Zillow Group, Inc.

Good afternoon. My name is Chuck, and I will be your conference operator today. At this time, I would like to welcome everyone to the Zillow Group fourth quarter 2020 conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. And if you would like to withdraw your question, please press star, then two. Please note, this event is being recorded. I would now like to turn the conference over to Brad Burning, Vice President, Investor Relations. Please go ahead, sir.

Thank you, Chuck. Good afternoon, and welcome to Zillow Group's fourth quarter 2020 conference call. Joining me today to discuss our Q4 results are Zillow Group's co-founder and CEO, Rich Barton, and CFO, Alan Parkers. During the call, we'll make forward-looking statements about our future performance and our operating plans based on current expectations and assumptions. These statements are subject to risks and uncertainties, and we encourage you to consider the risk factors described in our SEC filings for additional information. We undertake no obligation to update these statements as a result of new information or future events except as required by law. This call is being broadcast on the internet and is accessible on our investor relations website. A recording of the call will be available later today. During the call, we will discuss GAAP and non-GAAP measures, including... you to read our shareholder letter and our earnings release, which can be found on our investor relations website, as they contain important information about our GAAP and non-GAAP results, including reconciliations of historical non-GAAP financial measures. In addition, please know we will refer to our internet, media, and technology segment as our IMT segment. We will now open the call with brief remarks, followed by live Q&A. And with that, I will turn the call over to Rich.

You're on mute, Rich. That's now in the dictionary. Sorry about that. Thanks, Brad. Good afternoon and thank you all for joining our first call of the new year. February marks a big milestone for Zillow, our 15-year anniversary. We were motivated at the beginning by the same dream that motivates us now, reinventing a disjointed and friction-filled process to make it easier for people to move. While we have made tremendous progress and our position is strong, we are in many ways just getting started. A year ago on this same call, I deemed 2019 a tumultuously remarkable year. In hindsight, I clearly had no idea what tumultuous meant. There will be plenty of studies on COVID's impact on society, business, politics, and real estate in the years ahead. But today I'll focus on Zillow's impressive results in 2020. and some of our key accomplishments. First and foremost, we saw engagement across our mobile apps and websites in 2020 at levels we would not previously have thought possible. Zillow surfing has broken through to a whole new level of pop culture, given that Saturday Night Live did a funny and racy sketch about it this past weekend with guest host Dan Levy in the lead. Fantasizing about real estate is not new. Our survey results in traffic have always indicated that people love looking at real estate and want to move. What has changed is that more of those people now have the freedom to move. Many Americans, untethered from their commutes and offices, have begun to reevaluate how and where they want to live. This cultural trend, which we have been calling the Great Reshuffling, along with our continued technology improvements, resulted in 9.6 billion visits to our mobile apps and websites over the course of 2020. That is 1.5 billion more visits than in 2019. We took advantage of this rush of top of funnel engagement and executed well across Zillow's suite of products and services. We accelerated the growth of our flagship buy-side business, Zillow Premier Agent, partnering with real estate agents across the country to produce the strongest results we've ever seen, reporting a 35% revenue growth year over year in Q4. Our burgeoning sell-side business, Zillow Offers, proved durable through some bad weather. We paused home buying to manage risk during the early days of the pandemic, but exited 2020 with our quarterly acquisitions pace returning to Q4 2019 levels. We augmented these buy and sell side businesses with excellent execution in our adjacent services. Our financing arm, Zillow Home Loans, nearly tripled its originations revenue in 2020 compared to 2019. We expanded Zillow Closing Services to 25 markets in less than 12 months, and a vast majority of our customers are now choosing to close with us when purchasing a home from Zillow Offers. This execution resulted in total revenue growth of 22%, which when combined with a disciplined approach to managing costs resulted in more than 300 million in incremental EBITDA profit generation across the company as compared to 2019. Our team drove these business results in 2020 while quickly adjusting to a new way of working with 90% of our workforce doing their jobs remotely. While many companies across the country are evaluating their go-forward policies about remote work, Zillow is on to the next play, as legendary Duke basketball coach Mike Krzyzewski likes to say, having internalized that we are already successfully operating as a cloud headquartered company. This location flexible work model has a myriad of benefits. Our employees, like so many others across the country who are participating in the great reshuffling, now have the flexibility to wrap their work around their lives rather than vice versa. And it allows us to recruit from almost anywhere and increase diversity in our workforce. We believe this will be a significant competitive advantage as we grow, and it is already yielding exciting results. Of course, there are challenges to not being in the office together, but that is temporal. In a post COVID world, our workplace design goal is to maximize flexibility for our high demand talent. We will have awesome offices for those who want or need to come in. At the same time, we must ensure a level playing field for all team members, regardless of their physical location. There cannot be a two class system. Those in the room being first class and those on the phone being second class. We are entering the most interesting and innovative period for workplace design in our lifetimes. And our people and facilities teams at Zillow are out in front. To wrap this year in review, I must say how proud I am of what our whole team has accomplished on the scariest of roller coaster rides that was 2020. And I would like to thank them here for their commitment and resilience. As we look ahead, I'll start with the housing market. Our Zillow economists have made bold predictions for an even stronger housing market this year. They're projecting a near record of 6.8 million home sales for 21% growth plus double digit home price appreciation. We of course do not have a crystal ball and our mission does not depend on the cyclical vagaries of the housing market due to the mega shift from offline to online. but we believe that residential real estate will continue its brisk trajectory. The millennial generation is entering prime home buying years and mortgage rates are historically low. On top of those macro factors, the past year has members of all generations rethinking where they live with a new lens of flexibility and possibility as the great reshuffling continues to take hold. Some of you are concerned about low inventory persisting. Despite historically low inventory, 2020 closed with 5.6 million existing home sales, the highest level since 2006. Low inventory and high volume of sales seem at odds until you consider how quickly homes are selling. Average time on market was 17 days in December, a full 25 fewer days than in December of 2019. In addition to being a hot market, agents and customers adopted technology and tools for safety, convenience, and simply to compete. And higher prices pull more inventory onto the market, of course. So, like a warehouse using lean operations to transition to just-in-time inventory management, the housing market became more streamlined. Current home inventory levels, therefore, can be addressed with something like a safety refrain from a flight attendant. The oxygen will flow, even if the bag does not appear to fully inflate. Amid what we believe will be a very healthy housing market backdrop, we expect 2021 will be a pivotal year for Zillow. I've spent some breath here in the past two years talking about our transition from Zillow 1.0, a media-focused business, into Zillow 2.0, a transaction-focused business. Today, I believe that we have the pieces in place the vision, the team, the technology solutions, and customer products and services to execute on Zillow 2.0 now. We will undoubtedly keep innovating and adding products and services on the long road to customer one-click trade-in nirvana, but our entire company is now relentlessly focused on transactions and ready to scale from here. To do that, we are investing aggressively in technologies and services that make it easier for our customers to make that transition. As part of our quest to make our customers' experiences better, today we announced our intent to acquire ShowingTime, an industry-leading real estate showing software provider that facilitated over 50 million in-person home tours in 2020 for $500 million. ShowingTime's technology already extends into the broader real estate industry, and we intend to grow its adoption across the industry moving forward to the benefit of all industry participants and customers. The addition of showing time to our suite of real estate technology solutions allows us to accelerate a widely adopted solution for scheduling home tours. We see this as similar to the work we did to build our Connections platform a few years ago, and wider acceptance of this technology has the added benefit of improving the experience for the broader industry as well as for our premier agent partners as our platform grows. We envision a future experience that begins on our mobile app, where a customer can immerse herself in a home via our 3D home technology, book an in-person tour through Showing Time with an agent, get pre-qualified through Zillow home loans, work with a primary agent to buy the home, and close the transaction with Zillow Closing Services. We spent the last year bringing our Zillow offers and primary agent businesses closer together to orient around customer success and customer choice. While I know you all think of these businesses as distinct, our customers arrive at Zillow simply trying to move. It is our job to deliver for them in any way that we can, be it through our own services or with our best-in-class partners. Our customers are hungry for the seamless experience that we can now provide. In programs we've begun to run across the country, we see evidence that a suite of Zillow services appeals to people. Take retired elementary school teacher Terry Lee. After 44 years in her Atlanta home, she felt intimidated by the prospect of making repairs and selling, especially with the health risks posed by COVID-19. Her son, an avid user of Zillow, suggested she call us. She accepted a Zillow offer, used a primary agent to help her shop, then financed and closed using Zillow services. Now she has a townhouse in a convenient walkable neighborhood. Having integrated Zillow experience made the move convenient. They were all part of the same team, she said. I didn't have to remember to remind someone, did you let so-and-so know? Everybody knew. We dropped a link to a short video of Terry's firsthand story in the shareholder letter. It's not nearly as alluring as the SNL bit, but it's really a fantastic encapsulation of where we are headed. Testimonials like Terry's are what get us so excited about the opportunity in front of us. So long as we are able to deliver delightful customer experiences, it's a win for everyone involved. Terri sold her previous home, is living in her new home, our premier agent partner completed a successful transaction, and we participated in economics across our multiple services without spending incrementally to find Terri as a customer for the additional services. Our low customer acquisition cost advantage is integral to our Zillow 2.0 strategy. For example, this year, many customers in Zillow offers markets will see that their Zestimate is a live initial offer from Zillow offers. This will begin to realize the big, hairy, audacious goal we set 15 years ago when we launched Zillow of putting an actual price on every rooftop. As this estimate begins to move from fantasy to reality, we are one small but important step closer to delivering on that BHAG. Marketplaces are healthier and more liquid with transparency. Lastly, as I zoom out and think about opportunity, we are in a unique position to build an iconic company and brand that transforms one of the country's largest, most complex and most important industries. Our large audience, The breadth of our services across real estate transactions, our profit streams and profit potential, our strong balance sheet, our experienced leadership team, and our long-term orientation all combine to put us in pole position. The advantages we've worked hard to build over the last 15 years will help drive us forward for the next 15. Our talented team here is making it happen, but I also want to thank you, our investors, who have given us the space and support to move to the next exciting chapter in the story of Zillow. I'll now turn it over to Alan. You're on mute, Alan.