Q2 2024 Zillow Group Inc Earnings Call
Given instructions for the question and answer session.
Also as a reminder, this conference is being recorded today. If you have any objections. Please disconnect at this time, Brad you may begin.
Brad: Thank you good afternoon, and welcome to Zillow group's second quarter 2024 call. Joining me today to discuss our results are Zillow group's co founder and co executive Chairman and rich Barton newly appointed CEO, Jeremy Wacksman and CFO Jeremy Hoffman during today's call. We will make forward looking statements about our future performance and operating plans based on.
Brad: On our 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.
Brad: On the Internet and is accessible on our Investor Relations website.
Brad: A recording of the call will be available later today.
Brad: During the call, we will discuss GAAP and non-GAAP measures, including adjusted EBITDA, which we referred to as EBITDA.
Rich: We encourage you to read our shareholder letter and 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 financial measures. We will now open the call with remarks, followed by live Q&A with that I will turn the call over to rich.
Rich: Thanks, Brad good afternoon, and good evening to everyone dialing into here over second quarter 2024 results.
Rich: We delivered another strong quarter and an ongoing challenging real estate macro environment exceeding our outlook for revenue and EBITDA as we continue to successfully execute on our growth strategy.
Today, We also announced Jeremy Wacksman has been promoted to Chief Executive Officer of Zillow Group and I will serve as co exec chair of the board of Directors alongside my co founder Lloyd Frink.
Rich Barton: I have been CEO <unk> chairman since the day Lloyd and I cede funded the company in 2004 and will remain engaged my role, however will shift to supporting and counseling, Jeremy Wacksman and the leadership team rather than daily operational leadership.
Speaker Change: Before talking about Jeremy and the team, let me talk about the state of the company.
Speaker Change: The short version is that Zillow business is in great shape financially strategically operationally and organizationally.
Speaker Change: We are executing well and are consistently outperforming the broader residential real estate industry as we methodically ship, great software and services to digitize and integrate on buying selling financing and renting empowering consumers and partners alike.
Speaker Change: We have done this inside the Zillow branded housing Super App.
Speaker Change: The integrated consumer and partner experience, we are rolling out in markets across the country.
Speaker Change: And we continue to increase the breadth of our market coverage and the depth of transaction penetration within those markets I am pleased with where we are in this effort and the opportunity we see for many years of growth ahead.
Speaker Change: We are also increasingly leveraged our brand trust and massive audience to diversify our revenue streams.
Speaker Change: We've leaned hard into the obvious and adjacent rentals and purchase mortgage opportunities both of which are now exciting growth businesses for zillow.
Speaker Change: Rentals now account for one fifth of total company revenue and Zillow home loans purchase mortgage origination volume grew more than 100% year over year again this quarter.
Speaker Change: Rentals has plenty of room to run.
Speaker Change: And the mortgages opportunity for us is wide open and large.
Speaker Change: Additionally, we have built and acquired then integrated a quietly exciting set of products and services that we offer to the broader industry.
Speaker Change: Brokers and our losses and the whole of the professional agent community.
Speaker Change: We are investing in broad industry wide adoption of our suite of increasingly integrated digital content and workflow tools, including incredible products like are showing time home touring solution.
Speaker Change: Follow up boss agents', CRM Dot loop forums, and document management and showcase three D interactive listings.
Speaker Change: Our conviction is that a rising digital tide lifts all boats.
A more digital industry using our software is better for consumers better for our partners and ultimately better for Zillow group.
Speaker Change: We have unique ambition here and unique talent and resources to conjugate into reality.
Speaker Change: And through all of this innovation and expansion. The leadership team has maintained real cost discipline that is delivering improvements in EBITDA margins.
Speaker Change: Executing well against Big complex interconnected opportunities requires amazing talent, who have a clear strategy.
Speaker Change: Hi, Accountability and high Trust in one another.
Speaker Change: Which leads me to Jeremy Wacksman, our new CEO and the person we organized most of the company around three years ago. When we promoted him to C O O.
Speaker Change: He has been supported by an exceptional team and has successfully positioned the company to go after these multiple large opportunities as I have laid out.
Speaker Change: Jeremy is a familiar voice to you all on this call, but allow me to share some of his history.
Speaker Change: He is an engineering degree, which is not required here at zillow, but it's nice.
Speaker Change: He also got his MBA, many years ago, which the engineers don't hold against them.
Speaker Change: We found Jeremy at Microsoft in 2009, when Zillow was very small and recruited him into a product and marketing role.
Speaker Change: Throughout his time at Zillow, Jeremy is worn many hats.
His responsibilities have steadily gained scope spanning product marketing and operations.
Speaker Change: He has been a key strategic partner throughout his tenure advising Lloyd and me on major strategy and product decisions.
Speaker Change: Early on he helped pioneer mobile real estate shopping with the launch of the Zillow App.
Speaker Change: Later as CMO, he was critical to leading <unk> consumer marketing strategy, establishing a high bar and a branding framework for what has become a rare loved and trusted household brand.
Speaker Change: His tenure as CFO the past three years with all product engineering design marketing sales.
Speaker Change: And go to market business operations reporting to him.
Speaker Change: There's been a time of particularly impressive innovation, Brazil, which has put the company back on an accelerating growth path following pandemic dislocation from which the industry has yet to recover.
Jeremy: Jeremy Operationalized Zellers housing Super App strategy, while maintaining strong cost discipline.
Jeremy: Diversifying our revenue base and growing the rentals and mortgages businesses.
Speaker Change: He successfully championed the follow a boss and showing time acquisitions, helping us deliver on our goal to provide agent partners and the broader industry with the best software solutions to power their businesses.
Speaker Change: He also organized elevated and recruited talent that makes up <unk> world class R&D organizations and increasingly critical sales and marketing operations.
Executing well against big, complex, interconnected opportunities requires amazing talent who have a clear strategy, high accountability, and high trust in one another.
Jeremy's chronic forward consumer first leadership operational experience and technology orientation make him right and ready to be CEO of Zillow now.
Speaker Change: Which leads me to Jeremy Waxman, our new CEO , and the person we organized most of the company around three years ago when we promoted him to COO.
Speaker Change: I am confident in his judgment and his leadership and I am excited to support him as he leads Zulus next chapter.
Speaker Change: He has been supported by an exceptional team and has successfully positioned the company to go after these multiple large opportunities as I have laid out.
Speaker Change: And with that I'll now hand, the mic over to Zillow group's new Chief Executive Officer, Jeremy Wacksman.
Speaker Change: Jeremy is a familiar voice to you all on this call, but allow me to share some of his history.
Jeremy Wacksman: Thanks Rich.
Jeremy Wacksman: Having spent the past 15 years at Zillow I can honestly say taking on this role as the honor of my career I loved This company and I Love This team and.
Speaker Change: He has an engineering degree, which is not required here at Zillow, but it's nice. He also got his MBA many years ago, which the engineers don't hold against him.
Jeremy Wacksman: And I believe deeply in the digital future of real estate, we're building for the benefit of buyers sellers renters agents, the broader industry and our shareholders.
We found Jeremy at Microsoft in 2009 when Zillow was very small and recruited him into a product and marketing role.
Jeremy Wacksman: Zillow has a huge audience our partner network comprising some of the best agent teams in the business and tech and product prowess that is unmatched in residential real estate.
Throughout his time at Zillow, Jeremy has worn many hats.
Speaker Change: His responsibilities have steadily gained scope, spanning product, marketing, and operations.
Jeremy Wacksman: With an increasingly diversified and growing business, we are primed to capitalize on the strength of the Zillow brand and capture a meaningful slice of the $30 billion accessible Tam in real estate.
Speaker Change: He has been a key strategic partner throughout his tenure, advising Lloyd and me on major strategy and product decisions.
Jeremy Wacksman: A slice that more closely reflects our reach in the category.
Early on, he helped pioneer mobile real estate shopping with the launch of the Zillow app.
Jeremy Wacksman: And our results show, we're making great headway.
Jeremy Wacksman: I'm excited to share that Zillow had another strong quarter reporting better than expected revenue growth across the business.
Speaker Change: Later as CMO, he was critical to leading Zillow's consumer marketing strategy, establishing a high bar and a branding framework for what has become a rare, loved, and trusted household brand.
Jeremy Wacksman: Q2 revenue was $572 million up 13% year over year, which marks the eighth consecutive quarter. Our total revenue results have outperformed the residential real estate industry.
Speaker Change: His tenure as COO the past three years with all product, engineering, design, marketing, sales, IT, and go-to-market business operations reporting to him.
Jeremy Wacksman: We delivered double digit year over year revenue growth and demonstrated cost discipline, while continuing to invest to deliver solid EBITDA margin expansion year over year.
Speaker Change: has been a time of particularly impressive innovation for Zillow, which has put the company back on an accelerating growth path following pandemic dislocation from which the industry has yet to recover.
Q2 residential revenue grew 8% year over year to 409 million rental.
Jeremy Wacksman: Rentals continued its strong growth with $117 million revenue in Q2 up 29% year over year.
Speaker Change: Jeremy operationalized Zillow's Housing Super App strategy while maintaining strong cost discipline, diversifying our revenue base, and growing the rentals and mortgages businesses.
Jeremy Wacksman: Multifamily revenue was up 44% year over year, driven by strong growth in our multifamily property count with 44000 properties at the end of Q2 up from 40000 at the end of Q1.
Speaker Change: He successfully championed the follow-up boss and showing time acquisitions, helping us deliver on our goal to provide agent partners and the broader industry with the best software solutions to power their businesses.
Jeremy Wacksman: We also continued to make strong progress in mortgages with Q2 revenue of $34 million up 42% year over year and purchase mortgage origination volume growing 125% year over year. These.
Speaker Change: He also organized, elevated, and recruited talent that makes up Zillow's world-class R&D organizations and increasingly critical sales and marketing operations.
Jeremy Wacksman: These successes come despite a persistently challenging mortgage rate environment as evidenced by our estimate of total industry purchase loan origination volume being down mid single digits year over year in Q2.
Jeremy: Jeremy's product-forward, consumer-first leadership, operational experience, and technology orientation make him right and ready to be CEO of Zillow now.
Jeremy Wacksman: We continue to believe our most important investments are in tech innovations that improve the customer experience, which has helped us earn and maintain our strong brand position and massive engaged audience of movers.
Speaker Change: I am confident in his judgment and his leadership, and I am excited to support him as he leads Zillow's next chapter.
Jeremy Wacksman: In Q2, we reported 231 million average monthly unique users across the zillow ecosystem of apps and sites.
Speaker Change: And with that, I'll now hand the mic over to Zillow Group's new Chief Executive Officer, Jeremy Wacksman.
Jeremy Wacksman: As Youll remember from previous calls and our February investor presentation about 80% of our users come to us organically and they are using our app three times more than anyone else in the category.
Jeremy Waxon: Thanks, Rich.
Jeremy Waxman: Having spent the past 15 years at Zillow, I can honestly say taking on this role is the honor of my career. I love this company and I love this team. And I believe deeply in the digital future of real estate we're building for the benefit of buyers, sellers, renters, agents, the broader industry, and our shareholders.
Jeremy Wacksman: Another way to measure traffic and brand strength is through Comscore, which is widely viewed among internet brands as a reliable transparent third party source because it aims to capture the number of unique visitors while de duping cookies. According to Comscore Zillow group's apps and sites at 116 million average monthly unique visitors in Q2.
Jeremy: Zillow has a huge audience, a partner network comprising some of the best agent teams in the business, and tech and product prowess that is unmatched in residential real estate.
Speaker Change: We're pleased with the progress, we're making to transform and digitize the movie experience on behalf of buyers sellers renters agents and the broader industry.
Jeremy Waxman: With an increasingly diversified and growing business, we are primed to capitalize on the strength of the Zillow brand and capture a meaningful slice of the $30 billion accessible TAM in real estate, a slice that more closely reflects our reach in the category.
Speaker Change: Since 2022, we've been building the digitally integrated transaction experience and testing it and our enhanced markets across the country.
Jeremy: And our results show we're making great headway. I'm excited to share that Zillow had another strong quarter, reporting better-than-expected revenue growth across the business.
Speaker Change: Through this year, we've been increasing our breadth of coverage across more markets and our depth of penetration in those markets as we drive towards sustainable profitable growth.
Jeremy: Q2 revenue was $572 million, up 13% year-over-year, which marks the eighth consecutive quarter our total revenue results have outperformed the residential real estate industry.
Speaker Change: As of the end of Q2 or in 19 enhanced markets expanding to 36 by the end of August well on our way to achieving our goal of 40 by the end of 2024.
Jeremy: We deliver double-digit year-over-year revenue growth and demonstrated cost discipline while continuing to invest to deliver solid EBITDA margin expansion year-over-year.
Speaker Change: As we've said Zillow is the housing Super App, and we are continually adding updates and improvements to it guided by our five for sale growth pillars touring financing seller solutions, enhancing our partner network and integrating our services.
Jeremy: Q2 residential revenue grew 8% year-over-year to $409 million.
Jeremy: Rentals continued its strong growth with 117 million revenue in Q2, up 29% year-over-year.
Speaker Change: Our for sale growth pillars, Mark the pathway to meeting our goals to increase customer transaction share to 6% by the end of 2025.
Jeremy: Multifamily revenue is up 44% year-over-year, driven by strong growth in our multifamily property count, with 44,000 properties at the end of Q2, up from 40,000 at the end of Q1.
Speaker Change: We are also focused on building up rentals, which currently represents 20% of our revenue and is growing rapidly.
Speaker Change: First up is touring.
Speaker Change: Integrating our touring solutions into our buyer flow is meaningfully improving our ability to identify high intent customers and connect them with our premier agent partners.
Jeremy: We also continue to make strong progress in mortgages, with Q2 revenue of $34 million, up 42% year-over-year, and purchase mortgage origination volume growing 125% year-over-year.
Speaker Change: We've seen that those touring connections convert at three times the rate of other actions on Zillow.
Jeremy: These successes come despite a persistently challenging mortgage rate environment, as evidenced by our estimate of total industry purchase loan origination volume being down mid-single digits year-over-year in Q2.
Speaker Change: Last month, we nearly doubled the number of markets with real time touring and we're seeing positive early results from being better able to connect higher intent customers with our premier agent partners.
Jeremy: We continue to believe our most important investments are in tech innovations that improve the customer experience, which has helped us earn and maintain our strong brand position and massive engaged audience of movers.
Speaker Change: In fact, we have already achieved our end of year target of approximately 20% of our connections coming from real time touring as well as improved transaction conversion.
As one of the many improvements we're making to this part of the customer journey as a leader in touring software last quarter, we introduced a touring agreement that instills more transparency into the process.
Jeremy: In Q2, we reported 231 million average monthly unique users across the Zillow ecosystem of apps and sites.
Jeremy: As you'll remember from previous calls and our February investor presentation, about 80% of our users come to us organically, and they're using our app three times more than anyone else in the category.
Speaker Change: The early indicators of success, we saw in our pilot gave us the confidence to integrated into Zillow is touring experience and just last week. The agreement became part of the request a tour flow on Zillow for nearly 80% of our tour connections.
Jeremy: Another way to measure traffic and brand strength is through Comscore, which is widely viewed among internet brands as a reliable, transparent, third-party source because it aims to capture the number of unique visitors while de-duping cookies.
Speaker Change: We plan to roll it out to remaining torq connections in the coming months <unk>.
Speaker Change: Facilitating consumer friendly agreements earlier in the funnel is not only an opportunity for us to help educate consumers and agents navigate the industry rule changes, but it also helps us identify higher intent customers send more qualified connections to our premier agent partners and drive conversion rates.
Jeremy: According to Comscore, Zillow Group's absent sites had 116 million average monthly unique visitors in Q2.
Speaker Change: We're pleased with the progress we're making to transform and digitize the moving experience on behalf of buyers, sellers, renters, agents, and the broader industry.
Speaker Change: I'll now move on to financing.
Speaker Change: We have been working to integrate Zillow home loans more seamlessly with our premier agent partner network and throughout the customer journey.
Jeremy: Since 2022, we've been building the Digitally Integrated Transaction Experience and testing it in our enhanced markets across the country.
Speaker Change: Overall customer adoption rates in our nine most mature enhanced markets have reached the mid teens and nearly 60% of our Zillow home loan originations are represented by Premier agent partner.
Jeremy: Through this year, we've been increasing our breadth of coverage across more markets and our depth of penetration in those markets as we drive towards sustainable, profitable growth.
Speaker Change: To further capture buyers' attention. We've also launched innovative tools through Zillow home loans to help them more accurately understand what they can afford in Q2, we introduced a feature called by ability, which gives buyers a personalized real time estimates of the home price and monthly payment that fit within there.
Jeremy: As of the end of Q2, we're in 19 enhanced markets, expanding to 36 by the end of August , well on our way to achieving our goal of 40 by the end of 2024.
Jeremy: As we've said, Zillow is the housing super app, and we are continually adding updates and improvements to it, guided by our five for sale growth pillars. Touring, financing, seller solutions, enhancing our partner network, and integrating our services.
Speaker Change: <unk>.
Speaker Change: Powered by mortgage rates through Zillow home loans and available to check regularly in the Zillow app.
Speaker Change: Our efforts have accelerated purchase mortgage growth with $756 million in purchase loan origination volume in Q2, a 125% year over year increase.
Jeremy: Our four sale growth pillars mark the pathway to meeting our goals to increase customer transaction share to 6% by the end of 2025.
Jeremy: We are also focused on building up rentals, which currently represents 20% of our revenue and is growing rapidly.
Speaker Change: We expect continued purchase mortgage growth for Zillow home loans as we launch more enhanced markets and continued to improve our go to market integration with our Premier agent partners.
Jeremy: First up is touring. Integrating our touring solutions into our buyer flow is meaningfully improving our ability to identify high-intent customers and connect them with our premier agent partners.
For our seller solutions update I'll focus on Zillow showcase a unique offering unlike anything else available today that not only make selling a home easier, but also creates real value for sellers and their agents.
Jeremy: We've seen that those Turing connections convert at three times the rate of other actions on Zillow.
Jeremy: Last month, we nearly doubled the number of markets with real-time touring, and we're seeing positive early results from being better able to connect higher-intent customers with our Premier Agent partners.
Speaker Change: So a showcase elevates agents brand presence on Zillow and provides an enhanced shopping experience through our AI powered homegrown rich media and floor plant technology.
Jeremy: In fact, we have already achieved our end-of-year target of approximately 20% of our connections coming from real-time TORI, as well as improved transaction conversion.
Speaker Change: Showcase listings drive higher engagement compared to similar non showcase listings on zillow more views more saves and more shares.
Jeremy: As one of the many improvements we're making to this part of the customer journey as a leader in touring software, last quarter we introduced a touring agreement that instills more transparency into the process.
Speaker Change: But even more importantly homes that list with showcase our selling faster and for more money.
Speaker Change: Showcase listings typically sell for 2% more than similar non showcase listings on zillow, a bonus of more than $9000 on a home sold at the average home sale price.
Jeremy: The early indicators of success we saw in our pilot gave us the confidence to integrate it into Zillow's touring experience, and just last week, the agreement became part of the Request a Tour flow on Zillow for nearly 80% of our tour connections.
Speaker Change: Homes listed with showcase are also more likely to secure an accepted offer within 14 days.
Speaker Change: What's more we've observed that agents, who use <unk> showcase our winning 20% more listings than similar agents on zillow.
Jeremy: We plan to roll it out to remaining tour connections in the coming months.
Jeremy: Facilitating consumer-friendly agreements earlier in the funnel is not only an opportunity for us to help educate consumers and agents navigate the industry rule changes, but it also helps us identify higher-intent customers, send more qualified connections to our premier agent partners, and drive conversion rates.
Speaker Change: These results have made it an attractive offering for real estate professionals.
Speaker Change: Zillow showcases available to agents in every market after launching nationwide earlier this year, even though it's early days, we're pleased to share that more than 1% of all new listings nationwide are now using showcase.
Speaker Change: I'll now move on to financing.
Speaker Change: We are on our way to our goal of 5% to 10% listing coverage, which represents a $150 million to $300 million annual revenue opportunity and we believe there is potential for future growth beyond that.
Speaker Change: We have been working to integrate Zillow Home Loans more seamlessly with our Premier Agent Partner Network and throughout the customer journey.
Speaker Change: Overall customer adoption rates in our nine most mature enhanced markets have reached the mid-teens and nearly 60% of our Zillow home loan originations are represented by a Premier Agent Partner.
Speaker Change: This takes me to our next update enhancing our partner network.
Speaker Change: Our Premier agent partners represent some of the best most professional agents in real estate. We believe are poised to take share in the evolution of the industry is experiencing.
Speaker Change: To further capture buyers' attention, we've also launched innovative tools through Zillow Home Loans to help them more accurately understand what they can afford.
Speaker Change: Recall that not every real estate agent is a zillow premier agent partner in fact since 2015, we've shrunk our active partner base by roughly 60%, while our premier agent revenue has grown by more than two and a half times over the same timeframe.
Speaker Change: In Q2, we introduced a feature called Buyability, which gives buyers a personalized, real-time estimate of the home price and monthly payment that fit within their budget, powered by mortgage rates through Zillow Home Loans and available to check regularly in the Zillow app.
Speaker Change: We've oriented premier agent around some of the best agent teams. Those that we believe provides superior customer service understand the industry and their local market have a proven ability to scale and make the most money to invest alongside the.
Speaker Change: Our efforts have accelerated purchase mortgage growth, with $756 million in purchase loan origination volume in Q2, a 125% year-over-year increase.
Speaker Change: The top 20% of agent teams handle 80% of transactions and nearly four and five Zillow Premier agent partners are in that top tier.
Speaker Change: We expect continued purchase mortgage growth for Zillow Home Loans as we launch more enhanced markets and continue to improve our go-to-market integration with our Premier Agent partners.
Speaker Change: We are supporting our partners by providing them with some of the best digital tools and solutions.
Speaker Change: For our seller solutions update, I'll focus on Zillow Showcase, a unique offering unlike anything else available today that not only makes selling a home easier, but also creates real value for sellers and their agents.
Speaker Change: For example, we're really pleased with the early results eight months after our acquisition of follow up off one of real estate as a leading customer relationship management systems.
Speaker Change: More than 70% of our connections and enhanced markets are being managed through follow boss.
Speaker Change: Zillow Showcase elevates agents brand presence on Zillow and provides an enhanced shopping experience through our AI powered homegrown rich media and floor plan technology.
Speaker Change: And those substantial adoption rates set the stage for us to build an improved features and services that help those partners gained share.
Speaker Change: Showcase listings drive higher engagement compared to similar non-showcase listings on Zillow. More views, more saves, and more shares.
Speaker Change: And finally, integrating our services, where the for sale growth pillars come together in the Zillow housing Super App experience.
Speaker Change: But even more importantly, homes that list with Showcase are selling faster and for more money.
Speaker Change: Providing high intent customers with valuable solutions working with some of the best agents and providing those agents with some of the best tools has paid off for us in our first four enhanced markets. We've seen revenue growth per total transaction value increased by more than 80% since the beginning of 2023.
Speaker Change: Showcase listings typically sell for 2% more than similar non-showcase listings on Zillow, a bonus of more than $9,000 on a home sold at the average home sale price.
Speaker Change: Homes listed with Showcase are also more likely to secure an accepted offer within 14 days. And what's more, we've observed that agents who use Zillow Showcase are winning 20% more listings than similar agents on Zillow.
Speaker Change: Compared with the more than 50% growth, we reported back on the February call.
Speaker Change: And as we expand we are consistently seeing signs of repeatable success and the 13 enhanced markets. We were in at the end of Q1, we are seeing gains in revenue per total transaction value.
Speaker Change: These results have made it an attractive offering for real estate professionals.
We see an opportunity to increase conversion and revenue per total transaction value even more from here as we launch the remaining enhanced markets. This year.
Speaker Change: Zillow Showcase is available to agents in every market after launching nationwide earlier this year. Even though it's early days, we're pleased to share that more than 1% of all new listings nationwide are now using Showcase.
Speaker Change: Now turning our focus to rentals.
Speaker Change: Last quarter, we released an investor presentation and talk through the massive opportunity in front of US today. There is no nationwide marketplace containing all rental listings, resulting in a fragmented experience for renters.
Speaker Change: We are on our way to our goal of 5-10% listing coverage, which represents a $150-300 million annual revenue opportunity, and we believe there is potential for future growth beyond that.
Speaker Change: We are building a two sided marketplace with a comprehensive suite of listings, both multifamily and long tail that enables renters to more easily shop tour apply sign a lease and pay rent securely all on one convenient platform zillow.
Speaker Change: This takes me to our next update, Enhancing Our Partner Network.
Speaker Change: Our premier agent partners represent some of the best, most professional agents in real estate, who we believe are poised to take share in the evolution the industry is experiencing.
Speaker Change: and
Speaker Change: Recall that not every real estate agent is a Zillow Premier Agent partner. In fact, since 2015, we've shrunk our active partner base by roughly 60%, while our Premier Agent revenue has grown by more than two and a half times over the same time frame.
Speaker Change: Having more rental listings in multifamily properties and ramping up our marketing have both helped drive customer awareness of rentals on zillow.
Speaker Change: In June our total rental unique visitors were up more than 20% year over year. According to Comscore widening our margin as the leading online rentals brand with the largest audience and number one preference among renters.
Speaker Change: We've oriented Premier Agent around some of the best agent teams, those that we believe provide superior customer service, understand the industry in their local market, have a proven ability to scale, and make the most money to invest alongside us.
Speaker Change: We expect multifamily to be the primary driver of our rentals revenue growth and we made great progress in Q2.
Speaker Change: The top 20% of agent teams handle 80% of transactions, and nearly four in five Zillow Premier agent partners are in that top tier.
Zillow now has 44000 multifamily properties, 38% more than a year ago.
Speaker Change: And our exclusive partnership with Realtor Dot Com is further boosting exposure for our multifamily listings, helping our partners reach even more renters.
Speaker Change: We are supporting our partners by providing them with some of the best digital tools and solutions.
Speaker Change: We have a lot of work ahead, but with multifamily revenue up 44% year over year, we are on our way with a $1 billion plus revenue opportunity in front of us.
Speaker Change: For example, we're really pleased with the early results eight months after our acquisition of Follow-Up Boss, one of real estate's leading customer relationship management systems.
Speaker Change: Before handing it over to Jeremy Hoffman I want to congratulate the exceptional zillow team on our eighth consecutive quarter of total revenue outperformance, it's their dedication and expertise that continued to drive our business forward as we work to deliver exceptional products and services for consumers agents and the broader industry.
Speaker Change: More than 70% of our connections in enhanced markets are being managed through Follow a Boss.
Speaker Change: And those substantial adoption rates set the stage for us to build and improve features and services that help those partners gain share.
Speaker Change: And finally, integrating our services, where the four sale growth pillars come together in the Zillow Housing Super App experience.
Speaker Change: Our successes to date give me a great deal of confidence in our future. We're on track to meet our expectations for 2024 to deliver double digit revenue growth and modestly expand our EBITDA margins.
Speaker Change: Providing high-intent customers with valuable solutions, working with some of the best agents, and providing those agents with some of the best tools has paid off for us.
Speaker Change: And we believe we are on our way to strong GAAP profitability overtime that benefits all of us as shareholders. Thank you for being on this journey with US I will now pass the line over to Jeremy Hoffman.
Speaker Change: In our first four enhanced markets, we've seen revenue growth per total transaction value increase by more than 80% since the beginning of 2023.
Speaker Change: compared with the more than 50% growth we reported back on the February call.
Speaker Change: Thanks, Jeremy and congratulations I'm really excited for you and for US as you lead us through this next chapter for the company.
Speaker Change: And as we expand, we are consistently seeing signs of repeatable success. In the 13 enhanced markets we were in at the end of Q1, we are seeing gains in revenue per total transaction value.
Jeremy Hoffman: I'll start with our Q2, 2024 results, which exceeded expectations for revenue and EBITDA.
Jeremy Hoffman: Revenue in Q2 was up 13% year over year to $572 million, which was $39 million above the midpoint of our outlook range.
Speaker Change: We see an opportunity to increase conversion and revenue per total transaction value even more from here as we launch the remaining enhanced markets this year.
Speaker Change: Our strategy is working and we are seeing our investments drive outperformance across each of our revenue categories, including residential rentals and mortgages.
Speaker Change: Now turning our focus to rentals.
Speaker Change: Last quarter, we released an investor presentation, talked through the massive opportunity in front of us. Today, there is no nationwide marketplace containing all rental listings, resulting in a fragmented experience for renters.
Speaker Change: For the quarter, we outperformed the broader residential real estate industry growth of 3% According to data from the north.
Speaker Change: We are building a two-sided marketplace with a comprehensive suite of listings, both multifamily and long-tail, that enables renters to more easily shop, tour, apply, sign the lease, and pay rent securely, all on one convenient platform, Zillow.
Speaker Change: Additionally, we estimate that the total purchase loan volume for mortgage buyers, which is more aligned with our customer base for Premier agent was down mid single digits year over year in Q2 and underperformed the overall market.
Speaker Change: On a GAAP basis Q2, net loss was $17 million, representing 3% of our revenue.
Speaker Change: Having more rental listings and multifamily properties and ramping up our marketing have both helped drive customer awareness of rentals on Zillow.
Speaker Change: EBITDA was $134 million for the quarter, resulting in a 23% EBITDA margin a year over year margin expansion of more than 100 basis points.
Speaker Change: In June , our total rental unique visitors were up more than 20% year-over-year according to Comscore, widening our margin as the leading online rentals brand with the largest audience and number one preference among renters.
Speaker Change: The combination of our revenue outperformance and effective cost management delivered the improved year over year EBITDA results.
Speaker Change: We expect multifamily to be the primary driver of our rentals revenue growth, and we made great progress in Q2.
Speaker Change: Q2 residential revenue grew 8% year over year to $409 million outperforming our outlook range.
Speaker Change: Zillow now has 44,000 multifamily properties, 38% more than a year ago.
Speaker Change: Our premier agent revenue benefited from the ongoing investments in our top and mid funnel experiences that drove improvements in our overall connection rates and we also saw better than expected conversion rates.
Speaker Change: And our exclusive partnership with Realtor.com is further boosting exposure for our multifamily listings, helping our partners reach even more renters.
Speaker Change: Looking at our relative performance the investments we have made since the beginning of 2022 throughout our funnel has paid off.
Speaker Change: We have a lot of work ahead, but with multifamily revenue up 44% year-over-year, we are on our way with a billion-dollar-plus revenue opportunity in front of us.
Speaker Change: Over the last two years, we have increased our ability to connect customers with partner agents by over 2000 basis points.
Jeremy Hofmann: Before handing it over to Jeremy Hofmann, I want to congratulate the exceptional Zillow team on our eighth consecutive quarter of total revenue outperformance.
Speaker Change: This has led to residential revenue in Q2 growing 4% when compared to the same period in 2022 or more than 2000 basis points better than the industry, which is down approximately 20% over the same time period.
Jeremy Hofmann: It's their dedication and expertise that continue to drive our business forward as we work to deliver exceptional products and services for consumers, agents, and the broader industry.
Speaker Change: Rental revenue grew 29% year over year in Q2 to $117 million, primarily driven by our multifamily revenue, which grew 44% year over year.
Jeremy Hofmann: Our successes to date give me a great deal of confidence in our future. We're on track to meet our expectations for 2024 to deliver double-digit revenue growth and modestly expand our EBITDA margins.
Speaker Change: We are executing well on our rental strategy to develop a two sided marketplace with the most comprehensive set of rentals listings.
Jeremy Hofmann: and we believe we are on our way to strong gap profitability over time that benefits all of us as shareholders.
Speaker Change: Thank you for being on this journey with us. I will now pass the line over to Jeremy Hofmann.
Speaker Change: We saw the number of multifamily properties on our apps and sites growth, 38% year over year, reaching an all time high of 44000 multifamily properties as of the end of Q2.
Speaker Change: Thanks, Jeremy, and congratulations. I'm really excited for you and for us as you lead us through this next chapter for the company.
Jeremy Hofmann: I will start with our Q2 2024 results, which exceeded expectations for revenue and EBITDA.
Speaker Change: Total active listings across our entire rentals marketplace were up more than 16% year over year to an industry, leading $1 9 million listings in June.
Jeremy Hofmann: Revenue in Q2 was up 13% year-over-year to $572 million, which was $39 million above the midpoint of our outlook range.
Speaker Change: Mortgages revenue growth accelerated in Q2 up 42% year over year to $34 million as revenue growth begins to more closely align with zillow home loans growth.
Speaker Change: Our strategy is working, and we are seeing our investments drive outperformance across each of our revenue categories, including residential, rentals, and mortgages.
Speaker Change: The HL purchase loan origination volume grew 125% year over year to $756 million in Q2.
Jeremy Hofmann: For the quarter, we outperformed the broader residential real estate industry growth of 3% according to data from the NAR.
Speaker Change: Our mortgage strategy to provide consumer greater financing choice with greater ease from a brand name trust is leading to more customers choosing financing through zillow home loans.
Jeremy Hofmann: Additionally, we estimate that the total purchase loan volume for mortgage buyers, which is more aligned with our customer base for Premier Agent, was down mid-single digits year-over-year in Q2 and underperformed the overall market.
Speaker Change: EBITDA expenses in Q2 totaled $438 million in line with our outlook as a result of our ongoing focus on cost management.
Jeremy Hofmann: On a gap basis, Q2 net loss was $17 million, representing 3% of our revenue.
Speaker Change: We ended Q2 with $2 $6 billion of cash and investments down from $2 9 billion at the end of Q1.
Jeremy Hofmann: EBITDA was $134 million for the quarter, resulting in a 23% EBITDA margin, a year-over-year margin expansion of more than 100 basis points.
Speaker Change: Positive net operating cash flow was more than offset by $88 million of repurchases of convertible senior notes due in 2025, and the repurchase of $292 million of our shares at a weighted average price of roughly $42.
Jeremy Hofmann: The combination of our revenue outperformance and effective cost management delivered the improved year-over-year EBITDA results.
Jeremy Hofmann: Q2 residential revenue grew 8% year-over-year to $409 million, outperforming our outlook range.
Speaker Change: As of the end of Q2, we had $1 5 billion of outstanding convertible debt, which includes $608 million that is due in September of this year and $419 million that is due in may of 2025, we expect to settle the principal balances in cash and any conversion premiums and shares of class C capital stock.
Jeremy Hofmann: Our premier agent revenue benefited from the ongoing investments in our top and mid-funnel experiences that drove improvements in our overall connection rates, and we also saw better than expected conversion rates.
Jeremy Hofmann: Looking at our relative performance, the investments we have made since the beginning of 2022 throughout our funnel have paid off.
Speaker Change: After backing out our convertible debt, we had a net cash and investments balance of $1 1 billion at the end of the quarter, which gives us continued financial flexibility going forward.
Jeremy Hofmann: Over the last two years we have increased our ability to connect customers with partner agents by over 2,000 basis points.
Jeremy Hofmann: This has led to residential revenue in Q2 growing 4% when compared to the same period in 2022, or more than 2,000 basis points better than the industry, which is down approximately 20% over the same time period.
Speaker Change: Turning to our outlook for Q3, we expect residential revenue to be between $375 million and $385 million.
Speaker Change: Our residential revenue outlook for Q3 is driven by the normal seasonality of Premier agent as well as continued strong contributions from our showing time, plus new construction and follow up boss product offerings.
Jeremy Hofmann: Rentals revenue grew 29% year-over-year in Q2 to $117 million, primarily driven by our multifamily revenue, which grew 44% year-over-year.
Speaker Change: We expect rental revenue to grow in the mid 20% range year over year in Q3, we expect multifamily revenue to grow faster than rentals revenue overall as we benefit from our sales execution, our national brand awareness campaign, and our partnership with Realtor Dot com.
Jeremy Hofmann: We are executing well on our rental strategy to develop a two-size marketplace with the most comprehensive set of rentals listings.
Jeremy Hofmann: We saw the number of multifamily properties on our apps and sites grow 38% year over year, reaching an all-time high of 44,000 multifamily properties as of the end of Q2.
Speaker Change: For mortgages, we expect a similar year over year revenue growth rate to what we reported in Q2 2024, we remain on track to further integrate premier agent and Zillow home loans with our planned enhanced market expansion in Q3.
Jeremy Hofmann: Total active listings across our entire rentals marketplace were up more than 16% year-over-year to an industry-leading 1.9 million listings in June .
Jeremy Hofmann: Mortgage's revenue growth accelerated in Q2, up 42% year-over-year to $34 million as revenue growth begins to more closely align with Zillow home loans growth.
We expect total revenue to be between $545 million and $560 million in Q3, implying a year over year increase of 11% at the midpoint of our outlook range.
Speaker Change: ZHL purchase loan origination volume grew 125% year-over-year to $756 million in Q2.
Speaker Change: This compares to our estimates for their residential real estate industry total transaction value to be in the mid single digit year over year growth range for Q3.
Jeremy Hofmann: Our mortgage strategy to provide consumers greater financing choice with greater ease from a brand name trust is leading to more customers choosing financing through Zillow Home Loans.
Speaker Change: We expect EBITDA to be between $95 million and $110 million in Q3, equating to a 19% margin at the midpoint of our outlook range.
Jeremy Hofmann: EBITDA expenses in Q2 totaled $438 million in line with our outlook as a result of our ongoing focus on cost management.
Speaker Change: This implies EBITDA expenses will increase from $438 million in Q2 to an estimated $450 million in Q3.
Jeremy Hofmann: We ended Q2 with 2.6 billion dollars of cash and investments down from 2.9 billion at the end of Q1.
Speaker Change: The sequential increase in EBITDA expenses is driven by an uptick in our brand marketing spend related to our rentals brand campaign.
Jeremy Hofmann: Positive net operating cash flow was more than offset by $88 million of repurchases of convertible senior notes due in 2025 and the repurchase of $292 million of our shares at a weighted average price of roughly $42.
Speaker Change: We expect <unk> costs to decline sequentially from Q3 to Q4 as marketing spend decreases in line with typical seasonal media spend.
Speaker Change: Moving to the full year I want to reiterate that we expect to drive double digit revenue growth for 2024 with modest EBITDA margin margin expansion, primarily driven by our growth pillars.
Jeremy Hofmann: As of the end of Q2, we had $1.5 billion of outstanding convertible debt, which includes $608 million that is due in September of this year, and $419 million that is due in May of 2025. We expect to settle the principal balances in cash and any conversion premiums in shares of Class C capital stock.
Speaker Change: Our annual fixed cost run rate is approximately $1 billion consistent with where we stood at the end of 2023.
Speaker Change: We continue to believe our fixed investments are at the right level, which should result in our fixed cost growing modestly with inflation.
Jeremy Hofmann: After backing out our convertible debt, we had a net cash and investments balance of $1.1 billion at the end of the quarter, which gives us continued financial flexibility going forward.
Speaker Change: Consistent with previous quarters, our various variable costs are expected to grow ahead of revenue initially as we ramp new hires to be fully productive.
Jeremy Hofmann: Turning to our outlook for Q3, we expect residential revenue to be between $375 million and $385 million.
Speaker Change: Advertising spend as a lever we view is separate and distinct from the rest of the cost base and one we will pull depending on the growth opportunities we see in front of us we.
Speaker Change: We are demonstrating the benefit of pulling this advertising lever in our rentals marketplace given the growth we're seeing in traffic and revenue and we are pleased with the early results.
Jeremy Hofmann: Our residential revenue outlook for Q3 is driven by the normal seasonality of Premier Asian, as well as continued strong contributions from our Showing Time Plus, new construction, and follow-up boss product offerings.
Speaker Change: To close it is clear we are executing on our strategy.
Speaker Change: We are growing across every part of our business. We are seeing great results from our growth pillars, and our enhanced markets that will continue to rollout. This year and we are on track to grow revenue by double digits and expand margins in 2024 and with that operator, we'll open the line for questions.
Jeremy Hofmann: We expect rentals revenue to grow in the mid-20% range year over year in Q3. We expect multifamily revenue to grow faster than rentals revenue overall as we benefit from our sales execution, our national brand awareness campaign, and our partnership with Realtor.com.
At this time, if you would like to ask a question. Please click on the raise hand button, which can be found on the black bar at the bottom of your screen. When it is your turn you will receive a message on your screen from the house, allowing you to talk.
Jeremy Hofmann: For mortgages, we expect a similar year-over-year revenue growth rate to what we reported in Q2 2024. We remain on track to further integrate Premier Agent and Zillow Home Loans with our planned enhanced market expansion in Q3.
Speaker Change: And Youll hear your name called please accept Amit your audio and ask your question.
Jeremy Hofmann: We expect total revenue to be between $545 million and $560 million in Q3, implying a year-over-year increase of 11% at the midpoint of our outlook range.
Speaker Change: One moment to allow the <unk> to form.
Speaker Change: Our first question comes from Ron Josey from Citi.
Jeremy Hofmann: This compares to our estimates for the residential real estate industry total transaction value to be in the mid-single-digit year-over-year growth range for Q3.
Ron Josey: Great. Thanks for taking the question this new.
Ron Josey: Making sure you can hear me, Okay, guys are rich Jeremy Jeremy can you hear me.
Jeremy Hofmann: We expect EBITDA to be between $95 million and $110 million in Q3, equating to a 19% margin at the midpoint of our outlook range.
Ron Josey: We got you all right cool so congrats on the new roles, Jeremy specifically enrich back to back to Chairman you mentioned in your conversation upfront just how zillow is in great shape financially strategically operationally organizationally.
Jeremy Hofmann: This implies EBITDA expenses will increase from $438 million in Q2 to an estimated $450 million in Q3.
Speaker Change: And why now is the right time at the same time the industry is going through a change so just a little more insights on why now would be helpful. And then more importantly, I guess.
Jeremy Hofmann: The sequential increase in EBITDA expenses is driven by an uptick in our brand marketing spend related to our rentals brand campaign.
Speaker Change: When we have enhanced markets now in 36 markets by the end of August 40 by the end of the year I think accounting for around call. It 40% of total connections we get a lot of questions around the benefits of enhanced market. So can you take a step back and just remind us on the benefits of enhanced markets as we get to that call it 6% of transactions unloved.
Jeremy Hofmann: We expect EBITDA costs to decline sequentially from Q3 to Q4 as marketing spend decreases in line with typical seasonal media spend.
Jeremy Hofmann: Moving to the full year, I want to reiterate that we expect to drive double-digit revenue growth for 2024 with modest EBITDA margin expansion, primarily driven by our growth pillars.
To hear more about what youre seeing in some of the markets.
Speaker Change: And then given the structural change in the industry, how does enhance market sort of impact that or benefit from it thanks, guys and congrats again.
Jeremy Hofmann: so
Jeremy Hofmann: Our annual fixed cost run rate is approximately $1 billion, consistent with where we stood at the end of 2023. We continue to believe our fixed investments are at the right level, which should result in our fixed costs growing modestly with inflation.
Speaker Change: Thanks, Ron So maybe I'll take the first bit.
Speaker Change: Jeremy Wacksman and you can you can come in on the second yes, yes, okay.
Jeremy Hofmann: Consistent with previous quarters, our various variable costs are expected to grow ahead of revenue initially as we ramp new hires to be fully productive.
Speaker Change:
Jeremy Wacksman: Yeah, I mean, it's incredibly impressive to me Ron how well we are executing as a company. Despite all of the kind of stormy weather that is that constitutes the real estate macro I mean, we're just posting.
Jeremy Hofmann: Advertising spend is a lever we view as separate and distinct from the rest of the cost base and one we will pull depending on the growth opportunities we see in front of us.
Jeremy Hofmann: We are demonstrating the benefit of pulling this advertising lever in our rentals marketplace given growth we are seeing in traffic and revenue, and we are pleased with the early results.
Ron Josey: Terrific numbers, we have.
Speaker Change: For three years now since Jeremy Wacksman was promoted to COO running most of the company and all the lines of business.
Jeremy Hofmann: To close, it is clear we are executing on our strategy.
Jeremy Hofmann: We are growing across every part of our business. We are seeing great results from our growth pillars in our enhanced markets that will continue to roll out this year. And we are on track to grow revenue by double digits and expand margins in 2024. And with that operator, we'll open the line for questions.
Speaker Change: We have talked about our housing Super App strategy, and our rental strategy in our mortgages strategy.
Speaker Change: And I would say you all as investors have been like Okay show me that that is actually going to work as a way to digitize and integrate this transaction and create a really big long term growth opportunity and I would say now that strategically we.
Speaker Change: At this time, if you would like to ask a question, please click on the raise hand button, which can be found on the black bar at the bottom of your screen.
Speaker Change: When it is your turn, you will receive a message on your screen from the host allowing you to talk, and then you will hear your name called. Please accept, unmute your audio, and ask your question. We will wait one moment to allow the queue to form.
Speaker Change: Kind of Derisked the concept of what we're building here.
Jeremy Wacksman: We have a long way to go to execute and fulfill what I see as our ultimate rights of market share and claiming that in growth, but strategically we are in really good shape and that is in no small part due to Jeremy Wacksman his leadership over the last.
Speaker Change: for
Speaker Change: Our first question comes from Ronald Josey from The City.
Ronald Josey: Great, thanks for taking the question, this new, making sure you can hear me okay, guys, Rich, Jeremy, Jeremy, can you hear me? We can, yeah, we got you. All right, cool. So, congrats on the new roles, Jeremy, specifically, and Rich, back to Chairman. You mentioned in your conversation up front just how Zillow is in great shape financially, strategically, operationally, organizationally, and why now is the right time. At the same time, the industry is going through a change, so just a little more insights on why now would be helpful. And then, more importantly, I guess,
Ron Josey: Few years getting this all together and so that is why the time is right. Jeremy is ready the company is ready and Ron personally I am ready as well.
Ron Josey: I am not I'm, not going anywhere I'm, not doing anything else, but I'm really excited to be moving to a role of coach and advisor rather than the daily field General. Thank you, but maybe I'll have our new Chief Executive Officer, Jeremy Wacksman answer the second part of your question.
Speaker Change: You know, when we have enhanced markets now in 36 markets by the end of August , 40 by the end of the year, I think accounting for around
Louie Thanks, Ron.
Jeremy Wacksman: On enhanced markets just a reminder, since since you asked.
Speaker Change: Call it 40% of total connections
Speaker Change: You know, we get a lot of questions around the benefits of enhanced markets. So, can you take a step back and just remind us on the benefits of enhanced markets as we get to that, call it, 6% of transactions? I'd love to hear more about what you're seeing in some of the markets. And then, given the structural change in the industry, you know, how does enhanced markets sort of impact that or benefit from it?
The metrics there its market share and we measure that in terms of revenue per total transaction value.
Jeremy Wacksman: And then it's also revenue per transaction rights of Nam transactions and revenue per transaction gets you to that and 17.
Speaker Change: 36 markets by the end of August on our way to 40 by the end of the year.
Speaker Change: Thanks guys and congrats again.
Speaker Change: That in each of those markets, we're not serving 100% of customers. So I think we gave a stat earlier this year, that's going to be about 20% of all customers will get that experience and that experience allows them to get a real time touring and <unk> experienced a zillow home loans as a financing option if they choose Ed and then most importantly, the enhanced partner network.
Speaker Change: Thanks, Ron. So maybe I'll take the first bit, Jeremy Waksman, and you can come in on the second. Yeah. That sound good? Yeah. Okay.
Jeremy Waksman: Yeah, I mean, it's incredibly impressive to me, Ron, how well we are executing as a company despite...
Speaker Change: All of the kind of stormy weather that constitutes the real estate macro. I mean, we're just posting.
Jeremy Hoffman: The Handpick set of partners that Jeremy Hoffman talked about in his prepared remarks that really deliver a great job provide great customer service, Ron Professionalized business says for the modern Internet consumer so that's what the enhanced market experience is as we bring that to more and more customers. We are seeing in the markets. We're in a revenue per total transaction.
Ron: terrific numbers
Speaker Change: We have, for three years now, since Jeremy Wacksman was promoted to COO, running most of the company on all the lines of business,
Jeremy Hoffman: Value gains and we expect those gains to contribute to more of our residential and total company revenue as we get to that 20% of customers and then into next year more of those customers and so you know.
Ronald Josey: We have
Ronald Josey: talked about our housing super app strategy and our rental strategy and our mortgages strategy.
Ronald Josey: and...
Speaker Change: The land and expand strategy is working well, we're really excited to accelerate $2 36 markets by the end of August and be at 40 markets by the end of the year.
Speaker Change: I would say you all as investors have been like, okay, show me that that is actually going to work as a way to digitize and integrate this transaction and create a really big long-term growth opportunity. And I would say now that strategically, we have kind of de-risked the concept of what we're building here.
Speaker Change: Thank you Jeremy Thank you rich.
Speaker Change: Our next question comes from Brad Erickson from RBC.
Brad Erickson: Your line is open Bachelor afraid I mean.
Ronald Josey: We have a long way to go to execute and fulfill what I see as our ultimate rights of market share and claiming that and growth, but strategically we are in really good shape.
Alright, why don't we return to.
Speaker Change: I will come back so we'll go to Nick Jones from citizens champion.
Ronald Josey: And that is in no small part due to Jeremy Waxman's leadership.
Nick Jones: Great. Thanks for taking the questions congratulations Jeremy.
Ronald Josey: over the last few years getting this all together. And so, that is why the time is right. Jeremy is ready, the company is ready, and Ron, personally, I am ready as well. I am not going anywhere, I'm not doing anything else, but I'm really excited to be moving to a role of...
Nick Jones: I have two questions first can you maybe double click on the rentals business, 44% growth in multifamily.
Nick Jones: As impressive can you maybe speak to the key drivers behind the success how are the conversations evolving.
Speaker Change: With the multifamily operators, giving you the confidence.
Speaker Change: It kind of spend after that $1 billion revenue opportunity you hung out and then the second question maybe.
Speaker Change: coach and advisor rather than the the daily field general. Thank you. But maybe I'll have our new chief executive officer Jeremy Waxman answer the second part of your question.
Speaker Change: On traffic volumes.
Speaker Change: Called out three times of our App users I think is the competitive environment heats up rather residential closer to increasingly focus on some of these engagement metrics, let me speak to the or remind us of the benefits of the app as opposed to web traffic our mobile web. Thank you.
Jeremy Waxman: Absolutely, thanks Ron. On enhanced markets
Jeremy Waxman: Just a reminder, since you asked, the metrics there, you know, it's market share, and we measure that in terms of revenue per total transaction value, and then it's also revenue per transaction, right, so num transactions and revenue per transaction gets you to that, and 17, or 36 markets by the end of August .
Speaker Change: Yeah. Thanks, Thanks, Nick Thanks for the questions on rentals.
Yeah, as I said, a little bit in my prepared remarks, and we shared for those that were on in February a more detailed investor presentation on our rental strategy.
Speaker Change: on our way to 40 by the end of the year, or that in each of those markets, we're not serving 100% of customers. So I think we gave a stat earlier this year.
Speaker Change: We're so excited about our rental strategy, because it's really unique and it really solves the consumer problem right. What renters want is to find all inventory. There is no one place for all of inventory there is no MLS for rentals. So they end up having to shop everywhere during a really compressed timeframe, it's super stressful and so we set out years ago to try and assemble as much inventory as possible both Mueller.
Speaker Change: That's going to be about 20% of all customers will get that experience.
Speaker Change: And that experience allows them to get.
Jeremy Hofmann: Real-time Touring and a Touring Experience, Zillow Home Loans as a financing option if they choose it, and then most importantly, the Enhanced Partner Network, you know, the hand-picked set of partners that Jeremy Hofmann talked about in his prepared remarks that really deliver a great job, provide great customer service.
Speaker Change: The family the Big buildings, we all know and long tail the millions of homes and small unit properties that are out there for rent that turnover and frequently by a long tail of owners and we've done that we now have the most listings. We don't have them. All every every year, we try and garner more than we're growing our listing count, but we have most the most inventory of anyone out there and that is.
Ron: Ron professionalized businesses for the modern internet consumer so that's what the enhanced market experience is as we bring that to more and more customers we are seeing in the markets we're in revenue per total transaction value gains and we expect those gains to contribute to more of our residential and total company revenue as we get to that 20% of customers and then in the next year more of those customers and so you know the land and expand strategy is working well we're really excited to accelerate to 36 markets by the end of August and be at 40 markets by the end of the year
Speaker Change: Yielded us the most audience the biggest audience of renters rights. The Zillow rental network is the largest audience. It just grew 20% year over year.
This last month and it continues to grow because renters want that product and so that two sided marketplace now gives way to the monetization growth youre seeing coming from multifamily and so that's the stats I gave in my prepared remarks 44000 buildings on Zillow now up from 40000 last quarter.
Speaker Change: Thank you, Jeremy. Thank you, Richard.
Jeremy Waxman: Our next question comes from Brad Erickson from RBC.
Speaker Change: That's driving the 29% revenue growth, you're seeing which 44% revenue growth in multifamily that's coming from that property count that engagement. The advertisers. So you know.
Speaker Change: Your line is open, Brad. Feel free to unmute.
Speaker Change: That's what gets us so excited it's this really great win win marketplace, where the consumer is getting a better and better experience as the supply comes online and that in turn drives the demand and makes the product better for their renters and vice versa. So that's why you've heard Jeremy Hoffmann talk about using advertising as a lever to help stimulate demand to help continue to make that marketplace spin.
Speaker Change: All right, why don't we return to...
Speaker Change: We'll come back. So we'll go to Nick Jones from Citizens JMP.
Nick Jones: Great, thanks for taking the questions. Congratulations, Jeremy.
Nick Jones: I have two questions. First, can you maybe double-click on the rentals business, 44% growth and multifamily?
Speaker Change: And that's what gives us the excitement not just in Q2's growth and in the guide for rentals, but in the $1 billion plus business opportunity, we see in front of us.
Speaker Change: is impressive. Can you maybe speak to the key drivers behind the success? How are the conversations evolving?
Speaker Change: And then on traffic.
Speaker Change: Yeah, I mean, we have talked long about how the most important part of audience is engaging with that audience and I talked in my prepared remarks that you can measure cookies and devices and people in many ways, but what matters is do people know who you are or do they use you to shop do they find a light in your services and Zillow has long believed that the best.
Speaker Change: with the multifamily operator is giving you the confidence to go, you know, to kind of spend after that $1 billion revenue opportunity you hung out. And then the second question may be.
Speaker Change: on traffic volumes. You know, you called out three times more app users, I think is a competitive environment. He's tougher on residential.
Speaker Change: Folks are increasingly focused on some of these engagement metrics. Can you maybe speak to the, or remind us of the benefits of the app as opposed to web traffic or mobile web? Thank you.
Speaker Change: Way to drive audience has great products, great innovative products amplified by marketing and you see that in the mix of our traffic rate, 80% of our audience comes to US brand direct they come to us because they know who we are and they choose to use us and app usage is a good measure of that right and so that's why I talked about the app being used three times more than the.
Speaker Change: Yeah, thanks. Thanks, Nick. Thanks for the questions. On rentals...
Speaker Change: Yeah, as I said, a little bit of my prepared remarks, and we shared, for those that were on in February , a more detailed investor presentation on our rental strategy. We're so excited about our rental strategy because it's really unique.
Speaker Change: And then the others in the category. It's just a great measure of really healthy deep engagement, if you're buying a home if you're actually trying to shop youre going to use an app and youre going to use a desktop website that ties to that app and youre going to use us as a shopping experience and youre going to use an agent that you find from us and that's going to lead you down the funnel to these transactions. So that's why for us brand engagement in health.
Speaker Change: and it really solves the consumer problem, right? What renters want is to find all the inventory. There is no one-place fill of inventory. There is no MLS for rentals. So they end up having to shop everywhere during a really compressed timeframe. It's super stressful.
Speaker Change: And so we set out years ago to try and assemble as much of the inventory as possible, both multifamily, the big buildings we all know, and long tail, the millions of homes and small unit properties that are out there for rent that turn over infrequently by a long tail of owners.
Speaker Change: The traffic is so important it is the start of this transaction strategy, we're on and as we talk a lot about our goal is to take all that great app usage engagement with audience and turn that into more transactions right. Our goal of 6% transaction share comes from taking the 60, 70% audience share we have and getting.
Speaker Change: And we've done that. We now have the most listings, we still don't have them all, every year we try and go after more and we're growing our listing count, but we have the most inventory of anyone out there, and that has yielded us the most audience, the biggest audience of renters, right? So Zillow's rental network is the largest audience, it just grew 20% year-over-year this last month.
Speaker Change: More of them to use us and use our housing super App to actually buy rent finance or sell their home.
Speaker Change: Okay.
Speaker Change: Our next question will return to Brad Erickson from RBC.
Speaker Change: and it continues to grow because renters want that product.
Speaker Change: Yeah.
Speaker Change: And so that two-sided marketplace now gives way to the monetization growth you're seeing coming from multifamily. And so that's the stats I gave in my prepared remarks, 44,000 buildings on Zillow now, up from 40,000 last quarter. That's driving the 29% revenue growth you're seeing, which 44% revenue growth in multifamily, that's coming from that property count and that engagement with the advertisers. So that's what gets us so excited. It's this really great win-win marketplace where the consumer is getting a better and better experience as the supply comes online. And that then in turn drives the demand and makes the product better for the renters and vice versa. So that's why you've heard Jeremy Hoffman talk about.
Brad Erickson: Hi can you guys hear me.
Speaker Change: Yes, we got you Brad verbal technology is hard.
Brad Erickson: A couple of questions just on the I have to ask the obligatory Commission question. Just first just latest and greatest views on kind of the changes coming in any noticeable observations, yet and kind of what feedback are you getting from your P. As we head into August 17th.
Brad Erickson: And then second.
Brad Erickson: If we assume that any.
Brad Erickson: Fact of the regulatory changes may vary a lot up and down the spectrum of the market talk about how you view zillow is exposure, particularly to that to the degree that that there is any change with commissions.
Speaker Change: using advertising as a lever to help stimulate demand to help continue to make that marketplace spin. And that's what gives us the excitement, not just in Q2's growth and in the guide for rentals, but in the $1 billion-plus business opportunity we see in front of us.
Brad Erickson: Yeah, Brad its Jeremy out, but I'll take that one.
Brad Erickson: I think we can't really speak to broad commission trends, just because 80% of our premier agent base is in that top 20% of all producers.
So we're working with the top agents versus a broad swath of professionals.
Speaker Change: And then on traffic, yeah, I mean, we have talked long about how the most important part of audience is the engagement with that audience.
Speaker Change: That said across our business, we've seen commission rates stay in a pretty tight band over the past three years 'twenty 'twenty four is down a few basis points versus 2023, but in line with 'twenty 'twenty 2022 levels.
Speaker Change: And I talked in my prepared remarks, you can measure cookies and devices in people many ways. But what matters is, do people know who you are? Do they use you to shop? Do they find a light in your services? And Zillow has long believed that the best way to drive audience is great products, great innovative products, amplified by marketing. And you see that in the mix of our traffic. 80% of our audience comes to us brand direct. They come to us because they know who we are, and they choose to use us. And app usage is a good measure of that. And that's why I talked about the app being used three times more than the others in the category. It's just a great measure of really healthy, deep engagement. If you're buying a home, if you're actually trying to shop, you're going to use an app. And you're going to use a desktop website that ties to that app. And you're going to use us as a shopper.
Speaker Change: And I think just stepping back we've been pretty consistent here for a while we believe we and our partners are the outsized beneficiaries of these changes coming a knee in the industry. We have the most customers we work with the best partners. We provide the most technology and we expect our P. A's will deliver and get paid because they provide great service and they and we.
Speaker Change: We think we'll be share takers in any future evolution or dispersion of the industry. So that's how we're seeing it that's been very consistent for a while now and nothing has really changed our minds on that based on the latest things that we can say.
Speaker Change: Got it thanks.
Speaker Change: Our next question comes from Mark Mahaney from Evercore.
Speaker Change: Shopping Experience, and you're going to use an agent that you find from us, and that's going to lead you down the funnel to these transactions.
Mark Mahaney: Two things one just want to wish you rich the best at whatever you're going to do operationally going forwards or just congrats on all the success with the company over the years and best of luck to you to Jeremy and the new CEO role I just want to ask one question about the customer transaction share. So I know the goal is law has long been.
Speaker Change: So that's why, for us, brand engagement and health of traffic is so important. It is the start of this transaction strategy we're on. And as we talk a lot about, our goal is to take all that great app usage engagement with audience and turn that into more transactions. Our goal of 6% transaction share comes from taking this 60%, 70% audience share we have and getting more of them to use us and use our housing super app to actually buy, rent, finance, or sell their home.
Speaker Change: To get to the 6%.
Speaker Change: And could you just quantify other lead markets, where you think your are there any lead markets now where you think you are within spitting distance of that of the different enhanced markets that you're in I know you provided some data around but I just wanted to focus just on that number are there and the other other other markets, where you think youre within a point or point and a half of that thanks.
Speaker Change: For our next question, we'll return to Brad Erickson from RBC.
Brad Erickson: Hi, can you guys hear me?
Speaker Change: A lot yeah.
Speaker Change: Yes, we got you Brad. Verbal technology is hard.
Mark Mahaney: Yeah. Thanks Mark.
Speaker Change: All are on the market share gains I think I said in my prepared remarks, I said in my prepared remarks.
Brad Erickson: A couple questions just on the, I have to ask the obligatory commission question just first just latest and greatest views on kind of the changes coming and any noticeable observations yet and kind of what feedback are you getting from your PAs as we head into August 17th?
Way, we are measuring that is revenue per total transaction value growth and in the first and the oldest enhanced markets, where we have the most data and we have good year over years, which we've given you an update on earlier. This year. We said we were up 50% year over year that growth has accelerated to 80% year over year in those first four and then in the.
Speaker Change: And then second, I guess if we assume that, you know, any effect of the regulatory changes may vary a lot up and down kind of the spectrum of the market. Talk about how you view Zillow's exposure, particularly to that, to the degree that there is any change with commissions.
Speaker Change: 13, and we've been in since Q1, we don't have year over year as yet, but the early trend line is gains in revenue per ton of transaction bioprocess, 13th to that curve looks similar to us as we get into next year, we'll have year over years on more market. So that's that's what gives us confidence that as we take this recipe this housing super App into your experience to more partners in each.
Speaker Change: Thank you. Thank you.
Jeremy Hoffman: Yeah, Brad, it's Jeremy Hoffman. I'll take that one. I think we can't really speak to broad commission trends just because 80% of our premier agent base is in that top 20% of all producers. So we're working with the top agents versus a broad swath of professionals.
Speaker Change: And to more markets, we'll see that same trend line of share and revenue per total transaction value grow the way, we're seeing it in our four original markets.
Speaker Change: That said, across our business.
Speaker Change: You know, we've seen commission rates stay in a pretty tight band over the past three years.
Speaker Change: And Mark I'll, just pile on a bit as Jeremy Hoffman.
Speaker Change: 2024 is down a few basis points versus 2023, but in line with 2022 levels.
Speaker Change: Jeremy Wacksman said it we were at 50% in the first four markets. We grew revenue in 2023, 50% versus total transaction value and we're now at 80%.
Brad Erickson: And I think just stepping back, you know, we've been pretty consistent here for a while. We believe we and our partners are the outsized beneficiaries of these changes coming in the industry. We have the most customers. We work with the best partners. We provide the most technology. And we expect our PAs will deliver and get paid because
Through 18 months of that so you're seeing a consistent steady growth.
Speaker Change: And then on top of that we saw really good results in our oldest markets, which we put in the.
Speaker Change: The Investor deck, we did in February we're in Phoenix and Atlanta over.
Speaker Change: They provide great service, and they and we, we think, will be sharetakers in any future evolution or dispersion of the industry. So that's how we're seeing it. That's been very consistent for a while now, and nothing has really changed our minds on that, based on the latest things that we can see.
Speaker Change: Call. It two year period, we saw 80 and 90% transaction growth during that period of time, which is effectively is close to double. So those are the types of proof points that make us feel quite good and why you see us accelerating the way that we have going from 19 to 36 pretty quickly.
Speaker Change: Got it. Thanks.
Speaker Change: Our next question comes from Mark Mahaney from Evercore.
Speaker Change: It's just because we keep seeing really solid results that we think sets us up quite well for <unk>.
Mark Mahaney: Two things. One, I just want to wish you, Rich, the best at, you know, whatever you're going to do operationally going forward. So, just congrats on all the success with the company over the years and best of luck to you too, Jeremy, in the new CEO role. I just want to ask one question about the customer transaction share. So, I know the goal has long been to get to the 6%.
Speaker Change: Continued future growth.
Speaker Change: Okay. Thank you very much.
Mark Mahaney: Thanks Mark.
Mark Mahaney: Our next question comes from Ryan Mckenna from Zelman.
Ryan Mckenna: Hey, guys, Congrats Jeremy enrich and nice job on the quarter quarter. Thanks for taking the questions.
Ryan Mckenna: I wanted to ask from a macro perspective around first time buyers. So theres been periods in the past where that was called out as a tailwind last quarter. It was mentioned as a headwind within the guidance and obviously you strongly outperformed that so is your sense that this quarter's results came in where they were.
Speaker Change: And could you just quantify, are there any lead markets now where you think you're within spitting distance of that?
Speaker Change: of the different enhanced markets that you're in. I know you've provided some data around, but I just wanted to focus just on that number and the other markets where you think you're within, you know, a point or a point and a half of that. Thanks a lot.
In spite of a drag that did exist from that first time buyer dynamic or did something maybe changed beneath the surface, where that just didn't turn out to be the headwinds you might've expected and kind of part two of that is just any views on this dynamic into the third quarter and kind of what's embedded within the guidance there.
Speaker Change: Yeah, thanks, Mark. On the market share gains, I think I said in my prepared remarks,
Speaker Change: You know, the way we're measuring that is revenue per total transaction value growth. And in the oldest enhanced markets where we have the most data and we have good year-over-years, which we've given you an update on earlier this year, we said we were up 50%.
Ryan Mckenna: Yes, sure Ryan I'll take it it's Jeremy Hoffman I think.
Speaker Change: year-over-year, that growth has accelerated to 80% year-over-year in those first four.
Jeremy Hoffman: The mortgages market was challenged in Q2, we called that out on the in the May call and it persisted. So we think that it was down mid single digits year over year versus 3% up for the housing market. So there was a headwind there we just happened to perform quite well throughout it and that's a that's a great story for US it's one that we feel.
Speaker Change: and then in the...
Speaker Change: 13 that we've been in since Q1. We don't have year-over-years yet, but the early trend line is gains in revenue per total transaction value across those 13. So that curve looks similar to us. As we get into next year, we'll have year-over-years on more markets. So that's what gives us confidence that as we take this recipe, this housing super app, integrated experience, to more partners in each market and to more markets, we'll see that same trend line of share in revenue per total transaction value grow the way we're seeing it in our four original markets.
Jeremy Hoffman: Quite good about and that's a function really.
Jeremy Hoffman: All of us outperforming across the business I think we've really performed well on the residential side, we had a soft pocket in late March and early April when rates spiked, but then they normalized and as a result.
Speaker Change: Yeah, and Mark, I'll just pile on a bit. It's Jeremy Hofmann. You know, Jeremy Wacksman said it.
Jeremy Hoffman: Our ADP marketplace got healthier throughout the quarter, both on new sales and lower churn and then additionally, the conversion across Premier agent, both MVP and flex was stronger than we anticipated and that flowed through right to revenue.
Jeremy Hofmann: We were at 50% in the first four markets we grew revenue. In 2023, 50% versus total transaction value. And we're now at 80%, you know,
Jeremy Hofmann: through 18 months of that, so you're seeing a consistent, steady growth.
And then on the rest of the residential side showcases growing nicely. The new construction marketplace is growing nicely and follow up boss is outperforming what we expected in early days of the acquisition and then you have mortgages and rentals, obviously, Jeremy has talked a bit about that already but rentals is up 29% multifamily was up 44% and then C. H L grew 125%.
Jeremy Hofmann: And then on top of that, you know, we saw really good results in our oldest markets, which we put in the investor deck we did in February , where in Phoenix and Atlanta, over, you know, call it two year period, we saw 80 and 90% transaction growth during that period of time, which, you know, is close to double. So those are the types of proof points that make us feel quite good. And why you see us accelerating the way that we have going from 19 to 36 pretty quickly is just because we keep seeing, you know, really solid results that we think sets us up quite well for, you know, continued future growth.
Jeremy: So really when we look across all of the business in Q2, it felt quite good regardless of what's going on in the first time homebuyer market.
Speaker Change: And then that'd be suffice to say like on the EBITDA front, we're pretty proud of the consistent ability to accurately forecast and hold ourselves accountable on costs as we tell the team when we're in a market like this revenue is harder to forecast, which makes it even more important to be really good on the cost line and for Q2, we expected $440 million a car.
Speaker Change: Okay, thank you very much.
Mark Mahaney: Thanks, Mark.
Speaker Change: Our next question comes from Ryan McKeveny from Zellman.
Speaker Change: Costs, we came in at $438 million. So when we outperformed on the revenue front at all flowed through to the EBITDA line.
Ryan McKeveny: Hey guys, congrats Jeremy and Rich. Nice job on the quarter. Thanks for taking the questions. I wanted to ask from a macro perspective around first-time buyers. So, you know, there's been periods in the past where that was called out as a tailwind. Last quarter it was mentioned.
Speaker Change: Very helpful. Thank you Jeremy.
Speaker Change: And also on the mortgage piece. So obviously, some some some momentum under the surface there sequentially and year over year growing nicely I know there are some moving pieces with the very significant growth in purchase origination volume, but some of the offset on the marketplace side can you just remind us where the marketplace stand.
Speaker Change: As a headwind within the guidance, and obviously you strongly outperformed that, so is your sense that this quarter's results came in where they were in spite of a drag that did exist from that first-time buyer?
Speaker Change: At this point, both strategically and in terms of where that fits in maybe in terms of loan products, our differences against the HL and <unk>.
Speaker Change: dynamic or did something maybe change beneath the surface where you know that just didn't turn out to be the headwinds you might have expected and and kind of part two of that is just any views on on this dynamic into the third quarter and kind of what's embedded within the guidance there?
Speaker Change: Just kind of how you think of that mix between between DHL and marketplace moving forward.
Yeah, Ryan I can take it as Jeremy Hopper, and then Jeremy Wacksman may pilot as well, but I think you're right that the bulk of the business going forward is going to be Zillow home loans. So you see the mortgage category start to more accurately mapped to the Zillow home loans growth that's not to say the marketplace is.
Speaker Change: Yeah, sure, Ryan, I'll take it. It's Jeremy Hofmann. I think...
Speaker Change: The mortgages market was challenged in Q2. We called that out in the May call and it persisted. So, we think that it was down mid-single digits year over year versus 3% up for the housing market. So, there was a headwind there. We just happened to perform quite well throughout it. And that's a great story for us. It's one that we feel quite good about. And that's a function really of us outperforming across the business. I think we really performed well. On the residential side, we had a soft pocket in late March and early April when rates spiked, but then they normalized. And as a result, our MVP marketplace got healthier throughout the quarter, both on new sales and lower term. And then additionally, the conversion...
Speaker Change: And important to it's just secondary.
They're going to be inevitably, they're going to be times in which we can't service the customer through Zillow home loans, and we like having the marketplace as a way to serve customers, regardless right. We're always about customer choice and making sure that in financing, we're providing customer choice as well.
Speaker Change: So we feel quite good about both of those businesses, but the vast majority of the focus.
Speaker Change: Going forward is going to be Enzo almost.
Speaker Change: Got it thanks a lot.
Speaker Change: Our next question comes from John Campbell from Stephens.
Jeremy: across Premier Agent, both MVP and Flex was stronger than we anticipated. And that flowed through, you know, right to revenue. And then on the rest of the residential side, Showcase is growing nicely, the new construction marketplace is growing nicely, and Follow Boss is outperforming what we expected in early days of the acquisition. And then you have mortgages and rentals, obviously, Jeremy's talked a bit about that already, but rentals was up 29%, multifamily was up 44%, and then, you know, CHL grew 125%. So really, when we look across all of the business in Q2, it felt quite good, regardless of what's going on in the first time home buyer market. And then, you know, I'd be spiced to say, like,
John Campbell: Hey, guys and rich congrats on helping position the business for a pretty promising set up here in the years ahead glad you will see it through on the on the board seat and then of course, congrats to you Jeremy well deserved.
Speaker Change: But a two part question here first on the Torreon agreement you guys called out early indicators of success in your pilot.
Speaker Change: You also you know for the last couple of years I've said that tour and connections are converted at three times the rate I've got to believe that Tori agreement, probably boost that conversion rates.
Speaker Change: It was absolutely secondly, even more or greater.
Speaker Change: Maybe if you could talk a little bit deeper into what you're seeing thus far and then I've got one more quick one on Zillow home loans.
Speaker Change: Yeah. Thanks, John Thanks for the congrats and on Turing.
Speaker Change: On the EBITDA front, we're pretty proud of the consistent ability to accurately forecast and hold ourselves accountable on costs.
Youre right, we continue to see Turing.
Speaker Change: You know, as we tell the team, when we're in a market like this, revenue is harder to forecast, which makes it even more important to be really good on the cost line. And for Q2, we expected $440 million of costs. We came in at $438 million, so when we outperformed on the revenue front, it all flowed through to the EBITDA line.
Speaker Change: Actions convert higher than any other action on Zillow and our expectation is the torreon agreement will be a net benefit to conversion because it's it's in the flow post introduction and so it is just education and its helpful qualification and the pilot was small we saw basically no negative to like likely positive impact there as we.
Speaker Change: That's very helpful. Thank you, Jeremy. And also on the mortgage piece, so obviously some momentum under the surface there sequentially and year over year growing nicely, you know, I know there are some moving pieces with the
Speaker Change: Starting to engage consumers and so that's what gave us the confidence to roll it out to take it to now almost 80% of connections.
Speaker Change: And we expect to get to all eventually so.
Speaker Change: you know, very significant growth in purchase origination volume, but some of the offset on the marketplace side. Okay, can you just remind us where the marketplace
Don: I think you nailed the idea of education to the consumer Don in a consumer friendly way helps get back into a more informed before they get to the tour and makes it more likely that they'll want over where the agent as you know having worked with us and followed us for a long time, the lag on seeing that data and transactions as long right. So our pilot market.
Speaker Change: stands at this point, both strategically in terms of where that fits in, maybe in terms of loan products or differences against ZHL, and just kind of how you think of that mix between ZHL and Marketplace moving forward.
Don: A tour experience measuring transaction rates with those agents is going to be a period of quarters and quarters and quarters, but the early indicator data gave us confidence that this is a good thing.
Speaker Change: Yeah, Ryan, I can take this. Jeremy Hofmann and then Jeremy Wacksman may pile in as well. But I think, you know, that you're right that, you know, the bulk of the business going forward is going to be Zillow Home Loans. So you see the mortgage category start to more accurately map to the Zillow Home Loans growth. That's not to say the marketplace isn't important too. It's just secondary. You know, there are going to be, inevitably, there are going to be times in which we can't service a customer through Zillow Home Loans. And we like having the marketplace as a way to serve customers regardless. Right. We're always about customer choice and making sure that in financing, we're providing customer choice as well. So we feel quite good about both of those businesses. But the vast majority of the focus going forward.
Don: That's why we proceeded so rapidly to roll it out okay.
Okay, that's great to hear and then on the Zillow home loans I mean, obviously refi was I think about half of the origination mix two years ago that dropped to 1% last year. So I think it's probably a good problem, you're having as far as like capacity issues. It sounds like you've got an assortment of out of demand will purchase but I'm just curious about how youre thinking about the staffing how youre thinking about if there is.
Speaker Change: Is a degree of a mini refi wave if you feel like you can participate in that in a year or so ahead.
Speaker Change: Yeah, I mean, our focus has been on purchase not just because of the where the refi market wasn't it I think it will remain on purchase and that's just because of what we've talked about as our opportunity right. You've heard us talk a lot about I mean, everything we've said about the integrated transaction and the benefits for the consumer it is for the homebuyer.
Speaker Change: is going to be in Zillow Homeless.
Ryan McKeveny: Got it. Thanks a lot.
Speaker Change: Our next question comes from John Campbell from Stevens.
Speaker Change: And our ability to go have more and more customers, who either start by asking that purchase financing question or ask that go shop question end up getting exposure to our great agents and our great financing options. That's demand that we won't tap out of for a long time and that's what we're methodically scaling both in our enhanced market Street.
John Campbell: Hey, guys. And Rich, congrats on helping position the business for a pretty promising setup here in the years ahead. Glad you'll be able to see it through on the board seat. And then, of course, congrats to you, Jeremy. Well deserved.
Speaker Change: But a two-part question here. First, on the touring agreement, you know, you guys called out early indicators of success in your pilot.
Speaker Change: <unk> were up more than half markets, but also digitally to our consumers that come to the website and actually want to start with a what can I afford. This is a tough market question. So we are I think in a privileged position to be able to go build.
Speaker Change: I think you also, you know, for the last couple of years have said that touring connections have converted at three times the rate. I've got to believe that touring agreement probably boosts that conversion rates. It's, you know, it's obviously signaling even more or greater, you know, intent. Maybe if you could talk, go a little bit deeper into what you're seeing thus far, and then I've got one more quick one on Zillow Home Loans.
Speaker Change: Durable growth in the mortgage business really focused on purchase and we're excited about how we did in Q2 and we're excited about our plans for Q3.
Speaker Change: Yeah. Thanks, John . Thanks for the congrats and on touring.
Speaker Change: Indeed, thanks for the time guys.
John Campbell: Thanks, John.
Speaker Change: You're right. We continue to see touring actions convert higher than any other action on Zillow and our expectation is the touring agreement will be a net benefit to conversion because it's in the flow post-introduction and so it's just education and it's helpful qualification and the pilot was small. We saw basically no negative to like likely positive impact there as we started to engage consumers and so that's what gave us the confidence to roll it out to take it to now almost 80% of connections and we expect to get to all eventually so you know I think you nailed the idea of
John Campbell: Our next question comes from John <unk> from Jefferies.
John Campbell: Yes.
Hey can you hear me.
Speaker Change: Yes, we got you John Okay, great. Thanks for the questions.
Speaker Change: So I wanted to just start with the housing market I was hoping you could unpack the outlook for mid single digit growth in residential housing transactions during the third quarter with pending sales down 8% in June I'm. Just curious if your outlook incorporates an assumption that the market bounces back a bit in August and September based on.
Speaker Change: Potentially a recent pickup in activity and second it looks like your outlook for the residential revenue segment implies a bit of underperformance for Mir agent business relative to your mid single digit housing market outlook. If you exclude the M&A tailwind from follow up.
Speaker Change: education to the consumer done in a consumer friendly way helps get that consumer more informed before they get to the tour and makes it more likely that they'll want to work with the agent. As you know, having worked with us and followed us for a long time, the lag on seeing that data and transactions is long, right? So a pilot market, a tour experience, measuring transaction rates with those agents is going to be a period of quarters and quarters and quarters, but the early indicator data gave us confidence that this is a good thing, and that's why we proceeded so rapidly to roll it out.
Speaker Change: Boss can you just talk about the drivers of that underperformance and maybe a few of embedded some room for upside in that assumption. Thanks.
Speaker Change: Yes, Thanks, Shaun it's Jeremy Hoffman, so I'll take it.
Speaker Change: Similar to what we've said in the past, we don't really over focus on the quarter to quarter fluctuations.
Speaker Change: Okay, that's great to hear. And then on the Zillow home loans, I mean, obviously refi was, I think, about half of the origination mix two years ago. That dropped to 1% last year.
Speaker Change: Given how fluid macro has been and will continue to be.
Speaker Change: We're pleased that we've outperformed the industry by 2000 basis points in residential over the last two years and that's really a credit to the product experiences that were driving the conversion gains are driving and the partner experiences that we're driving.
Speaker Change: I think it's probably a good problem you're having as far as like capacity issues. It seems like you got an exorbitant amount of demand on purchase. But I'm just curious about how you're thinking about the staffing, how you're thinking about, you know, if there is a, you know, degree of a mini refi wave, if you feel like you can participate in that in a year or so ahead.
Speaker Change: At the same time.
Speaker Change: We are seeing healthy growth versus that mortgage market. So that was called out earlier in the in the in the call that's where we tend to index or our customer base tends to index and those folks are struggling comparatively so they that first time homebuyer. If you measure by the mortgage market is.
Speaker Change: Yeah, I mean, our focus has been on purchase, not just because of the where the refi market was, and I think it will remain on purchase. And that's just because of what we've talked about as our opportunity, right? You've heard us talk a lot about, I mean, everything we've said about the integrated transaction and the benefits for the consumer, it is for the home buyer. And our ability to go have more and more customers who either start by asking that purchase financing question or ask that go shop question, end up getting exposure to our great agents and our great financing options. You know, that's a demand that we won't tap out of for a long time. And that's what we're methodically scaling, both in our enhanced market strategy as we roll out more enhanced markets, but also digitally to our consumers that come to the website and actually want to start with what can I afford? This is a tough market question.
Speaker Change: Underperforming 800 to 1000 basis points per.
Jerry: In Q2, and we think those trends probably continue into Q3. So I think we feel all in quite good about where the business is knowing that that's out there and I think most important is just the consistent outperformance we've had across both residential and the total company. We expect to continue to do so as we rollout our enhanced markets and see success there right Jerry.
Speaker Change: <unk> talked a lot about that but that's a really important piece to the future story and we're just getting started rolling markets out and I will kind of step back and remind you. All Q1, we were up 13% year over year as a company Q2, we were up 13% year over year, our outlook calls for a revenue range of 10% to 13% for Q3, we're clearly well on our.
Speaker Change: We are, I think, in a privileged position to be able to go build, you know, durable growth in the mortgage business really focused on purchase. And we're excited about how we did in Q2, and we're excited about our plans for Q3.
Speaker Change: Indeed. Thanks for the time, guys.
Speaker Change: next time.
Speaker Change: A way to double digit revenue growth in 'twenty, 'twenty, four and margin expansion and it's been a rough housing market. So we sit there and feel like the business is really well positioned despite all of that.
Speaker Change: Our next question comes from John Calentoni from Jeffries.
Speaker Change: that
John Calentoni: Hey, can you hear me?
Speaker Change: Yes, we got you, John . Okay, great. Thanks for the questions.
Speaker Change: Great. Thanks, so much.
John Calentoni: So I wanted to just start with the housing market. I was hoping you could...
Speaker Change: Our next question comes from Tom Champion from Piper Sandler.
Speaker Change: Unpack the Outlook for Mid-Single-Digit Growth in Residential Housing Transactions during the third quarter with pending sales down 8% in June . I'm just curious if
Tom Champion: Hi, guys. Good afternoon, hopefully you can hear me as well.
Tom Champion: Jeremy if you take the baton as CEO.
Speaker Change: Your Outlook incorporates an assumption that the market bounces back a bit in August and September based on
Tom Champion: What's your goal for the business over the medium term what are you looking to achieve and then maybe for Jeremy Hoffman.
Speaker Change: potentially a recent pickup in activity.
Speaker Change: And second, it looks like your outlook for the residential revenue segment implies a bit of underperformance for mere agent business relative to your mid-single-digit housing market outlook, if you exclude the M&A tailwind from follow-up costs. Can you just...
Jeremy Hoffman: Can you talk about the margin profile associated with enhanced markets.
Speaker Change: This gets you closer to GAAP profitability. Thanks.
Speaker Change: Yeah, I'll start Tom and maybe Jeremy you can head.
Jeremy Hoffman: Margin profile I.
Speaker Change: Tom it's going to sound, a little boring, but my my focus and strategy is more of what we've been doing.
Speaker Change: Talk about the drivers of that underperformance and maybe if you've embedded some room for upside in that assumption. Thanks
Jeremy: And I think accelerating and continuing to roll out our enhanced market strategy continuing to grow our rentals business into the opportunity. We've laid out for you all continuing to build mortgage into the big business. We know it can be and then powering all of that with the amazing software and technology. We are building to help rewire, the real estate industry for agents teams and brokers right.
Jeremy Hofmann: Yeah, thanks, John . It's Jeremy Hofmann, so I'll take it. You know, similar to what we've said in the past, we don't really over-focus on the quarter-to-quarter fluctuations, given how fluid macro has been and will continue to be. We're pleased that we've outperformed the industry by 2,000 basis points in residential over the last two years, and that's really a credit to the product experiences that we're driving, the conversion gains we're driving, and the partner experiences that we're driving. You know, at the same time, we are seeing healthy growth versus that mortgage market, so that was called out earlier in the...
Jeremy: Large like that that has been our strategy we've talked to you all about for the last however, many calls you are seeing the early signs and results of that play out in the output numbers and we're really excited to have more of this come to light. So you see more of it in the output numbers in the years to come as we grow into the share target. We have for you all and then grow our business beyond that so oftentimes.
Speaker Change: in the call, you know, that's where we tend to index, our customer base tends to index, and those folks are struggling comparatively. So they, the first-time homebuyer, if you measure it by the mortgage market, is, you know, underperforming 800 to 1,000 basis points per in Q2, and we think those trends probably continue into Q3. So I think we feel all in quite good about where the business is, knowing that that's out there, and I think most important is just the consistent outperformance we've had across both residential and the total company. We expect to continue to do so as we roll out our enhanced markets, and see success there, right? Jeremy's talked a lot about that, but that's a really important piece to the future story, and we're just getting started rolling markets out. And, you know, I...
When when there's a leadership change there is like a what's going to change question and the answer is not much is going to change we're going to focus on continuing to execute deliver scale and accelerate this into the future.
Yeah, and then I can take the margin question I think it's less about enhanced markets on our March to GAAP profitability, it's really around the cost structure. We've laid out so we have roughly $1 billion in fixed cost today, we feel like we're pretty well invested there.
Jeremy: And at least get to our 2025 share targets and so we expect that to grow kind of modestly with inflation variable as it is 25% to 30% of revenue that will scale, a little faster than revenue when we ramp up but ultimately that's a good profile and then the balances in marketing and advertising.
Jeremy: I will kinda step back and remind y'all.
Speaker Change: You know, Q1, we were up 13% year over year. As a company, Q2, we were up 13% year over year. Our outlet calls for a revenue range of 10 to 13% for Q3. We're clearly well on our way to double digit revenue growth in 2024 and margin expansion. And it's been a rough housing market. So we sit there and feel like the business is really well positioned despite all that.
Jeremy: So we feel good that if we are controlled on the fixed side, we can grow revenue faster than our cost on the EBITDA front and youre seeing that in the margin expansion you've seen throughout this year so far.
Jeremy: And then going forward on the GAAP side. The next thing that's really important to us is getting our stock based compensation and are in a good spot. So we've committed to shrinking SBC total dollars year over year, and 24 versus 23, and then even more so as a percentage of revenue.
Speaker Change: Great. Thanks so much.
Speaker Change: Our next question comes from Tom Champion from Piper Sandler.
Jeremy: And it's important to remember that 90% of our of our SBC cost fits in that fixed bucket. So as we keep our eyes really really focused on that we're going to get more and more leverage on SBC overtime and that puts us on a nice path to get to GAAP profitability.
Tom Champion: Hi guys, good afternoon. Hopefully you can hear me as well.
Tom Champion: Jeremy, as you take the baton as CEO
Tom Champion: What's your top goal for the business over the medium term? What are you looking to achieve? Then maybe for Jeremy Hofmann, can you talk about the margin profile associated with enhanced markets? Does this get you closer to gap profitability? Thanks.
Speaker Change: Thank you both.
Rich Barton: This completes the allotted time for questions I will now turn the call back over to rich Barton for any closing remarks.
Speaker Change: Yeah, I'll start, Tom, and maybe, Jeremy, you can hit margin profile.
Rich Barton: Thank you all.
Speaker Change: As you as you guys can see the.
Tom Champion: I mean, Tom, it's going to sound a little boring, but my focus and strategy is more of what we've been doing. And I think
Rich Barton: Company is really doing well the company is on firm footing.
Tom Champion: accelerating and continuing to roll out our enhanced market strategy, continuing to grow our rentals business into the opportunity we've laid out for you all, continuing to build mortgage into the big business we know it can be, and then powering all that with the amazing software and technology we are building to help rewire the real estate industry for agents, teams, and brokers writ large. Like, that has been our strategy we've talked to you all about for the last however many calls. You're seeing the early signs and results of that play out in the output numbers, and we're really excited to have more of this come to light so you see more of it in the output numbers in the years to come as we grow into the share target we have for you all and then grow our business beyond that. So, oftentimes when there's a leadership change, there's like a what's going to change question, and the answer is...
Jeremy Wacksman: And as you can also see demonstrated in this call and on many calls before Jeremy Wacksman is ready to lead in the broader leadership team is ready as well.
Jeremy Wacksman: And so I'm Super excited there is a ton of clean water in front of the company lots of opportunity.
Jeremy Wacksman: May be the window change direction income behind US one of these days, but we certainly don't need it.
Jeremy Wacksman: But I'm sure it'll happen at some point.
Speaker Change: I want to thank you all for being on the journey with US and we'll talk to you soon.
Speaker Change: Thank you.
Speaker Change: Yeah, and then I can take the margin question. I think it's less about enhanced markets, you know, on our march to gap profitability It's really around the cost structure we've laid out. So we have roughly a billion dollars in fixed costs today We feel like we're pretty well invested there
Tom Champion: to at least get to our 2025 share targets. And so we expect that to grow kind of modestly with inflation. Variable is 25 to 30% of revenue. That will scale a little faster than revenue when we ramp up, but ultimately that's a good profile. And then the balance is in marketing and advertising. So we feel good that, you know, if we are controlled on the fixed side, we can grow revenue faster than cost.
Tom Champion: on the EBITDA front. And you're seeing that in the margin expansion you've seen throughout this year so far. And then going forward on the GAAP side, you know, the next thing that's really important to us is getting stock-based compensation in a good spot. So we've committed to shrinking SBC
Tom Champion: total dollars year over year in 24 versus 23, and then even more so as a percentage of revenue. And it's important to remember that 90% of our SBC cost
Tom Champion: sits in that fixed bucket. So as we keep our eyes really, really focused on that, we're gonna get more and more leverage on SBC over time, and that puts us on a nice path to get to gap profitability.
Speaker Change: Thank you both.
Speaker Change: This completes the allotted time for questions. I will now turn the call back over to Rich Barton for any closing remarks.
Rich Barton: Hey, thank you all. As you guys can see, the
Rich Barton: company is really doing well. The company is on firm footing and as you can also see demonstrated in this call and on many calls before Jeremy Waxman is ready to lead and the broader leadership team is ready as well.
Speaker Change: And so I'm super excited. There is a ton of clean water in front of the company, lots of opportunity.
Speaker Change: Maybe the wind will change direction and come behind us one of these days, but we certainly don't need it. But I'm sure it'll happen at some point. I want to thank you all for being on the journey with us. We'll talk to you soon.