Q1 2025 Zillow Group Inc Earnings Call
Happy Crafting!
Speaker Change: Hello, and welcome to Zillow Group's first quarter 2025 financial results call.
Speaker Change: We ask that you please hold all questions until the completion of the formal remarks.
Speaker Change: at which time you'll be 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.
Speaker Change: Brad, you may begin. Thank you, good afternoon, and welcome Zillow Group's quarterly earnings call. Joining me today to discuss our results are Zillow Group's CEO , Jeremy Wacksman and CFO , Jeremy Hofmann. During today's call, we will make forward-looking statements about our future performance and operating plans based on current expectations and assumptions. Thank you for your time.
Speaker Change: 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.
Speaker Change: We undertake no obligation to update these statements as a result of new information or future events
Speaker Change: This call is being broadcast on the internet and is accessible on our investor relations website.
Speaker Change: A recording of the call will be available later today. During the call, we will discuss gap and non-GAAP measures including adjusted EBITDA, which we refer to as EBITDA.
Speaker Change: We encourage you to read our shareholder letter and earnings release, both of which could be found on our investor relations website as they contain important information about our gap and non-GAAP results, including reconciliation of historical non-GAAP financial measures.
Speaker Change: We will open the call with remarks followed by live Q&A and with that I will now turn the call over to Jeremy Wacksman.
Jeremy Wacksman: Thank you Brad and good afternoon everyone. Thank you for joining us today. It's been another excellent quarter. I'm pleased to share that we exceeded our Q1 outlook including delivering strong top line growth despite all the macro noise around us. Thank you for joining us today.
Jeremy Wacksman: We've kept our focus on executing our strategy, managing costs, and expanding Eva-Dum margins, which resulted in Zillow achieving gap profitability for the quarter.
Jeremy Wacksman: Our Q1 results position us well to achieve our full-year 2025 goals of low-to-mid-teens revenue growth, continued EBITDA margin expansion and positive gap net income.
Jeremy Wacksman: We believe we are also well positioned to deliver sustainable, profitable growth.
Jeremy Wacksman: We have a strong and trusted brand and a disciplined cost structure and we are executing well on our differentiated housing super app strategy. [inaudible]
Jeremy Wacksman: All of this sets us up to monetize more of the significant total addressable market opportunity in front of us.
Jeremy Wacksman: Zillow provides significant value to movers and the industry, which is why we continue to attract the largest audience in residential real estate.
Jeremy Wacksman: We have four times the app engagement of the next company in our category.
Jeremy Wacksman: About two-thirds of the real estate audience uses Zillow somewhere along their journey, more than twice any other company in our category.
Jeremy Wacksman: and 80% of that traffic is coming to us directly and organically.
Jeremy Wacksman: In Q1, we have 227 million average monthly unique users, a lead we continue to widen.
Jeremy Wacksman: Consumers trust and turn to Zillow because we consistently deliver products and services that make moving easier while also fostering a transparent marketplace.
Jeremy Wacksman: Dillow was founded on that very principle, giving people fair and equal access to information so they can make informed choices.
Jeremy Wacksman: As such, we recently wrote out listing standards that encourage the entire industry to formally implement what most already believed in more practicing.
Jeremy Wacksman: A listing marketed publicly to some buyers should be marketed online to all buyers.
Jeremy Wacksman: We have a long history of aligning our business model with the best interest of consumers which in turn benefits real estate professionals and the industry as a whole.
Now onto our Q1 results.
Jeremy Wacksman: As we expand our services and scale the housing super app across more markets, we are bringing more customers and industry service providers together, which helps us grow both our revenue and profitability.
Jeremy Wacksman: Q1 served as a strong example of that with results that surpassed our expectations.
Jeremy Wacksman: We reported total Q1 revenue of $598 million, up 13% year-over-year, continuing the trend of double-digit revenue growth.
Jeremy Wacksman: In our for sale category, we reported 458 million of revenue in Q1 up 8% year-over-year with residential revenue up 6% and mortgages revenue up 32%.
Jeremy Wacksman: Rental's revenue was up 33% year-over-year, reaching an all-time high of $129 million in Q1.
Jeremy Wacksman: The strong results, combined with continued cough discipline, helped us deliver 153 million of adjusted EBITDA in Q1, and expand our EBITDA margin by 200 basis points a year to 26%.
Jeremy Wacksman: Our four-sale strategy is to monetize more of the massive audience that has already engaged in our funnel.
Jeremy Wacksman: We are expanding and improving our services to meet the needs of buyers and sellers, helping them at every step of their move, each of which represents an additional potential driver of revenue per transaction for us as they choose to stay within the Zillow ecosystem.
Jeremy Wacksman: In Zillow's Housing Super App, we have been building the experience we know movers and industry professionals want. One that is easier, dream lines, tech enabled and integrated. It's a very good, very good, very good.
Jeremy Wacksman: This experience is most fully realized in our enhanced markets. The go-to market motion we have been successfully scaling for the past few years.
Jeremy Wacksman: We have been adding more enhanced markets and going deeper in existing ones as we work to increase connection and conversion rates.
Jeremy Wacksman: We launched more new markets in April and we expect to keep increasing the share of connections within enhanced markets to more than 35% by the end of this year.
Jeremy Wacksman: We are well on our way toward this goal with 24% of our overall connections in Q1 happening in enhanced markets up from 21% in Q4.
Jeremy Wacksman: More than 90% of connections in enhanced markets are being managed through follow-up boss, which is helping agents identify high intent buyers and sellers so they can earn more business.
Jeremy Wacksman: and with AI-powered call summaries, follow-up messages and action items, agents using follow-up loss and loan officers with Zillow Home Loans are able to save hours of time, gain valuable insights and serve clients better.
Jeremy Wacksman: Developing products along the entire customer journey helps us connect more and more high intent movers with great agents through Zillow.
Jeremy Wacksman: For example, we know most buyers need both an agent and a mortgage, and they want their experience with both to feel seamless.
Jeremy Wacksman: So we are increasingly confident in our work to integrate Premier Agent with our Zillow Home Loans offering, as we continue to see double-digit adoption of Zillow Home Loans across all enhanced markets.
Jeremy Wacksman: And now, 70% of movers choosing financing through Zillow home loans are also working with a premier agent partner, up from 60% a year ago.
Jeremy Wacksman: We continue to add functionality to Zillow Home Loan's viability feature, which helps buyer shop based on what they can afford, the instant indication of whether a home they're eyeing is within their viability, and quickly adapt to changes in the market, interest rates, and their personal financial situation.
Jeremy Wacksman: More than one and a half million customers have enrolled in viability since it launched a year ago, including more than 360,000 in March alone.
Jeremy Wacksman: We continue to build out our touring services to remove the friction from booking a home tour online which creates a better experience for consumers and helps us identify high intent buyers.
Jeremy Wacksman: After becoming available nationwide late last year, real-time touring now accounts for 36% of all connections compared with just 12% a year ago
Jeremy Wacksman: We are further expanding our adjustable market by developing and scaling seller services since we know two-thirds of buyers are selling a home as well
Jeremy Wacksman: We are excited by the success we're seeing with Zillow Showcase, which features our home-grown AI-powered rich media technology that generates a seamless 3D model of the home with an interactive floor plan.
Jeremy Wacksman: Showcase helps the seller's listing stand out, provides an immersive shopping experience for buyers, and elevates agent's brand presence on Zillow.
Jeremy Wacksman: As of the end of March, showcase was featured on about 2% of all new for sale listings, up from 1.7% at the end of last year.
Jeremy Wacksman: We are boosting showcases reach through a combination of continued sales to individual agents and agreements with brokerages to provide showcase to their agents.
including recently with home services of America.
Jeremy Wacksman: We are on track to reach 5-10% of all US listings in the intermediate term.
Jeremy Wacksman: Showcase is an appealing offering for real estate professionals. Agents who use it are winning 30% more listings than similar agents who don't.
Jeremy Wacksman: and Showcase listings sell faster and for more money, typically netting a 2% higher sales price than similar non-showcase listings on Zillow. A bonus of more than $9,000 on a home sold at the average home sales price.
Jeremy Wacksman: We continue to develop showcase in ways that add value for agents. In April , we launched a dashboard that helps agents better track how their showcase listings are performing, including a comparison to similar non showcase listings.
Jeremy Wacksman: We're also excited about our work to integrate virtual staging AI technology into our sweet of agent software and advertising solutions. Further, elevate in the listings and shopping experience on Zillow.
Jeremy Wacksman: We are consistently looking for ways to create a more seamless experience for sellers, buyers and their agents, and increase our revenue along the way. The progress we're making across for sale shows how well we're executing on this strategy.
Now diving into rentals.
Jeremy Wacksman: Building on our momentum from 2024, we are seeing impressive growth in property listings and renter traffic as we scale our two-sided marketplace. As a result, Rentals Revenue reached an all-time high in Q1.
Jeremy Wacksman: The opportunity and rentals is significant with an estimated 25 billion total addressable market and more rental homes than for sale homes turning over each year. In fact, about three times as many movers are looking to rent versus looking to buy, and almost every mover starts out as a renter.
Jeremy Wacksman: But there has historically been no single marketplace where they can see all available homes for rent.
Jeremy Wacksman: Phil O'Renthal is rapidly becoming that comprehensive one-stop marketplace, with more than two million active rental listings as of the end of Q1, spanning single-family homes, large multifamily buildings, and everything in between.
Jeremy Wacksman: We ended Q1 with 55,000 multi-family properties on Zillow rentals, up 38% from 40,000 at the same time last year, and have seen even further acceleration to 60,000 as of early May.
Jeremy Wacksman: We are attracting more multifamily properties because more property managers are recognizing the value and lead quality we provide by connecting them with the largest consumer rentals audience, including an increasing share of apartment seekers.
Jeremy Wacksman: Zillow Renswell's had 37 million unique visitors in March and his renters number one preference.
Jeremy Wacksman: We've earned our success by applying the same product expertise and relentless consumer focus we've shown in the for sale experience to building a more unified rental experience.
Jeremy Wacksman: Renters on Zillow can shop, tour, apply, sign a lease, and pay rent securely on participating listings.
Jeremy Wacksman: and property managers can list book tours, screen applicants, create leases, and sign them electronically, and collect rent payments all on the Zillow platform.
Jeremy Wacksman: I encourage you to watch the partner testimonial video we've linked in our shareholder letter this quarter. It offers a clear window into why property managers are choosing to work with Zillow rentals.
Jeremy Wacksman: We are number one in partner satisfaction in our category for return on marketing investment as we deliver high quality leads to the industry.
Jeremy Wacksman: And as we gain wallet share with property managers, multifamily rentals revenue growth of 47% in Q1 outpaced property count growth.
Jeremy Wacksman: That's because more property managers are upgrading their subscription packages with us to higher tiers of advertising, to help attract renters, gain more views and impressions on their listings and quickly and easily fill their vacancies.
Jeremy Wacksman: Through this impressive growth, we remain focused on being attractively priced and delivering high ROI for our partners.
Jeremy Wacksman: We expect multifamily revenue to be the main driver of Rental's revenue growth in the near term.
Jeremy Wacksman: Our strategic partnerships are another important factor in Zillow rental success.
Jeremy Wacksman: The multi-family listing partnership we announced with Redfin in February just went live last week.
Jeremy Wacksman: Alongside our successful partnership to distribute multi-family rental listings on Realtor.com, we expect it to expand our reach with renters, enhance our value proposition with advertisers and drive substantial growth in leads, leases and revenue.
Jeremy Wacksman: And just a few weeks ago, we announced a new partnership with App Folio, a leading rental property management company to connect our rental audience with their powerful tools, making it easier for property managers to manage listings and fill vacancies efficiently while simplifying the process for renters.
Jeremy Wacksman: Building on the excellent year Zillow rentals had in 2024, we drove increased year-over-year revenue growth in Q1 and expect quarterly growth to accelerate throughout 2025, with a clear path toward the billion dollar plus revenue opportunity in front of us.
Jeremy Wacksman: As our strong results show, it's been another great quarter across the business. We are scaling us planned and executing well on our strategy in both for sale and rentals. And importantly, this quarter we achieved got profitability.
Jeremy Wacksman: We are on track to meet our full year 2025 goals for low to mid teens revenue growth, continued EBITDA margin expansion and positive gap net income
Speaker Change: We're proud of how we've begun the year and look forward to sharing our continued progress with you all. With that, I'll turn the call over to our CFO , Jeremy Hofmann.
Thanks, Jeremy, and good afternoon, everyone.
Speaker Change: We delivered another strong quarter in Q1 and we are well positioned to continue doing so as we execute on our strategy in 2025 and beyond.
Speaker Change: Our Q-1 2025 results exceeded expectations for revenue and EBITDA with revenue up 13% year-over-year to $598 million, which was $15 million above the midpoint of our Outlook range.
Speaker Change: Our Better Than Expected Revenue Performance, combined with effective cost management, also delivered better than expected EBITDA in the quarter.
Speaker Change: Q1 EBITDA was $153 million with an EBITDA margin of 26%, a 200 basis point year-over-year improvement.
Speaker Change: Our trailing 12-month EBITDA as of the end of Q1 grew 28% [inaudible]
Speaker Change: In Q1, we also achieved an important milestone for the company, delivering positive gap net income of $8 million, representing 1% of our revenue.
Speaker Change: Our Q-Run results put us on a solid path to achieve positive gap net income for the full year 2025.
Speaker Change: 4 sale revenue grew 8% year over year in Q1 to $458 million, above industry growth of 3% as reported by NAR and 6% according to Zillow.
Speaker Change: We are pleased with our relative performance across our four-sale revenue category, particularly when comparing against a purchased mortgage origination market that was roughly flat for the
Speaker Change: As a reminder, the vast majority of Zillow buyers get mortgages and we under index to the high end of the market.
Speaker Change: In Q1, we saw the high end of the market contributed over 500 basis points of growth in total industry transaction value, this quarter, implying the rest of the market was largely flat year
Speaker Change: Within the four-sale category, Residential revenue grew 6% year-over-year to $417 million outperforming our outlook.
Speaker Change: Resonance will revenue primarily benefited from continued growth in premier agent, expansion of Zillow showcase, as well as contributions from our new construction marketplace and
Speaker Change: Also within the For Sale category, Mortgage's revenue in Q1 was up 32% year over year to $41 million ahead of our outlook.
Speaker Change: Our mortgages strategy is leading more buyers to choose financing through Zillow home loans, which is the main growth driver of our overall mortgages revenue.
Purchased loan origination volume grew 32% year-over-year to $791 million.
Speaker Change: Rental's revenue growth accelerated in Q1, increasing 33% year-a-year to $129 million, driven primarily by our multifamily revenue, which grew 47% in the quarter, up from 41% in Q4.
Speaker Change: We increase the number of multifamily properties on our apps and sites by 38% year-over-year reaching an all-time high of 55,000 multifamily properties as of the end of Q1, up from 50,000 properties
Speaker Change: As a reminder, we define our multifamily properties as 25-plus unit buildings, and this count does not include our industry-leading long-tail properties, which is a significantly larger number.
Speaker Change: Our leading audience and lead quality is resonating in the market as more and more multifamily property managers seek to improve their ROI by partnering with Zillow, the most comprehensive rental's marketplace.
Speaker Change: Our offering is providing value to customers and multifamily operators of all sizes, as evidenced by the growth of both our property count and our share of wallet.
Speaker Change: Q1 EBITDA expenses totaled $445 million, below our implied outlook of $450 million.
Speaker Change: We continue to leverage our fixed costs, which grew only 3% year-over-year compared to total revenue growth of 13% in Q1.
Speaker Change: Controlling our fixed headcount growth also helps drive leverage on share-based compensation expense, which was down more than 10% year-over-year in Q1.
Speaker Change: We ended Q1 with $1.6 billion of cash and investments, down from $1.9 billion at the end of Q4, primarily driven by share repurchases of $250 million in Q1 and a $100 million payment to Redfin in connection with the Rental's partnership we entered into in February .
Speaker Change: These decreases were partially offset by net cash provided by operating activities of $104 million.
which was up from $80 million in key $1,2024.
Speaker Change: We ended the quarter with $419 million of convertible debt outstanding that we expect to settle before the end of Q2.
In April , we repurchased over 600,000 shares for $36 million dollars.
Speaker Change: When accounting for the Sherry purchases we made in April , we have $95 million remaining on our current authorization.
Speaker Change: Given our strong financial position and the success of our share buyback program to date, our board recently approved an additional $1 billion share repurchase authorization.
Speaker Change: To date, we have repurchased approximately $2.3 billion of shares at a weighted average price of $47.
Speaker Change: We expect to continue to be opportunistic with share repurchases while prudently investing to grow the business.
Speaker Change: Turning to our outlook for Q2, we expect total revenue to be between $635 million and $650 million, employing a year-over-year increase of 11 to 14 percent.
Speaker Change: We expect four sale revenue growth in Q2 to be in the mid-single digits range driven by residential revenue growth in the mid-single digit range and more years revenue growth of approximately 30%
Speaker Change: Our guidance reflects our expectation that challenging housing market conditions and macro uncertainty will continue.
Speaker Change: We expect our rentals revenue growth to accelerate in Q2, increasing more than 35% year over year.
Speaker Change: We are seeing stronger than expected benefits from our Redfin Rental's partnership, which went live at the end of April .
Speaker Change: In Q2, we will begin paying Red Finn for Rentals Leads and expect the partnership to be a creative to EBITDA in the second half of 2025.
Speaker Change: Further showing the strength of our rentals business, we have added another 5,000 multifamily properties since the end of the quarter, taking our total properties on Zillow from 55,000 at the end of March to 60,000 as of early May.
Speaker Change: Given the momentum we are seeing, we are inspecting rentals to accelerate throughout the year and expect rentals revenue growth to be approximately 40% for full year 2025. For Q2, we expect EBITDA to be between $140 million and $155 million, equating to a 22 to 24% margin range.
Speaker Change: This implies EBITDA expenses will increase from $445 million in Q1 to an estimated $495 million in Q2.
Speaker Change: More than half of this increase will be driven by normal seasonal marketing.
Speaker Change: The remainder will be driven by incremental lead costs associated with our Redfin Rentals partnership, which will be reflected in our cost of revenue.
Speaker Change: For the full year 2025, we continue to expect to deliver low to mid-teens revenue growth, which includes approximately 40% rentals revenue growth, while we continue to prudently manage our cost structure.
Speaker Change: As we have been saying for some time we believe we are at the right fixed investment level to achieve our mid-cycle financial targets.
Speaker Change: We expect fixed investment costs to grow modestly with inflation while investing in variable costs for future growth, primarily in rentals and Zillow home loans.
Speaker Change: We are on track to deliver expanded EBITDA margins and positive net income for the full year 2025.
Speaker Change: To close, we are successfully executing on our strategy and are excited about the opportunity ahead of us. We are growing across our business with investments in place to drive sustainable, profitable growth well into the future. And with that, we'll open the line for questions.
Speaker Change: Thank you. 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 of 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.
Speaker Change: We will wait one moment to allow the Qt 4.
Our first question will come from Ron Josie with City
You are now on mute your audio and ask your question
Ron Josie: Great, thanks for taking the question, and I've got it Tom, but I want to focus Jeremy on the rental business specifically and the commentary about accelerating revenue growth to 40% for the full year and I want to understand a little bit more about what's driving that I mean clearly multi-family units reaching 60k early as of early May talks about an acceleration at least. [inaudible]
Ron Josie: Growing units there at a faster cadence than we've seen normally .
Ron Josie: And so, when you think about the accelerating growth or, you know, accelerating growth in rentals, multi-family units growing as fast as they are.
Speaker Change: Just talk just a little bit more about where these games are coming from. Is it more of these multifamily units are willing to work with Zillow and therefore you're winning greater market share or wallet share for that matter? And then once red can start kicking in, how should we think about that? Thanks again for your thanks again for the help.
Speaker Change: Yeah, hey, Ron, maybe I'll start and Jeremy Hofmann can give you some details on the forecast on the guide. I mean, I'll start with strategy on rentals because what you're really seeing is the execution and the outputs of the business come from the strategy really working.
Right, the strategy is build this comprehensive marketplace .
Jeremy Hofmann: This national database of as much of the inventory as possible, right? There is no national database of all rentals. We now have more than two million listings that mix of single family as well as multi family. We think that's the most listings that are out there in one place and that really starts to satisfy the renters needs. [inaudible]
Jeremy Hofmann: Brand of Choice, you're seeing that play out, right? So now that we have the supply, you're seeing our audience lead Wyden, right? 37 million uniques in Comm Square in March that lead continues to grow. And the brand preference we have among renters is number one as well. We have because we're satisfying their need. And so I start with that strategy because that strategy is now yielding the revenue growth and the revenue acceleration that Jeremy talked about. That property growth is a larger and larger share of advertisers.
Bending to Avertise to the audience.
Jeremy Hofmann: And if you check out the video we put in our shareholder letter, you'll see really good testimonials from some of our partners about not just the audience size but the quality that they're receiving and the ROI they're getting from the Zillow rental network.
Jeremy Hofmann: So that's really what's been driving the growth story to date, and that's what's driving the growth rate, the record revenue we had in Q1 and the acceleration we're expecting to see for a rest of year.
Jeremy Hofmann: Yeah, and then Ron, I'll just pile on, you know, from a numbers perspective, we grew revenue in rentals 27% last year. We grew Q1, 33%, we're expecting 35% growth in Q2 and then 40% for the full year. And I think that's just the dynamics that Jeremy highlighted playing out in the revenue growth. And we're quite pleased with what we're doing and really see a long opportunity, we'll be on 2025, that billion dollar plus revenue target.
Jeremy Hofmann: feels quite achievable, and we're pleased with what we're doing in 2025.
Thank you, guys.
Speaker Change: Our next question comes from Brad Erickson with RBCD Capital Markets. You may now meet your audio and ask your question.
Brad Erickson: Yeah, thanks. So, a couple of questions. One, just done market share.
Brad Erickson: Nar, I guess, showed 3% growth, you guys should 6% growth, residential grew, 6% and appreciate Jeremy the comments earlier on kind of the high end low end.
Speaker Change: New Ones going on there, but just in general with these two reported metrics being a little bit far apart, how should we looking at this and aiming to kind of assess your growth relative to the market, and then I've got to follow up.
Speaker Change: Mr. Bradley, let me take that first. I think you're right. There's a lot of noise in the macro environment right now, and we've been bouncing along the bottom for a good bit of time in housing. I think we're pleased with the outperformance, both on the residential side and the four-sale side, particularly when we look at the mortgage market. So, like I called out in the prepared remarks, the high end of the market was really the driver of any growth in housing, and we tend to look more like the mortgage buyer. That's the person, that's the person.
Speaker Change: and that shows up most frequently for Zillow. And as a result of that being flat this quarter, the 6% growth in residential and the 8% growth in for sale feels quite good. I think you've heard this from us for a long time now. We don't overly focus on the quarterly fluctuations just because macro has a lot going on. So we try to look at annual and multi-year views and we think we're consistently outperforming and we're really pleased with
The enhanced markets roll out as a, as a, as a big driver of that . . .
Speaker Change: Got it. And then, you know, you've obviously got a growing portion of connections here coming from the enhanced markets.
Speaker Change: I guess 24% this quarter, 35% expected by the end of the year.
Speaker Change: It would seem like that could really start to take growth with rates further above the market to your last point. So I guess is that the right way to think about it or maybe any other nuances you might want us to be aware of as we contextualize that in the full year guidance?
Speaker Change: Yeah, I'll take that, Brad. I'm in Jeremy Powell, and if I miss anything. But I think the enhanced markets are going well. You're right. We're at 24% of all connections in Q1. We're expecting that to be 35% plus by year end. The bulk of the launches last year were Q2 through Q4. And it takes about 12 months to see accretion. So I do think that's something to just keep in mind as we go. But I think the progress is quite good. We're seeing double digit adoption rates across all.
Speaker Change: All of the enhanced markets, not just those that are more mature with Zillow home loans and continuing to see really good customer experience and really good partner feedback as well. So I think it's just a good methodical build, like we've been talking about for a while now and continuing to be quite pleased with it.
Speaker Change: Yeah, the only thing I'd add there is just, I know it makes it harder for you all to model but not everything.
Speaker Change: is the same, right? You think about real-time touring and that comes to the enhanced markets as you roll them out, but it also comes more broadly. And, you know, I talked about 36% of connections nationwide now being in real-time touring. So when we have things we can deliver. [inaudible]
Speaker Change: in all the enhanced markets and beyond we do, and then when we have things that we have to really be methodical about things like follow-up boss improvements for our premier agent partners to drive enhanced markets results, things like introduction and training with Zillow home loan officers, those things will be more methodical in the land and expand strategy, all of that if you zoom out. Thank you very much.
Speaker Change: puts us on a path to get to the majority of Zillow customers, right? We kind of, we gave you all a mile marker of 75% of Zillow transactions to flow through that experience in the future. We don't think that's the upper limit, right? But we wanted to give everyone a guidepost to show our goal is to get. Let's go ahead and take a look at that.
Speaker Change: The majority of Zillow customers to be able to use this more integrated, more digital experience with a great professional that's on board to use our software and services and to deliver the integrated transactions. So, that's where we're headed and the hand markets are just a really good way to model our progress against that.
helpful thanks
Speaker Change: Our next question will come from John Colantuoni with Jeffrey. You may now unmute your audio and ask your question.
Great. Thanks for taking my questions. Looks like you're-
Speaker Change: Folier Outlook calls for a better growth in the rental segment, which...
Speaker Change: kind of implies either the residential or the mortgage segments or maybe both are falling a bit short of prior expectations. Can you talk to the factors causing that short fall relative to your expectations for either segment?
Speaker Change: And second question, based on your hiring needs to service your current market footprint in your growth areas, how is that informing your pathway to get back to variable cost growing more consistent with revenue?
Thanks.
Speaker Change: Yes, thanks, John . I'll start, Jeremy Hofmann. On the rental side, our fill year guide had already included that rental's acceleration in our February outlook. We had just given a total company number and we were trying to give you all this quarter just a bit more visibility into how that builds. So it's not necessarily a change versus what we guided in February , just more color on rentals, just given the acceleration we are seeing and expected to see. So I think that's question one. And then on the variable side,
Speaker Change: We are going to continue to invest in variable for both silicone loans and rentals. We just see really good growth opportunities there. And we want to make sure that we're capturing those.
that being said, we can...
Speaker Change: clearly drive leverage in the business and grow profits faster than revenue, and that's going to be on the back of the fixed costs this one. So Q1s, a good example of that, where we grew fixed costs 3%, revenue grew 13% for the company, and you see the margin expansion show through. We're expecting more the same throughout the course of 2025, and that's why we feel so good about the 2025 guide over all of the loaded mid teens revenue growth.
continued margin expansion and positive gap net income.
Great, thank you [inaudible]
Our next question will come from Trevor Young with Bart, please.
Speaker Change: Please unmute yourself and ask your question. Great. Thanks. Just back to the questions on rentals and the multi-family ramp there. How much of the uptick in May to the 60,000 was from contracts that lapsed at Redfinn that you were able to pick up? I think you said the partnership just launched last week, so clearly very early days. Thank you very much.
Speaker Change: And also, can you just remind us kind of the mechanics of the partnerships since it wasn't an acquisition. Redfin cancels their contracts but can share a customer list with you and then your sales or it can go try to sign up those properties, is that more or less how it works?
Yeah, Trevor, I'll take that as Jeremy Hofmann.
Speaker Change: The way that I would think about the partnership is there was no transfer of contracts so we had to go out and win that business.
Speaker Change: And we obviously did that quite well. And that goes back to what Jeremy was talking about earlier. We have differentiated supply, we have differentiated demand, and we're driving what we believe is differentiated ROI to our partners as well. And when you put all three of those things together, you can start to see the success that we've had, and adding 5,000 buildings in Q1, another 5,000 in April alone, makes us feel quite good that the proposition that we're putting forth in the market is clearly resonating.
Speaker Change: and revenues accelerating throughout the course of the year as a result of all that.
Speaker Change: The syndication went live in late April so we started syndicating properties to Redfinn then and what that means is now the 60,000 buildings that are on Zillow are on Redfinn and their sites as well as Realtor.com and that's obviously compelling for consumers and it's compelling for our multifamily property customers as well.
Speaker Change: Yeah, and maybe the only thing I'd add is, as Jeremy said, we had to go sell and win that business. We're of course not going to bat 1000, right? I mean, having to earn this business, there's going to be our best efforts. You're seeing the result of that in the numbers we talked about and why we gave the color even since Q1 because it's really a win win, right? It's a win for the advertiser that was on their sites, but was not on Zillow. They're not getting access to a bigger audience and it is of course a win for our existing advertisers. It's a win for the advertiser. It's a win for the advertiser.
Speaker Change: and partners that were on Zillow properties and maybe not yet on on red fence properties. So that's part of why I think you're seeing such great
Speaker Change: Acceleration in the property count. And as Jeremy talked about, you're also seeing them maybe select higher tiers of advertising because they want more exposures. So on the partner side,
Speaker Change: It's been really well received and what excites me the most is that all turns around and ends up being more supply and more choice for the renter, right? So the renter on Zillow, the renter on Redfin sites, the renter on realtor.com is now seeing more properties and able to shop. But going back to that strategy, we're trying to drive organizing more of the supply, driving engagement with the renter providing this fantastic consumer experience. That's how this marketplace spins and that's the benefit that we and Redfin are going to see from this partnership. . . . .
Really helpful. Thank you.
Speaker Change: Our next question will come from Tom Champion with Piper Sandler. Please unmute yourself and ask your question.
Speaker Change: Hi, good afternoon. Jeremy Wacksman, maybe for you, please can you talk a little bit about the listing access standards? This seems like an important...
Industry Development, and I'm wondering if you could just-
Speaker Change: I'll offer some comments on it and why it's important and maybe for
Speaker Change: I'm wondering if you could offer just a little more detail around enhanced markets growth and the plans through the balance of the year. I want to say you ended 24 with roughly 50 maybe that expanded.
to 90 ish in
Speaker Change: in April . What ending are we in with the expansion of the enhanced markets? What does this look like over the next maybe a couple quarters into next year? Any thoughts on that would be really helpful. Thank you.
Speaker Change: Yeah, Tom, I'll start. So our listing standards that we announced recently, it's really just about encouraging the industry to formally implement what most are already practicing.
Speaker Change: which is that if you're going to market a listing, if a seller's not going to choose privacy or they're not going to choose no internet, which are all options available to them, and you're going to market it publicly to some buyers, you need to market it to all buyers. [inaudible]
and the reason we're doing that is because...
Speaker Change: The transparency that the U.S. residential real estate market has the luxury of allows buyers to be informed and be educated when they select their professional.
Speaker Change: Sellers understand and get the benefits of that transparency and agents can do their job effectively agents can see all the inventory and cooperate with each other so we . . .
Speaker Change: buyer and seller, empowerment and education and availability of content and we want to make sure that remains in our market so that our consumers and the professionals work with us, the professional work with our competitors, professional work everywhere on the industry can continue to do their jobs effectively. Thank you very much.
and then Tom on the Enhanced Markets.
Speaker Change: We are, I think we're still early innings and when I say that, you know, we think this is the future consumer experience that
Speaker Change: drives the vast majority of how Zillow customers interact with us and we have to get that right. And why we're so methodical in how we roll these enhanced markets out is that integration between our Zillow home loans, loan officer and premier agent partner is something we just have to get right from the start. So we're being really thoughtful about how we roll out and scale accordingly because we think there's so much potential in the strategy and so much potential in the customer experience for a long period of time. So I think that's the answer on the early innings. Where we are in terms of money.
Speaker Change: We're at 21% of all connections at the end of 2024. We are now at 24% we expect to be at 35% by the end of this year and then on our way to 75% plus.
Speaker Change: over time, and if you ladder that back to the mid-cycle targets we put out in February .
Speaker Change: The 75% enhanced markets, connections going into enhanced markets translate to what we think is a billion dollar organic revenue opportunity in front of us. So we think that is really, really attractive regardless of what happens with the housing market. So that's it, that's it.
Speaker Change: You know, assuming the housing market states flat, we think there's a lot of growth there to go get and we're going to be methodical to make sure we build the experience right . . . . . . . . . .
Thanks guys
Speaker Change: Our next question will come from Mark Mahaney with Evercore ISI.
Mark Mahaney: Please unmute your audio and ask your question. Okay, thanks. Two questions, please. First, there, your market transactions, growth assumption behind your Q2 residential revenue outlook. Is it for flat, low single digits? Is that what you're assuming in the market?
Mark Mahaney: And then I know it's a broad range, or there's probably a couple of ranges, but could you talk about the monetization of per connection differential between the enhanced markets and the rest of the and the regular markets thanks.
Speaker Change: Double digit revenue growth in the face of a really challenging housing market. It's something I think we're quite...
Speaker Change: and we have continued confidence that will grow low to mid teens in 2025 against a challenge market. Q2 is much of the same. We don't have any more specificity around that, just given how fluid macro is but it's bouncing along the bottom and we expect that to continue to be the case for some time.
and then maybe on your second question, Mark.
Jeremy Wacksman: kind of monetization of enhanced market versus not. I mean, we don't break it out that precisely. We have talked about how the enhanced markets are growing faster than the business on average and that's that's the math that backs what Jeremy just talked about earlier around getting from the 20 odd percent to 35 percent of connections to 75 percent plus by the end drives that billion dollars of organic growth because that's basically share our performance against the flousing, flat housing market, right? So...
Jeremy Wacksman: All that math and the return we're seeing and the growth rates we're seeing, which we talked about a bit in the prepared remarks of enhanced market performance is a is a good color for you but we haven't given a precise break out of it.
Okay. Thank you.
Speaker Change: Our next question will come from Sergio Segura with Keybank Capital Markets. You may now unmute your audio and ask your question.
Sergio Segura: Great, thanks for taking the questions. I had two, maybe going back to the listing standards, just curious what the industry-wide reaction has been. You know, for the brokerages that have been pushing these private listing networks, have you seen any find of them, maybe back in a way from that strategy.
Speaker Change: and then for the EBITDA expense on one queue, those modestly below, what you had in your outlook. So anything to call out there on cost savings or without more just one queue investment spend shifting into the second quarter, thank you.
Speaker Change: Yeah, Jeremy, I'll start maybe on listings and you can take the second one.
Speaker Change: I mean, it's really early, I guess, is my short answer, but we're pretty pleased to see so many in the industry brokerages, MLS's, other organizations
Speaker Change: Publicly committing to the same principle, or again most of them already believed in and were practicing this that if you're going to market a listing a listing.
Speaker Change: You should market it, available to everyone to all buyers so that the marketplace has transparency. We're also seeing a lot of consumer advocacy organizations, including the Consumer Policy Center support that transparency and real estate. So again, we really put that statement and policy out because it is really supporting most of what those in the industry already believed in were practicing. Thank you very much.
Speaker Change: and then half of that is driven by normal seasonal marketing step-up, and then the balance of it comes from the Redfin partnership and us starting to pay them for leads, and the leads they generate to our rentals marketplace.
Thank you both.
Speaker Change: Our next question comes from Curtis Nagel with Bank of America Merrill Lynch. You re now, ask your question and I'm your audio.
Great. Thank you for taking the questions.
Speaker Change: I just want to go back to the point about the impact at high housing, you know, kind of driving a relative disparity in terms of...
Speaker Change: You know, you're ready for sale at the performance, the versus the market as a whole. I guess with that, we're outsized in one queue, relative to other quarters. I know, I and Hal, he's been largely, or I think for the most part, through better than the market as a whole. Let's say the best. [inaudible]
Speaker Change: several quarters. So, yeah, just to be curious, you're not saying that. Thanks very much.
Speaker Change: Yeah, you're right, Curtis. The high end just outperformed in the first quarter homes at the high end where we had 6% total growth on our calculation high end contributed 500 plus basis points. So that means the middle and lower end was roughly flat. And that is the set of customers that we tend to more commonly work with. I think that's been a trend, particularly the affordability
Speaker Change: The ability challenge I think for home buyers and first time home buyers in particular has been a headwind for more than just Q1. We had that headwind through the course of 2024 as well. It was a bit of a tailwind back in 2023 but more of a headwind in 2024 and I think continued to be the case.
Speaker Change: into Q1. And I think that's, like I said, on the relative performance question. That's why we try not to over function, right? The macro is just so fluid at the moment and has been for a long period of time now that we try to look at how are we doing in residential for sale and total company over longer periods of time, where that stuff starts to smooth out. And I think quite pleased with the ability to take share in residential in for sale and across the business.
and others. ________________
Speaker Change: Okay, and then maybe just a quick follow up, Jeremy, on that point, just I guess the philosophy behind, you know, not giving a market forecast, it was quarter, I think you have released, I don't know, past.
Speaker Change: Before I back as I can see, that's something you've done, so just, you know, what why not do is to cute you?
Speaker Change: It's just a little too hard to predict first. I think the housing market itself has been challenging to predict.
Speaker Change: The last few years and you throw in the more uncertainty going on in the rest of the macro we felt like better serve to just tell you all our expectation is much of the same and our expectation is grow right through it so that's what we plan to do in Q2.
OK, thank you.
Speaker Change: Our next question will come from Benjamin Black with Deutsch Bank Research. You may now on Media Audio and ask your questions.
Benjamin Black: Great. Thanks for taking my question. One other thing to showcase is...
Benjamin Black: Kitakledo, the learning, fair, your go-to-market strategy.
Benjamin Black: You know, what's one of the feedback that you're getting from your listing agents, and is there...
Benjamin Black: Is there anything on the product side that you're working on that could potentially drive even greater adoption? And, you know, this longer term, you know, when do you get to the place where I'm not having this thing showcase, it's seen as sort of a real disadvantage and
Benjamin Black: and the seller is about to pressurize and tease it more. Thank you.
I love that question. We ask ourselves that question too.
So on showcase...
Benjamin Black: 2% of all new listings up from 1.7% last quarter. We are thrilled with that for a product that's really just nationwide, you know, a little more than a year. And your second question is what we all think about, right, when this becomes a standard, but the reality is we're sitting in a world where this is still new, and most sales calls are introducing and educating an agent on what this is.
Benjamin Black: Right, so we're really pleased that progress and you've seen us.
Benjamin Black: Do a great job in rolling agents and teams and we're starting to also work with brokers as well to work with their agents. We just announced a partnership this quarter and we're going to continue to evolve our go to market to get the word out more with agents and brokers and then. [inaudible]
Benjamin Black: when do we move from kind of the fear of missing out version of showcase to the table stakes that comes with scale and with time and with share of showcase I mean and that is the future we see I think it's
Benjamin Black: When you see buyers engage more with the showcase listing and they spend nearly double the time engaging with it, that's a higher intent buyer, right? And so the agent trying to sell that home absolutely wants that because it helps them sell the home faster. You see that in data, right? In every market, we see home sell faster and sell for more money when they are showcased. [inaudible]
Benjamin Black: and that's what allows agents to win more listings when they use it. So right now it's new, it's novel, we've been talking to you about it for many quarters now but if you if you go sit inside a real estate agent's office
Benjamin Black: There's still learning about it for the first time in many places. So we will get there. Part of the guidance we try to give you all was we think
at five to ten percent.
Benjamin Black: Share, that's the incremental 150 to 300 million of the product.
Benjamin Black: But when we get beyond that and when we start to get to real penetration of the content, it does turn into an expectation. And we know that because every time you give the consumer access to more content.
They move from...
Benjamin Black: New Innovative to Expectation. You saw that with mobile. You're going to see that with things like Showcase and AI Power Technology in our category. So, we're really excited about its potential. We didn't put a time frame on that 5 to 10 and we haven't put a time frame on your second question, but that is ultimately the goal is to really move.
Benjamin Black: All buyer and seller expectations to a much more interactive, much more immersive way to virtually shop. That empowers the consumer and that ultimately empowers the agent too. It's a higher intent buyer and seller. It's a more educated customer.
Thank you for that.
Speaker Change: Our next question will come from Di Lee with JP Morgan. You may now unmute your audio and ask your question
Greg, can you hear me?
Yep.
Speaker Change: Thanks for taking the questions, I have to. It's all up on the macro, comments are made on there, so I understand that housing remains challenge, but with that said, how is that translating into age and participation on your platform? [inaudible] it's all up on the macro
and wondering if you're seeing any change in them.
Speaker Change: how they're participating this year, or that it's last year, and then-
Speaker Change: Second, you've been seeing acceleration in your unique user growth. So curious what's driving that acceleration. And if you're seeing any changes to consumer behavior on your platform, I could help us guide how to think about how 25,000 market should look like. Thank you.
This is a
Speaker Change: Agents still like the ROI and see great ROI from places like Zillow, but in the challenge market you often turn to this flight to safety of the places you know are going to work to help build your business making more efficient and help you grow your business and that is Zillow for many of them. So for us we feel really fortunate the strategy we have a partner with the top end. [inaudible]
Speaker Change: Existing home sales that trade four and change million down from five and a half to six million average were really down at only the folks that have to pull the trigger. That doesn't mean the demand's not there, it just means that they're not actually following through and able to buy and that's the affordability challenge, which is exacerbated by lack of inventory, right? So you'll see that in the in the buy side signals, you'll see that in the demand signals in our traffic and other companies that report on buy side demand, even with the the challenges that are going to happen in the market.
Speaker Change: in the outside for their wallet, the pent-up desire is still there.
Speaker Change: And then I think just the pile on that, if you think about how to get comfortable with why do we continue to grow in the low to mid teens for 2025? It's not so much on the back of user growth, it's going to be on the back of things like rentals, multifamily property growth, which you're seeing enhanced market expansion, continued expansion to follow up on and continue expansion of showcase. Those are all really much more kind of self-help transactional services that we're delivering to help us drive.
Speaker Change: growth rather than user-specific at the top of the funnel. That's right. And that's because, as we said, made the India hour, our strategy is...
Speaker Change: Convert more of the highly engaged brand direct audience we have, right? This isn't about lead genital lead acquisition. This is about helping more buyers and sellers use an integrated...
Jeremy Wacksman: Shopping experience to not just shop but actually buy and sell with great partners and everything Jeremy just laid out are the ways in which we're doing that and we're doing that in our hands markets most fully. Thank you.
John , thank you.
Speaker Change: Our next question will come from Maria Ritz with Canacord. You may now unmute your audio and ask your question.
Speaker Change: Maria, I think you're still on mute if you're trying tough [inaudible]
Maria Ripps: Great, thanks so much for taking my questions and I'll sort of all that.
Just first a board in this question.
Speaker Change: Good luck here sort of your thoughts on what Rocket announced the positions of Red Fane and Mr. Cooper sort of when they're strategy there could mean for Zillow and the industry more broadly and maybe relatedly does that position change sort of anything as it relates to any sort of key aspects of the Red Fane partnership and then I have a quick follow-up.
Speaker Change: Why don't I start? And then Jeremy obviously jump in on anything on the partnership specifically. I think
Speaker Change: For me, rockets announcing their acquisition of Red Fint is really about a recognition that the future real estate is this integrated transaction, right? That is what buyers and sellers are demanding, the idea that you need to put together fantastic technology for the buyer and for the seller and for the real estate agent and for the loan officer and for all the transaction services along the way because the buyer and a seller wants to do that increasingly in the palm of their hand inside one app.
Speaker Change: That's how I think about that. The great news for us is that's been our strategy for a while, and you're seeing us grow our share of transactions,
Speaker Change: and we like the assets we have to continue to grow and be a big sharegainer in that future of real estate. And it's a huge and highly fragmented market, right? There's going to be multiple winners here and so as more companies...
Speaker Change: See that that is actually a feature of real estate is building this integrated experience. There's going to be more than just us doing it. So we love the bet we are making that real estate is going to be further digitized and integrated and we love our strategic positioning. Thank you very much.
Speaker Change: And then to the Redfin question, we expect, and I think Rocket has said this as well, we expect them to be supportive there, we don't expect.
Speaker Change: changes to the partnership as a result of the acquisition. Like Jeremy said, really big market, really interesting strategy. We think there are multiple winners and of course in these partnerships we look for ways to create win-wins. That's how these partnerships work best and we think the Redfin one is a win for us. We think it's a win for Rocket Flash Redfin as well.
Speaker Change: That's very helpful. And then can you maybe help us kind of understand sort of the magnitude of gross margin impact from the Western partnership that's embedded in your guidance.
Yeah, I would go back to just thinking about, um,
Speaker Change: The sequential uptick between Q1 and Q2 is about $50 million, so $4.45 and Q1, $4.95 and Q2. More than half of that is just seasonal marketing step up, and then the balance of it will come from that Redfin partnership, and that will be showing up in cost of revenue.
That's very helpful. Thank you very much.
Speaker Change: This completes the a lot of time for questions. I will now turn the call back over to Jeremy Wacksman for any closing remarks.
Speaker Change: Thank you all for joining us today. We really appreciate your continued support. We're excited for what's ahead and we look forward to speaking with you in August .
Speaker Change: Thank you for joining Zillow Group's first quarter financial results call. This concludes today's conference call. You may now disconnect.