Discontinued Operations

9 Months Ended

Sep. 30, 2022

Discontinued Operations and Disposal Groups [Abstract]

Zillow Offers Wind Down

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

The wind down of Zillow Offers was complete as of September 30, 2022, at which time Zillow Offers met the criteria for discontinued operations. We have presented the assets and liabilities and results of operations, excluding allocation of any general corporate expenses, of Zillow Offers for all periods presented as discontinued operations in our condensed consolidated financial statements. No assets or liabilities were classified as discontinued operations as of September 30, 2022.

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


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

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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Revenue	$	23	$	1,187	$	4,249	$	2,668
Cost of revenue	24		1,414		4,023		2,751
Gross profit (loss)	(1)		(227)		226		(83)
Operating expenses:
Sales and marketing	1		90		153		189
Technology and development	—		10		6		41
General and administrative	—		10		10		26
Restructuring costs	—		—		25		—
Total operating expenses	1		110		194		256
Income (loss) from discontinued operations	(2)		(337)		32		(339)
Loss on extinguishment of debt	—		—		(21)		—
Other income	—		—		13		—
Interest expense	—		(16)		(36)		(25)
Loss from discontinued operations before income taxes	(2)		(353)		(12)		(364)
Income tax benefit (expense)	—		6		(1)		1
Net loss from discontinued operations	$	(2)	$	(347)	$	(13)	$	(363)
Net loss from discontinued operations per share:
Basic	$	(0.01)	$	(1.37)	$	(0.05)	$	(1.46)
Diluted	$	(0.01)	$	(1.31)	$	(0.05)	$	(1.38)

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


	Nine Months Ended September 30,
	2022		2021
Amortization of debt discount and debt issuance costs	$	21	$	1
Loss on debt extinguishment	21		—
Share-based compensation	16		27
Inventory valuation adjustment	9		304
Depreciation and amortization	7		7
Capital expenditures	1		6
Issuance (settlement) of beneficial interests in securitizations	(79)		25

Restructuring

There were no restructuring charges attributable to discontinued operations for the three months ended September 30, 2022. The following table presents a summary of restructuring charges attributable to discontinued operations for the periods presented (in millions):


	Line Item of Discontinued Operations	Nine Months Ended September 30, 2022		Cumulative Amount Recognized
Inventory write-down	Cost of revenue	$	9	N/A
Other charges:
Employee termination costs	Restructuring costs	$	20	$	72
Financing-related charges	Interest expense and Loss on debt extinguishment	37		43
Contract termination costs	Restructuring costs	4		14
Accelerated depreciation and amortization	Cost of revenue	14		19
Asset write-offs	Restructuring costs	—		1
Other charges	Restructuring costs	1		1
Total other charges		76		150
Total		$	85	$	150

Restructuring charges attributable to continued operations relate to employee termination costs within our IMT and Mortgages segments and certain indirect costs of the Homes segment that do not qualify as discontinued operations. These costs were not material for the three months ended September 30, 2022 and totaled $6 million, $2 million and $6 million, respectively, for the nine months ended September 30, 2022. Cumulative restructuring charges attributable to continued operations as of September 30, 2022 totaled $23 million. The remaining liability balance associated with such restructuring charges as of September 30, 2022 is not material.