UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): November 2, 2021
ZILLOW GROUP, INC.
(Exact name of registrant as specified in its charter)
Washington | 001-36853 | 47-1645716 | ||||||||||||
(State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) | ||||||||||||
1301 Second Avenue, Floor 31, Seattle, Washington | 98101 | |||||||||||||
(Address of principal executive offices) | (Zip Code) |
(206) 470-7000
(Registrant’s telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: |
☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | ||||
☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | ||||
☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | ||||
☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
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 is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
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. ☐
Item 2.02 | Results of Operations and Financial Condition. |
Zillow Group, Inc. (“Zillow Group”) today issued a press release and a shareholder letter announcing its financial results for the fiscal quarter ended September 30, 2021. The full text of the press release issued in connection with the announcement is furnished as Exhibit 99.1, accompanying supporting tables as Exhibit 99.2 and the shareholder letter as Exhibit 99.3 to this Current Report on Form 8-K.
The information in this Item 2.02 and Exhibits 99.1, 99.2 and 99.3 of this Current Report on Form 8-K shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such a filing.
Item 2.05 | Costs Associated with Exit or Disposal Activities. |
On November 2, 2021, the Board of Directors of Zillow Group made the determination to wind down Zillow Offers operations. This decision was made in light of home pricing unpredictability, capacity constraints and other operational challenges faced by Zillow Offers that were exacerbated by an unprecedented housing market, a global pandemic and a difficult labor and supply chain environment. Zillow Group expects to continue to complete the purchase of homes currently under contract and to renovate and sell properties currently in inventory through 2022. The wind down is expected to take several quarters and result in approximately a 25% reduction of the Company’s workforce.
In connection with the preparation of financial statements for the quarterly period ended September, 30, 2021, Zillow Group recorded a $304.4 million write-down of inventory associated with Zillow Offers as a result of purchasing homes during the third quarter at higher prices than Zillow Group’s current estimates of future selling prices after selling costs. Zillow Group expects to record additional charges of approximately $240 million to $265 million associated with homes that Zillow Group was under contract to purchase at September 30, 2021, which may be canceled without significant penalty, within cost of revenue in its consolidated statements of operations during the three months ending December 31, 2021.
Zillow Group expects to record additional pre-tax charges of approximately $175 million to $230 million related to the wind down of Zillow Offers operations, primarily in the fourth quarter of 2021 and the first half of 2022. Of the charges that will be recorded as impairment and restructuring costs in Zillow Group’s consolidated statements of operations, an estimated $110 million to $150 million relate to employee termination costs, an estimated $15 million to $20 million relate to charges associated with long-lived assets pertaining to Zillow Offers, an estimated $5 million to $10 million relate to charges associated with termination of contractual obligations, and the remaining amounts primarily relate to approximately $40 million to $50 million of charges associated with winding down financing facilities related to Zillow Offers operations, which will be recorded as interest expense in Zillow Group’s consolidated statements of operations. Zillow Group plans to fund the cash costs through existing cash and investment balances. As a result of the decision to wind down Zillow Offers operations, Zillow Group plans to report Zillow Offers as a discontinued operation beginning with the period during which disposition of the business is complete. Our evaluation of various alternative courses of action that we may take related to the wind down is in progress and we may incur additional costs as a result of such actions. All estimated amounts are subject to change until finalized.
Forward-Looking Statements
This Current Report on Form 8-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 that involve risks and uncertainties, including, without limitation, statements regarding the future performance and operation of our business and the expected amount and timing of charges, write-downs and cash expenditures and expected wind down plans of Zillow Offers operations. Statements containing words such as “may,” “believe,” “anticipate,” “expect,” “intend,” “plan,” “project,” “predict,” “will,” “projections,” “continue,” “estimate,” “outlook,” “guidance,” “would,” “could,” or similar expressions constitute forward-looking statements. Forward-looking statements are made based on assumptions as of November 2, 2021, and although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee these results. Differences in Zillow Group’s actual results from those described in these forward-looking statements may result from actions taken by Zillow Group as well as from risks and uncertainties beyond Zillow Group’s control.
Factors that may contribute to such differences include, but are not limited to, disruptions in operations, including in our ability to complete the purchase of homes currently under contract and renovate, market and close on the sale of homes currently in inventory during the wind down of Zillow Offers; disruptions in relationships with customers, suppliers, vendors, broker partners, contractors, employees, lenders and consumers given our decision to wind down Zillow Offers operations; unanticipated developments that may prevent, delay or increase the costs associated with our wind down activities; our access to and the availability of financing on terms acceptable to us to finance the purchase of homes through Zillow Offers during the wind down of Zillow Offers; the impact of the COVID-19 pandemic (including variants) or other public health crises and any associated economic downturn on Zillow Group’s future financial position, operations and financial performance; the
magnitude, duration and severity of the COVID-19 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, 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 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 Zillow Group’s ability to operate in light of the COVID-19 pandemic; changes in general economic and financial conditions that reduce demand for our products and services, lower our profitability or reduce Zillow Group’s 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 Zillow Group’s 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 Zillow Group’s current and future businesses; ability to comply with MLS rules and requirements to access and use listing data, and to maintain or establish relationships with listings and data providers; ability to operate our Zillow Offers and mortgage origination businesses, including the ability to obtain sufficient financing; fluctuations in the valuation of companies perceived by investors to be comparable to Zillow Group; the impact of natural disasters and other catastrophic events; the impact of pending or future litigation; and the issuance of new or updated research or reports by securities analysts.
The foregoing list of risks and uncertainties is illustrative but not exhaustive. For more information about potential factors that could affect Zillow Group’s business and financial results, please review the “Risk Factors” described in Zillow Group’s Annual Report on Form 10-K for the year ended December 31, 2020 and in future quarterly and annual reports. Except as may be required by law, Zillow Group does not intend and undertakes no duty to update this information to reflect future events or circumstances.
Item 9.01 | Financial Statements and Exhibits. |
(d) Exhibits.
Exhibit Number | Description | |||||||
99.1 | ||||||||
99.2 | ||||||||
99.3 | ||||||||
104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). |
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 hereunto duly authorized.
Dated: November 2, 2021 | ZILLOW GROUP, INC. | ||||||||||
By: | /s/ JENNIFER ROCK | ||||||||||
Name: | Jennifer Rock | ||||||||||
Title: | Chief Accounting Officer |