Discontinued Operations

12 Months Ended

Dec. 31, 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. 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.

Historically Zillow Offers has been reported within our Homes segment. The wind down of Zillow Offers was completed in the third quarter of 2022, at which time Zillow Offers met the criteria for discontinued operations. Accordingly, 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 consolidated financial statements. No assets or liabilities were classified as discontinued operations as of December 31, 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 consolidated statements of operations for the periods presented (in millions):


	Year Ended December 31,
	2022		2021		2020
Revenue	$	4,249	$	6,015	$	1,716
Cost of revenue	4,023		6,071		1,611
Gross profit (loss)	226		(56)		105
Operating expenses:
Sales and marketing	153		361		156
Technology and development	6		53		66
General and administrative	10		35		33
Impairment and restructuring costs	25		62		—
Total operating expenses	194		511		255
Income (loss) from discontinued operations	32		(567)		(150)
Loss on extinguishment of debt	(21)		—		—
Other income, net	13		3		—
Interest expense	(36)		(64)		(17)
Loss from discontinued operations before income taxes	(12)		(628)		(167)
Income tax benefit (expense)	(1)		(2)		—
Net loss from discontinued operations	$	(13)	$	(630)	$	(167)
Net loss from discontinued operations per share:
Basic	$	(0.05)	$	(2.52)	$	(0.75)
Diluted	$	(0.05)	$	(2.41)	$	(0.72)

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


	Year Ended December 31,
	2022		2021		2020
Amortization of debt discount and debt issuance costs	$	21	$	11	$	—
Loss on debt extinguishment	21		—		—
Share-based compensation	16		40		27
Inventory valuation adjustment	9		408		—
Depreciation and amortization	7		10		6
Capital expenditures	1		6		8
Issuance (settlement) of beneficial interests in securitizations	(79)		63		—

Restructuring

The following table presents a summary of restructuring charges attributable to discontinued operations for the periods presented (in millions):


		Year Ended December 31,
	Line Item of Discontinued Operations	2022		2021		Cumulative Amount Recognized
Inventory write-down	Cost of revenue	$	9	$	408	N/A
Other charges:
Employee termination costs	Impairment and restructuring costs	$	20	$	52	$	72
Financing-related charges	Interest expense and Loss on debt extinguishment	37		6		43
Contract termination costs	Impairment and restructuring costs	4		10		14
Accelerated depreciation and amortization	Cost of revenue	14		5		19
Asset write-offs	Impairment and restructuring costs	—		1		1
Other charges	Impairment and restructuring costs	1		—		1
Total other charges		76		74		150
Total		$	85	$	482	$	567

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 totaled $12 million, $4 million and $8 million, respectively, for the year ended December 31, 2022. Cumulative restructuring charges attributable to continued operations as of December 31, 2022 totaled $33 million, $10 million of which pertained to employee cost actions that occurred during the fourth quarter of 2022 that did not relate to the Zillow Offers wind down. The remaining liability balance associated with such restructuring charges as of December 31, 2022 is not material.