Q3 2023 Zillow Group Inc Earnings Call

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Good afternoon, My name is Lauren and I'll be your conference call prices today.

Tom I would like to welcome everyone Who's been a great third quarter 2023 conference call.

Lines have been placed on mute to prevent any background noise.

After the Speakers' remarks, there'll be a question and answer session.

If you would like to ask a question. During this time simply press star lead by the number one.

You bet.

If you would like to withdraw your question. Please press star two.

Please note this event is being recorded.

I would like to turn the call brought budding Vice President strategic and Investor Relations. Please go ahead.

Thank you Lauren good afternoon, and welcome to Zillow group's third quarter 2023 conference call. Joining me today to discuss our results are Zillow group's co founder and CEO Rich Barton CFO, Jeremy Hoffman and CFO Jeremy Wacksman.

During today's call, we will make forward looking statements about our future performance and operating plans and the housing market based on current expectations and assumptions.

These statements are subject to risks and uncertainties and we encourage you to consider the risk factors described in our SEC filings for additional information.

We undertake no obligation to update these statements as a result of new information or future events, except as required by law.

This call is being broadcast on the Internet and is accessible on our Investor Relations website <unk>.

We're recording the call will be available later today.

During the call, we will discuss GAAP and non-GAAP measures, including adjusted EBITDA, which we referred to as EBITDA. We encourage you to read our shareholder letter and our earnings release, which can be found on our Investor Relations website as they contain important information about our GAAP and non-GAAP results, including reconciliations of historical non-GAAP.

<unk> measures.

We will now open the call with remarks, followed by live Q&A with that I'll turn the call over to rich.

Thank you Brad and thanks Lauren.

Good afternoon, everyone. We appreciate you dialing in today to hear our third quarter 2023 results.

I'm looking forward to sharing the progress we've made on our growth strategy as we yet again meaningfully outperformed the industry by making steady execution progress converting traffic into transactions.

Operator: Good afternoon.

Lauren: My name is Lauren, and I'll be your conference operator today.

Lauren: At this time, I would like to welcome everyone to the Zillow Group 3rd quarter of 2023 conference call. All lines have been placed on mute to prevent any background noise.

Before I get to our results and an update on our five growth pillars. It's important that I address the high level of media attention and speculation surrounding several ongoing industry lawsuits and what the implications may be for the broader residential real estate industry in Brazil in particular.

Lauren: After the speakers remark, there'll be a question and answer session. If you would like to ask a question during this time, simply press star, made by the number one in your telephone keyboard. If you would like to withdraw your question, please press star two. Please note, this event is being recorded.

The short version is we strongly believe zillow is well positioned to thrive regardless of how it all plays out.

Brad Berning: I would like to turn the conference leaves to Brad Berning, Vice President, Strategic Affairs, and Invest the Relations. Please go ahead. Thank you, Lauren.

I will explain our logic, but first let me be clear on the marketplace principles that underlie zelos stance.

Brad Berning: Good afternoon and welcome to Zillow Group's 3rd quarter 2023 conference call. Joining me today to discuss our results are Zillow Group's co-founder and CEO, Rich Barton, CFO, Jeremy Hofmann, and CEO, Jeremy Wacksman. During today's call, we'll make forward-looking statements about our future performance. These statements are subject to risks and uncertainties, and we encourage you to consider the risk factors described in our SEC filings for additional information. We undertake no obligation to update these statements as a result of new information or future events, except as required by law.

With respect to free fair and transparent access to real estate information we are strong supporters.

With respect to the importance of independent representation.

Our strong supporters.

And finally with respect to transparent and negotiable agent commissions.

We are strong supporters.

From where we stand it seems clear that these principles are in the best interest of mover consumers agents and the industry as a whole.

Consumers and agents should have access to all listings and consumers should be empowered with information about listings and how agent commissions get paid.

Brad Berning: This call is being broadcast on the Internet and is accessible on our investor relations website. The recording of the call will be available later on. During the call, we will discuss gap and non-gap measures, including adjusted EBITDA, which we refer to as EBITDA. We encourage you to read our shareholder letter and our earnings release, which can be found on our investor relations website, as they contain information about our gap and non-gap results, including reconciliation of historical non-gap financial measures.

We believe this is the best way forward.

Now regarding litigation news, we expect the sits or Burnett lawsuit that made headlines yesterday.

The jury ruled in favor of plaintiffs and awarded approximately $1 $8 billion in damages will likely be tied up.

In court for years.

Brad Berning: We will now open the call with remarks followed by live Q&A.

Defendants in that case, such as the National Association of Realtors and certain real estate franchise doors have already indicated that they intend to proceed pursuing.

Rich Barton: With that, I will turn the call over to Rich. Thank you, Brad, and thanks, Lauren. Good afternoon, everyone. We appreciate you dialing in today to hear our third quarter 2023 results. I'm looking forward to sharing the progress we've made on our growth strategy as we yet again, meaningfully, up-performed the industry by making steady, executional progress, converting traffic into transactions.

Pursuing appeals process unless there is some negotiated settlement.

As a reminder to you all Zillow is not a party to this lawsuit nor other similar ones.

Aside from how long. This particular case may take to fully play out we expect industry changes, resulting from this lawsuit or ones like it will involve commission transparency and negotiable any provisions similar to those seen in several of the settlements plate plaintiffs entered into with other real estate franchise.

Rich Barton: Before I get to our results and an update on our five growth pillars, it's important that I address the high level of media attention and speculation surrounding several ongoing industry lawsuits and what the implications may be for the broader residential real estate industry and for Zillow in particular. The short version is we strongly believe Zillow is well positioned to thrive regardless of how it all plays out. I'll explain our logic, but first let me be clear on the marketplace principles that underlie Zillow's stance.

<unk> in advance of the trial.

These industry changes would tend to look like good initial steps at more transparency in education for consumers.

And forward leaning markets that have been exploring changes that results in increased transparency and negotiable 80, we believe our business thrives.

We also believe complete disruption to the existence of buyer's agent is improbable.

Rich Barton: With respect to free, fair, and transparent access to real estate information, we are strong supporters. With respect to the importance of independent representation, we are strong supporters. And finally, with respect to transparent and negotiable agent commissions. We are strong supporters. From where we stand, it seems clear that these principles are in the best interest of mover consumers, agents and the industry as a whole. Consumers and agents should have access to all listings and consumers should be empowered with information about listings and how agent commissions get paid.

<unk> reasons.

Why.

Because buyers agents represent the buyers interest throughout this complex and often intimidating process purchasing a home the biggest purchase most people, making their lifetime for which most people take on huge dead and which has ended up being for most homeowners their largest financial asset.

Similar to other infrequent high complexity high Stakes transactions independent representation in real estate is important.

As an analogy.

Investment bankers don't represent both the buyer and the seller in an M&A deal because it makes no logical sense that one adviser could effectively represent the best interest of both parties.

Rich Barton: We believe this is the best way forward. Now regarding litigation news, we expect the Sitzer Burnett lawsuit that made headlines yesterday in which a jury ruled in favor of plaintiffs and awarded approximately $1.8 billion in damages will likely be tied up in court for years. Defendants in that case, such as the National Association of Realtors and certain real estate franchiseors have already indicated that they intend to pursue an appeals process unless there is some negotiated settlement.

In fact dual agency, where the same individual listing agent represents both parties or double siding is harmful enough in the real estate transaction that it's already been banned or substantially restricted in eight states in the U S.

Buyers deserve and most need their own independent counsel and for most buyers. This means a dedicated agent.

There is always a DIY or do it yourself segment of any industry and we fully support DIY. It inside of Zillow today, while knowing via research on experienced that for most movers. The stakes are too high for DIY.

Rich Barton: As a reminder to you all, Zillow is not a party to this lawsuit nor other similar ones. Aside from how long this particular case may take to fully play out, we expect industry changes resulting from this lawsuit or ones like it will involve commission transparency and negotiability provisions similar to those seen in several of the settlement plaintiffs entered into with other real estate franchiseors in advance. This is a chance of the trial.

So I'll remind you that <unk> was founded on the first principle of free and fair access to real estate information and listings, we have not wavered.

We continue to adhere to this principle and assert our position by advocating and lobbying in favor of more transparency and real estate.

The benefits of durability, the benefits and durability of independent by a representation.

Rich Barton: These industry changes would tend to look like good initial steps at more transparency and education for consumers. In forward leaning markets that have been exploring changes that results in increased transparency and negotiability, we believe our business thrives. We also believe complete disruption to the existence of buyer's agents is improbable for a few reasons. Why? Because buyer's agents represent the buyer's interest throughout this complex and often intimidating process of purchasing a home, the biggest purchase most people make in their lifetime for which most people take on huge debt and which is ended up being for most homeowners their largest financial asset.

And the importance of transparent and negotiable commissions, we believe change in the industry is has been and will be slow, but we will.

Tenuously bend towards these principles.

However, indulging for a moment a future scenario, where buyers agency does go away, we have high confidence that <unk> will remain in a strong position potentially even stronger why.

Because then the U S market would likely transition to a market structure that we observe in several international geographies, where a very large portal or to offer a pay to play paid inclusion digital listings marketplace.

Sort of a digital classified advertising analogy.

In this scenario zyla would be an odds on favorite to become the leading digital listings marketplace, given our brand traffic engagement and our unique focus on solving movers real pain points with our software anchored housing Super App vision.

Rich Barton: Similar to other infrequent high complexity high stakes transactions, independent representation in real estate is important. As an analogy, investment bankers don't represent both the buyer and the seller in an M&A deal because it makes no logical sense that one advisor could effectively represent the best interest of both parties. In fact, dual agency where the same individual listing agent represents both parties or double fighting is harmful enough in the real estate transaction that it's already been banned or substantially restricted in eight states in the US.

International Classifieds markets are any guide. It is also possible that this leads to a larger and more profitable business model for Zillow.

Are we advocating for this to happen.

No because we believe pay to play marketplace is a step backwards for consumers and the industry as a whole.

And we very much like our position and growth plan and a market structure that continually evolves towards our principles of access independents and transparency.

Rich Barton: Buyers deserve and most need their own independent council and for most buyers, this means a dedicated agent. There is always a DIY or do it yourself segment of any industry and we fully support DIY inside of Zilla today while knowing buyer research and experience that for most movers, the stakes are too high for DIY.

Let me wrap this section up by reiterating that we have always focused first on delighting the masses with software products that attract users with modest marketing spend.

Those who know us well know that over the years, we have exhibited an unusually high degree of business model creativity and innovation as we have figured out how to monetize our incredible user engagement in ways that are a win win win win.

Rich Barton: So I'll remind you that Zillow was founded on the first principle of free and fair access to real estate information and listings. We have not wavered. We continue to adhere to this principle and assert our position by advocating and lobbying favor of more transparency and real estate. The benefits of durability, the benefits and durability of independent buyer representation and the importance of transparent and negotiable commissions. We believe change in the industry has has been and will be slow but will continually bend towards these principles.

A win for consumers a win for our partners and a win for Zillow.

This experimentation and innovation has resulted in a revenue roll up today that features a wide variety of lines of business and monetization models to the point, where revenue derived from buyer agent activity represented less than 50% of our total revenue in Q3.

Today, we are focused on delivering the housing Super App.

<unk> enabled end to end platform with products and services that make it easier for people to move.

Rich Barton: However, indulging for a moment of future scenario where buyers agency does go away, we have high confidence that Zillow will remain in a strong position, potentially even stronger. Why? Because then the US market would likely transition to a market structure that we observe in several international geographies where a very large portal or two offer a pay to play paid inclusion digital listings marketplace. Sort of a digital classified advertising analogy. In this scenario, Zillow would be an odds on favorite to become the leading digital listings marketplace given our brand traffic engagement and our unique focus on solving movers real pain points with our software anchored housing super app vision.

Zillow the trusted brand in marketplace will be here to help buyers sellers renters and the industry transaction real estate, regardless of how the dollars flow.

Rich Barton: If international classified markets are any guide, it is also possible that this leads to a larger and more profitable business model for Zillow. Are we advocating for this to happen? No, because we believe paid a play marketplace is a step backwards for consumers and the industry as a whole.

Now that we've covered what's happening in the industry I'm excited to share our results with you.

You've heard me say many times that 2023 is crucial for Zillow, it's a year of execution as we prepare to scale in 2024 and 2025.

We're very pleased with what we've accomplished to date.

We again delivered strong relative outperformance compared to total industry transaction dollar volumes.

We reported better than expected and continued positive revenue growth of $496 million in Q3 up 3% year over year.

Residential revenue of $362 million declined by only 3% year over year, while the broader market declined by 14%, meaning zillow outperformed the industry by 100 basis points.

This quarter marks the fourth straight quarter of meaningful outperformance versus the industry.

Rich Barton: And we very much like our position and growth plan in a market structure that continually evolves towards our principles of access independence and transparency.

Our ongoing efforts to improve our customer funnel.

Capture more demand and connect more of that demand to our partner network continue to pay dividends for our performance.

Rich Barton: Let me wrap this section up by reiterating that we have always focused first on delighting the masses with software products that attract users with modest marketing spend. Those who know as well know that over the years we have exhibited an unusually high degree of business model creativity and innovation as we have figured out how to monetize our incredible user engagement in ways that are a win win win. A win for consumers, a win for our partners and a win for Zillow.

A contributor to our outperformance was a great quarter in our rentals marketplace drill.

Driven by increased traffic and listing growth in both multi and single family, we reported $99 million in revenue in rentals this quarter up 34% year over year.

We remain the number one most visited rentals platform. According to Comscore with average monthly rental unique visitors up double digits year over year in Q3.

We believe this positions us well for future revenue growth.

Rich Barton: This experimentation and innovation has resulted in a revenue roll up today that features a wide variety of lines of business and monetization models to the point where revenue derived from buyer agent activity represented less than 50% of our total revenue in Q3. Today we are focused on delivering the housing super app a tech enabled end to end platform with products and services that make it easier for people to move. Zillow the trusted brand and marketplace will be here to help buyer sellers renters and the industry transact and real estate regardless of how the dollars flow.

We're also making excellent progress in mortgages growing our purchase mortgage originations business by 88% year over year, even as mortgage rates hit 20 year highs.

Our core business continues to demonstrate healthy top of funnel demand driven by our powerful brand.

With 224 million average monthly unique users in the third quarter. Our overall, leading traffic is double that of our next competitor.

In a nod to our broad awareness and trust more than 80% of our users come to us organically directly and for free.

Rich Barton: Now that we've covered what's happening in the industry, I'm excited to share our results with you. You've heard me say many times that 2023 is crucial for Zillow. It's a year of execution as we prepare to scale in 2024 and 2025.

In less than 5% of our users come from paid SCM and digital acquisition.

Our great product respected brand and large audience or a meaningful strategic advantage Brazil.

This is the foundation upon which we invest in and build out our growth pillars, all of which are focused on increasing conversion by simplifying digitizing and integrating the complex scary and expensive real estate transaction.

Rich Barton: We're very pleased with what we've accomplished today. We again delivered strong relative outperformance compared to total industry transaction dollar volumes. We reported better than expected and continued positive revenue growth of $496 million in Q3, up 3% year-of-a-year. Residential revenue of $362 million declined by only 3% year-of-a-year while the broader market declined by 14%, meaning Zillow out-performed the industry by 1,100 basis points. This quarter now marks the fourth straight quarter of meaningful up-performance versus the industry.

Real customer problems that we're solving with great software and great partners.

Before we get to our roadmap update I'm excited to speak about are just signed agreement to acquire follow up bus and industry, leading CRM customer relationship management system that gives top performing real estate professionals, a central hub to organize and engage customers closed deals and build their teams.

We are investing in great Tech solutions that make it easier for people to move and follow up bus does just that.

Rich Barton: Our ongoing efforts to improve our customer funnel, capture more demand, and connect more of that demand to our partner network, continue to play pay dividends for our performance. A contributor to our outperformance was a great quarter in our rentals marketplace, driven by increased traffic and increased growth in both multi and single family. We reported $99 million in revenue in rentals this quarter, up 34% year-of-a-year. We remain the number one most visited rentals platform according to Comscore, with average monthly rental unique visitors of double digits year-of-a-year in Q3.

They have bootstrap an industry, leading CRM platform from the ground up it's a great product one that is beloved by agents and teams across the industry and currently used by many zillow Premier agent partners and showing time plus clients.

We're excited to be able to use those resources to help follow up baas grow even faster and to invest in a more integrated software experience for agents and teams across the industry, enabling them to boost productivity and grow their own businesses.

Jeremy will speak in more detail about this proposed acquisition shortly.

Rich Barton: We believe this positions us well for future revenue growth. We're also making excellent progress in mortgages, growing our purchase mortgage originations business by 88% year-over-year, even as mortgage rates hit 20-year highs. Our core business continues to demonstrate healthy top of funnel demand driven by our powerful brand. With 224 million average monthly unique users in the third quarter, our overall leading traffic is double that of our next competitor. In a nod to our broad awareness and trust, more than 80% of our users come to us organically, directly and for free, and less than 5% of our users come from paid SEM and digital acquisition.

Zillow is housing Super App vision is to create a single digital experience to our customers across their real estate needs, including buying selling financing and renting serving as one ecosystem of connected solutions for all the tasks and services related to moving we're bringing this vision to life through investments across five growth pillars.

Turing financing seller solutions, integrating our services and enhancing our partner network.

These five growth pillars, mark the pathway to meeting our goals for increased transaction share and revenue per customer transaction.

This past year, we've been focused on launching learning and refining products and services within our growth pillars, as we scale and grow over the coming years.

We are making progress as demonstrated by our accelerated product rollouts. This quarter. Our efforts are improving our mid funnel conversion and with that our connection volumes across the business as we focus on driving real value through customer transactions.

Rich Barton: Our great product, respected brand, and large audience are a meaningful strategic advantage for Zilla. This is the foundation upon which we invest in and build out our growth pillars, all of which are focused on increasing conversion by simplifying, digitizing, and integrating the complex, scary, and expensive real estate transaction. Real customer problems that we are solving with great software and great partners.

We've been encouraged by what we're learning in the geographies, where we have rolled out our most full featured an integrated housing Super App experience our enhanced markets.

Since we last spoke we launched five more enhanced market is bringing us to a total of nine.

Rich Barton: Before we get to our roadmap update, I'm excited to speak about our just signed agreement to acquire follow-up boss and industry leading CRM customer relationship management system that gives top performing real estate professionals a central hub to organize and engage customers. Closed deals and build their teams. We are investing in great tech solutions that make it easier for people to move and follow up boss does just that. They have bootstrapped an industry leading CRM platform from the ground up.

As each month passes we are increasingly confident in the results. We are seeing in our enhanced markets and are encouraged by continued strong connections growth in customer transaction share gains.

We anticipate launching additional enhanced markets at an accelerated pace in the months ahead and throughout 2024.

Additionally, the investments, we're making to improve touring a key growth pillar, we will continue to fuel momentum.

Our home tours the moment that have dreamed about home is viewed on our Zillow app becomes a reality for the first time.

Rich Barton: It's a great product, one that is beloved by agents and teams across the industry and currently used by many Zilla premier agent partners and showing time plus clients. We're excited to be able to use Zilla's resources to help follow up boss grow even faster and to invest in a more integrated software experience for agents and teams across the industry, enabling them to boost productivity and grow their own businesses. Jeremy will speak in more detail about this proposed acquisition shortly.

Raising one's digital hand to take a physical tour is a strong indicator of seriousness and those shoppers who requested tour convert to buyers at three times the rate of other actions on Zillow.

Getting ready to buy starts with getting in the door physically.

Powered by showing time, a real time touring product Thats, a home shopper schedule and confirm our home tour in real time as opposed to simply requesting it.

Along with other improvements we've made throughout the conversion funnel real time touring is meaningfully improving our ability to connect higher intent customers to our premier agent partners.

Rich Barton: Zillow is housing super app vision is to create a single digital experience to help customers across their real estate needs, including buying, selling, financing, and renting, serving as one ecosystem of connected solutions for all the tasks and services related to moving. We're bringing this vision to life through investments across five growth pillars, touring, financing, seller solutions, integrating our services and enhancing our partner network. These five growth pillars mark the pathway to meeting our goals for increased transaction share and revenue per customer transaction.

Wherever real time touring is enabled we continue to see significant outperformance of our overall connections growth versus the industry.

As a result, we've accelerated the rollout of real time touring independent of our enhanced markets. We are currently live in 57 markets and expect to be in an additional 33 covering approximately 10% of our total connections by the end of 2023.

Exciting progress.

Rich Barton: This past year we've been focused on launching, learning, and refining products and services within our growth pillars as we scale and grow over the coming years. We are making progress as demonstrated by our accelerated product rollouts this quarter. Our efforts are improving our midfinal conversion and with that our connection volumes across the business as we focus on driving real value through customer transactions. We've been encouraged by what we're learning in the geographies where we have rolled out our most full featured and integrated housing super app experience, our enhanced markets.

Another pain point in the customers moving journey securing financing.

The second of our growth pillars.

As I've said before nearly 80% of homes purchased or finance for the mortgage.

Approximately 40% of all homebuyers start their journey shopping for a mortgage before deciding on an agent to work with.

Knowing that almost all of these mortgage seekers use zillow sets us up very nicely to build a substantial first party direct to consumer purchase mortgage origination business seamlessly integrated with our extensive premier agent partner network.

Rich Barton: Since we last spoke, we launched five more enhanced markets bringing us to a total of nine. As each month passes, we are increasingly confident in the results we are seeing in our enhanced markets and our encouraged by continued strong connections growth and customer transaction share gains. We anticipate launching additional enhanced markets at an accelerated pace in the months ahead and throughout 2024. Additionally, the investments we're making to improve touring, a key growth pillar, will continue to fuel momentum.

We have begun to show real traction over the last few quarters.

That growth continued in Q3 and despite the historically horrendous mortgage origination market Zillow home loans reported an 88% year over year increase in purchase loan origination volume.

Traditionally so look customers went to our mortgage marketplace to shop for rates increasingly those customers are being offered zillow home loans directly.

Those customers along with our work to integrate premier agents with Zillow home loans and our enhanced markets are driving the growth of Zillow home loans purchase mortgages.

Rich Barton: A home tour is the moment that it dreamed about home as viewed on our Zilla app becomes a reality for the first time. Raising one's digital hand to take a physical tour is a strong indicator of seriousness and those shoppers who request a tour convert to buyers at three times the rate of other actions on Zilla. Getting ready to buy starts with getting in the door physically. Powered by showing time, a real time touring product lets a home shopper schedule and confirm a home tour in real time as opposed to simply requesting it.

We are not yet at scale, but we are making excellent progress with $452 million in purchase loan originations during Q3, even as mortgage rates at 20 year highs.

I'll now move onto the final growth pillar in our roadmap update seller solutions.

As you know we are investing here to provide sellers and listing agents with tech enabled products and services that makes selling homes easier a big Tam that we have targeted and been innovating against for quite some time.

Rich Barton: Along with other improvements we've made throughout the conversion funnel, real time touring is meaningfully improving our ability to connect higher intent customers to our premier agent partners. Wherever real time touring is enabled, we continue to see significant outperformance of our overall connections growth versus the industry. As a result, we've accelerated the rollout of real time touring independent of our enhanced markets. We are currently live in 57 markets and expect to be in an additional 33 covering approximately 10% of our total connections by the end of 2023. Exciting progress.

Last quarter, we launched listing showcase under are showing time, plus broad real estate industry software brand.

Listing showcase listings feature rich media like scrolling hero images room by room for photo organization and interactive floor plans, giving buyers a deep understanding of the home before they ever step aside.

We're providing agents industrywide the tools to highlight our homes best features while also providing them an opportunity to elevate their brand presence on zillow, which should lead to future business.

Rich Barton: Another pain point in the customers moving journey is securing financing. The second of our growth pillars. As I've said before, nearly 80% of homes purchased are financed with a mortgage. Approximately 40% of all home buyers start their journey shopping for a mortgage before deciding on an agent to work with. Knowing that almost all of these mortgage seekers use Zillow sets us up very nicely to build a substantial first party direct to consumer purchase mortgage origination business seamlessly integrated with our extensive premier agent partner now.

The response has been quite positive so far as of today, we are in 17 markets with plans to expand throughout Q4 and beyond.

Additionally, with respect to opening up sell side Tam with seller solutions, we've expanded our partnership with <unk> buying leader open door to 45 markets as of last week.

In these markets home sellers, who start their journey on Zillow can simultaneously request a cash offer from open door as well as an estimate of what their home could sell for on the open market with a local zillow premier agent partner.

Rich Barton: Mark. We had begun to show real traction over the last few quarters. That growth continued in Q3, and despite a historically horrendous mortgage origination market, Zillow Home loans reported an 88% year-over-year increase in purchased loan origination volume. Traditionally, Zillow customers went to our mortgage marketplace to shop for rates. Increasingly, those customers are being offered Zillow Home loans directly. Those customers, along with our work to integrate premier agents with Zillow Home loans in our enhanced markets, are driving the growth of Zillow Home loans purchased mortgages. We are not yet at scale, but we are making excellent progress with $452 million in purchased loan originations during Q3, even as mortgage rates hit 20-year highs.

The myriad of progress we're reporting against our growth pillars investments and the announcement of an agreement to acquire industry, leading CRM software provider follow up boss.

Ain't a picture of a company that has a clear and exciting vision for a digital seamless integrated and efficient transaction in the messy scary land of a regular person who wants or needs to move.

Before I pass things over to CFO, Jeremy Hoffman I want to commend the extended Zillow team for working hard and successfully on solving real world concrete consumer problems by a great software and great partners.

This work requires a high degree of smarts skill and coordination as we rollout our services together and separately to an increasingly broad set of geographies.

Rich Barton: I'll now move on to the final growth pillar and our roadmap update, Cellar Solutions. As you know, we are investing here to provide sellers and listing agents with tech-enabled products and services that make selling homes easier, a big tam that we have targeted and been innovating against for quite some time. Last quarter, we launched listing showcase under our Showing Time Plus broad real estate industry software brand. Listing showcase listings feature rich media like scrolling hero images, room-by-room photo organization, and interactive floor plans giving buyers a deep understanding of the home before they ever step inside.

While industry noise is loud and the macro drag heavy our team is executing very well and it is showing up in our continued relative outperformance and the excitement we all feel about the growth opportunity ahead.

With that I will turn it over to Jeremy.

Thanks, Rick and Hello, everyone I am pleased to discuss details about our Q3 results as well as our outlook for continued total revenue growth and a very tough macro environment.

And my comments today I will also discuss our agreement to acquire follow up off as well as how we are currently thinking about share based compensation or SBC within the framework of our overall cost structure.

Rich Barton: We're providing agents, industry-wide, the tools to highlight a home's best features while also providing them an opportunity to elevate their brand presence on Zillow, which should lead to future business. The response has been quite positive so far. As of today, we are in 17 markets with plans to expand throughout Q4 and beyond. Additionally, with respect to opening up Cell Tam with Cellar Solutions, we've expanded our partnership with iBying Leader Open Door to 45 markets as of last week.

In Q3, we delivered continued positive year over year revenue growth up 3% to $496 million and $24 million above the midpoint of our outlook range.

On a GAAP basis net loss was $28 million.

Representing 6% of our revenue.

Q3, EBITDA of $107 million resulted in a 22% EBITDA margin.

Rich Barton: In these markets, home sellers who start their journey on Zillow can simultaneously request a cash offer from Open Door as well as an estimate of what their home could sell for on the open market with a local Zillow premier agent partner.

Our revenue outperformance combined with effective cost management drove $30 million of EBITDA outperformance above the midpoint of our outlook range demonstrating the high incremental margin business, we have today.

Rich Barton: The myriad of progress we are reporting against our growth pillar's investments and the announcement of an agreement to acquire industry-leading CRM software provider follow-up boss paint a picture of a company that has a clear and exciting vision for a digital seamless integrated and efficient transaction in the messy, scary land of a regular person who wants or needs to move. Before I pass things over to CFO Jeremy Hoffman, I want to commend the extended Zillow team for working hard and successfully on solving real-world concrete consumer problems by a great software and great partners.

Residential revenue was $362 million outperforming the high end of our outlook range down 3% year over year.

Our residential revenue performance was 1100 basis points about the industry decline of 14%. According to data from the National Association of Realtors.

Our internal calculations, which count the number of residential home sales in every market across the country suggest that the industry was down slightly more in Q3 than even in our numbers indicate.

Rich Barton: This work requires a high degree of smart skill and coordination as we roll out our services together and separately to an increasingly broad set of geographies. While industry noise is loud and the macro drag heavy, our team is executing very well and it is showing up in our continued relative out performance and the excitement we all feel about the growth opportunity ahead.

In Q3, we believe our relative outperformance was primarily driven by things that we are doing to grow and less by relative macro factors.

Our ongoing investment in our top of funnel at mid funnel experiences continue to drive improvements in our overall lead volumes when compared to the industry.

<unk> revenue growth accelerated in Q3 with revenue, increasing 34% year over year to $99 million, primarily driven by our multifamily revenue, which grew 42% year over year in Q3.

Jeremy Hofmann: With that, I will turn it over to Jeremy. Thanks, Rich, and hello, everyone. I am pleased to discuss details about our cues to your results as well as our outlook for continued total revenue growth in a very tough macro environment.

Growth in our rentals marketplace is being driven by four factors.

Jeremy Hofmann: In my comments today, I will also discuss our agreement to acquire follow up loss as well as how we are currently thinking about share based compensation or SBC within the framework of our overall cost structure. In Q3, we delivered continued positive year over year revenue growth of 3% to $496 million and $24 million above the midpoint of our outlook range. On a gap basis, net loss was $28 million representing 6% of our revenue.

First our retro team has executed accelerating the year over year growth in the number of multifamily properties on our apps and sites growing 28% in Q3 up from 21% in Q2 and 14% in Q1.

Second the total active listings across our entire rentals marketplace was up 45% year over year.

Third the increase in active rentals listings is driving our industry, leading rentals traffic, which was up 11% year over year to 30 million average monthly rent those unique visitors per comscore.

Jeremy Hofmann: Q3 EBITDA of $107 million resulted in a 22% EBITDA margin. Our revenue outperformance combined with effective cost management drew $30 million of EBITDA outperformance above the midpoint of our outlook range, demonstrating the high incremental margin business we have today. Residential revenue was $362 million outperforming the high end of our outlook range, down 3% year over year. Our residential revenue performance was 1100 basis points above the industry decline of 14%, according to data from the National Association of Realtors.

Last the occupancy rates have declined from historically high levels driving the need for landlords to advertise their vacant rental properties with us.

Mortgages revenue was $24 million with purchase loan origination volume growing 35% sequentially from Q2 at 88% year over year.

We have made solid progress each quarter this year to help more of our customers get financing through Zillow home loans.

This is being driven by adding new tools and integration capabilities as a branch between premier agents and our loan officers as well as directing more customer request.

Jeremy Hofmann: Our internal calculations, which count the number of residential home sales in every market across the country, suggests that the industry was down slightly more in Q3 than even the NAR numbers indicate. In Q3, we believe our relative outperformance was primarily driven by things that we are doing to grow and less by relative macro factors. Our ongoing investments in our top of funnel and mid funnel experiences continue to drive improvements in our overall lead volumes when compared to the industry. Rentals revenue growth accelerated in Q3, with revenue increasing 34% year over year to $99 million, primarily driven by our multifamily revenue, which grew 42% year over year in Q3.

So home loans, rather than sending them to third parties at our marketplace.

EBITDA expenses in Q3 totaled $389 million.

Slightly better than what was implied by our outlook with select operating expenses slightly lower as a result of selective actions. We took in Q3 as part of ongoing efforts to streamline the business and prioritize investments.

We also shifted $3 million of our advertising expenses from Q3 to Q4.

Cost of revenue increased $21 million or 24% year over year, primarily due to an increase in website development costs as we continue to released and test new products.

Jeremy Hofmann: Growth in our rentals marketplace is being driven by four factors. First, our rental team has executed on accelerating the year over year growth in the number of multifamily properties on our apps and sites, growing 28% in Q3, up from 21% in Q2, and 14% in Q1. Second, the total active listings across our entire rentals marketplace was up 45% year over year. Third, the increase in active rentals listings is driving our industry leading rentals traffic, which was up 11% year over year to 30 million average monthly rentals unique visitors per cons score.

We ended Q3.

With $3 3 billion of cash and investments flat compared to the end of Q2, which includes the benefit of net cash provided by operating activities as well as the impact of $100 million in share repurchases during Q3.

Convertible debt was $1 7 billion at the end of Q3.

Turning to our outlook for Q4, we expect total revenue to be between $430 million and $455 million.

Implying a year over year increase of 2% at the midpoint of our outlook range.

This compares to our estimate for an existing home industry transaction dollar decline between 8% and 13% year over year in Q4.

Jeremy Hofmann: Last, the occupancy rates have declined from historically high levels, driving the need for landlords to advertise their vacant rental properties with us. Mortgage's revenue was $24 million, with purchase loan origination volume growing 35% sequentially from Q2 at 88% year over year. We have made solid progress each quarter this year to help more of our customers get financing through Zillow Home Loans. This is being driven by adding new tools and integration capabilities as a bridge between premier agents and our loan officers, as well as directing more customer requests to Zillow Home Loans, rather than sending them to third parties via our marketplace.

We expect the total industry decline of 10% at the midpoint of the range to nominally improve compared to the Q3 decline of 14%.

Despite these ongoing headwinds we expect to outperform the industry in Q4 as the investments we have made in our funnel continue to deliver benefits.

We expect residential revenue to be between $316 million and $334 million down four 5% year over year at the midpoint of our outlook range.

For Premier agent, we estimate revenue will decline between 4% to 9% year over year.

Despite the tough macro existing home sales environment, our customer connections with premier agents have outperformed the industry consistently throughout 2023, and we expect this outperformance to continue into Q4.

Jeremy Hofmann: And what was implied by our outlook, with select operating expenses slightly lower, as a result of selective actions we took in Q3 as part of ongoing efforts to streamline the business and prioritize investments. We also shifted $3 million of our advertising expenses from Q3 to Q4. Cost of revenue increased $21 million for 24% year over year, primarily due to an increase in website development cost, as we continue to release and test new products.

That said, we remain cautious around housing affordability challenges and the low inventory environment.

We saw in Q3 and expect to continue to see in Q4 headwinds for prospective buyers who are finding it increasingly difficult to purchase a home we have factored this into our outlook accordingly.

Implied in our guidance for non residential revenue, which includes rentals mortgages and other revenue categories is 24% year over year growth at the midpoint of our outlook range and acceleration from 21% growth in Q3.

Jeremy Hofmann: We ended Q3 with $3.3 billion of cash and investments, black compared to the end of Q2, which includes the benefit of net cash provided by operating activities, as well as the impact of $100 million in share repurchases during Q3. Convertible debt was $1.7 million at the end of Q3.

We expect rental revenue to grow more than 30% year over year in Q4, as we continued to benefit from the strength of our execution.

We also expect positive growth in mortgages revenue year over year in Q4, as we lap that refinance activity of a year ago and begin to scale the internalization of our marketplaces.

Jeremy Hofmann: Turning to our outlook for Q4, we expect total revenue to be between $430 million and $455 million in applying a year over year increase of 2% at the midpoint of our outlook range. This compares to our estimate for an existing home industry transaction dollar decline between 8% and 13% year over year in Q4. We expect a total industry decline of 10% at the midpoint of the range to nominally improve compared to the Q3 decline of 14%.

For Q4, we expect EBITDA to be between $40 million and $60 million.

Implying an 11% margin at the midpoint of our outlook range.

We expect EBITDA to be down sequentially from Q3 due to seasonality of revenue.

Excluding the impact of the timing of $3 million of advertising expenses that moved from Q3 to Q4, we expect EBITDA expenses to be relatively flat sequentially.

Jeremy Hofmann: Despite these ongoing headlines, we expect to outperform the industry in Q4, as the investments we have made in our funnel continue to deliver benefits. We expect a residential revenue to be between $316 million and $334 million down 4.5% year over year at the midpoint of our outlook range. For Premiere Agent, we estimate revenue will decline between 4% to 9% year over year. Despite the top macro, existing home sales environment, our customer connections with Premiere Agent have outperformed the industry consistently throughout 2023, and we expect this outperformance to continue into Q4.

We have made reductions in fixed costs during Q3 that will flow into Q4 that we're reinvesting into revenue producing variable head count as we see increased traction across our business we.

We expect to continue to hire loan officers as we accelerate the pace of our enhanced market rollout into 2024.

We also expect to hire salespeople for lifting showcase as we expand the product to more market heading into 2024.

One item that we have not included in our outlook for Q4 as a potential one time charge related to a lease agreement Amendment, we recently signed to reduce our Seattle office space.

We estimate that we will record a onetime charge of $15 million included in EBITDA, if and when the landlord exercises their partial termination option, which we believe likely in either Q4 or Q1 2024.

Jeremy Hofmann: That said, we remain cautious around housing affordability challenges and the low inventory environment. We saw in Q3 and expect to continue to see in Q4 headwinds for prospective buyers who are finding it increasingly difficult to purchase a home. We have factored this into our outlook accordingly. Implied in our guidance for non-residential revenue, which includes rentals, mortgages, and other revenue categories, is 24% year over year growth at the midpoint of our outlook, in Acceleration from 21% growth in Q3.

Excluding the impact of that one time charge if the partial terminal a termination option is exercised in Q4. This year, we estimate that our 2024 facilities costs with decreased by $10 million and we would release, an estimated $39 million and EBITDA expenses in total.

Over the remaining life of the Seattle lease, which more than makes up for the one time hit to our EBITDA.

Jeremy Hofmann: We expect Rentals revenue to grow more than 30% year-over-year in Q4 as we continue to benefit from the strength of our execution. We also expect positive growth and mortgages revenue year-over-year in Q4 as we lack the refinance activity of a year ago and begin to scale the internalization of our marketplace leaf. For Q4, we expect EBITDA to be between $40 million and $60 million, implying an 11% margin at the mid-point-over outlook rate.

Now on to the announcement, we made to acquire followed by an industry, leading customer relationship management system for real estate professionals.

We are excited about follow up box for a number of reasons.

First they have been a key integration partner of ours for a long time and the product is beloved by the broader real estate industry and many of our Zillow Premier agent partners.

Follow up off has grown its revenue more than 40% on average annually over the last four years, primarily by word of mouth marketing with no meaningful outbound sales effort.

Jeremy Hofmann: We expect EBITDA to be down sequentially from Q3 due to seasonality of revenue. Excluding the impact of the timing of $3 million of advertising expenses that move from Q3 to Q4, we expect EBITDA expenses to be relatively flat sequentially. We have made reductions in fixed costs during Q3 that will slow into Q4 that we are reinvesting into revenue producing variable headcount as we see increased traction across our business. We expect to continue to hire loan officers as we accelerate the pace of our enhanced markets roll out into 2024. We also expect to hire salespeople for listing showcase as we expand the product to more markets heading into 2024.

This type of growth is quite a feat in any market environment and even more impressive in a housing market that is down nearly 20% since 2019.

Further the business has been profitable and growing for the last 11 years and is expected to grow more than 20% in 2023.

Similar to our acquisition of showing time in 2021 follow up off gives agents across the industry. A tech enabled solution that allows them to focus on what they do best delivering great experiences to customers.

Also similar to showing time follow up boss will remain an independent brand serving the broader real estate industry at that done so well for so many years.

Jeremy Hofmann: One item that we have not included in our outlook for Q4 is a potential one-time charge related to a lease agreement amendment we recently signed to reduce our Seattle office space. We estimate that we will record a one-time charge of $15 million included in EBITDA if and when the landlord exercises their partial termination option, which we believe likely in either Q4 or Q1 2024. Excluding the impact of that one-time charge, if the partial termination option is exercised in Q4 this year, we estimate that our 2024 facilities cost would decrease by $10 million and we would release an estimated $39 million in EBITDA expenses in total over the remaining life of the Seattle lease, which more than makes up for the one-time hit to our EBITDA.

The purchase price includes $400 million of cash upon closing and up to $100 million in cash earn out over a three year period upon achievement of certain performance metrics.

We estimate that we are paying upfront approximately 18 times follow up office 2020 for cash EBITDA on a standalone basis.

Once the transaction closes the followup off team will join <unk> as our newest industry offering for real estate agents.

Now I'm going to cover our cost structure.

First I want to reiterate what I walked through on our last earnings call.

We evaluate cost into three categories.

Variable and advertising.

For our fixed cost base I would like to reemphasize that we believe we are around the right levels of fixed cost to execute on the opportunities. We see ahead.

Jeremy Hofmann: Now, on to the announcement we made to acquire follow-up loss and industry leading customer relationship management system for real estate professionals. We are excited about follow-up loss for a number of reasons. First, they have been a key integration partner of ours for a long time and the product is beloved by the broader real estate industry and many of our Zillow premier agent partners. Follow-up loss has grown its revenue more than 40% on average annually over the last four years, primarily by word of mouth marketing with no meaningful outbound sales effort.

Similar to what we did in Q3, we are actively seeking to find efficiencies in our fixed costs to offset the inherent inflation in the fixed infrastructure.

While we expect to grow variable costs as we scale our business, we intend to drive operating leverage overtime.

We'll dial our spend up and down for advertising, depending on the environment and opportunities, we see to build awareness and drive growth.

We will assess advertising levels with that lens separate and distinct from the rest of the cost base.

Before we open up the line for Q&A I'd like to give you all some additional detail on how we look at share based compensation and how it fits in our cost structure.

Jeremy Hofmann: This type of growth is quite a feat in any market environment and even more impressive in a housing market that is down nearly 20% since 2019. Further, the business has been profitable and growing for the last 11 years and is expected to grow more than 20% in 2023. Similar to our acquisition of shadowing time in 2021, follow-up loss gives agents across the industry a tech-enabled solution that allows them to focus on what they do best. Delivering great experiences, customers. Also similar to showing time, follow-up boss will remain an independent brand, serving the broader real estate industry as they've done so well for so many years.

Since taking over as CFO in May I spent time with many of you on this topic.

We understand investors concerns about the relatively high level of SBC expense as a percentage of revenue. During this period of time when the macroeconomic environment is pressuring revenue and we are forward investing to drive future growth.

Historically SBC represents a meaningful portion of compensation for many of our employees and we give employees the choice of selecting Rs used or option awards each year. However.

Jeremy Hofmann: The purchase price includes $400 million of cash upon closing and up to $100 million in cash earn out over a three-year period upon achievement of certain performance metrics. We estimate that we are paying upfront approximately 18 times follow-up bosses 2024 cash EBITDA on a standalone basis.

However, we see SBC as an expense that should be leverage level on a per employee basis as we grow revenue.

Going forward. It is important to note that approximately 90% of our current SBC expense is related to fixed cost employees.

If you model, our fixed and variable EBITDA cost that we provided last quarter plus an assumption for marketing, while holding SBC expense flat per head count you will see we can be a GAAP profitable company over time as we drive revenue growth.

Jeremy Hofmann: Once the transaction closes, the follow-up boss team will join Dillow as our newest industry offering for real estate agents.

Jeremy Hofmann: Now I'm going to cover our cost structure. First, I want to reiterate what I walked through on our last earnings call. We evaluate costs in three categories, fixed, variable, and advertising. For our fixed cost base, I would like to reemphasize that we believe we are around the right level to fixed costs to execute on the opportunities we see ahead. Similar to what we did in Q3, we are actively seeking to find efficiencies in our fixed cost to offset the inherent inflation in the fixed infrastructure.

In addition to monitoring our SBC expense, we also focus on our share dilution related to employee equity awards.

Since 2018, we have granted an average annual net share dilution of three 2%, while the realized annual net dilution from employee equity awards has averaged two 5%.

More recently the August 2022 retention grants combined with the annual grant issued in 2022 drove annual granted net dilution up five 2%, while the realized annual net dilution was just 2% that same year.

Jeremy Hofmann: While we expect to grow variable costs as we scale our business, we intend to drive operating leverage over time. We will dial our spend up and down for advertising, depending on the environment and opportunities we see to build awareness and drive growth. We will assess advertising levels with that lens, separate and distinct from the rest of the cost base.

With all that said, we want to reiterate that becoming a GAAP profitable company over time is important to us to get there we expect to get leverage from our SBC expense as we grow revenue.

Jeremy Hofmann: Before we open up the line for Q&A, I'd like to give you all some additional detail on how we look at share-based compensation and how it fits in our cost structure. Since taking over a CFO in May, I've spent time with many of you on this topic. We understand investors' concerns about the relatively high level of SBC expense, as a percentage of revenue during this period of time when the macroeconomic environment is pressure and revenue, and we are forward investing to drive future growth.

To close I'll reiterate what you have heard from us before 'twenty.

2022 was a year, where we re strategize and reorganized around our housing Super App vision.

2023 is a year for us to release, new products and tests in various markets setting us up for further scaling in 2024 and 2025, we are three quarters through the year and are pleased with how we are progressing and with that operator, well open up the line for questions.

Jeremy Hofmann: Historically, SBC represents a meaningful portion of compensation for many of our employees, and we give employees the choice of selecting RFUs or option awards each year. However, we see SBC as an expense that should be leverageable on a per-employee basis as we grow revenue. Going forward, it is important to note that approximately 90% of our current SBC expense is related to fixed cost employees. If you model our fixed and variable EBITDAG cost that we provided last quarter, plus an assumption for marketing, while holding SBC expense flat per head count, you will see we can be a gap profitable company over time as we drive revenue growth.

Thank you.

If you would like to ask a question. Please press star one.

Pat.

Your question, Please press Star <unk> Pizza.

<unk> was to ensure that short sighted some muted like connect has a reminder, star one to ask a question.

Our first question comes from Brad Erickson from RBC. Please go ahead.

Yes, thanks, good afternoon.

For rich first.

Appreciate the thoughts about the lawsuits.

Central changes going on in the industry.

Maybe if we could talk through an outcome, where the buyer's agent remains but commissions get pressured more significantly maybe talk about some of the effects and impacts the business.

Under that scenario and then I have a follow up for Jeremy if I could.

Jeremy Hofmann: In addition to monitoring our SBC expense, we also focus on our share dilution related to employee equity awards. Since 2018, we have granted an average annual net share dilution of 3.2%. While the realized annual net dilution for employee equity awards has averaged 2.5%. More recently, the August 2022 retention grants combined with the annual grant issued in 2022 drove annual granted net dilution of 5.2% while the realized annual net dilution was just 2% that same year.

Okay, Hey, Brad yes, thanks, so kind of the middle path scenario.

Okay.

So why don't I.

Try to do a little bit more free preformed restatement of what I said in my scripted comments first Brad and kind of set the answer up and then I might toss it over to Jeremy Wacksman.

To answer your middle path.

A question, specifically, which we feel good about our position in the middle path scenario.

But overall I just want to reiterate that are kind of the short version of what how we think this plays out and any changes that might come as that we're positioned really really well for all weather.

Okay and that is based on some fundamental marketplace principles that we believe in one free and fair transparent access to real estate information and listings that is how we were founded turn on the lights, we believe a well lit game is cleaner and more equitable.

Jeremy Hofmann: To close, I'll reiterate what you have heard from us before. 2022 was a year where we re-strategized and reorganized around our housing super app vision. 2023 is a year for us to release new products and test in various markets, setting us up for further scaling in 2024 and 2025.

The second principle is independent representation people deserve and need independent representation, we've seen double siding in the industry, which is clearly a con conflict and is at certain times more expensive.

Operator: We are three quarters through the year and are pleased with how we are progressing and with that operator, we'll open up the line for questions. Thank you.

For for the true to the transaction.

We do support DIY that people wanted to DIY, and we have a pretty healthy DIY physical marketplace.

Operator: If you would like to ask a question, then please press Starfleet by 1 on your telephone keypad. To withdraw your question, please press Starfleet by 2. Please also ensure that your phone is unmuted locally. As a reminder, that is Starfleet by 1 to ask a question.

But in most instances movers want and need.

Council and we think that takes the form of a buyer's agent and then finally.

Transparency and negotiable city of commissions, which some markets have been moving towards and we think other markets are going to begin to move more quickly towards because of these legal actions.

Bradley Erickson: Our first question comes from Brad Erickson from RBC. Brad, please go ahead. Yeah, thanks. Good afternoon. So one for Rich first. Appreciate the thoughts about the lawsuits and potential changes going on in the industry. Maybe if we could talk through an outcome where the buyer's agent remains, but commissions get pressured more significantly. Maybe talk about some of the effects and impacts the business might see under that scenario. And then I will follow up for Jeremy. I could. Thanks. Okay. Hey, Brad. Yeah. Thanks. So kind of the middle path scenario.

So how will this play out I said this already it's likely to the legal process is likely to take years. It's highly complex. It's politically fraught there are millions of potential employees and people affected in every state.

As I, just said I think the industry will move quickly towards these more.

Transparent and negotiable.

Rules that we have begun to see in several markets I think we'll see that.

More quickly.

But I guess.

Rich Barton: So why don't I try to do a little bit more free, free form restatement of what I said in my scriptie comments first, Brad, and kind of set the answer up. And then I might toss it over to Jeremy Waxman to answer your middle path questions, specifically, which we feel good about our position as in the middle path scenario. But overall, I just want to reiterate that our kind of the short version of what how we think this plays out and any changes that might come is that we're positioned really, really well for all weather.

I would say, we don't believe that this the scenario the.

The most radical path the complete.

Disruption of the existence of a buyer's agent we believe it is probable.

And I guess I would.

Say, mostly because consumers really want.

And need and deserve representation, but I've been through that okay, but entertain the notion where it does happen alright, we think what happens is listings marketplaces fragment.

And we switched to a much more pay to play model like we see in some international geographies, we look more like a pay to play pay for enhanced.

Rich Barton: Okay, and that is based on some fundamental marketplace principles that we believe in one free and fair transparent access to real estate information and listings that is how we were founded turn on the lights. We believe a well-lit game is cleaner and more equitable. The second principle is independent representation people deserve and need independent representation. We've seen double sighting in the industry, which is clearly a conflict and is in at certain times more expensive for for the true to the transaction.

<unk> represent merchandising.

Kind of like digital classifieds.

If you think about that scenario, who set up to do well, we set up to do well is who is the biggest audience. The best most trusted brand the most information.

And Zillow is in a really good position there.

We've observed in those international markets. This friction fee on the transaction is actually higher than we see in the commission world in the U S.

It is actually a more opaque more fragmented and therefore.

Rich Barton: We do support DIY, the people who wanted to DIY and we have a pretty healthy DIY, physical marketplace. But in most instances, movers want and need. Council, and we think that takes the form of a buyer's agent. And then finally, transparency and negotiability of commissions, which some markets have been moving towards, and we think other markets are going to begin to move more quickly towards because of these legal actions. You know, so how will this play out?

An opportunity for more profit exists and that is what we've seen in international markets and so it's possible it could be even better economics, but we don't like that we think its bad for consumers. We think it's less efficient we think it is less fair, we think it's more expensive.

I'll begin my wrap up and hand, it over to waxman by saying that.

I made I made a point I don't know if Jeremy Hoffman reiterated, but I made a point that we.

We are really well diversified business and that business now and getting even even more diversified.

Rich Barton: I said this already. It's likely that the legal process is likely to take years. It's highly complex. It's politically fraught. There are millions of potential employees and people affected in every state. As I just said, I think the industry will move quickly towards these more transparent and negotiable rules that we have begun to see in several markets. I think we'll see that more quickly. But I guess I would say we don't believe that this scenario, the most radical path, the complete disruption of the existence of a buyer's agent, we believe it's improbable.

Rentals mortgages real estate software new construction.

Showcase these are all growers.

Follow up Boston, we will add to this these are all growers all big Tam and now account together for the majority of our revenues.

So I guess.

And the consumer as our North Star.

That has served us really really well so far.

Having engaged customers and solving real problems with software and partners means that we are really well insulated regardless of how the dollars.

And up flowing so sorry to bore you with all of that again, but I thought I'd get it out let's talk about the middle path, though Jeremy Wacksman, maybe you want to give me a little relief.

Rich Barton: And I guess I would say mostly because consumers really want and need and deserve representation, but I've been through that. Okay, but entertain the notion where it does happen. All right, we think what happens is listings marketplace is fragment. And we switch to a much more paid-to-play model like we see in some international geographies. We look more like a paid-to-play, pay-for-enhanced merchandising, kind of like digital classifies. If you think about that scenario, who set up to do well?

Yeah happy to yeah, Thanks, Brad I mean.

In a world where there are fewer dollars to go around I mean, I think similar to what rich said, we feel really well positioned and we love our strategy and I think the investments that we're making in tech and in the transaction itself and helping more customers.

It becomes even more valuable for the most productive agents as a reminder, our strategy is to partner with the best teams in agents and as such our partner base are those that are likely going to gain share from the part time or the less productive and effective agents and the <unk>.

Rich Barton: Who set up to do well? This was the biggest audience, the best, the most trusted brand, the most information. You know, and Zillow is in a really good position there. We've observed in those international markets, this friction fee on the transaction is actually higher than we see in the commission world in the US. It is actually a more opaque, more fragmented and therefore an opportunity for more profit exists. And that is what we've seen in international markets. And so it's possible it could be even better economics. But we don't like that. We think it's bad for consumers. We think it's less efficient. We think it's less fair. We think it's more expensive.

Participants in the marketplace that might find themselves even more challenged in a world like that and then it's to hand, those partners higher intent customers right rich talked a lot about our super App strategy that is about driving higher intent higher quality customers buyers and sellers.

In the process of transacting to those partners right and some touring our financing experiences our seller services are all doing that and then helping those partners become more productive close more deals and be able to be more efficient.

Jeremy Wacksman: I'll begin my wrap up and hand it over to Waxman by saying that I made a point, I don't know if Jeremy Hoffman reiterated it, but I made a point that we are really well-diversified business now and getting even more diversified rentals, mortgages, real estate software, new construction, showcase. These are all growers for, you know, follow up boss wheel ad to this. These are all growers, all big tams and now account together for the majority of our revenues.

A world powered by software so we get pretty excited about the value and services, we provide and if theres a void in the industry because the dollars are challenged.

Other providers are challenged we get excited about our ability to fill that because we feel really confident the partner strategy, we have but would really grab share here.

Thanks, guys helpful.

Thanks, Greg.

Thank you.

Our next question comes from John Campbell from Stephens John Please go ahead.

Jeremy Wacksman: So I guess, you know, in the end, the consumer is our north star. That has served us really, really well so far. You know, having engaged customers and solving real problems with software and partners means that we are really well-insulated regardless of how the dollars end up flowing. So sorry to bore you with all that again, but I thought I'd get it out.

Hey, guys I just wanted to echo.

The last question I think rich nice job addressing the losses upfront I've been frankly surprised to hear the level of investor concerns, but I think good job of framing that up so we agree with your take there, but going forward I mean investors are clearly going to still try to size up all these various scenarios I'm, hoping maybe you guys can help in that process.

Bradley Erickson: Let's talk about the middle path though, Jeremy Waxman. You may be going to give me a little relief. Yeah, happy to. Yeah, thanks Brad. I mean, in a world where there are fewer dollars to go around. I mean, I think similar to what Rich said, we feel really well positioned and we love our strategy. And I think the investments that we are making in tech and in the transaction itself and helping more customers becomes even more valuable for the most productive agents.

Typically around the paid inclusion model in those overseas markets like maybe what youre seeing on average or maybe a range of revenue per listing and then I know with your current listing today, Richard I'd say, it's going be kind of fragmented potentially but if you look at just your all in listing today, what that looks like today.

With the with the trough kind of inventory environment.

It's probably a little bit lighter than it's been in the past. So maybe talk about what it is today and maybe what it looked like I don't know 567 years ago.

Bradley Erickson: You know, as a reminder, our strategy is to partner with the best teams and agents. And as such, our partner base are those that are likely going to gain share from the part time where the less productive and effective agents and the participants in the marketplace that might find themselves even more challenged in a world like that. And then it's to hand those partners higher intent customers, right? Rich talked a lot about our super app strategy.

Okay.

Sure sure John.

Why don't I why don't I why don't we helped me out.

Jeremy and Jeremy.

If I Miss it but why don't we start with the second part.

The listings question.

<unk>.

For all its for all its words and flaws in all the complaints we make the MLS cooperative at least the way it's worked in the past maybe it doesn't work this way going forward, but at least the way. It's worked in the past it's offered up a really good level, playing relatively level playing field equal access transfer.

Bradley Erickson: That is about driving higher intent, higher quality customers buyers and sellers in the process of transacting to those partners, right? And so touring our financing experiences, our seller services are all doing that. And then helping those partners become more productive, close more deals, and be able to be more efficient in a world, you know, powered by software. So, you know, we get pretty excited about the value and services we provide. And if there's a void in the industry because the dollars are challenged and the other providers are challenged, we get excited about our ability to fill that because we feel really confident the partner strategy we have would really grab share here. Thank you guys, helpful. Thanks, sir. Thank you.

Transparent marketplace for us to access kind of for sale by agent listings in the marketplace.

So.

Because we're connected to these MLS is we have a full view of the for sale inventory in the market and ever since we have had MLS listings that hasn't that hasn't changed over time on top of all of that let's call. It commodity listings information that we have we add to it a whole bunch of non commodity listings information in the form of for sale by owners.

Oftentimes proprietary to our sites and in different markets as well as a.

Quite a number a large number of rental listings that oftentimes are unique to our market place and so combined to that alloy creates a relatively unique listings asset that is only strengthening over time.

John Campbell: Our next question comes from John Campbell from Steven's, John, please go ahead. Hey guys, I just want to echo the last question I think Rich, nice job addressing the lawsuits up front. I've been frankly surprised to hear the level of investor concerns but I think you a good job of framing that up so we grew through take there but going forward I mean, investors are clearly going to still try to size up all these various scenarios.

In the event that fragments as I said, the world gets kind of messy and difficult for regular consumers and partners alike, but zillow of course like we've done in the past, we will run off and secure the most inventory in the world We will get it now how the business model works in that situation is it.

John Campbell: I'm hoping maybe you guys can help in that process, you know, specifically around the paid inclusion model. You know, in those overseas markets, like maybe what you're seeing on average or maybe a range of revenue per listing. And then I know what your current listings today, Rich, you did say it's going to be kind of fragmented potentially but if you look at just your all-in listings today, what that looks like today. I know, you know, with a with a trough kind of inventory environment, but it's probably a little bit lighter than it's been in the past.

We have several.

We have a lot of experience with paid inclusion business models, okay, and it will likely move to a paid inclusion business model I don't know how to answer. Your specific question you are saying what would the rate look like in that world versus the rate that the industry is taking now other than to point to what the market cap per capita of the leading portal.

Rich Barton: So maybe talk about what is today and maybe what it look like, I don't know, five, six, seven years ago. Okay, sure, sure, John. Why don't I, why don't I, why don't we help me out, Jeremy and Jeremy, if I, if I mess up, why don't I start with the second part, the, the listings question. You know, for all its, for all its words and flaws and all the complaints we make, the MLS cooperative, at least the way it's worked in the past, maybe it doesn't work this way going forward, at least the way it's worked in the past, it's offered up a really good level playing feet, you know, relatively level playing field equal access, transparent marketplace for us to access kind of for sale by agent listings in the marketplace.

Real estate portals.

In the.

The U S versus say, Australia, or another market and Youll see pretty quickly that the amount of value at least in the form of market cap thats being captured by those companies is meaningfully higher than what we've been able to achieve as the leading portal here in the U S. We see that.

As obviously as potential upside, but once again.

We want to monetize in this industry in a way that is win win win we want to win for consumers, we want to win for our partners and we want to win for ourselves. We think the most durable business model is where all three of those parties win.

Did I leave anything out.

Rich Barton: And so because we're connected to these MLSs, we have a full view of the for sale inventory in the market. And ever since we have had MLS listings that hasn't, that hasn't changed over time. On top of all of that, let's call it commodity listings information that we have, we add to it a whole bunch of non commodity listings information in the form of for sale by owners that are oftentimes proprietary to our sites and in different markets, as well as a quite a number, a large number of rental listings that oftentimes are unique to our market place.

It's Jeremy Hoffman I will just layer on rich the hard part.

Is building the unique content that we've built over time. So that's a combination of for sale listings, new construction listings rentals listings for sale by owner listings. That's the really hard part that's what we've been after for 15 16, 17 years changing business models and doing a paid inclusion business model is not that challenging piece of the puzzle is getting all the indie content getting all the eyeballs.

And that's where we've really really excel and <unk>.

World in which.

We go the way of international markets, we feel really well positioned as a result.

Thanks, guys.

Rich Barton: And so combined that alloy creates a relatively unique listings asset that is only strengthening over time. Any event that fragments, as I said, the world gets kind of messy and difficult for regular consumers and partners alike, but Zillow, of course, like we've done in the past, will run off and secure the most inventory in the world. We will get it. Now, how the business model works and in that situation is it, we have, we have several, we have a lot of experience with paid inclusion business models.

Thanks, Tom.

Thank you. Our next question comes from Lloyd Walmsley from UBS. Please go ahead.

Thanks.

If I can purchase sticking with this shifting potentially shifting industry structure and the classifieds model potential can you just help us understand maybe the path where the MLS structure evolves setting the stage for that you think are more middle path scenario with some.

<unk> the MLS structure, such that it doesn't change like what specific chain of events, Steve do you all see.

Rich Barton: Okay, and it will likely move to a paid inclusion business model. And you'll see pretty quickly that the amount of value, at least in the form of market cap that's being captured by those companies is meaningfully higher than what we've been able to achieve as the leading portal here in the US. We see that. As obviously as potential upside, but once again, we want to monetize in this industry in a way that is win, win, win.

Breaking that structure to enable this and then.

And then I guess lifting secondly, lifting showcase it seems like a pretty good template or where the model could move.

If the model structurally changes or even if it doesn't it seems like an interesting product with a lot of potential can you just give us an update on kind of uptake agent feedback there and how meaningful could that be maybe an AR and AR.

Yes.

In a moderate scenario of change and then a more a more dramatic scenario like where does that fit in.

Okay. Thanks, Lloyd maybe I'll begin Jeremy Wacksman, and then hand, it and it hit it over to you.

Rich Barton: We want to win for consumers. We want to win for our partners and we want to win for ourselves. We think the most durable business model is where all three of those parties. One. Did I leave anything out? Yeah, I mean, it's Jeremy Hofmann. I'll just layer on Rich. You know, the hard part is building the unique content that we've built over time. So that's the combination of poor sale listings, new construction listings, rentals, listings, poor sale by owner listings.

Rich Barton: That's the really hard part. That's what we've been after for 15, 16, 17 years. Changing business models and doing a paid inclusion business model is not the challenging piece of the puzzle. It's getting all the unique content, getting all the eyeballs. And that's where we've really, really excelled. And so in a world in which we go the way of international markets, we feel really well positioned as a result. Thanks a lot. Thanks guys. Thanks, Tom.

Yes.

Lloyd I guess, what I'd say is we just don't think it's likely that like taking a giant hammer to the hundreds of MLS is around the country.

And how that.

Legislatively regulatory Lee are legally would happen would be a pretty difficult thing.

And so I guess, you know there's a ton of value provided by having an integrated marketplace, where most consumers and partners can see everything on the market and while many of the industry participants may have forgotten that benefit we believe that if as things begin to fragment. They will remember that benefit so anyway, we see this.

We see this as.

As unlikely so I honestly don't want to give it a ton more.

A ton more air time other than to say if it happens we're really well positioned on the showcase thing that is a big giant new Tam that we're going after and I'll hand, it over to Waxman two to chat about how that's going and the potential we see.

Lloyd Walmsley: Thank you. Our next question comes from Lloyd Walmsley from DBS. Lloyd, please go ahead. Thanks. Thanks to, if I can purchase sticking with this shifting potentially shifting industry structure and the classified model potential. Can you just help us understand maybe the path where the MLS structure devolves studying the stage for that. You think a more middle path scenario would sustain the MLS structure such that it doesn't change. Like what specific chain of events do you all see breaking that structure to enable this and then.

Yes.

We continue to receive really great feedback about letting showcase from both consumers using the product.

And agents have been part of our V. One in kind of early MVP rollout as rich mentioned, we're now live in 17 markets and.

We're hard at work building out the feature set to enable us to scale and that includes things like being able to offer it more flexibly.

Different geographies have different density different teams in any of our agents have bigger and smaller businesses and how do we enable our go to market that can serve all of them I think as we talked about earlier this year a big key to scale is ensuring that agents can bring their own photographers. If they want we provide a fantastic media service that captures all of this great Rich media rich talked about this interactive floor.

Lloyd Walmsley: And then I guess lifting secondly, lifting showcase seems like a pretty good template from where the model could move. If the model structurally changes or even if it doesn't, it seems like that's an interesting product. I was a lot of potential. Can you just give us an update on kind of uptake agent feedback there and how meaningful could that be maybe in a more in a moderate scenario of change and then a more a more dramatic scenario like where does that fit in. Thanks.

That is just such a unique and differentiated listening experience. It takes really well curated and trained media to do that but enabling those photographers to do that when agents have a great photography workflow.

And the acquisition we did in area earlier. This year is really to help scale that so building out those capabilities is really the key to scale.

Rich Barton: Okay, thanks, Lloyd, maybe I'll begin Jeremy Waxman and then hand it handed it over to you. You know, Lloyd, I guess what I'd say is we just don't think it's likely that like taking a giant hammer to the hundreds of MLS is around the country and how that legislatively regularly or legally would happen would be a pretty difficult thing. And so I guess you know, there's a ton of value provided by having an integrated marketplace where most consumers and partners can see everything on the market. And while many of the industry participants may have forgotten that benefit, we believe that if as things begin to fragment, they will remember that benefit.

Youre right that there are some commonalities between agents focusing on how to market their listing for their seller and international comp conversation, but we really think about lifting showcase as much about helping listing agents grow their business right what listing agents tell us and what early users have showcased have told us as this helps them win more.

Listings and that's how the product is discussed in used is when I'm sitting at the kitchen table. This is something I offer that other agents can offer and this is why you should list with me and so that economic value. In addition to helping to sell our showcase their home. The best helps the agent showcase themselves and so we get excited about really helping grow.

Listing side of our business through tools like that we will continue to update you as we make progress, but stay tuned for kind of expansion into more markets into next year.

Jeremy Wacksman: So anyway, we see this, we see this as as unlikely, so I honestly don't want to give it a ton more, a ton more airtime, other than to say if it happens, we're really well positioned on the showcase thing that is a big giant new tam that we're going after and I'll hand it over to Waxman to chat about how that's going and the potential we see. Yeah, I mean, we continue to receive really great feedback about listening showcase from both consumers using the product and agents who've been part of our V1 and kind of early MVP roll out as Rich mentioned, we're now live in 17 markets and you know, we're hard at work building out the feature set to enable us to scale.

Alright, thank you.

Thank you.

Our next question comes from Brian <unk> from Zelman and Associates Ryan. Please go ahead.

Hey, guys. Thanks for taking my question and all the details.

Within the commentary you gave in the letter on touring you mentioned real time touring is expected to be alive and about 10%.

We're covering about 10% of total connections.

I'm curious are you able to give us similar stat on the share of connections that are happening.

Jeremy Wacksman: And that includes things like being able to offer it more flexibly different geographies have different density, you know, different teams and individuals have bigger and smaller businesses and how do we enable a go to market that can serve all of them. I think as we talked about earlier this year, a big key to scale is ensuring that agents can bring their own photographers if they want. We provide a fantastic media service that captures all this great rich media rich talked about this interactive floor plan that is just such a unique and differentiated listening experience it takes.

The nine enhanced markets.

Similarly, a small piece of the pie.

Intense at this point.

But any specifics you can share on that.

Jeremy Wacksman: Really well curated and trained media to do that but enabling those photographers to do that when agents have a great photography workflow and the acquisition we did an area earlier this year is really to help scale that so building out those capabilities is really the key to scale. You're right that there are some commonalities between you know agents focusing on how to market their listing for their seller and international pop conversation, but we really think about listing showcase as much about helping listing agents grow their business.

Ryan just to make sure. The question Youre asking is how much of our enhanced markets is in the connections are in real time touring.

More so just kind of how much coverage enhanced market today of the total pie you are talking about accelerating the growth meaning openness.

<unk> enhanced markets in <unk> and into 'twenty, four and I'm, just trying to think about.

Almost like how low is the base today in terms of the enhanced market.

To think about the opportunity going forward to extend that.

Yes.

Thanks for the clarification I mean, the enhanced markets. The nine that we're just now in alright, and so prior to this quarter in the sense that we can rollout.

Small percentage of overall connections.

Jeremy Wacksman: Right what listing agents tell us and what early users of showcase have told us is this helps them win more listings and that's that's how the product is discussed and used is when i'm sitting at the kitchen table. This is something i offer that other agents can offer this is why you should list with me and so that economic value in addition to helping the seller showcase their home the best helps the agent showcase themselves and so you know we get excited about really helping grow.

To say in the teens maybe.

And then what Jeremy Hoffman was alluding to is obviously, a real time touring experience is not going to be available on 100% of customers not every customer request a tour and then not every customer agent relationship fits the eligibility criteria. So that's a bit why we gave the color on that as we ramp into that.

Ron McKeveny: The listing side of our business through tools like that will continue to update you as we may progress but you know stay tuned for kind of expansion into more markets in the next year. All right, thank you. Thank you.

I think 90 odd markets into 'twenty.

Into 'twenty four we expect that will cover about 10% of our customers.

And again, it's not simple math different markets have different eligibility different density different ability to serve we've talked a lot about the reason we're going market by market is because you are rolling out a new workflow for agents and teams and you train them on a new experience to deliver for the customer and have been great and we get great feedback from those agents because they are now meeting the customer where.

Ron McKeveny: Our next question comes from Ron McKeveny from Salmon and Associates. Ryan, please go ahead. Thanks for taking the question and all the details. Within the commentary, you gave a letter on touring. You mentioned real fat touring is expected to be live at about 10% of recovering, about 10% of total connection. I'm curious, are you able to give a similar stat on the share of connections that are happening currently as the nine enhanced markets.

They want to be met that appointment set is really what they want to get versus the request as rich talked about and some of the customers happier and the work with rate the number of times. The agent can work with the customer goes up and so those are all great indicators of transaction share gains and happier customer agent relationships, but it's not just as linear path.

Light it up on more pages on the website it is kind of market by market.

Ron McKeveny: You know, I assume it's morally a small piece of the pie that are enhanced at this point. But any specifics you can share on that. Ryan, just to make sure you the question you're asking is how much of our enhanced markets is in the connections are in real time touring. More so just kind of how much coverage you're going to enhance marks today of the total pie. You know, you're talking about accelerating the growth, meaning opening up more enhanced markets in 4Q and into 24.

Got it Okay. That's very helpful. And then one question on mortgage.

Maybe part of it is just reiterating that I think you said for <unk> that you would see or expect to see revenue growth.

But is that implying that the origination growth roughly 90% this quarter the revenue piece down on a year over year and you called out the mortgage marketplace.

Declines are kind of the offset there I guess are we reaching the point where origination growth should similarly translate to revenue growth like is that what.

Ron McKeveny: And I'm just trying to think about, you know, almost like how low is the base today in terms of the enhanced markets, you know, to think about the opportunity going forward to expand that. Yeah, thanks for the clarification. I mean, the enhanced markets, the nine that we're just now in, right? And so prior this quarter, the six that we wrote out, you know, it's a small percentage of overall connections. I want to say in the teens, maybe.

Expected to begin in <unk>, and then presumably going forward origination growth is.

Our origination volume is growing.

Generally revenue should grow going forward.

Yes, Ryan, it's Jeremy Hoff, but I'll take that one I think it's fair to think about.

The originations business, becoming more and more of the mortgages.

Line item. So it is taking up more revenue at this point in the marketplaces decreasing with respect to 'twenty four and beyond yes, our expectation is the mortgage.

Ron McKeveny: And then what Jeremy Hoffman was looking to is, you know, obviously a real time touring experience is not going to be available on 100% of customers, not every customer requests a tour. And then not every customer agent relationship fits the eligibility criteria. So that's a little bit why we gave the color that as we ramp into the, I think 90 odd markets into 20 into 24. We expect that will cover about 10% of our customers.

DHL originations revenue will be the bigger piece of the pie, but unquestionably marketplace is still part of the mix. So it's not perfectly direct.

Got it okay. Thank you very much.

Thank you.

Ron McKeveny: And again, it's not simple math, different markets have different eligibility, different density, different ability to serve. You know, we've talked a lot about the reason we're going market by market is because you're rolling out a new workflow for agents and teens. And you're training them out on new experience to deliver the customer ends up being great. And we get great feedback from those agents because they're now meeting the customer where they want to be met.

Our next question comes from John Collins from Jeffrey John. Please go ahead.

Hey, guys. Thanks for taking my question. This is Carter on for John.

Sticking on the on the mortgage topic here.

Query I know you flagged a 50% improvement in <unk>.

Ron McKeveny: That appointment set is really what they want to get versus the request as rich talked about. And so the customer's happier and the work with rate, the number of times the agent can work with the customer goes up. And so those are all great indicators of transactions share gains and happier customer agent relationships. But it's not just this linear path of, you know, light it up on more pages on the website.

One officer productivity versus <unk> of last year and then this.

This quarter you grew your originations bandwidth, 90%, 35% sequentially.

But also hiring a bunch of our loan officers, maybe you can help us think a little bit about how much of the growth there came from adding officers versus any productivity gains you saw in the quarter and then maybe.

Ryan McKeveny: It is kind of market by market. Okay, that's very helpful.

Talk about how much runway you see for opposite productivity given.

Ryan McKeveny: And then one question on mortgage. Maybe part of it is just reiterating that I think you said for four to you that you see or expects your revenue growth. But is that implying that you have the origination growth, you know, roughly 90% this quarter, the revenue piece down, you know, spot a year over year, and you called out the mortgage marketplace. You know, declines are kind of the offset there. I guess are we are reaching the point where origination growth should similarly translate to revenue growth.

Given the current housing backdrop, and then that you have that could change once we get rate relief going forward. Thanks.

Yes.

The question is Jeremy Hoffman I think we are really pleased with the way that we are.

Growing the purchase of our purchase mortgage origination business no question about it up 88% in a market like this.

That is that's challenged it's quite impressive.

I would say the ramp and loan officers, we still see opportunities for us to get more productive. We're pleased with the productivity today and we're obviously hiring loan officers as a result, but we think theres more to do at that time goes on and we get to scale.

Ryan McKeveny: Like I said, what you know expected to begin in and for you and then presumably, you know, going forward if origination growth is, or if origination volume is growing, you know, generally revenue should grow going forward. Yeah, Ryan, it's Jeremy Hofmann, I'll take that one. I think it's fair to think about the origination's business becoming more and more of the mortgages line item, so it is taking up more revenue at this point and the marketplace is decreasing with respect to 24 and beyond.

Yes, and maybe just to add to that a bit I think you should expect to see both or you should expect to see us grow loan officer count as we scale origination volume into next year, but you should also expect to see increased increases in productivity and efficiency both.

On the customer experience.

We've talked a lot in prior quarters about the huge opportunity we have with all of the customers that are coming to zillow asking for financing questions and how can we help meet them where they are there's those that are ready to get alone right. Now there's those that are not how do we help get them all in answer.

Ryan McKeveny: Yeah, our expectation is the mortgage, the VHL origination's revenue will be the bigger piece of the pie, but unquestionably, marketplace is still part of the mix, so it's not perfectly direct. Okay, thank you very much. Thank you.

As well as the customers coming from or a great Premier agents, who know best win to ask them to get financing questions answered to go write an offer on a home so lots of potential productivity gains there.

Vincent Kardos: Our next question comes from John Colantuoni from Jeffrey. John, please go ahead. Hey guys, thanks for taking my question. This is Vincent Kardos on for John. I was sticking on the mortgage topic here. The last query I know you flagged a 50% improvement in loan officer productivity versus 4Q of last year, and then this quarter you'd agree your origination's value is 90% down 35% sequentially, but also hiring a bunch more loan officers.

And then there's also lots of great factory improvements that we're hard at work building and Thats a lot of the investments we've been making to just help our loan officers are processors and our team get more efficient at being ready to handle the scale of volume that we want to bring so.

Short answer is you should you should expect to see both from us and both should contribute to growth into next year.

Jeremy Hofmann: Maybe you can up a think a little bit about how much of the growth there came from adding officers versus any product producers you saw in the quarter, and then maybe talk about how much runway you see for officer productivity, given the current housing back to often, then maybe how that could change once we get a bit of rate relief on forward. Thanks. Yeah, thanks for the question, Mr. Jeremy Hoffman. I think we are really pleased with the way that we are growing the purchase or purchase mortgage origination business.

Thanks, guys.

Thank you. Thank you. Our next question comes from Jason <unk> from Citigroup. Please go ahead.

Great. Thanks for taking the questions I appreciate it I wanted to ask.

On rentals, we saw listings grow 45% year over year revenue Reaccelerate in multifamily strength traffic is growing just talk to us about the change that's happening here in rentals and the strategy here longer term and then a quick follow up for the team just on lifting showcase our these buyers new to zillow or existing any I know where we're monetizing.

Jeremy Hofmann: No question about it, up 88% in a market like this. That is this challenge is quite impressive. I would say the ramp in loan officers, we still see, you know, opportunities for us to get more productive. We're pleased with the productivity today, and we're obviously hiring loan officers as a result, but we think there's more to do as that time goes on and we get to scale. Yeah, and maybe just to add to that a bit, I think you should expect to see both, but you should expect to see us grow loan officer count as we scale origination volume in the next year, but you should also expect to see increases in productivity and efficiency both on the customer experience.

Call. It a newer side of the transaction on the seller side, but are they new or existing and then are there any early feedback would be helpful. Thank you guys.

Yeah.

Yeah, Thanks, Rod, it's Jeremy Hoffman I'll start on.

On the rentals, yes, we're really pleased and I will let Jeremy Wacksman has more of it but up 34% year over year, this quarter up 42% and multifamily and yes, it's executing.

Executing on all cylinders, so multifamily properties were up 28% in Q3 total active listings across both multifamily and single family up 45% year over year and then obviously the traffic continues to be really strong we're industry, leading there and grew double digits. There. So we're really really happy with how we're executing in.

Jeremy Hofmann: We've talked a lot in prior quarters about the huge opportunity we have with all the customers that are coming to Zillow asking for financing questions, and how can we help meet them where they are? There's those that are ready to get a loan right now, there's those that are not. How do we help get them all in answer? As well as the customers coming from our great premier agents who know best when to ask them to get financing, questions answered to go right and offer on a home.

I said in my prepared remarks, we expect 30% plus growth in Q4, there too so.

So Jeremy anything else you want to add there.

No I think Thats right I think it's.

You hit it earlier to the largest and most engaged audience using great products and services across both multi and single family listings.

Jeremy Hofmann: So lots of potential productivity gains there, and then there's also lots of great factory improvements that we're hard at work building, and that's a lot of the investments we've been making to just help our loan officers, our processors, and our team get more efficient at being ready to handle the scale of volume that we want to bring. So, you know, short answer is you should expect to see both from us and both should contribute to growth in the next year. Thank you.

Some macro help in terms of occupancy rates decreasing in more supply in the market means the advertisers need our high quality customers and so youre seeing the team execute to drive a lot of revenue growth there across across the marketplace as a whole and we get really excited about that growth continuing.

And again, the rentals business, great business fast growing business bigger part of our business as rich talked about but also incredibly strategic has half of those renters are thinking about buying and half of those renters are.

Some of the most affordability challenge first time homebuyers that will be ready for DHL and our great someday as the macro normalizes, they're so incredibly great business growing really fast team is executing really well and super strategic for us long term.

Ron Josey: Our next question comes from Ron J, sequence, 50 group, Ron, please go ahead. Great, thanks for taking the questions I appreciated. I wanted to ask on rentals, you know, we saw listings grow 45% near via revenue recelerated, multi-family strength, traffic is growing.

And then on showcase.

How many advertisers.

<unk> I think was your question how many agents are our incremental I mean, it's a mix and intentionally so and I think as we scale. It beyond the initial markets. We expect to see that mean, it will interesting it'll be interesting to learn how that mix.

Jeremy Hofmann: Just talk just about the change that's happening here in rentals and the strategy here longer term and then a quick follow-up for the team just on listing showcase. Are these buyers new to Zillow or existing? Meaning I know we're monetizing called a newer side of the transaction on the seller side, but are they newer existing and then earn an early feedback would be helpful. Thank you guys.

Pans out you can imagine similar to our overall strategy when lifting showcase helps great agents and teams grow their business and it's a business growth driver for them you find teams that look like our great Premier agents today don't want to use it but you also find new customers who were less interested in the products that premier agent has to offer really interested in using listing.

Jeremy Wacksman: Yeah, thanks Ron, it's Jeremy Hofmann, I'll start on the rentals. Yeah, we're really pleased and I'll let Jeremy Wacksman have more of it, but up 34% year-over-year this quarter, up 42% in multi-family, and yeah, it's, you know, executing on all cylinders. So multi-family properties were up 28% in Q3, total active listings across both multi-family and single-family, up 45% year-over-year. And then obviously the traffic continues to be really strong. We're industry leading there and grew double digits there.

Okay. So it's a way to grow their business. So we're pleased with the early mix. It wasn't theres not any sort of intentional target there for us it's really more about learning with partners.

Early <unk> as were building <unk> and getting ready for scale.

Great. Thanks, guys I appreciate it.

Thanks, Ron.

Thank you.

Our final question comes from Tom Champion from Piper Sandler. Please go ahead.

Jeremy Wacksman: So we're really, really happy with how we're executing. And like I said in my prepare remarks, we expect 30% plus growth in Q4 there too. So Jeremy, anything else you want to add there? No, I think that's right. I think it's, you know, you hit it earlier too. The largest and most engaged audience using great production services across both multi- and single-family listings, you know, some macro help in terms of occupancy rates decreasing and more supply in the market means the advertisers, you know, need our high-quality customers.

Good afternoon, Richard Jeremy I'm curious, if you could talk about any changes or updated thoughts on the competition.

How do you think about UV growth at homes Dot Com and then maybe for Jeremy Hoffman.

Really appreciate the comments on the cost structure very helpful. Just curious if you could talk a little bit about your thoughts around head count growth into next year. Thank you.

Jeremy Wacksman: And so you're seeing the team execute to drive a lot of revenue growth there across across the marketplace as a whole. And we get really excited about that growth continuing, you know. And again, the rentals business, great business, fast growing business, bigger part of our business, as Rich talked about, but also incredibly strategic as half of those renters are thinking about buying and half of those renters are, you know, some of the most affordability challenge first-time home buyers that'll be ready for the HLNR-Great PA someday as the macro normalizes there. So incredibly great business growing really fast, team executing really well and super strategic for us long-term.

Hey, Ron.

We're not seeing any impact really from the noise out there.

You know other than posting great results.

And making great progress against our growth pillars.

We've been chatting about on this call.

I think.

The way, we inoculate ourselves from having the two over focus on competition is by really focusing on building awesome software for our users and our customers and our partners.

Jeremy Wacksman: And then on showcase, you know, how many advertisers or agents I think was your question, how many agents are incremental? I mean, it's a mix and intentionally so. And I think as we scale it beyond the initial markets, we expect to see that mean it will be interesting to learn how that mix pans out. You can imagine, similar to our overall strategy, when listing showcase helps great agents and teams grow their business and it's a business grow charter for them, you find teams that look like our great premier agents today that want to use it, but you also find new customers who were less interested in the products of premier agent has to offer really interested in using listing showcases the way to grow their business.

Software that solves real customer pain points.

Like the interactive floor plans and three D virtual walk throughs, and real time booking and a common app for rental applications and more and we are actually adding follow up boss now, which is really quite a beloved CRM.

In the with with a lot of customers in the agent space.

So we believe that the way we win long term really is by creating integrating seamlessly in creating this super app for customers and a super App for our partners.

Jeremy Wacksman: So we're pleased with the early mix. There's not any sort of intentional target there. For us, it's really more about learning with partners, this early MVP and V1, as we're building V2 and getting ready for scale.

<unk> like <unk>.

It's hard we like that it takes kind of mad software skills to do it it's worked well focusing on this has worked well for us. So far we've cited a bunch of data on that but not only do we have the biggest most engaged audience with 80% of it comes to us directly.

Operator: Great. Thanks guys. Appreciate it. Thanks, Ron. Thank you.

We anticipate that will continue to work maybe I'll throw.

Tom Champion: Our final question comes from Tom Champion from Piper Sandler. Tom, please go ahead. Good afternoon. Richard, Jeremy, I'm curious if you could talk about any changes or updated thoughts on the competition. How do you think about UV growth at homes.com? And then maybe for Jeremy Hofmann, really appreciate that the comments on the cost structure are very helpful. Just curious if you could talk a little bit about your thoughts around headcount growth into next year.

Throw to Jeremy Hoffmann that that last question and then we'll close thanks Ron.

Yes, and just on the cost structure I think just to reiterate what I said before no specific guidance around 2024, but we do feel like we are at around the right levels of fixed costs for the opportunities. We see ahead, and then variable costs will grow.

As we grow revenue and we will look for operate operational efficiencies along the way, but feel really good about what we're investing against and then also the long term margin profile above the things that we're investing against and then beyond that just reiterating that marketing has a different line item for us and one that will assess based on growth opportunities.

Tom Champion: Thank you. Hey, Ron. You know, we're not seeing any impact really from the noise out there. You know, other than posting great results and making great progress against our growth pillars as we've been chatting about on this call, you know, I think the way we inoculate ourselves from having to over focus on competition is by really focusing on building awesome software for our users and our customers and our partners. You know, software that solves real customer pain points.

But overarching feeling quite good about cost structure.

Thank you both.

Thank you.

The Q&A session.

To rich Barton for closing remarks.

We really appreciate the thoughtful questions from.

We look forward to updating you as we plan on continuing to make progress along our growth pillars. Thank you very much for your continued trust and investment Enzo will talk to you soon.

Tom Champion: You know, like the interactive floor plans and 3D virtual walkthroughs and real time booking and a common app for rental applications and more. And we are actually adding follow up boss now, which is really quite a beloved CRM with a lot of customers in the agent space. So we believe that the way we win long term really is by creating, integrating seamlessly and creating the super app for customers and a super app for our partners.

This concludes today's call. Thank you for joining you may now disconnect your lines.

[music].

Okay.

Okay.

Tom Champion: We like that it's hard. We like that it takes kind of mad software skills to do it. It's worked well focusing on this is worked well for us so far. We've cited a bunch of data on that, but not only do we have the biggest most engaged audience, but 80% of it comes to us directly. We anticipate that will continue to work.

Rich Barton: Maybe I'll throw to Jeremy Hoffman that last question and then we'll close. Thanks, Ron. Yeah, and just on the cost structure, I think just reiterate what I said before, no specific guidance around 2024, but we do feel like we are, you know, at around the right levels of fixed costs for the opportunities we see ahead and then variable costs will grow as we grow revenue and will look for operational efficiencies along the way, but feel really good about what we're investing against and then also the long term market profile of the things that we're investing against.

Rich Barton: And then beyond that, just reiterating that, you know, marketing is a different blind item for us and one that will assess based on growth opportunities, but overarchingly feeling quite good about cost structure. Thank you both. Thank you.

Operator: That is the end of the Q&A session.

Rich Barton: I will now hand back over to Rich Barton for Cleising with Mark. We really appreciate the thoughtful questions, y'all, from, and we look forward to updating you as we plan on continuing to make progress along our growth pillars. Thank you very much for your continued trust and investment in Zillow.

Operator: This concludes today's call. Thank you for joining.

Operator: You may not disconnect your lines.