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Share-Based Awards | 12 Months Ended
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Dec. 31, 2022
Share-Based Payment Arrangement [Abstract] |
Share-Based Awards | 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”), which became effective July 19, 2011. Subject to adjustment from time to time as provided in the 2020 Plan, a total of 12 million shares of Class C capital stock are authorized 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. Shares issued under the 2020 plan may be issued from authorized and unissued shares of Class C capital stock. The 2020 Plan is administered by the Compensation Committee of the Board (the “Compensation Committee”). Under the terms of the 2020 Plan, the Compensation Committee may grant equity awards, including incentive or nonqualified stock options, restricted stock, restricted stock units, restricted units, stock appreciation rights, performance shares or performance units to employees, directors and consultants of Zillow Group and its subsidiaries. The Board has also authorized certain senior executive officers to grant equity awards under the 2020 Plan, within limits prescribed by our Board. 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 three 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 over a period of four years. Restricted stock units granted under the 2020 Plan typically vest over a period of four years. Generally, 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. Zillow Group, Inc. Amended and Restated 2011 Incentive Plan 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. Zillow Group, Inc. 2019 Equity Inducement Plan On August 8, 2019, the 2019 Equity Inducement Plan (“Inducement Plan”) became effective. Subject to adjustment from time to time as provided in the Inducement Plan, 10 million shares of Class C capital stock are available for issuance under the Inducement Plan. Shares issued under the Inducement Plan shall be drawn from authorized and unissued shares of Class C capital stock. The purpose of the Inducement Plan is to attract, retain and motivate certain new employees of the Company and its subsidiaries by providing them the opportunity to acquire a proprietary interest in the Company and to align their interests and efforts to the long-term interests of the Company’s shareholders. Each award under the Inducement Plan is intended to qualify as an employment inducement award pursuant to Listing Rule 5635(c) of the corporate governance rules of the NASDAQ Stock Market. The Inducement Plan is administered by the Compensation Committee. Under the terms of the Inducement Plan, the Compensation Committee may grant equity awards, including nonqualified stock options, restricted stock or restricted stock units or restricted units to new employees of the Company and its subsidiaries. Options under the Inducement 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 date of grant, 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 generally expires on such date. Employees generally forfeit their rights to exercise vested options three months following their termination of employment or 12 months following termination by reason of death, disability or retirement. Options granted under the Inducement Plan expire ten years from the grant date and vest 25% after 12 months and quarterly thereafter over the next three years. Restricted stock units granted under the Inducement Plan vest 25% after 12 months and quarterly thereafter over the next three years. In general, 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. Option Award Repricing On August 3, 2022, upon recommendation of the Compensation Committee, the Board 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 weighted-average total fair value of options repriced was $67.58. 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 $33 million was recognized during the year ended December 31, 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 year ended December 31, 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, 2022 | 25,746 |  |  | $ | 72.86 |  |  | 7.48 |  | $ | 354 |
Granted | 7,527 |  |  | 45.22 |  |  |  |  |
Exercised | (1,129) |  |  | 39.97 |  |  |  |  |
Forfeited or cancelled | (3,546) |  |  | 83.46 |  |  |  |  |
Outstanding at December 31, 2022 | 28,598 |  |  | 44.90 |  |  | 7.08 |  | 15 |
Vested and exercisable at December 31, 2022 | 16,813 |  |  | 44.67 |  |  | 5.98 |  | 14 |
The following assumptions were used to determine the fair value of all option awards granted for the periods presented:
| Year Ended December 31,
| 2022 |  | 2021 |  | 2020
Expected volatility | 55% – 61% |  | 52% – 58% |  | 45% – 52%
Risk-free interest rate | 1.94% – 3.95% |  | 0.57% – 1.15% |  | 0.22% – 0.93%
Weighted-average expected life | 4.50 – 6.00 years |  | 4.50 – 5.75 years |  | 4.50 – 5.50 years
Weighted-average fair value of options granted | $23.25 |  | $54.55 |  | $22.50
As of December 31, 2022, there was a total of $409 million in unrecognized compensation cost related to unvested option awards, which is expected to be recognized over a weighted-average period of 2.5 years. The total intrinsic value of options exercised during the years ended December 31, 2022, 2021 and 2020 was $13 million, $310 million and $564 million, respectively. The fair value of options vested for the years ended December 31, 2022, 2021 and 2020 was $226 million, $173 million and $85 million, respectively. Restricted Stock Units The following table summarizes activity for all restricted stock units for the year ended December 31, 2022:
| Restricted Stock Units (in thousands) |  | Weighted- Average Grant- Date Fair Value
Unvested outstanding at January 1, 2022 | 6,074 |  |  | $ | 66.51 |
Granted | 12,066 |  |  | 41.72 |
Vested | (4,722) |  |  | 52.39 |
Forfeited | (2,488) |  |  | 59.48 |
Unvested outstanding at December 31, 2022 | 10,930 |  |  | 46.85 |
The total fair value of restricted stock units that vested during the years ended December 31, 2022, 2021 and 2020 was $247 million, $152 million and $125 million, respectively. As of December 31, 2022, there was $470 million of total unrecognized compensation cost related to restricted stock units, which is expected to be recognized over a weighted-average period of 2.5 years. Share-Based Compensation Expense The following table presents the effects of share-based compensation expense in our consolidated statements of operations during the periods presented (in millions):
| Year Ended December 31,
| 2022 |  | 2021 |  | 2020
Cost of revenue | $ | 16 |  |  | $ | 9 |  |  | $ | 6 |
Sales and marketing | 63 |  |  | 42 |  |  | 28 |
Technology and development | 165 |  |  | 103 |  |  | 67 |
General and administrative | 189 |  |  | 122 |  |  | 69 |
Impairment and restructuring costs | 2 |  |  | 1 |  |  | — |
Share-based compensation - continuing operations | 435 |  |  | 277 |  |  | 170 |
Share-based compensation - discontinued operations | 16 |  |  | 40 |  |  | 27 |
Total share-based compensation | $ | 451 |  |  | $ | 317 |  |  | $ | 197 |

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