs of $8.6 million and a decrease in marketing and advertising expenses of $8.4 million, partially offset by an increase in headcount-related expenses of $29.5 million, as discussed further below under the “Costs and Expenses and Other Items” subsection.

•A decrease in Homes segment loss before income taxes of $39.5 million, or 40%, resulting from a decrease of $101.4 million in Homes segment costs and expenses and a decrease of $3.8 million in interest expense, partially offset by a decrease of $65.7 million in Homes segment revenue. The decreases in these items was driven by the sale of 429 fewer homes during the three months ended March 31, 2021 compared to the three months ended March 31, 2020, as described above.

•A decrease in Mortgages segment loss before income taxes of $11.3 million, or 86%, primarily due to an increase in Mortgages segment revenue of $42.7 million driven by higher loan origination volume within our Zillow Home Loans business, as discussed above. This was partially offset by an increase in Mortgages segment costs and expenses of $31.4 million, driven primarily by increased headcount-related costs to support the growth in our Zillow Home Loans business.

•An increase in loss before income taxes for corporate items of $14.3 million to a loss of $34.2 million, primarily due to a decrease in other income of $8.7 million as a result of rebalancing of our investment portfolio to lower risk investments with generally lower yields in light of the COVID-19 pandemic, a $4.2 million increase in interest expense primarily associated with the May 2020 issuance of the convertible senior notes due in 2025, which was partially offset by the impact of the settlement of the convertible senior notes due in 2020 and 2021 during the three months ended December 31, 2020, and a $1.4 million increase in the loss on extinguishment of debt due to conversions of the convertible senior notes maturing in 2023, 2024 and 2026 which occurred during the three months ended March 31, 2021.

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Adjusted EBITDA


									% of Revenue
	Three Months Ended March 31,				2020 to 2021				Three Months Ended March 31,
	2021		2020		$ Change		% Change		2021		2020

	(in thousands, unaudited)
Net income (loss)	$	51,964	$	(163,273)	$	215,237	132	%	4	%	(15)	%
Adjusted EBITDA:
Homes segment	$	(33,948)	$	(74,995)	$	41,047	55	%	(5)	%	(10)	%
IMT segment	208,583		85,717		122,866		143		47		26
Mortgages segment	6,347		(5,603)		11,950		213		9		(22)
Total Adjusted EBITDA	$	180,982	$	5,119	$	175,863	3435	%	15	%	—	%

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 Quarterly Report on Form 10-Q. We have provided a reconciliation below of Adjusted EBITDA in total to net ~~loss~~income (loss) and Adjusted EBITDA by segment to income (loss) before income taxes for each segment, the most directly comparable GAAP financial measures.

We have included Adjusted EBITDA in total and for each segment in this Quarterly Report on Form 10-Q 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 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;

•Adjusted EBITDA does not reflect impairment costs;

•Adjusted EBITDA does not reflect acquisition-related costs;

•Adjusted EBITDA does not reflect the ~~gain~~loss on ~~the partial~~ extinguishment of ~~the 2021 Notes;~~debt;

•Adjusted EBITDA does not reflect interest expense or other income;

•Adjusted EBITDA does not reflect income taxes; and

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

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

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


		Three Months Ended June 30, 2020																			Three Months Ended March 31, 2021
		Homes		IMT		Mortgages		Corporate Items (2)		Consolidated			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		$	(84,448)
Income tax expense		N/A		N/A		N/A		N/A		679
Reconciliation of Adjusted EBITDA to Net Income and Income (Loss) Before Income Taxes:												Reconciliation of Adjusted EBITDA to Net Income and Income (Loss) Before Income Taxes:
Net income (1)												Net income (1)	N/A		N/A		N/A		N/A		$	51,964
Income tax benefit												Income tax benefit	N/A		N/A		N/A		N/A		(2,890)
Income (loss) before income taxes	Income (loss) before income taxes	$	(80,058)	$	19,166	$	(240)	$	(22,637)	$	(83,769)	Income (loss) before income taxes	$	(58,474)	$	143,575	$	(1,820)	$	(34,207)	$	49,074
Other income	Other income	—		(5,300)		(385)		(4,430)		(10,115)		Other income	—		—		(1,732)		(707)		(2,439)
Depreciation and amortization expense	Depreciation and amortization expense	2,597		22,038		1,538		—		26,173		Depreciation and amortization expense	4,293		22,799		1,807		—		28,899
Share-based compensation expense	Share-based compensation expense	12,728		35,958		3,665		—		52,351		Share-based compensation expense	15,921		41,392		6,360		—		63,673
Gain on partial extinguishment of 2021 Notes		—		—		—		(6,391)		(6,391)
Acquisition-related costs												Acquisition-related costs	—		817		—		—		817
Loss on extinguishment of debt												Loss on extinguishment of debt	—		—		—		1,403		1,403
Interest expense	Interest expense	3,825		—		307		33,458		37,590		Interest expense	4,312		—		1,732		33,511		39,555
Adjusted EBITDA	Adjusted EBITDA	$	(60,908)	$	71,862	$	4,885	$	—	$	15,839	Adjusted EBITDA	$	(33,948)	$	208,583	$	6,347	$	—	$	180,982


	Three Months Ended March 31, 2020
	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		$	(163,273)
Income tax benefit	N/A		N/A		N/A		N/A		(9,228)
Loss before income taxes	$	(97,958)	$	(41,507)	$	(13,145)	$	(19,891)	$	(172,501)
Other income	—		—		(202)		(9,391)		(9,593)
Depreciation and amortization expense	3,575		23,777		1,674		—		29,026
Share-based compensation expense	11,304		29,547		2,944		—		43,795
Impairment costs	—		73,900		2,900		—		76,800
Interest expense	8,084		—		226		29,282		37,592
Adjusted EBITDA	$	(74,995)	$	85,717	$	(5,603)	$	—	$	5,119

(1) We use income (loss) before income taxes as our profitability measure in making operating decisions and assessing the performance of our segments, therefore, net income (loss) and income tax benefit 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 loss on extinguishment of debt, interest income earned on our short-term investments included in other income and interest costs on our convertible senior notes included in interest expense.

Table of Contents

Three Months Ended June 30, 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 $ (71,977)
Income tax benefit N/A N/A N/A N/A —
Income (loss) before income taxes $ (71,122) $ 13,238 $ (10,438) $ (3,655) $ (71,977)
Other income — — (402) (9,056) (9,458)
Depreciation and amortization expense 1,732 18,308 1,163 — 21,203
Share-based compensation expense 7,039 32,509 4,084 — 43,632
Interest expense 5,899 — 287 12,711 18,897
Adjusted EBITDA $ (56,452) $ 64,055 $ (5,306) $ — $ 2,297
Costs and Expenses and Other Items

Six Months Ended June 30, 2020
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 $ (247,721)
Income tax benefit N/A N/A N/A N/A (8,549)
Loss before income taxes $ (178,016) $ (22,341) $ (13,385) $ (42,528) $ (256,270)
Other income — (5,300) (587) (13,821) (19,708)
Depreciation and amortization expense 6,172 45,815 3,212 — 55,199
Share-based compensation expense 24,032 65,505 6,609 — 96,146
Gain on partial extinguishment of 2021 Notes — — — (6,391) (6,391)
Impairment costs — 73,900 2,900 — 76,800
Interest expense 11,909 — 533 62,740 75,182
Adjusted EBITDA $ (135,903) $ 157,579 $ (718) $ — $ 20,958

Six Months Ended June 30, 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 $ (139,502)
Income tax benefit N/A N/A N/A N/A (2,500)
Income (loss) before income taxes $ (116,327) $ 1,786 $ (20,054) $ (7,407) $ (142,002)
Other income — — (715) (17,911) (18,626)
Depreciation and amortization expense 3,053 35,902 2,773 — 41,728
Share-based compensation expense 12,641 87,414 9,701 — 109,756
Interest expense 9,657 — 388 25,318 35,363
Adjusted EBITDA $ (90,976) $ 125,102 $ (7,907) $ — $ 26,219

~~Table of Contents~~


									% of Total Revenue
	Three Months Ended March 31,				2020 to 2021				Three Months Ended March 31,
	2021		2020		$ Change		% Change		2021		2020

	(in thousands, unaudited)
Cost of revenue (exclusive of amortization) (1)	$	687,030	$	761,672	$	(74,642)	(10)	%	56	%	68	%
Sales and marketing	193,593		204,648		(11,055)		(5)		16		18
Technology and development	148,856		134,918		13,938		10		12		12
General and administrative	100,551		92,285		8,266		9		8		8
Impairment costs	—		76,800		(76,800)		(100)		0		7
Acquisition-related costs	817		—		817		N/A		—		0
Total costs and expenses	1,130,847		1,270,323		(139,476)		(11)		93		113
Loss on extinguishment of debt	(1,403)		—		(1,403)		N/A		—		0
Other income	2,439		9,593		(7,154)		(75)		—		1
Interest expense	(39,555)		(37,592)		(1,963)		(5)		(3)		(3)
Income tax benefit	2,890		9,228		(6,338)		(69)		—		1

(1) ~~We use income (loss) before income taxes as our profitability measure in making operating decisions~~Amortization of website development costs and ~~assessing the performance of our segments, therefore, net loss and income tax benefit (expense) 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 on the partial extinguishment of the 2021 Notes, interest income earned on our short-term investmentsintangible assets included in ~~Other income~~technology and ~~interest costs on our convertible senior notes included in Interest expense.~~

~~Three Months Ended June 30, 2020 Compared to Three Months Ended June 30, 2019~~

~~Revenue~~

~~The following table presents Zillow Group’s revenue by category~~development was $20.8 million and ~~by segment for the periods presented (in thousands, unaudited):~~

Three Months Ended
June 30, 2019 to 2020
% Change
2020 2019
Homes revenue:
Zillow Offers $ 453,816 $ 248,924 82 %
Other 436 — N/A
Total Homes revenue 454,252 248,924 82 %
IMT revenue:
Premier Agent 191,962 231,961 (17) %
Other 88,377 91,708 (4) %
Total IMT revenue 280,339 323,669 (13) %
Mortgages 33,761 26,985 25 %
Total revenue $ 768,352 $ 599,578 28 %

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

Three Months Ended
June 30,
2020 2019
Percentage of Total Revenue:
Homes revenue:
Zillow Offers 59 % 42 %
Other — 0
Total Homes revenue 59 42
IMT revenue:
Premier Agent 25 39
Other 12 15
Total IMT revenue 36 54
Mortgages 4 5
Total revenue 100 % 100 %

~~Table of Contents~~

Total revenue increased by $168.8 million, or 28%, for the three months ended June 30, 2020 compared to the three months ended June 30, 2019. The increase in total revenue was primarily attributable to our Zillow Offers business. Total Homes segment revenue grew to $454.3$17.2 million for the three months ended ~~June 30,~~March 31, 2021 and 2020, ~~from $248.9~~respectively.

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.

Cost of revenue decreased by $74.6 million, ~~for~~or 10%, due primarily to a decrease of $91.6 million in our Homes segment, partially offset by increases of $13.2 million and $3.7 million within the ~~three months ended June 30, 2019, an increase~~Mortgages and IMT segments, respectively.

The decrease in cost of ~~$205.3 million. This~~revenue in our Homes segment was driven primarily ~~driven~~ by ~~an increase~~a decrease of $92.7 million in home acquisition and renovation costs due to the decrease in the number of homes sold ~~to 1,437 for~~from 2,394 during the three months ended ~~June 30,~~March 31, 2020 ~~compared~~ to ~~786 for~~1,965 during the three months ended ~~June 30, 2019. Visits increased 14% to 2,491.1 million for~~March 31, 2021. See further discussion on the three months ended June 30, 2020 from 2,181.4 million for the three months ended June 30, 2019. There were approximately 218.1 million average monthly unique users of our mobile applications and websites for the three months ended June 30, 2020 compared to 194.3 million average monthly unique users for the three months ended June 30, 2019, representing year-over-year growth of 12%. The increases in visits and unique users increased the number of impressions, leads, clicks and other events we monetized across our revenue categories. The increase in Homes segment revenue was partially offset by a $43.3 million decrease in IMT segment revenue for the three months ended June 30, 2020 as compared to the three months ended June 30, 2019, primarily due to temporary discounts offered to support our customers in response to the COVID-19 pandemic.

~~Homes Segment~~

~~Zillow Offers Revenue.~~ Zillow Offers revenue was $453.8 million for the three months ended June 30, 2020 due to the sale of 1,437 homes at an average selling price of $315.8 thousand per home. For the three months ended June 30, 2019, Zillow Offers revenue was $248.9 million due to the sale of 786 homes at an average selling price of $316.7 thousand per home. The increase in Zillow Offers revenue was due to an increase in the number of homes sold inunder the period as customer adoption of Zillow Offers increased in geographic areas in which it is currently operating and as Zillow Offers expanded into new geographic markets. As of June 30, 2020, Zillow Offers had operations in 24 metropolitan areas.

Beginning on March 23, 2020, we paused home buying activities in all Zillow Offers markets, as of June 30, 2020, we had resumed home buying in 15 of our 24 markets and are now active in all 24 markets beginning in August 2020. Although we have resumed home buying and continue to update, list and sell homes in inventory in all markets, we expect the gradual increase in home buying to result in a significant decrease in Zillow Offers revenue in the future until we grow home acquisition and resale volumes in all Zillow Offers markets. Given the unknown duration and severity of the COVID-19 pandemic and related economic disruption, we do not know whether we will have to make further adjustments to our operations or how quickly the business will re-accelerate now that we have resumed home buying activities.

~~Other Revenue.~~ ~~Other revenue within the Homes segment was $0.4 million for the three months ended June 30, 2020 and relates to revenue generated by Zillow Closing Services which launched in the second half of 2019.~~

~~IMT Segment~~

~~Premier Agent Revenue.~~ Premier Agent revenue was $192.0 million for the three months ended June 30, 2020 compared to $232.0 million for the three months ended June 30, 2019, a decrease of $40.0 million, or 17%. Premier Agent revenue was positively impacted by an increase in visits. As discussed above, visits increased 14% to 2,491.1 million for the three months ended June 30, 2020 from 2,181.4 million for the three months ended June 30, 2019. The increase in visits increased the number of impressions and leads we could monetize in our Premier Agent marketplace. However, Premier Agent revenue was negatively impacted for the three months ended June 30, 2020 by temporary discounts offered to our Premier Agent partners in response to the COVID-19 pandemic.“Revenue” subsection above. We ~~expect Premier Agent revenue to increase in future periods when the discounts are no longer offered related to the COVID-19 pandemic.~~

Premier Agent revenue per visit decreased by 28% to $0.077 for the three months ended June 30, 2020 from $0.106 for the three months ended June 30, 2019. 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. The decline in Premier Agent revenue per visit was primarily a result of the discounts offered in response to the COVID-19 pandemic described above.

Premier Agent revenue for the three months ended June 30, 2020 and June 30, 2019 also included an insignificant amount of revenue generated from our testing of the Flex pricing model, in limited markets. We plan to continue testing this pricing model in select markets with high-performing partners in the future, including offering it alongside our legacy market-based pricing model.

~~Table of Contents~~

~~Other Revenue.~~ Other IMT revenue was $88.4 million for the three months ended June 30, 2020 compared to $91.7 million for the three months ended June 30, 2019, a decrease of $3.3 million, or 4%. The decrease in Other revenue was primarily the result of a 60% decrease in display revenue as customers decreased discretionary marketing spend during the COVID-19 pandemic. In addition, in response to the COVID-19 pandemic, we have offered temporary discounts on certain of our other IMT products throughout the second quarter to help mitigate the impact of the pandemic on our customers. We expect Other revenue to increase in future quarters when the discounts are no longer provided in response to the COVID-19 pandemic. The decrease in other IMT revenue was partially offset by continued adoption of our rental application product.

~~Mortgages Segment~~

~~MortgagesRevenue~~. Mortgages revenue was $33.8 million for the three months ended June 30, 2020 compared to $27.0 million for the three months ended June 30, 2019, an increase of $6.8 million, or 25%. The majority of the increase in mortgages revenue was a result of an increase in revenue generated by Zillow Home Loans due to increased sales volume reflective of market demand and reduced interest rates. The increase in mortgages revenue was partially offset by insignificant discounts offered during the three months ended June 30, 2020 on our Connect services in response to the COVID-19 pandemic. We expect mortgages revenue to increase in future periods due to higher mortgage origination volumes and low interest rates.

~~Six Months Ended June 30, 2020 Compared to Six Months Ended June 30, 2019~~

~~Revenue~~

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

Six Months Ended
June 30, 2019 to 2020
% Change
2020 2019
Homes revenue:
Zillow Offers $ 1,222,928 $ 377,396 224 %
Other 1,197 — N/A
Total Homes revenue 1,224,125 377,396 224 %
IMT revenue:
Premier Agent 434,068 449,696 (3) %
Other 176,937 172,245 3 %
Total IMT revenue 611,005 621,941 (2) %
Mortgages 59,043 54,345 9 %
Total revenue $ 1,894,173 $ 1,053,682 80 %

~~Table of Contents~~

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

Six Months Ended
June 30,
2020 2019
Percentage of Total Revenue:
Homes revenue:
Zillow Offers 65 % 36 %
Other — 0
Total Homes revenue 65 36
IMT revenue:
Premier Agent 23 43
Other 9 16
Total IMT revenue 32 59
Mortgages 3 5
Total revenue 100 % 100 %

Total revenue increased by $840.5 million, or 80%, for the six months ended June 30, 2020 compared to the six months ended June 30, 2019. The increase in total revenue was primarily attributable to our Zillow Offers business. Total Homes segment revenue grew to $1,224.1 million for the six months ended June 30, 2020 from $377.4 million for the six months ended June 30, 2019, an increase of $846.7 million. This was primarily driven by an increase in the number of homes sold to 3,831 for the six months ended June 30, 2020 compared to 1,200 for the six months ended June 30, 2019. Visits increased 9% to 4,567.4 million for the six months ended June 30, 2020 from 4,201.2 million for the six months ended June 30, 2019. There were approximately 218.1 million average monthly unique users of our mobile applications and websites for the three months ended June 30, 2020 compared to 194.3 million average monthly unique users for the three months ended June 30, 2019, representing year-over-year growth of 12%. The increases in visits and unique users increased the number of impressions, leads, clicks and other events we monetized across our revenue categories. The increase in Homes segment revenue was partially offset by a $10.9 million decrease in IMT segment revenue for the six months ended June 30, 2020 compared to the six months ended June 30, 2019, primarily due to temporary discounts offered during the second quarter of 2020 to support our customers in response to the COVID-19 pandemic.

~~Homes Segment~~

~~Zillow Offers Revenue.~~ Zillow Offers revenue was $1,222.9 million for the six months ended June 30, 2020 due to the sale of 3,831 homes at an average selling price of $319.2 thousand per home. For the six months ended June 30, 2019, Zillow Offers revenue was $377.4 million due to the sale of 1,200 homes at an average selling price of $314.5 thousand per home. The increase in Zillow Offers revenue was due to an increase in the number of homes sold in the period as customer adoption of Zillow Offers increased in geographic areas in which it is currently operating and as Zillow Offers expanded into new geographic markets. As of June 30, 2020, Zillow Offers had operations in 24 metropolitan areas. As discussed above, although Zillow Offers revenue increased for the six months ended June 30, 2020 as compared to the six months ended June 30, 2019, revenue for the six months ended June 30, 2020 was negatively impacted by the COVID-19 pandemic. Beginning on March 23, 2020, we paused home buying activities in all Zillow Offers markets, as of June 30, 2020, we had resumed home buying in 15 of our 24 markets and we are now active in all 24 markets beginning in August 2020.

~~Other Revenue.~~ ~~Other revenue within the Homes segment was $1.2 million for the six months ended June 30, 2020 and relates to revenue generated by Zillow Closing Services which launched in the second half of 2019.~~

~~IMT Segment~~

~~Premier Agent Revenue.~~ Premier Agent revenue was $434.1 million for the six months ended June 30, 2020 from $449.7 million for the six months ended June 30, 2019, a decrease of $15.6 million, or 3%. Premier Agent revenue was positively impacted by an increase in visits. As discussed above, visits increased 9% to 4,567.4 million for the six months ended June 30, 2020 from 4,201.2 million for the six months ended June 30, 2019. The increase in visits increased the number of impressions and leads we could monetize in our Premier Agent marketplace. However, Premier Agent revenue was negatively impacted for the six months ended June 30, 2020 by discounts offered to our Premier Agent partners in response to the COVID-19 pandemic, as discussed above.

~~Table of Contents~~

Premier Agent revenue for the six months ended June 30, 2020 and June 30, 2019 also included an insignificant amount of revenue generated from our testing of the Flex pricing model, in limited markets.

~~Other Revenue.~~ Other IMT revenue was $176.9 million for the six months ended June 30, 2020 compared to $172.2 million for the six months ended June 30, 2019, an increase of $4.7 million, or 3%. The increase in Other revenue was primarily a result of an 18% increase in revenue generated by our rentals marketplace. Growth in rentals revenue was primarily attributable to the adoption of our rental application product and increased spend on our cost per lease product. The increase in Other IMT revenue was partially offset by a 51% decrease in display revenue, as customers decreased discretionary marketing spend during the COVID-19 pandemic, as well as the impact of COVID-19-related discounts offered during the six months ended June 30, 2020.

~~Mortgages Segment~~

~~MortgagesRevenue~~. Mortgages revenue was $59.0 million for the six months ended June 30, 2020 compared to $54.3 million for the six months ended June 30, 2019, an increase of $4.7 million, or 9%. The growth in mortgages revenue was primarily driven by increases in marketplace and Mortech revenue driven by increased demand for our Connect and Mortech services, primarily due to the low interest-rate environment. The increase in mortgages revenue was also a result of an increase in revenue generated by Zillow Home Loans due to increased sales volume reflective of market demand and reduced interest rates.

~~Three Months Ended June 30, 2020 Compared to Three Months Ended June 30, 2019~~

~~Segment Results of Operations~~

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

Three Months Ended
June 30, 2020 Three Months Ended
June 30, 2019
Homes IMT Mortgages Homes IMT Mortgages
Revenue $ 454,252 $ 280,339 $ 33,761 $ 248,924 $ 323,669 $ 26,985
Costs and expenses:
Cost of revenue 431,788 23,387 5,896 240,732 26,059 4,430
Sales and marketing 47,877 96,026 11,695 37,409 135,440 14,584
Technology and development 28,918 93,176 6,763 18,198 94,261 7,871
General and administrative 21,902 53,884 9,725 17,808 54,671 10,360
Integration costs — — — — — 293
Total costs and expenses 530,485 266,473 34,079 314,147 310,431 37,538
Income (loss) from operations (76,233) 13,866 (318) (65,223) 13,238 (10,553)
Other income — 5,300 385 — — 402
Interest expense (3,825) — (307) (5,899) — (287)
Income (loss) before income taxes (1) $ (80,058) $ 19,166 $ (240) $ (71,122) $ 13,238 $ (10,438)

~~(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, unaudited):~~

Three Months Ended
June 30,
2020 2019
Total segment loss before income taxes $ (61,132) $ (68,322)
Corporate interest expense (33,458) (12,711)
Corporate other income 4,430 9,056
Gain on partial extinguishment of 2021 Notes 6,391 —
Consolidated loss before income taxes $ (83,769) $ (71,977)

~~Table of Contents~~

~~Homes Segment~~

~~Cost of Revenue.~~ Cost of revenue was $431.8 million for the three months ended June 30, 2020 compared to $240.7 million for the three months ended June 30, 2019, an increase of $191.1 million or 79%. The increase in cost of revenue was primarily attributable to home acquisition and renovation costs related to the 1,437 homes that we sold during the period compared to the sale of 786 homes during the three months ended June 30, 2019. Due to the pause in Zillow Offers home buying activities that began on March 23, 2020 in response to the COVID-19 pandemic, we expect cost of revenue to decrease in absolute dollars in the near-term as we expect to resell fewer homes until we grow home acquisition volumes following resuming home buying activities in all Zillow Offers markets. As of June 30, 2020, we had resumed home buying in 15 of our 24 markets and we are now active in all 24 markets beginning in August 2020.

~~Sales and Marketing.~~ ~~Sales and marketing expenses were $47.9 million~~ for the three months ended June 30, 2020 compared to $37.4 million for the three months ended June 30, 2019, an increase of $10.5 million or 28%. The increase in sales and marketing expenses was primarily attributable to a $9.4 million increase in selling expenses attributable to the resale of homes and a $6.9 million increase in headcount-related expenses, including share-based compensation expense. The increase was partially offset by a $2.6 million decrease in marketing and advertising costs, a $1.7 million decrease in holding costs and a $1.1 million decrease in travel expenses as we paused non-essential travel for employees in response to the COVID-19 pandemic.

~~Sales and marketing expenses include $2.6 million in holding costs for the three months ended June 30, 2020 and $4.4 million in holding costs for the three months ended June 30, 2019.~~

Due to the pause in Zillow Offers home buying activities that began on March 23, 2020 in response to the COVID-19 pandemic, we expect sales and marketing expenses to decrease in absolute dollars in the near-term as we expect to hold and resell fewer homes until we grow home acquisition volumes following resuming home buying activities in all Zillow Offers markets.

~~Technology and Development.~~ Technology and development expenses, which include research and development costs, were $28.9 million for the three months ended June 30, 2020 compared to $18.2 million for the three months ended June 30, 2019, an increase of $10.7 million or 59%. The increase in technology and development expenses was primarily due to a $9.5 million increase in headcount-related expenses, including share-based compensation expense, as we continue to grow our teams to support the Homes segment ~~and a $1.2 million increase in depreciation and amortization expense.~~

~~General and Administrative.~~ General and administrative expenses were $21.9 million for the three months ended June 30, 2020 compared to $17.8 million for the three months ended June 30, 2019, an increase of $4.1 million or 23%. The increase in general and administrative expenses was primarily due to a $3.5 million increase in headcount-related expenses, including share-based compensation expense, as we continue to grow our teams to support the Homes segment.

~~Interest Expense.~~ Interest expense was $3.8 million for the three months ended June 30, 2020 compared to $5.9 million for the three months ended June 30, 2019, a decrease of $2.1 million, or 35%. The decrease in interest expense was attributable to the reduced number of homes financed on our credit facilities due to the temporary pause of Zillow Offers home buying activities in response to the COVID-19 pandemic.

Due to the pause in Zillow Offers home buying activities, we expect interest expense to decrease in absolute dollars in the near-term as we have reduced the number of homes financed on our credit facilities. Subsequently, we expect interest expense to increase as we increase our homes inventory following resuming home buying in Zillow Offers markets.

~~IMT Segment~~

~~Cost of Revenue.~~ Cost of revenue was $23.4 million for the three months ended June 30, 2020 compared to $26.1 million for the three months ended June 30, 2019, a decrease of $2.7 million, or 10%. The decrease in cost of revenue was primarily related to a $1.3 million decrease in ad serving costs and a $0.8 million decrease in software and hardware costs.

~~Table of Contents~~

~~Sales and Marketing.~~ Sales and marketing expenses were $96.0 million for the three months ended June 30, 2020 compared to $135.4 million for the three months ended June 30, 2019, a decrease of $39.4 million, or 29%. The decrease in sales and marketing expenses was primarily attributable to a $35.6 million decrease in marketing and advertising expenses due to the pause of most advertising spend in response to the COVID-19 pandemic. In addition, there was a $3.5 million decrease in travel expenses as we paused non-essential travel for employees in response to the COVID-19 pandemic and a $3.3 million decrease in related trade show and event expenses. The decrease in sales and marketing expenses was partially offset by a $3.0 million increase in headcount related expenses, including share-based compensation expense, as we continue to grow our team. We expect sales and marketing expenses to increase in absolute dollars in the future as we begin to increase our marketing and advertising activities.

~~Technology and Development.~~ Technology and development expenses, which include research and development costs, were $93.2 million for the three months ended June 30, 2020 compared to $94.3 million for the three months ended June 30, 2019, a decrease of $1.1 million, or 1%. Technology and development expenses remained relatively consistent due to proactive measures we have taken to reduce costs. We expect technology and development expenses to decrease in absolute dollars in future periods as a result of these cost saving measures.

~~General and Administrative.~~ General and administrative expenses were $53.9 million for the three months ended June 30, 2020 compared to $54.7 million for the three months ended June 30, 2019, a decrease of $0.8 million, or 1%. General and administrative expenses remained relatively consistent due to proactive measures we have taken to reduce costs.

~~Mortgages Segment~~

~~Cost of Revenue.~~ Cost of revenue was $5.9 million for the three months ended June 30, 2020 compared to $4.4 million for the three months ended June 30, 2019, an increase of $1.5 million, or 33%. The increase in cost of revenue was primarily attributable to a $0.9 million increase in headcount-related expenses, including share-based compensation expense. We expect cost of revenue to increase in absolute dollars in future periods as we ~~continue~~accelerate home buying and selling through our Zillow Offers business.

The increase in cost of revenue in the Mortgages segment was primarily attributable to ~~incur~~an increase in headcount-related expenses of $5.7 million and an increase in lead acquisition costs of $4.7 million associated with growth in ~~revenue and expansion of~~our Zillow Home ~~Loans.~~

~~Sales and Marketing.~~ Sales and marketing expenses were $11.7 million for the three months ended June 30, 2020 compared to $14.6 million for the three months ended June 30, 2019, a decrease of $2.9 million, or 20%. The decrease in sales and marketing expenses was primarily attributable to a $3.8 million decrease in marketing and advertising expenses due to the pause of most advertising spend in response to the COVID-19 pandemic.Loans business, as discussed above. We expect cost of revenue for our ~~sales and marketing expenses~~Mortgages segment to increase in absolute dollars in future periods due to ~~increased marketing and headcount related spend associated with~~an increase in lead acquisition costs to support the growth of our Zillow Home Loans business.

We expect cost of revenue for our IMT segment to increase in absolute dollars in future periods to support the expected growth in revenue ~~and expansion of Zillow Home Loans.~~

~~Technology and Development.~~ Technology and development expenses, which include research and development costs, were $6.8 million for the three months ended June 30, 2020 compared to $7.9 million for the three months ended June 30, 2019, a decrease of $1.1 million, or 14%. The decrease in technology and development expenses was primarily a result of a $0.7 million~~decrease in data acquisition costs.~~

~~General and Administrative.~~ General and administrative expenses were $9.7 million for the three months ended June 30, 2020 compared to $10.4 million for the three months ended June 30, 2019, a decrease of $0.6 million, or 6%. General and administrative expenses remained relatively consistent due to proactive measures we have taken to reduce costs.

~~Corporate Items~~

Certain corporate items are not directly attributable to any of our segments, including the gain on the partial extinguishment of the 2021 Notes, interest income earned on our short-term investments included in Other income and interest costs on our convertible senior notes included in Interest expense.

~~Interest Expense.~~ Interest expense was $33.5 million for the three months ended June 30, 2020 compared to $12.7 million for the three months ended June 30, 2019, an increase of $20.7 million, or 163%. This increase was primarily due to the September 2019 issuance of the convertible senior notes due in 2026, the September 2019 and October 2019 issuances of the convertible senior notes due in 2024, and the May 2020 issuance of the 2025 Notes. We expect interest expense to increase over time in absolute dollars as we incur additional interest related to the May 2020 issuance of the 2025 Notes. For additional information regarding the convertible senior notes, see Note 12 of our Notes to Condensed Consolidated Financial Statements in Part I of this Quarterly Report on Form 10-Q.discussed above.

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Table of Contents

~~Other Income.~~ ~~Other income not directly attributable~~Sales and Marketing

Sales and marketing expenses consist of advertising costs and other sales expenses related to ~~any~~promotional and marketing activities, headcount 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 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 ~~segments was $4.4 million~~Mortgages segment, sales and marketing expenses include headcount expenses for ~~the three months ended June 30, 2020 compared to $9.1 million for the three months ended June 30, 2019, a decrease of $4.6~~loan officers and specialists supporting Zillow Home Loans.

Sales and marketing expenses decreased $11.1 million, or ~~51%.~~ 5%, due primarily to decreases of $16.6 million in our Homes segment and $6.9 million in our IMT segment, partially offset by a $12.4 million increase in our Mortgages segment.

The decrease in ~~Other income is largely due to rebalancing our investment portfolio to lower risk, lower yield investments in light of the COVID-19 pandemic. We expect Other income to decrease~~sales and marketing expenses in the ~~future as interest rates are projected~~Homes segment was primarily attributable to ~~remain low through 2020.~~

~~Gain on Partial Extinguishment~~an $8.0 million decline in home holding and selling costs driven by the reduction in the number of ~~2021 Notes.~~ ~~We recorded a $6.4 million gain on the partial extinguishment of the 2021 Notes~~homes sold during the three months ended ~~June 30, 2020. For additional information on the repurchase, see Note 12 of our Notes to Condensed Consolidated Financial Statements in Part I of this Quarterly Report on Form 10-Q.~~

~~Six Months Ended June 30, 2020 Compared to Six Months Ended June 30, 2019~~

~~Segment Results of Operations~~

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

Six Months Ended
June 30, 2020 Six Months Ended
June 30, 2019
Homes IMT Mortgages Homes IMT Mortgages
Revenue $ 1,224,125 $ 611,005 $ 59,043 $ 377,396 $ 621,941 $ 54,345
Costs and expenses:
Cost of revenue 1,163,987 47,705 11,051 363,151 50,310 9,108
Sales and marketing 119,466 216,199 24,581 58,271 262,094 28,655
Technology and development 61,456 188,204 14,115 30,479 182,230 15,391
General and administrative 45,323 112,638 19,835 32,165 125,521 20,927
Impairment costs — 73,900 2,900 — — —
Integration costs — — — — — 645
Total costs and expenses 1,390,232 638,646 72,482 484,066 620,155 74,726
Income (loss) from operations (166,107) (27,641) (13,439) (106,670) 1,786 (20,381)
Other income — 5,300 587 — — 715
Interest expense (11,909) — (533) (9,657) — (388)
Income (loss) before income taxes (1) $ (178,016) $ (22,341) $ (13,385) $ (116,327) $ 1,786 $ (20,054)

~~(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, unaudited):~~

Six Months Ended
June 30,
2020 2019
Total segment loss before income taxes $ (213,742) $ (134,595)
Corporate interest expense (62,740) (25,318)
Corporate other income 13,821 17,911
Gain on partial extinguishment of 2021 Notes 6,391 —
Consolidated loss before income taxes $ (256,270) $ (142,002)

~~Homes Segment~~

~~Cost of Revenue.~~ Cost of revenue was $1,164.0 million for the six months ended June 30, 2020 compared to $363.2 million for the six months ended June 30, 2019, an increase of $800.8 million. The increase in cost of revenue was primarily attributable to home acquisition and renovation costs related to the 3,831 homes that we sold during the periodMarch 31, 2021 compared to the ~~sale of 1,200 homes~~three months ended March 31, 2020, as discussed above. Further, during the ~~six~~three months ended ~~June 30, 2019.~~

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~~Sales and Marketing.~~ ~~Sales and marketing expenses were $119.5 million for the six months ended June 30,~~March 31, 2020, ~~compared to $58.3 million for the six months ended June 30, 2019, an increase of $61.2 million. The increase in~~Homes segment sales and marketing expenses was primarily attributable to a $37.0 million increase in selling expenses attributable to the resale of homes, an $18.3 million increase in headcount-related expenses, including share-based compensation expense, as we have grown our team to support our Homes segment, andincluded $5.7 million in expenses attributable to our efforts to pause home buying in response to the COVID-19 pandemic.

We expect sales and marketing expenses within the Homes segment to increase in absolute dollars in future periods as we accelerate our Zillow Offers business. Sales and marketing expenses ~~include $7.9~~in our Homes segment included $3.9 million and $5.3 million in holding costs for the ~~six~~three months ended ~~June 30,~~March 31, 2021 and 2020, respectively.

The decrease in sales and ~~$6.7~~marketing expenses in the IMT segment was primarily attributable to an $8.4 million reduction in ~~holding~~marketing and advertising costs, a $2.7 million decline in depreciation and amortization expense and a $2.2 million decline in travel expenses. The decreases in IMT segment sales and marketing expenses were partially offset by an increase in headcount-related expenses, including share-based compensation expense, of approximately $7.1 million. Marketing and advertising costs for the ~~six~~three months ended ~~June 30, 2019.~~March 31, 2021 were lower than the comparable prior year period due to our pause in most discretionary spending in the first half of 2020 in response to the COVID-19 pandemic. We expect IMT sales and marketing expenses to increase in absolute dollars in future periods as we continue to increase our marketing and advertising activities.

The increase in sales and marketing expenses in the Mortgages segment was primarily attributable to a $10.4 million increase in headcount-related expenses associated with growth of our Zillow Home Loans business.

Technology and ~~Development.~~ Development

Technology and development expenses ~~which include research~~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 ~~were $61.5~~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 trade names and trademarks, developed technology and customer relationships, amongst others, equipment and maintenance costs and depreciation expense.

Technology and development expenses increased $13.9 million, ~~for the six months ended June 30, 2020 compared~~or 10%, due to ~~$30.5~~increases of $6.9 million ~~for the six months ended June 30, 2019, an increase of $31.0 million.~~ in our IMT segment, $4.6 million in our Homes segment and $2.5 million in our Mortgages segment.

The increase in technology and development expenses within the IMT segment was primarily ~~due~~attributable to ~~a $25.9~~an increase of $15.0 million ~~increase~~ in headcount-related expenses, including share-based compensation expense, as we continue to invest in human capital to grow our businesses, partially offset by a decrease of $8.6 million in data acquisition costs. We expect technology and development expenses for our IMT segment to increase in absolute dollars in future periods due to expected increases in headcount.

The increase in technology and development expenses within the Homes segment was primarily attributable to an increase of $4.7 million in headcount-related expenses, including share-based compensation expense, as we have grown our teams to support the continued expected growth in the Homes ~~segment, and a $3.3 million increase in depreciation and amortization expense.~~segment.

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General and ~~Administrative.~~ Administrative

General and administrative expenses ~~were $45.3 million~~consist of headcount expenses, including salaries, benefits, bonuses and share-based compensation expense for ~~the six months ended June 30, 2020 compared to $32.2 million for the six months ended June 30, 2019, an increase of $13.2~~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.

General and administrative expenses increased $8.3 million, or ~~41%.~~ 9%, due to increases of $6.2 million in our Mortgages segment and $2.1 million in our Homes segment. IMT segment general and administrative expenses remained relatively flat quarter over quarter.

The increase in Mortgages segment general and administrative expenses was primarily due to a ~~$9.2~~$5.1 million increase in headcount-related expenses, including share-based compensation expense, ~~as we continue to grow~~associated with the growth of our teams to support the Homes segment. In addition, there was a $1.9 million increase in building lease-related expenses including rent, utilities and insurance and a $0.9 million increase in software and hardware costs.

~~Interest Expense.~~ Interest expense was $11.9 million for the six months ended June 30, 2020 compared to $9.7 million for the six months ended June 30, 2019, an increase of $2.3 million, or 23%. 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.

Zillow Home Loans business. While IMT ~~Segment~~

~~Cost of Revenue.~~ Cost of revenue was $47.7 million for the six months ended June 30, 2020 compared to $50.3 million for the six months ended June 30, 2019, a decrease of $2.6 million, or 5%. The decrease in cost of revenue was primarily attributable to a $1.7 million decrease in ad serving costs and a $0.9 million decrease in software and hardware costs. The decreases in cost of revenue were partially offset by a $2.0 million increase in other direct product costs.

~~Sales and Marketing.~~ Sales and marketing expenses were $216.2 million for the six months ended June 30, 2020 compared to $262.1 million for the six months ended June 30, 2019, a decrease of $45.9 million, or 18%. The decrease in sales and marketing expenses was primarily attributable to a $45.9 million decrease in marketing and advertising expenses due to the pause of most advertising spend in response to the COVID-19 pandemic, a $4.7 million decrease in travel expenses as we paused non-essential travel for workers in response to the COVID-19 pandemic and a $4.0 million decrease in related trade show and event-related costs. The decrease in sales and marketing expenses was partially offset by a $5.0 million increase in headcount-related expenses, including share-based compensation expense, as we continue to grow our teams, and a $3.9 million increase in depreciation expense.

~~Technology and Development.~~ Technology and development expenses, which include research and development costs, were $188.2 million for the six months ended June 30, 2020 compared to $182.2 million for the six months ended June 30, 2019, an increase of $6.0 million, or 3%. The increase in technology and development expenses was primarily attributable to a $6.1 million increase in depreciation and amortization expense and a $3.2 million increase in headcount-related expenses, including share-based compensation expense, as we continue to grow our engineering teams to support current and future product initiatives. These increases were partially offset by a $2.4 million decrease in professional services fees.

~~General and Administrative.~~ General and administrative expenses were $112.6 million for the six months ended June 30, 2020 compared to $125.5 million for the six months ended June 30, 2019, a decrease of $12.9 million, or 10%. The decrease insegment general and administrative expenses for the six months ended June 30, 2020 was primarily due to a $21.5 million decrease in headcount-related expenses driven primarily by the recognition of $23.3 million of share-based compensation expense in the IMT segment in 2019 in connection with the modification of certain outstanding equity awards related to the departure of Spencer Rascoff in February 2019, who served as Zillow Group’s Chief Executive Officer beginning in 2010. For additional information regarding the equity modification, see Note 15 in our Notes to Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q. Additionally,remained relatively flat, there was a ~~$1.3~~$6.2 million ~~decrease~~increase in ~~travel~~headcount expenses ~~as we paused non-essential travel for workers~~driven by continued investment in ~~response to the COVID-19 pandemic. The~~our IMT segment products and services, offset primarily by decreases of $3.1 million in legal expenses and $1.2 million in business-related taxes.

We expect general and administrative expenses ~~were~~

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~~partially offset by an~~to increase in ~~estimated legal liabilities~~absolute dollars in future periods for all of ~~approximately $3.5 million, a $2.0 million increase in building lease-related~~our segments due to increased headcount expenses ~~including rent, utilities and insurance, a $1.8 million increase in business taxes, a $1.0 million increase in credit loss expense and a $0.5 million increase in depreciation and amortization expense.~~required to support the growth of our businesses.

Impairment ~~Costs.~~Costs

We did not record any impairment costs for the three months ended March 31, 2021. Impairment costs ~~recorded to the IMT segment~~ for the ~~six~~three months ended ~~June 30,~~March 31, 2020 consist of ~~$68.6 million of the total~~a $71.5 million non-cash impairment related to the Trulia trade names and trademarks intangible asset and a $5.3 million non-cash impairment related to our October 2016 equity investment. For additional information about ~~these~~the impairments, see Note 9 and Note 10 in our Notes to Condensed Consolidated Financial Statements ~~in Part I~~ of this Quarterly Report on Form 10-Q.

~~Mortgages Segment~~Loss on Extinguishment of Debt

~~Cost~~We recorded a $1.4 million loss on extinguishment of ~~Revenue.~~ ~~Cost~~debt during the three months ended March 31, 2021 associated with conversions of ~~revenue was $11.1~~the convertible senior notes maturing in 2023, 2024 and 2026. For additional information on the loss on extinguishment, see Note 11 of our Notes to Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q.

Other Income

Other income consists primarily of interest income earned on our cash, cash equivalents and short-term investments.

Other income decreased $7.2 million, or 75%, primarily due to a decrease in corporate other income not directly attributable to our segments driven by a rebalancing of our investment portfolio to lower risk investments with generally lower yields in light of the COVID-19 pandemic. We expect other income related to investment portfolio returns to remain relatively low for the ~~six months ended June 30, 2020 compared~~foreseeable future as interest rates are currently projected to ~~$9.1 million~~remain low.

Interest Expense

Our corporate interest expense consists of interest on our convertible senior notes and also includes the amortization of the debt discount and deferred issuance costs for the ~~six months ended June 30, 2019,~~convertible senior notes. Refer to Note 11 of our Notes to Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q 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 the credit facilities related to our Zillow Offers business. Borrowings on these credit facilities bear interest at the one-month London Inter-Bank Offered Rate (“LIBOR”) plus an ~~increase~~applicable margin, and in certain cases are subject to a LIBOR floor, as defined in the credit agreements.

For our Mortgages segment, interest expense includes interest on the warehouse line of ~~$1.9~~credit and interest on the master repurchase agreements related to our Zillow Home Loans business. Borrowings on the warehouse line of credit and master repurchase agreements bear interest at the one-month LIBOR plus an applicable margin, and in certain cases are subject to a LIBOR floor, as defined in the agreements.

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Interest expense increased $2.0 million, or ~~21%.~~ 5%, due to a $4.2 million increase in corporate interest expense not attributable to any of our segments, partially offset by a $3.8 million decrease in interest expense related to our Homes segment.

The increase in ~~cost~~corporate interest expense not attributable to any of ~~revenue~~our segments was primarily due to the May 2020 issuance of the 2025 Notes, partially offset by the settlement of the convertible senior notes due in 2020 and 2021 in the three months ended December 31, 2020. The decrease in Homes segment interest expense was primarily attributable to ~~a $1.7 million~~the reduced number of homes financed on our credit facilities, as described above. We expect interest expense to increase in ~~headcount-related expenses, including share-based compensation expense,~~absolute dollars in future periods due to expected growth in our homes inventory as we ~~increased fulfillment hiring~~grow our Zillow Offers business.

Income Taxes

We are subject to ~~support~~federal and state income taxes in the ~~increase~~U.S. and federal and provincial income taxes in ~~volume~~Canada. As of ~~loans funded.~~March 31, 2021 and December 31, 2020, 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. Therefore, no material current tax liability or expense has been recorded in the condensed consolidated financial statements. We have accumulated federal tax losses of approximately $1.7 billion as of December 31, 2020, which are available to reduce future taxable income. We have accumulated state tax losses of approximately $53.2 million (tax effected) as of December 31, 2020.

~~Sales and Marketing.~~ ~~Sales and marketing expenses were $24.6~~We recorded an income tax benefit of $2.9 million for the ~~six~~three months ended ~~June 30, 2020 compared~~March 31, 2021, primarily related to ~~$28.7~~state income taxes. We recorded an income tax benefit of $9.2 million for the ~~six~~three months ended ~~June 30, 2019, a decrease of $4.1 million, or 14%. The decrease in sales and marketing expenses was~~March 31, 2020 primarily attributable to a $5.3 million decrease in marketing and advertising expenses due to the pause of most advertising spend in response to the COVID-19 pandemic, partially offset by a $1.3 million increase in headcount-related expenses, including share-based compensation expenses, driven primarily by the expansion of our leadership team as ~~we continue to expand our Zillow Homes Loans business.~~

~~Technology and Development.~~ Technology and development expenses, which include research and development costs, were $14.1 million for the six months ended June 30, 2020 compared to $15.4 million for the six months ended June 30, 2019, a decrease of 1.3 million, or 8%. The decrease in technology and development expenses was primarily a result of a ~~$1.3~~$9.7 million~~decrease in data acquisition costs.~~

~~General and Administrative.~~ ~~General and administrative expenses were $19.8~~ income tax benefit related to the $71.5 million ~~for~~non-cash impairment we recorded during the ~~six~~three months ended ~~June 30,~~March 31, 2020 compared to $20.9 million for the six months ended June 30, 2019, a decrease of $1.1 million, or 5%. The decrease in general and administrative expenses was primarily due to a $1.1 million decrease in headcount-related expenses, including share-based compensation expense, due primarily to our temporary pause in most hiring in response to the COVID-19 pandemic.

~~Impairment Costs.~~ ~~Impairment costs recorded to the Mortgages segment for the six months ended June 30, 2020 consist of $2.9 million of the total $71.5 million impairment~~ related to the Trulia trade names and trademarks intangible asset. For additional information about ~~this~~the non-cash impairment, see Note 10 ~~in our Notes to Condensed Consolidated Financial Statements in Part I of this Quarterly Report on Form 10-Q.~~

~~Corporate Items~~

~~Interest Expense.~~ Interest expense was $62.7 million for the six months ended June 30, 2020 compared to $25.3 million for the six months ended June 30, 2019, an increase of $37.4 million, or 148%. This increase was primarily due to the September 2019 issuance of the convertible senior notes due in 2026, the September 2019 and October 2019 issuances of the convertible senior notes due in 2024 and the May 2020 issuances of the 2025 Notes. For additional information regarding the convertible senior notes, see Note 12 of our Notes to Condensed Consolidated Financial Statements ~~in Part I~~ of this Quarterly Report on Form 10-Q.

~~Other Income.~~ Other income not directly attributable to any of our segments was $13.8 million for the six months ended June 30, 2020 compared to $17.9 million for the six months ended June 30, 2019, a decrease of $4.1 million, or 23% The decrease in Other income is largely due to rebalancing our investment portfolio to lower risk investments with lower yields in light of the COVID-19 pandemic. We expect Other income to decrease for the foreseeable future as interest rates are projected to remain low throughout 2020.

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~~Gain on Partial Extinguishment of 2021 Notes.~~ We recorded a $6.4 million gain on the partial extinguishment of the 2021 Notes during the six months ended June 30, 2020. For additional information on the repurchase, see Note 12 of our Notes to Condensed Consolidated Financial Statements in Part I of this Quarterly Report on Form 10-Q.

Liquidity and Capital Resources

As of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, we had cash and cash equivalents, investments and restricted cash of ~~$3,570.3 million~~$4.8 billion and ~~$2,511.9 million,~~$4.0 billion, respectively. Cash and cash equivalents balances consist of operating cash on deposit with financial institutions, money market funds and ~~treasury bills.~~municipal securities. Investments consist of fixed income securities, which include U.S. government agency securities, ~~corporate notes and bonds, commercial paper,~~ municipal securities, treasury bills and certificates of ~~deposit and treasury bills.~~deposit. Restricted cash consists of amounts funded to the reserve and collection accounts related to our credit facilities, ~~and~~ amounts held in escrow related to funding home purchases in our mortgage origination business and amounts held in escrow related to our Zillow Closing Services business. Amounts on deposit with third-party financial institutions exceed the Federal Deposit Insurance Corporation and the Securities Investor Protection Corporation insurance limits, as applicable. As of ~~June 30, 2020,~~March 31, 2021, Zillow Group and its subsidiaries were in compliance with all debt covenants specified in the facilities described below.

To preserve our liquidity in response to the COVID-19 pandemic, we ~~have~~temporarily paused hiring for non-critical roles, paused the majority of our advertising spending and reduced other discretionary spending during the first half of 2020. As our financial position has strengthened, we have ~~focused~~gradually increased our hiring and marketing and advertising activities, and on ~~scaling~~March 11, 2021, we announced our ~~business with discipline and with a reduction~~plan to hire more than 2,000 employees nationwide in ~~certain discretionary spending.~~2021. Additionally, we temporarily paused home buying through Zillow Offers in March of 2020 and ~~have since~~ resumed home buying activities in ~~15 of our 24~~all markets ~~as of June 30, 2020 and are now active~~ in ~~all 24 markets beginning in~~early August 2020. ~~In May~~As of 2020 we strengthened our financial position through our issuance of $565.0 million aggregate principle amount of 2025 Notes for net proceeds of $553.3 million, with which we repurchased $194.7 million aggregate principle amount of ourMarch 31, 2021, Notes, and we issued 8,800,000 shares of Class C capital stock at a public offering price of $48.00 per share for net proceeds of $411.5 million, as further described above. In addition, we expect ourZillow Offers is available in 25 markets.

Our liquidity ~~to be~~has been positively impacted by certain provisions included in the CARES Act which provides tax provisions and other stimulus measures to affected companies. ~~The impact of the CARES Act has not been material to our results of operations for the three and six month periods ended June 30, 2020. However, under~~Under the CARES Act, we expect to defer certain 2020 employer payroll tax payments until the fourth quarter of 2021 and 2022. WeDuring 2020, we deferred a total of ~~$10.6~~$23.8 million of such ~~payments~~payments.

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 Managers, shares of our Class C capital stock, having an aggregate gross sales price of up to $1.0 billion, in such share amounts as we may specify by notice to the Managers, in accordance with the terms and conditions set forth in the equity distribution agreement. During the three months ended March 31, 2021, we issued and sold 3,163,502 shares of ~~June~~our Class C capital stock for total proceeds of $550.6 million and net proceeds of $544.6 million, after deducting $6.1 million of commissions and other offering expenses incurred. For additional information regarding the Equity Distribution Agreement, see Note 13 in our Notes to Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q.

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In February 2021, we entered into a definitive agreement to acquire ShowingTime.com, Inc. (“ShowingTime”), a real estate showing software provider, for $500.0 million in cash, subject to adjustments, payable upon the closing of the acquisition. On April 19, 2021, each of Zillow Group and ShowingTime received a request from the U.S. Federal Trade Commission (the “FTC”) for additional information and documentary material (commonly referred to as a “Second Request”) pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the “HSR Act”) in connection with our proposed acquisition of ShowingTime. The FTC’s Second Request extends the waiting period imposed under the HSR Act until 30 ~~2020. As previously noted,~~days after both Zillow Group and ShowingTime have substantially complied with the ~~COVID-19 pandemic and related economic disruptions have resulted in significant uncertainty~~Second Request, unless the waiting period is terminated earlier by the FTC or voluntarily extended through an agreement among Zillow Group, ShowingTime and the extent of the impact of COVID-19 on our business continues to be difficult to predict. The COVID-19 pandemic has and will continue to disrupt our revenue and operating cash flow levels and may disrupt future access to capital through debt or equity markets.FTC.

~~The expansion of~~ Zillow Group’s purchase of homes through the Zillow Offers program and sale of homes ~~on the open market~~ has ~~continued 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. As previously noted, due to the temporary pause in Zillow Offers home buying activities ~~beginning on March 23, 2020~~ in response to the COVID-19 pandemic in 2020, we temporarily ~~expect~~experienced a decrease in the ~~future~~ amounts drawn on our credit facilities as we ~~have~~ reduced the number of homes ~~financed until~~financed. We expect home financing to accelerate in future periods as we continue to grow ~~home acquisition volumes following resuming~~our home buying ~~activities~~ in all Zillow Offers markets. As of ~~June 30, 2020, we had resumed home buying in 15 of our 24 markets and are now active in all markets beginning in August 2020. As of June 30, 2020,~~March 31, 2021, we have ~~$117.2~~$398.8 million of total outstanding borrowings on credit facilities to provide capital for Zillow Offers with a total maximum borrowing capacity of ~~$1,500.0 million.~~$1.5 billion.

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. As of ~~June 30, 2020,~~March 31, 2021, we have ~~$69.8~~$263.3 million of total outstanding borrowings on our warehouse line of credit and master repurchase agreement with a total maximum borrowing capacity of ~~$125.0~~$500.0 million.

As of ~~June 30, 2020,~~March 31, 2021, we have outstanding a total of ~~$2,386.7 million~~$2.1 billion aggregate principal of convertible senior notes. The convertible notes are senior unsecured obligations, and interest on the convertible notes is paid semi-annually.

For additional information regarding our debt, see Note 1211 of our Notes to Condensed Consolidated Financial Statements in Part I of this Quarterly Report on Form 10-Q.

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.

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The following table presents selected cash flow data for the periods presented (in thousands, unaudited):

Six Months Ended
June 30,
2020 2019
Cash Flow Data:
Net cash provided by (used in) operating activities $ 692,620 $ (373,823)
Net cash provided by (used in) investing activities (264,634) 197,822
Net cash provided by financing activities 420,199 323,138


	Three Months Ended March 31,
	2021		2020
Cash Flow Data:
Net cash provided by operating activities	$	241,658	$	301,990
Net cash provided by investing activities	904,334		254,341
Net cash provided by (used in) financing activities	597,548		(163,102)

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 and brand advertisers, as well as cash received from customers for sales of homes through Zillow Offers and sales of mortgages originated by Zillow Home Loans. 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.

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For the ~~six~~three months ended ~~June 30,~~March 31, 2021, net cash provided by operating activities was $241.7 million. This was primarily driven by net income of $52.0 million, adjusted by share-based compensation expense of $63.7 million, depreciation and amortization expense of $28.9 million, amortization of debt discount and debt issuance costs of $25.3 million, amortization of contract cost assets of $10.1 million, amortization of right of use assets of $7.4 million, a loss on disposal of property and equipment and other assets of $4.4 million, amortization of bond premium of $4.0 million, and a loss on extinguishment of debt of $1.4 million. This was partially offset by a $2.9 million change in deferred income taxes. Changes in operating assets and liabilities increased cash provided by operating activities by $47.3 million. The changes in operating assets and liabilities are primarily related to a $56.4 million decrease in mortgage loans held for sale, a $24.9 million increase in accrued expenses and other liabilities driven by the timing of payments, an $18.9 million decreasein inventory due to the sale of homes through Zillow Offers outpacing home purchases for the three months ended March 31, 2021, a $5.2 million increase in deferred revenue, and a $2.2 million increase in accrued compensation and benefits. These changes were partially offset by a $28.6 million increase in prepaid expenses and other current assets due to timing of payments and an increase in our contract assets. The increase in contract assets was primarily associated with increased revenue from our Premier Agent Flex pricing model. The changes were further offset by a $12.6 million increase in accounts receivable due to an increase in revenue from products and services billed in arrears, a $9.6 million increase in contract cost assets due primarily to capitalized sales commissions, a $6.8 million decrease in lease liabilities, a $2.2 million decrease in accounts payable and a $0.4 million decrease in other long-term liabilities.

For the three months ended March 31, 2020, net cash provided by operating activities was ~~$692.6~~$302.0 million. This was primarily driven by a net loss of ~~$247.7~~$163.3 million, adjusted by ~~share-based compensation expense of $96.1 million,~~ non-cash impairment costs of $76.8 million, share-based compensation expense of $43.8 million, depreciation and amortization expense of ~~$55.2~~$29.0 million, amortization of ~~the~~debt discount and debt issuance costs ~~on the convertible notes maturing~~of $22.5 million, a $9.2 million change in ~~2021, 2023, 2024, 2025 and 2026 of $47.7 million,~~deferred income taxes, amortization of contract cost assets of ~~$17.1~~$8.4 million, ~~and~~ amortization of right of use assets of ~~$12.7 million. This was offset by an $8.5 million change in deferred income taxes, a gain on the partial extinguishment of the 2021 Notes of $6.4~~$6.5 million and a ~~gain~~loss on disposal of property and equipment ~~and other assets~~ of ~~$2.7~~$2.0 million. Changes in operating assets and liabilities increased cash provided by operating activities by ~~$650.6~~$285.0 million. The changes in operating assets and liabilities are primarily related to a ~~$701.1~~$302.6 million decreasein inventory due to the sale of homes and a decrease in home purchases through Zillow Offers during the ~~six~~three months ended ~~June 30,~~March 31, 2020, a $10.0 million increase in other long-term liabilities, a $7.5 million increase in accounts payable and a $4.8 million increase in deferred revenue. These changes were partially offset by a $38.5 million increase in mortgage loans held for sale, a $19.6 million increase in contract cost assets due primarily to the capitalization of sales commissions, an $8.7 million decrease in accrued expenses and other liabilities driven by the timing of payments, a $3.3 million decrease in accrued compensation and benefits, and a $1.5 million increase in accounts receivable due primarily to an increase in revenue from products and services which we bill in arrears.

For the six months ended June 30, 2019, net cash used in operating activities was $373.8 million. This was primarily driven by a net loss of $139.5 million, adjusted by share-based compensation expense of $109.8 million, depreciation and amortization expense of $41.7 million, amortization of contract cost assets of $17.9 million, amortization of the discount and issuance costs on the convertible notes maturing in 2023 and 2021 of $17.8 million, amortization of right of use assets of $10.6 million, a loss on disposal of property and equipment of $3.9 million, accretion of bond discount of $3.7 million and a $2.5 million change in deferred income taxes. Changes in operating assets and liabilities increased cash used in operating activities by $430.4 million. The changes in operating assets and liabilities are primarily due to a $390.0 million increase in inventory due to the purchase of homes through Zillow Offers, an $18.3$9.8 million increase in contract cost assets due primarily to the capitalization of sales commissions, a ~~$16.9~~$7.7 million increase in accounts payable and a $4.6 million increase in accrued expenses and other liabilities driven by the timing of payments, a $5.3 million increase in accounts receivable due primarily to an increase in revenue, ~~an $11.9~~a $5.0 million decrease in ~~lease liabilities,~~accrued compensation and benefits, a ~~$3.2~~$4.4 million ~~increase~~decrease in ~~mortgage loans held for sale~~deferred revenue and a ~~$2.0~~$2.9 million increase in prepaid expenses and other current assets driven primarily by the timing of ~~payments, partially offset by a $7.0 million increase in accrued expenses and other current liabilities driven primarily by the timing of payments, and a $3.0 million increase in deferred revenue.~~payments.

Cash Flows Provided By ~~(Used In)~~ Investing Activities

Our primary investing activities include the purchase and sale or maturity of investments and the purchase of property and equipment and intangible assets.

For the ~~six~~three months ended June 30, 2020, net cash used in investing activities was $264.6 million. This was the result of $208.6 million of net purchases of investments in connection with investment of a portion of the net proceeds from our May 2020 issuance of the 2025 Notes and offering of our Class C capital stock, and $66.1 million of purchases for property and equipment and intangible assets, partially offset by $10.0 million in proceeds from the sale of an equity investment.

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~~For the six months ended June 30, 2019,~~March 31, 2021, net cash provided by investing activities was ~~$197.8~~$904.3 million. This was ~~primarily~~ the result of ~~$236.4~~$920.3 million of proceeds from the maturity of investments and $16.0 million of purchases of property and equipment and intangible assets.

For the three months ended March 31, 2020, net cash provided by investing activities was $254.3 million. This was the result of $291.8 million of net proceeds from maturities and sales of investments and ~~$38.6~~$37.5 million of purchases for property and equipment and intangible assets.

Cash Flows Provided By (Used In) Financing Activities

Net cash provided by financing activities has primarily resulted from net proceeds from the issuance of convertible notes, net proceeds from equity offerings, the exercise of employee option awards and equity awards withheld for tax liabilities, proceeds from and repayments of borrowings on our credit facilities related to Zillow Offers and proceeds from borrowings on our warehouse ~~lines~~line of credit and the master repurchase ~~agreement~~agreements related to Zillow Home Loans.

For the ~~six~~three months ended ~~June 30, 2020,~~March 31, 2021, cash provided by financing activities was ~~$420.2~~$597.5 million, which was primarily related to ~~net~~the $544.6 million in proceeds from the ~~issuance~~sale of ~~the 2025 Notes~~3,163,502 shares of ~~$553.3 million, net proceeds from the public offering of our~~ Class C capital stock ~~of $411.5 million, $185.0~~under our equity distribution agreement, $61.1 million of proceeds from the exercise of option awards, and ~~$39.4~~$37.7 million of net borrowings on our credit facilities related to Zillow Offers. These cash inflows were partially offset by $45.7 million of net repayments on our warehouse line of credit and master repurchase agreements related to Zillow Home Loans.

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For the three months ended March 31, 2020, cash used in financing activities was $163.1 million, including $259.7 million of net repayments of borrowings on our credit facilities related to Zillow Offers, partially offset by $92.2 million of proceeds from the exercise of option awards and $4.4 million of net borrowings on our warehouse line of credit and master repurchase agreement related to Zillow Home Loans. These cash inflows were partially offset by $617.5 million of net repayments of borrowings on our credit facilities related to Zillow Offers and $194.7 million of cash paid for the partial repurchase of the 2021 Notes.

For the six months ended June 30, 2019, cash provided by financing activities was $323.1 million, including $293.1 million of proceeds from borrowings on our revolving credit facilities related to Zillow Offers and $33.0 million of proceeds from the exercise of option awards, partially offset by $3.0 million of net repayments of borrowings on our warehouse lines of credit related to Zillow Home Loans.

Off-Balance Sheet Arrangements

We did not have any off-balance sheet arrangements other than outstanding surety bonds issued for our benefit of approximately ~~$9.8~~$10.4 million as of ~~June 30, 2020.~~March 31, 2021. 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. For additional information regarding the surety bonds, see Note 1716 of our Notes to Condensed Consolidated Financial Statements ~~in Part I~~ of this Quarterly Report on Form 10-Q under the subsection titled “Surety Bonds”.

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Contractual Obligations and Other Commitments

There have been no material changes outside the ordinary course of business in our commitments under contractual obligations as previously disclosed in our Annual Report on Form 10-K for the year ended December 31, ~~2019,~~2020, except for the categories of contractual obligations included in the table below, which have been updated to reflect our contractual obligations as of ~~June 30, 2020~~March 31, 2021 (in thousands, unaudited):

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

2025 Notes (1) $ 565,000 $ — $ — $ 565,000 $ —
Interest on 2025 Notes (2) 75,702 15,537 31,075 29,090 —
2021 Notes (3) 265,330 — 265,330 — —
Interest on 2021 Notes (4) 7,518 5,307 2,211 — —
Homes under contract (5) 51,850 51,850 — — —
Homes segment credit facilities (6) 117,218 117,218 — — —
Purchase obligations (7) 29,431 19,126 10,050 255 —
Mortgages segment credit facilities (8) 69,814 69,814 — — —
____________________
(1) The aggregate principal amount of the 2025 Notes is due on May 15, 2025 if not earlier converted or redeemed.
(2) The stated interest rate on the 2025 Notes is 2.75%.
(3) The aggregate principal amount of the 2021 Notes is due on December 1, 2021 if not earlier converted or redeemed.
(4) The stated interest rate on the 2021 Notes is 2.00%.
(5) We have obligations to purchase homes under contract through our Zillow Offers business.
(6) Includes principal amounts due for amounts borrowed under the credit facilities used to provide capital for our Zillow Offers business. Amounts exclude an immaterial amount of estimated interest payments.
(7) 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 17 of our Notes to Condensed Consolidated Financial Statements in Part I of this Quarterly Report on Form 10-Q.
(8) 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.


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

2024 Notes (1)	$	622,382	$	—	$	—	$	622,382	$	—
Interest on 2024 Notes (2)	15,949		4,668		9,336		1,945		—
Homes segment credit facilities (3)	398,836		398,836		—		—		—
Mortgages segment credit facilities (4)	263,339		263,339		—		—		—
Homes under contract (5)	511,253		511,253		—		—		—
Total contractual obligations	$	1,811,759	$	1,178,096	$	9,336	$	624,327	$	—
____________________ (1) The aggregate principal amount of the 2024 Notes is due on September 1, 2024 if not earlier converted or redeemed. (2) The stated interest rate on the 2024 Notes is 0.75%. (3) Includes principal amounts due for amounts borrowed under the credit facilities used to provide capital for our Zillow Offers business. Amounts exclude an immaterial amount of estimated interest payments. (4) 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. Amounts exclude an immaterial amount of estimated interest payments. (5) We have obligations to purchase homes under contract through our Zillow Offers business.

As of ~~June 30, 2020,~~March 31, 2021, we have outstanding letters of credit of approximately $16.9 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. We have outstanding surety bonds issued for our benefit of approximately ~~$9.8~~$10.4 million and $10.1 million as of ~~June 30, 2020.~~March 31, 2021 and December 31, 2020, respectively.

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Critical Accounting Policies and Estimates

Our condensed consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles, or GAAP. The preparation of these financial statements requires us to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenue, 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, and the COVID-19 pandemic has introduced significant additional uncertainty with respect to estimates, judgments and assumptions, which may materially impact our estimates. For information on our critical accounting policies and estimates, see Part II Item 27 (Management’s Discussion and Analysis of Financial Condition and Results of Operations) of our ~~Quarterly~~Annual Report on Form ~~10-Q~~10-K for the ~~three months~~fiscal year ended ~~March~~December 31, 2020. There have been no material changes to our critical accounting policies and estimates as previously disclosed in our ~~Quarterly~~Annual Report on Form ~~10-Q~~10-K for the ~~three months~~fiscal year ended ~~March~~December 31, 2020.

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Item 3. 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,~~municipal securities, U.S. government agency securities, treasury bills ~~commercial paper, municipal securities~~ and ~~corporate notes and bonds.~~certificates of deposit. Our current investment policy seeks first to preserve principal, second to provide liquidity for our operating and capital needs and third to maximize yield without putting our principal at risk.

Our 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. As 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 convertible senior notes bear interest at fixed rates. Thus, we have no related direct financial statement risk associated with changes in interest rates. However, 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 ~~June 30, 2020~~March 31, 2021 (in thousands, except interest rates):

Maturity Date Aggregate Principal Amount Stated Interest Rate
September 1, 2026 $ 500,000 1.375 %
May 15, 2025 565,000 2.75 %
September 1, 2024 673,000 0.75 %
July 1, 2023 373,750 1.50 %
December 1, 2021 265,330 2.00 %
December 15, 2020 9,637 2.75 %
$ 2,386,717

Since the convertible senior notes bear interest at fixed rates, we have no direct financial statement risk associated with changes in interest rates as of June 30, 2020. However, the fair values of the convertible senior notes change primarily when the market price of our stock fluctuates or interest rates change.


Maturity Date	Aggregate Principal Amount		Stated Interest Rate
September 1, 2026	$	498,800	1.375	%
May 15, 2025	565,000		2.75	%
September 1, 2024	622,382		0.75	%
July 1, 2023	372,825		1.50	%
	$	2,059,007

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 ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, we had outstanding ~~$117.2~~$398.8 million and ~~$691.5~~$361.2 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”)~~LIBOR plus an applicable ~~margin.~~margin, and in certain cases a LIBOR floor. Accordingly, fluctuations in market interest rates may increase or decrease our interest expense. Assuming no change in the outstanding borrowings on our credit facilities, we estimate that a one percentage point increase in LIBOR would increase our annual interest expense by approximately ~~$1.0~~$4.0 million and ~~$6.9~~$3.6 million as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively.

We are also subject to market risk by way of changes in interest rates on borrowings under our warehouse line of credit and master repurchase ~~agreement~~agreements that provide capital for Zillow Home Loans. As of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, we had outstanding ~~$69.8~~$263.3 million and ~~$30.4~~$309.0 million, respectively, of borrowings on our warehouse line of credit and master repurchase ~~agreement~~agreements which bear interest at a floating rate based on LIBOR plus an applicable margin, and in certain cases include a LIBOR floor. 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 would increase our annual interest expense associated with the warehouse line of credit and master repurchase ~~agreement~~agreements by ~~$0.5~~approximately $2.6 million and $3.1 million as of ~~June 30, 2020~~March 31, 2021 and ~~by an insignificant amount as of~~ December 31, ~~2019.~~2020, respectively.

As described above, we utilize debt facilities that bear interest at a floating rate based on LIBOR, which is expected to be phased out as a reference rate in future periods. We do not expect the eventual transition away from LIBOR to have a material impact on our financial position, results of operations or cash flows.

Inflation Risk

We do not believe that inflation has had a material effect on our business, results of operations or financial condition. If our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, results of operations and financial condition.

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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.

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Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures (as defined under Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended). Management, under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of the Company’s disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(b) as of ~~June 30, 2020.~~March 31, 2021. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that these disclosure controls and procedures were effective as of ~~June 30, 2020.~~March 31, 2021.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the three months ended ~~June 30, 2020~~March 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II – OTHER INFORMATION

Item 1. Legal Proceedings

For information regarding legal proceedings in which we are involved, see Note 1716 under the subsection titled “Legal Proceedings” in our Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.

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Item 1A. Risk Factors

~~Our~~There have not been any material changes to the risk factors affecting our business, ~~is subject to numerous risks. You should carefully consider the following risk factor, in addition to~~financial condition or future results from those set forth in Part I, Item 1A (Risk Factors) in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2019, as any of these risks~~2020. However, you should carefully consider the factors discussed in our Annual Report on Form 10-K, which could ~~harm~~materially affect our business, ~~results of operations, and~~financial condition or future financial performance. Recovery pursuant to our insurance policies may not be available due to policy definitions of covered losses or other factors, and available insurance may be insufficient to compensate for damages, expenses, fines, penalties, and other losses we may incur as a result of these and other risks. In addition,results. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition ~~and~~and/or operating results. ~~If any of these risks occur, the trading price of our common and capital stock could decline, and you could lose all or part of your investment.~~

~~Our financial condition and results of operations have been and may continue to be adversely affected by the COVID-19 pandemic.~~

In December 2019, a novel strain of coronavirus, COVID-19, was reported and has subsequently spread worldwide. On March 11, 2020, the World Health Organization declared COVID-19 a pandemic. As a result of COVID-19, significant portions of the United States economy and population shut down and slowed down due to widespread travel and transportation restrictions, shelter in place and stay at home policies and closures of commercial spaces and government facilities, including in locations where we maintain operations and a significant number of employees. The current COVID-19 pandemic, its broad impact and preventive measures taken to contain or mitigate the pandemic have had, and are likely to continue to have, significant negative effects on the United States and global economy, employment levels, employee productivity, residential real estate and financial markets. This, in turn, has and may increasingly have a negative impact on our real estate partners, suppliers, demand for our products and services, the ability of customers to effectuate real estate transactions, profitability, the value of collateral securing loans, our ability to resell loans on the secondary market, access to credit and our ability to operate our business.

In response to these unprecedented circumstances, we temporarily paused home buying through Zillow Offers, provided certain product discounts, temporarily closed offices, paused hiring for non-critical roles, paused the majority of our marketing and advertising activities and reduced discretionary spending. Although, among other things, we have resumed home buying in all Zillow Offers markets as of August 2020, expect to increase our hiring, marketing and advertising activities and plan to reopen offices, we cannot predict whether and to what extent we will have to implement additional operational changes in light of COVID-19 in the future. As a result of these and other consequences, the pandemic has and may continue to adversely affect our business, results of operations and financial condition, likely significantly.

Our ability to fund our liquidity requirements and operate our business depends on our cash flows from operations as well as our ability to access capital markets and borrow on our existing credit facilities. For example, the provision of certain product discounts and pause of home buying through Zillow Offers has and may continue to disrupt our revenue and operating cash flow levels. Further, our access to and the availability of financing on acceptable terms may be adversely impacted by the pandemic. For more information on the impact the COVID-19 pandemic has had on our liquidity position and outlook, please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.”

The extent to which the outbreak will impact our operations will depend on future developments, which are highly uncertain and cannot be predicted at this time, and include the magnitude, duration and severity of the outbreak, the actions taken to contain or mitigate the outbreak and any associated economic downturn or extended slowdown in the real estate markets.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Unregistered Sales of Equity Securities

There were no unregistered sales of equity securities during the three months ended ~~June 30, 2020.~~March 31, 2021.

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Item 6. Exhibits

The exhibits listed below are filed as part of this Quarterly Report on Form 10-Q.


Exhibit Number						Description
~~3.1~~						~~Amended and Restated Bylaws of Zillow Group, Inc. (Filed as Exhibit 3.1 to Zillow Group, Inc~~.~~’s Current Report on Form 8-K filed with the Securities and Exchange Commission on June 5, 2020, and incorporated herein by reference).~~

~~4.1~~						~~Indenture dated as of May 15, 2020~~, by and between Zillow Group, Inc. and The Bank of New York Mellon Trust Company, N.A., as trustee (Filed as Exhibit 4.1 to Zillow Group, Inc.’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 1 8 ~~, 2020, and incorporated herein by reference).~~

~~4.2~~						~~Form of 2.75% Convertible Senior Note due 2025 (incorporated by reference from Exhibit A to Exhibit 4.1 hereto).~~

10.1*						Zillow Group, Inc. 2020 Incentive Plan (Filed as Exhibit 10.1 to Zillow Group, Inc’s Current Report on Form 8-K filed with the Securities and Exchange Commission on June 10, 2020, and incorporated herein by reference).

10.2*						~~Form of~~ ~~Nonqualified~~ ~~Stock Option Grant Notice and~~ ~~Nonqualifie~~d ~~Stock OptionAgreement under the Zillow Group, Inc. 2020 Incentive Plan.~~

10.3*						~~Form of Restricted Stock Unit Award Notice and Restricted Stock Unit Award Agreement under the Zillow Group, Inc. 2020 Incentive Plan.~~

31.1						Certification of Chief Executive Officer pursuant to Rule 13-14(a) of the Securities Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2						Certification of Chief Financial Officer pursuant to Rule 13-14(a) of the Securities Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1						Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2						Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS						Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the inline XBRL document).

101.SCH						Inline XBRL Taxonomy Extension Schema Document.

101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB						Inline XBRL Taxonomy Extension Label Linkbase Document.

101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document.

104						Cover Page Interactive Data File (embedded within the inline XBRL document).

*						~~Indicates a management contract or compensatory plan or arrangement.~~

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated: ~~August 6, 2020~~May 4, 2021

ZILLOW GROUP, INC.

By:

/s/ JENNIFER ROCK

Name:

Jennifer Rock

Title:

Chief Accounting Officer

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	PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements (unaudited)	3
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Operations	4
	Condensed Consolidated Statements of Comprehensive ~~Loss~~Income (Loss)	5
	Condensed Consolidated Statements of Shareholders’ Equity	6
	Condensed Consolidated Statements of Cash Flows	87
	Notes to Condensed Consolidated Financial Statements	108
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3229
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	5946
Item 4.	Controls and Procedures	6148

	PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	6249
Item 1A.	Risk Factors	6350
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	6451
Item 6.	Exhibits	6552

	Signatures	6653


	Three Months Ended June 30, 2020														Three Months Ended June 30, 2019
Maturity Date	Contractual Coupon Interest		Amortization of Debt Discount		Amortization of Debt Issuance Costs		Interest Expense		Contractual Coupon Interest		Amortization of Debt Discount		Amortization of Debt Issuance Costs		Interest Expense
September 1, 2026	$	1,719	$	4,922	$	120	$	6,761	$	—	$	—	$	—	$	—
May 15, 2025	2,007		3,148		168		5,323		—		—		—		—
September 1, 2024	1,262		8,095		278		9,635		—		—		—		—
July 1, 2023	1,402		3,749		366		5,517		1,402		3,496		342		5,240
December 1, 2021	1,803		3,945		408		6,156		2,300		4,677		484		7,461
December 15, 2020	66		—		—		66		66		—		—		66
Total	$	8,259	$	23,859	$	1,340	$	33,458	$	3,768	$	8,173	$	826	$	12,767


	Six Months Ended June 30, 2020														Six Months Ended June 30, 2019
Maturity Date	Contractual Coupon Interest		Amortization of Debt Discount		Amortization of Debt Issuance Costs		Interest Expense		Contractual Coupon Interest		Amortization of Debt Discount		Amortization of Debt Issuance Costs		Interest Expense
September 1, 2026	$	3,438	$	9,746	$	238	$	13,422	$	—	$	—	$	—	$	—
May 15, 2025	2,007		3,148		168		5,323		—		—		—		—
September 1, 2024	2,510		15,956		545		19,011		—		—		—		—
July 1, 2023	2,804		7,446		727		10,977		2,804		6,933		678		10,415
December 1, 2021	4,103		8,856		916		13,875		4,600		9,268		959		14,827
December 15, 2020	132		—		—		132		132		—		—		132
Total	$	14,994	$	45,152	$	2,594	$	62,740	$	7,536	$	16,201	$	1,637	$	25,374


Maturity Date	Conversion Spread	Conversion Price per Share
September 1, 2026	11,492	$	43.51
May 15, 2025	8,408	67.20
September 1, 2024	15,468	43.51
July 1, 2023	4,769	78.37
December 1, 2021	5,067	52.36


	Purchase Obligations
2020	$	8,254
2021	17,627
2022	3,043
2023	507
Total future purchase commitments	$	29,431


	Six Months Ended June 30, 2020										Six Months Ended June 30, 2019
	Homes		IMT		Mortgages		Homes		IMT		Mortgages
Revenue:
Zillow Offers	$	1,222,928	$	—	$	—	$	377,396	$	—	$	—
Premier Agent	—		434,068		—		—		449,696		—
Other	1,197		176,937		—		—		172,245		—
Mortgages	—		—		59,043		—		—		54,345
Total revenue	1,224,125		611,005		59,043		377,396		621,941		54,345
Costs and expenses:
Cost of revenue	1,163,987		47,705		11,051		363,151		50,310		9,108
Sales and marketing	119,466		216,199		24,581		58,271		262,094		28,655
Technology and development	61,456		188,204		14,115		30,479		182,230		15,391
General and administrative	45,323		112,638		19,835		32,165		125,521		20,927
Impairment costs	—		73,900		2,900		—		—		—
Integration costs	—		—		—		—		—		645
Total costs and expenses	1,390,232		638,646		72,482		484,066		620,155		74,726
Income (loss) from operations	(166,107)		(27,641)		(13,439)		(106,670)		1,786		(20,381)
Segment other income	—		5,300		587		—		—		715
Segment interest expense	(11,909)		—		(533)		(9,657)		—		(388)
Income (loss) before income taxes (1)	$	(178,016)	$	(22,341)	$	(13,385)	$	(116,327)	$	1,786	$	(20,054)


	Three Months Ended June 30,				2019 to 2020 % Change
	2020	2019
Visits	2,491.1	2,181.4	14	%