XML 34 R21.htm IDEA: XBRL DOCUMENT v3.22.4
Debt
 12 Months Ended
Dec. 31, 2022
Debt Disclosure [Abstract]  
Debt Debt
The following table presents the carrying values of Zillow Group’s debt as of the dates presented (in millions):
December 31,
20222021
Mortgages segment
Repurchase agreements:
Credit Suisse AG, Cayman Islands$23 $77 
Citibank, N.A.3 17 
Warehouse line of credit:
Comerica Bank11 19 
Total Mortgages segment debt37 113 
Convertible senior notes
1.375% convertible senior notes due 2026
495 369 
2.75% convertible senior notes due 2025
560 443 
0.75% convertible senior notes due 2024
605 507 
Total convertible senior notes1,660 1,319 
Total debt$1,697 $1,432 
Mortgages Segment
To provide capital for Zillow Home Loans, we utilize master repurchase agreements and a warehouse line of credit which are classified as current liabilities in our consolidated balance sheets. The repurchase agreements and warehouse line of credit provide short-term financing between the issuance of a mortgage loan and when Zillow Home Loans sells the loan to an investor or directly to an agency. The following table summarizes certain details related to our repurchase agreements and warehouse line of credit (in millions, except interest rates):
LenderMaturity DateMaximum Borrowing CapacityWeighted Average Interest Rate
Credit Suisse AG, Cayman IslandsMarch 17, 2023$100 6.16 %
Citibank, N.A.June 9, 2023100 6.18 %
Comerica BankJune 24, 202350 6.22 %
Total$250 
Master Repurchase Agreements
On March 18, 2022, Zillow Home Loans amended its Credit Suisse AG, Cayman Islands (“Credit Suisse”) master repurchase agreement to decrease the uncommitted total maximum borrowing capacity to $100 million with a maturity date of March 17, 2023 and to update the reference rate from one-month LIBOR to Adjusted Daily Simple Secured Overnight Financing Rate.
On June 10, 2022, Zillow Home Loans amended its Citibank, N.A. (“Citibank”) master repurchase agreement to update the reference rate from one-month LIBOR to Secured Overnight Financing Rate (“SOFR”), as defined by the governing agreements. Additionally, the amendment extended the maturity date of the Citibank master repurchase agreement from June 10, 2022 to June 9, 2023.
In accordance with the master repurchase agreements, Credit Suisse and Citibank (together the “Lenders”) have agreed to pay Zillow Home Loans a negotiated purchase price for eligible loans, and Zillow Home Loans has simultaneously agreed to repurchase such loans from the Lenders under a specified timeframe at an agreed upon price that includes interest. The master repurchase agreements contain margin call provisions that provide the Lenders with certain rights in the event of a decline in the market value of the assets purchased under the master repurchase agreements. As of December 31, 2022 and 2021, $28 million and $87 million, respectively, in mortgage loans held for sale were pledged as collateral under the master repurchase agreements.
Warehouse Line of Credit
On June 25, 2022, Zillow Home Loans amended its Comerica Bank warehouse line of credit to decrease the total maximum borrowing capacity from $60 million to $50 million and update the reference rate from one-month LIBOR to Bloomberg Short-Term Bank Yield Index Rate (“BSBY”), as defined by the governing agreements. Additionally, the amendment extended the maturity date of the Comerica Bank warehouse line of credit from June 25, 2022 to June 24, 2023.
Borrowings on the repurchase agreements and warehouse line of credit bear interest either at a floating rate based on SOFR plus an applicable margin, as defined by the governing agreements, or BSBY plus an applicable margin, as defined by the governing agreements. The repurchase agreements and warehouse line of credit include customary representations and warranties, covenants and provisions regarding events of default. As of December 31, 2022, Zillow Home Loans was in compliance with all financial covenants and no event of default had occurred. The repurchase agreements and warehouse line of credit are recourse to Zillow Home Loans, and have no recourse to Zillow Group or any of its other subsidiaries.
Convertible Senior Notes
Effective January 1, 2022, we adopted guidance which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts in an entity’s own equity. For additional information regarding the adoption of this guidance, see Note 2 of our consolidated financial statements.
The following tables summarize certain details related to our outstanding convertible senior notes as of the dates presented or for the periods ended (in millions, except interest rates):
December 31, 2022December 31, 2021
Maturity DateAggregate Principal AmountStated Interest RateEffective Interest RateFirst Interest Payment DateSemi-Annual Interest Payment DatesUnamortized Debt Issuance CostsFair ValueUnamortized Debt Discount and Debt Issuance CostsFair Value
September 1, 2026$499 1.375 %1.57 %March 1, 2020March 1; September 1$4 $504 $130 $781 
May 15, 2025565 2.75 %3.20 %November 15, 2020May 15; November 155 531 122 725 
September 1, 2024608 0.75 %1.02 %March 1, 2020March 1; September 13 629 101 945 
Total$1,672 $12 $1,664 $353 $2,451 
Year Ended December 31, 2022Year Ended December 31, 2021Year Ended December 31, 2020
Maturity DateContractual Coupon InterestAmortization of Debt Issuance CostsInterest ExpenseContractual Coupon InterestAmortization of Debt DiscountAmortization of Debt Issuance CostsInterest ExpenseContractual Coupon InterestAmortization of Debt DiscountAmortization of Debt Issuance CostsInterest Expense
September 1, 2026$7 $— $7 $7 $22 $1 $30 $7 $20 $— $27 
May 15, 202516 3 19 16 27 1 44 10 15 1 26 
September 1, 20244 2 6 4 32 1 37 5 33 1 39 
July 1, 2023— — — 3 8 1 12 6 15 1 22 
December 1, 2021— — — — — — — 6 14 2 22 
Total$27 $5 $32 $30 $89 $4 $123 $34 $97 $5 $136 
The convertible senior notes are senior unsecured obligations and are classified as long-term debt in our consolidated balance sheets based on their contractual maturity dates. Interest on the convertible notes is paid semi-annually in arrears. The estimated fair value of the convertible senior notes is classified as Level 2 and was determined through consideration of quoted market prices in markets that are not active.
Convertible Senior Notes due in 2025
On May 15, 2020, we issued $500 million aggregate principal amount of 2.75% Convertible Senior Notes due 2025 (the “Initial 2025 Notes”) and on May 19, 2020, we issued $65 million aggregate principal amount of 2.75% Convertible Senior Notes due 2025 (the “Additional Notes” and, together with the Initial 2025 Notes, the “2025 Notes”). The Additional Notes were sold pursuant to the underwriters’ option to purchase additional 2025 Notes granted in connection with the offering of the Initial 2025 Notes. The net proceeds from the issuance of the 2025 Notes were approximately $553 million, after deducting underwriting discounts and commissions and offering expenses paid by Zillow Group.
Convertible Senior Notes due in 2024 and 2026
On September 9, 2019, we issued $600 million aggregate principal amount of Convertible Senior Notes due 2024 (the “Initial 2024 Notes”) and $500 million aggregate principal amount of Convertible Senior Notes due 2026 (the “2026 Notes”) in a private offering to qualified institutional buyers. The net proceeds from the issuance of the Initial 2024 Notes were approximately $592 million and the net proceeds from the issuance of the 2026 Notes were approximately $494 million, in each case after deducting fees and expenses paid by Zillow Group. We used approximately $75 million of the net proceeds from the issuance of the Initial 2024 Notes and approximately $75 million of the net proceeds from the issuance of the 2026 Notes to pay the cost of the capped call transactions entered into in connection with the issuances, described below.
On October 9, 2019, we issued $73 million aggregate principal amount of 0.75% Convertible Senior Notes due 2024 (the “Additional Notes” and, together with the Initial 2024 Notes, the “2024 Notes”). The Additional Notes were sold pursuant to the initial purchasers’ partial exercise of their option to purchase such notes, granted in connection with the offering of the Initial 2024 Notes. The Additional Notes have the same terms, and were issued under the same indenture, as the Initial 2024 Notes. The net proceeds from the offering of the Additional Notes were approximately $72 million, after deducting fees and expenses paid by Zillow Group. We used approximately $9 million of the net proceeds from the issuance of the Additional Notes to pay the cost of the capped call transactions entered into in connection with the issuance of the Additional Notes, described below.
Convertible Senior Notes due in 2023
On July 3, 2018, we issued $374 million aggregate principal amount of Convertible Senior Notes due 2023 (the “2023 Notes”), which includes $49 million principal amount of 2023 Notes sold pursuant to the underwriters’ option to purchase additional 2023 Notes. The net proceeds from the issuance of the 2023 Notes were approximately $364 million, after deducting fees and expenses paid by Zillow Group. We used approximately $29 million of the net proceeds from the issuance of the 2023 Notes to pay the cost of capped call transactions entered into in connection with the issuances, described below.
Convertible Senior Notes due in 2021
On December 12, 2016, we issued $460 million aggregate principal amount of 2.00% Convertible Senior Notes due 2021 (the “2021 Notes”), which includes the exercise of the $60 million over-allotment option, to the initial purchaser of the 2021 Notes in a private offering to qualified institutional buyers. The net proceeds from the issuance of the 2021 Notes were approximately $448 million, after deducting fees and expenses paid by Zillow Group. In addition, we used approximately $37 million of the net proceeds from the issuance of the 2021 Notes to pay the cost of the capped call transactions with the initial purchaser of the 2021 Notes and two additional financial institutions, described below.
The outstanding 2024 Notes, 2025 Notes and 2026 Notes (collectively “the Notes”) are convertible into cash, shares of Class C capital stock or a combination thereof, at our election, and may be settled as described below. They will mature on their respective maturity date, unless earlier repurchased, redeemed or converted in accordance with their terms.
The following table summarizes the conversion and redemption options with respect to the Notes:
Maturity DateEarly Conversion DateConversion RateConversion PriceOptional Redemption Date
September 1, 2026March 1, 202622.9830$43.51 September 5, 2023
May 15, 2025November 15, 202414.881067.20 May 22, 2023
September 1, 2024March 1, 202422.983043.51 September 5, 2022
Prior to the close of business on the business day immediately preceding the applicable Early Conversion Date, the Notes will be convertible at the option of the holders only under certain conditions. On or after the applicable Early Conversion Date, until the close of business on the second scheduled trading day immediately preceding the applicable Maturity Date, holders may convert the Notes at their option at the applicable Conversion Rate then in effect, irrespective of these conditions. The Company will settle conversions of the Notes by paying or delivering, as the case may be, cash, shares of its Class C capital stock, or a combination of cash and shares of its Class C capital stock, at its election. The applicable Conversion Rate for each series of Notes will initially be the conversion rate of shares of Class C capital stock per $1,000 principal amount of the Notes (equivalent to an initial Conversion Price per share of Class C capital stock). The applicable Conversion Rate and the corresponding initial Conversion Price will be subject to adjustment in some events but will not be adjusted for any accrued and unpaid interest. The Company may redeem for cash all or part of the respective series of Notes, at its option, on or after the applicable Optional Redemption Date, under certain circumstances, at a redemption price equal to 100% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date (as defined in the indentures governing the Notes). We may not redeem a series of Notes prior to the applicable Optional Redemption Date. We may redeem for cash all or any portion of a series of Notes, at our option, in whole or in part on or after the applicable Optional Redemption Date if the last reported sale price per share of our Class C capital stock has been at least 130% of the Conversion Price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period. The conversion option does not meet the criteria for separate accounting as a derivative as it is indexed to our own stock.
The last reported sale price of our Class C capital stock did not exceed 130% of the conversion price of each series of the Notes for more than 20 trading days during the 30 consecutive trading days ended December 31, 2022. Accordingly, each series of the Notes is not redeemable or convertible at the option of the holders from January 1, 2023 through March 31, 2023.
If the Company undergoes a fundamental change (as defined in the indentures governing the Notes), holders may require the Company to repurchase for cash all or part of a series of Notes, as applicable, at a repurchase price equal to 100% of the principal amount of the notes to be purchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date (as defined in the indentures governing the Notes). In addition, if certain fundamental changes occur, the Company may be required, in certain circumstances, to increase the conversion rate for any of the Notes converted in connection with such fundamental changes by a specified number of shares of its Class C capital stock. Certain events are also considered “Events of Default,” which may result in the acceleration of the maturity of the Notes, as described in the indentures governing the Notes. There are no financial covenants associated with the Notes.
In accounting for the issuance of the convertible senior notes, prior to the adoption of new accounting guidance on January 1, 2022, the Company separated the convertible senior notes into liability and equity components. The carrying amount of the liability component for each of the Notes was calculated by measuring the fair value of a similar liability that does not have an associated convertible feature. The carrying amount of the equity component, representing the conversion option, was determined by deducting the fair value of the liability component from the par value of the convertible senior notes. The difference between the principal amounts and the liability components represented the respective debt discounts, which were recorded as a direct deduction from the related debt liability in the consolidated balance sheets and amortized to interest expense using the effective interest method over the term of the convertible senior notes. The equity components of the convertible senior notes, net of issuance costs, were included in additional paid-in capital in the consolidated balance sheets and were not remeasured as long as they continued to meet the conditions for equity classification. Upon adoption of the new accounting guidance, we de-recognized the equity components of the convertible senior notes and the respective debt discounts through a decrease to additional paid-in capital, an increase to long-term debt and a cumulative-effect adjustment to accumulated deficit of $156 million. For additional information regarding the adoption of this guidance, see Note 2 of our consolidated financial statements.
There were no conversions or repurchases of convertible senior notes during the year ended December 31, 2022. The following table summarizes the activity for our convertible senior notes for the periods presented (in millions, except for share amounts):
Year Ended December 31, 2021Year Ended December 31, 2020
2023 Notes2024 Notes2026 NotesTotal2021 Notes
Aggregate principal amount settled$374 $65 $1 $440 $460 
Cash paid1 — — 1 195 
Shares of Class C capital stock issued4,752 1,485 28 6,265 5,820 
Total fair value of consideration transferred (1)$572 $200 $4 $776 $783 
(Gain) loss on extinguishment of debt:
Consideration allocated to the liability component (2)$349 $53 $1 $403 $430 
Carrying value of the liability component, net of unamortized debt discount and debt issuance costs334 51 1 386 431 
(Gain) loss on extinguishment of debt$15 $2 $— $17 $(1)
Consideration allocated to the equity component$223 $147 $3 $373 $353 
(1) For convertible senior notes converted by note holders, the total fair value of consideration transferred includes the value of shares transferred to note holders using the daily volume weighted-average price of our Class C capital stock on the conversion date and an immaterial amount of cash paid in lieu of fractional shares. For convertible senior notes redeemed, the total fair value of consideration transferred comprises cash transferred to note holders to settle the related notes. For convertible senior notes repurchased in the year ended December 31, 2020, the total value of consideration transferred includes the value of shares transferred to note holders using the daily volume weighted-average price of our Class C capital stock on the date of transfer as well as cash transferred to note holders to settle the related notes.
(2) Consideration allocated to the liability component is based on the fair value of the liability component immediately prior to settlement, which was calculated using a discounted cash flow analysis with a market interest rate of a similar liability that does not have an associated convertible feature.
The following table summarizes certain details related to the capped call confirmations with respect to certain of the convertible senior notes:
Maturity DateInitial Cap PriceCap Price Premium
September 1, 2026$80.5750 150 %
September 1, 202472.5175 125 %
July 1, 2023105.45 85 %
The capped call confirmations are expected generally to reduce the potential dilution of our Class C capital stock in connection with any conversion of the Notes and/or offset the cash payments the Company is required to make in excess of the principal amount of such notes in the event that the market price of the Class C capital stock is greater than the strike price of the capped call confirmations (which initially corresponds to the initial Conversion Price of such notes and is subject to certain adjustments under the terms of the capped call confirmations), with such reduction and/or offset subject to a cap based on the cap price of the capped call confirmations. The capped call confirmations with respect to the 2026 Notes, the 2024 Notes and the 2023 Notes have an Initial Cap Price per share, which represents a premium (“Cap Price Premium”) over the relevant historical closing price of the Company’s Class C capital stock on the Nasdaq Global Select Market, and is subject to certain adjustments under the terms of the capped call confirmations. The capped call confirmations will cover, subject to anti-dilution adjustments substantially similar to those applicable to the convertible senior notes, the number of shares of Class C capital stock that will underlie such notes. The capped call confirmations do not meet the criteria for separate accounting as a derivative as they are indexed to our own stock. The capped call premiums paid have been included as a net reduction to additional paid-in capital within shareholders’ equity.
In connection with the repurchase of a portion of the 2021 Notes during the year ended December 31, 2020, we partially terminated the capped call transactions entered into in connection with the issuance of the 2021 Notes for an amount corresponding to the aggregate principal amount of the 2021 Notes that were repurchased. As a result of the partial settlement of the capped call transactions, we received 0.3 million shares of our Class C capital stock equal to a value of approximately $15 million based on the trading price of our Class C capital stock at the time of the unwind. On December 1, 2021, the remaining capped call transactions entered into in connection with the issuance of the 2021 Notes were settled on their contractual maturity date. As a result, we received 0.7 million shares of our Class C capital stock equal to a value of approximately $43 million based on the trading price of our Class C capital stock at the time of the unwind. Under applicable Washington State law, the acquisition of a corporation’s own shares is not disclosed separately as treasury stock in the financial statements and such shares are treated as authorized but unissued shares. We record acquisitions of our shares of capital stock as a reduction to capital stock at the par value of the shares reacquired, then to additional paid-in capital until it is depleted to a nominal amount, with any further excess recorded to retained earnings. We recorded an offsetting increase to additional paid-in capital for the partial unwind of the capped call transactions.
Convertible Senior Notes Repurchase Authorization
On December 2, 2021, Zillow Group’s Board of Directors (the “Board”) authorized the repurchase of up to $750 million of our Class A common stock, Class C capital stock or a combination thereof. On May 4, 2022, the Board authorized the repurchase of up to an additional $1.0 billion (together the “Repurchase Authorizations”) of our Class A common stock, Class C capital stock or a combination thereof. On November 1, 2022, the Board further expanded the Repurchase Authorizations to allow for the repurchase of a portion of our outstanding Notes. Repurchases of outstanding Notes may be made in open-market transactions or privately negotiated transactions, or in such other manner as deemed appropriate by management, and may be made from time to time as determined by management depending on market conditions, market price of the Notes, trading volume, cash needs and other business factors, in each case as permitted by securities laws and other legal requirements. There were no repurchases of convertible senior notes during the year ended December 31, 2022. As of December 31, 2022, $500 million remained available for future repurchases pursuant to the Repurchase Authorizations. For additional details related to the Repurchase Authorizations, see Note 15 under the subsection titled “Stock Repurchase Authorizations”.