XML 31 R21.htm IDEA: XBRL DOCUMENT v3.22.2.2
Share-Based Awards
 9 Months Ended
Sep. 30, 2022
Share-Based Payment Arrangement [Abstract]  
Share-Based Awards Share-Based Awards
During the first quarter of 2022, in connection with the 2021 annual review cycle, the Compensation Committee of the Board of Directors (the “Compensation Committee”) approved option and restricted stock unit awards under the Zillow Group, Inc. 2020 Incentive Plan (the “2020 Plan”), a portion of which vest quarterly over four years, and a portion of which vest quarterly over a one year period beginning in May 2022. On August 3, 2022, upon recommendation of the Compensation Committee, the Board of Directors approved a supplemental grant of restricted stock units to eligible employees. The supplemental restricted stock units were granted on August 8, 2022 and vest quarterly over a two-year period beginning in August 2022. The exercisability and settlement terms of these equity awards are otherwise consistent with the terms of the option awards and restricted stock units typically granted under the 2020 Plan.
When determining the grant date fair value of share-based awards, management considers whether an adjustment is required to the observable market price or volatility of the Company’s Class A common stock or Class C capital stock used in the valuation as a result of material non-public information. For additional information regarding our share-based awards, see Note 16 in the Notes to the Consolidated Financial Statements in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.
Option Award Repricing
On August 3, 2022, upon recommendation of the Compensation Committee, the Board of Directors approved adjustments to the exercise price of certain outstanding vested and unvested option awards for eligible employees. The exercise price of eligible option awards was reduced to $38.78, which was the closing market price of our Class C capital stock on August 8, 2022. No other changes were made to the terms and conditions of the eligible option awards.
We have accounted for the reprice of the eligible option awards as an equity modification whereby the incremental fair value attributable to the repriced option awards, as measured on the date of reprice, will be recognized as additional share-based compensation expense. The reprice impacted 7 million stock option awards, affected 3,348 employees and is expected to result in incremental share-based compensation expense of $66 million in total, of which $29 million was recognized during the three months ended September 30, 2022, including amounts associated with vested awards. The remaining expense will be recognized over the remaining requisite service period of the original awards.
Option Awards
The following table summarizes all option award activity for the nine months ended September 30, 2022:
Number
of Shares
Subject to
Existing
Options (in thousands)		Weighted-
Average
Exercise
Price Per
Share		Weighted-
Average
Remaining
Contractual
Life (Years)		Aggregate
Intrinsic
Value
(in millions)
Outstanding at January 1, 202225,746 $72.86 7.48$354 
Granted6,792 46.47 
Exercised(1,078)40.59 
Forfeited or cancelled(3,061)88.70 
Outstanding at September 30, 202228,399 45.25 7.318 
Vested and exercisable at September 30, 202215,398 44.74 6.108 
The fair value of all option awards 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
September 30,		Nine Months Ended
September 30,
 2022202120222021
Expected volatility61%55%
55% - 61%
52% - 56%
Risk-free interest rate3.38%0.76%
1.94% - 3.38%
0.57% - 0.90%
Weighted-average expected life
5.00 years
4.75 years
4.50 - 6.00 years
4.50 - 5.75 years
Weighted-average fair value of options granted$18.06$45.40$23.75$58.96
The weighted-average total fair value of options repriced was $67.58. As of September 30, 2022, there was a total of $463 million in unrecognized compensation cost related to unvested option awards.
Restricted Stock Units
The following table summarizes activity for all restricted stock units for the nine months ended September 30, 2022:
Restricted
Stock Units (in thousands)		Weighted-
Average Grant-
Date Fair
Value
Unvested outstanding at January 1, 20226,074 $66.51 
Granted10,664 42.71 
Vested(3,278)53.87 
Forfeited(2,193)60.45 
Unvested outstanding at September 30, 202211,267 48.85 
As of September 30, 2022, there was a total of $510 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 millions):
 Three Months Ended
September 30,		Nine Months Ended
September 30,
 2022202120222021
Cost of revenue$5 $2 $12 $7 
Sales and marketing21 11 46 31 
Technology and development57 25 123 78 
General and administrative64 32 142 88 
Restructuring costs— — 2 — 
Share-based compensation - continuing operations147 70 325 204 
Share-based compensation - discontinued operations1 9 16 27 
Total share-based compensation$148 $79 $341 $231