Zillow Group, Inc.

Hello and welcome to Zillow Group's fourth quarter 2024 financial results call. We ask that you please hold all questions until the completion of the formal remarks, at which time you will 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. Brad, you may begin.

Thank you, good afternoon, and welcome to Zillow Group's fourth quarter and full year 2024 call. Joining me today to discuss our results are Zillow Group's CEO, Jeremy Waxman, and CFO, Jeremy Hoffman. During today's call, we will make forward-looking statements about our future performance and operating plans based on current expectations and assumptions. These statements are subject to risk 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 adjusted EBITDA, which we refer to as EBITDA. We encourage you to read our updated investor presentation, shareholder letter, and earnings release, all of which can be found on our investor relations website, as they contain important information about GAAP and non-GAAP results, including reconciliations of historical non-GAAP financial measures. We will open the call with remarks, followed by live Q&A. And with that, I will now turn the call over to Jeremy Waxman.

Thank you, Brad, and good afternoon, everyone. Thank you for joining us today. We're excited to share our fourth quarter and full year 2024 results with you. Zillow is delivering value to movers and real estate professionals with our products and services, and that's translating to strong performance across our business. We have the leading brand in residential real estate with the largest and most engaged audience, a significant total adjustable market, and we are executing well on our differentiated housing super app strategy. We believe all of this positions us to deliver sustainable, profitable growth for our shareholders. As you'll hear more about in a moment, we met our stated goals for 2024 and expect to continue our momentum in 2025. This momentum includes being on track to meet our goal of 6% share of customer transactions by the end of this year. The results we're reporting today demonstrate how we are executing and seizing our opportunity to transform and digitize residential real estate. As with everything we do at Zillow, our approach begins with the movers we serve. Over the past 20 years, we've built our top of funnel advantage by releasing a steady drumbeat of products, services, and software tools designed to delight and empower customers throughout their moving journey. From the Zestimate and our vast two-sided marketplace of homes for sale or rent, to Zillow Showcase and improvements to both in-person and virtual touring, to natural language search and Zillow Home Loans buyability, helping people find the right home for them and their budget. As a result, Zillow has the largest audience in both for sale and rentals, with four times the app engagement of the next company in our category, a lead we've widened this past year. About two-thirds of the real estate audience uses Zillow somewhere along their journey, more than twice any other company in the category. And 80% of that traffic is coming to us directly and organically. Increasingly, we are better able to identify high-intent movers within our large audience and connect them with high-performing real estate professionals, ultimately leading to more people transacting with us and our partners, resulting in greater revenue. And as we continue to leverage our cost structure, expanding EBITDA margins show up alongside our consistently strong revenue performance, and ultimately, we believe it will drive sustainable gap profitability. Now onto our fourth quarter and full year 2024 results. We reported total Q4 revenue of 554 million, up 17% year over year, above our outlook range. And I'm proud to share that we met our target of double digit revenue growth for full year 2024, up 15% year over year to 2.2 billion, despite a persistently challenged housing market that saw only 6% total transaction value growth for the year. We also met our target for expanded EBITDA margin for 2024. As we invested strategically over the course of the year, we maintained cost discipline, expanding our EBITDA margin by 200 basis points, all of which sets us up well for 2025. This quarter, we've also released a new investor presentation available on our investor relations website. In that presentation and in the bulk of my remarks today, we'll provide an update on how we've been executing our strategy and why we are confident in our ability to achieve our goals in the future and transform U.S. residential real estate. Importantly, we believe we have a clear path to $5 billion in revenue and 45% EBITDA margin in a normalized housing market, which Jeremy Hoffman will dive into further during his remarks. As you'll see in the investor presentation, we are now articulating our revenue in two major categories, for sale and rentals. The for sale category includes revenue from residential and mortgages, which we manage together to best serve the buyers and sellers who work with us. The vast majority need both a great real estate agent to represent them and a great mortgage. And we are building our products and managing our teams more closely together as a result and want to ensure that the way we're talking to you about our business reflects how we manage it. Our for sale revenue in Q4 was up 15% with 11% growth in residential revenue and 86% growth in mortgages revenue. For rentals, 2024 was a seminal year, and we finished strong in Q4 with revenue up 25% year over year. We increased the number of multifamily properties on Zillow to 50,000, up from 37,000 at the end of 2023. Across the business, we are pleased with our execution in Q4 and throughout 2024, and are excited about the foundation we've laid for future growth. Now I'd like to dive a bit deeper on the progress we're making, starting with for sale. Our current opportunity and focus areas across for sale is to capture more of the potential revenue represented by buyers and sellers already engaging in our funnel. The majority of eventual transactors dream and shop on our apps and sites at some point in their moving journey, and one in four of those raises their hand to connect with an agent through Zillow. And yet only a single digit share of customer transactions are currently completed through Zillow and our partners. To capture this significant opportunity in our for sale category, we are focused on a few key areas. First and foremost, we are building the experience we know buyers, sellers, and industry professionals want. One that is easier, streamlined, tech enabled, and integrated in Zillow's Housing Super App. On Zillow, movers can choose their agent, choose how they sell their current home, and book a tour as easily as they book a restaurant reservation. With Zillow Home Loans, buyers can shop based on what they can afford with the buyability feature and get digital pre-approval. And for real estate professionals, Zillow helps agents understand their clients' needs, manage tours, see how they're performing, win listings with Zillow Showcase, help clients learn about their financing options, and handle title and closing through Dotloop and increasingly Spruce. And in select markets, both parties are now able to communicate and collaborate directly in the Zillow app, enabled by Follow-Up Boss, an industry-leading agent-customer relationship management system we acquired at the end of 2023. Second, we are laser focused on connecting high intent buyers on Zillow with our excellent partners, increasing the conversion of shoppers into transactors and increasing our share of transactions as a result. Continuously reducing friction for these high intent buyers has helped us meaningfully outperform the residential real estate market over the past three years. And we see future drivers of conversion across multiple areas of our business going forward. For example, today, our real-time touring product is nationwide, and one-third of our connections come through real-time touring. We're routing these connections to some of the top agents and teams across the country. 80% of the agents we work with are in the top 20% of producers in the U.S. And we're enabling real estate professionals to do their jobs even more efficiently and effectively with tools like Follow-Up Boss. We recently integrated more Zillow data into Follow-Up Boss, making it an even more powerful tool for agents to identify the highest intent buyers and sellers and serve their clients better. In our enhanced markets, the geographic areas where the integrated housing super app experience is most fully realized, more than 80% of our connections are being managed through Follow-Up Boss. Third, we are focused on integrating Premier Agent with our Zillow Home Loans offering because, again, most buyers need both an agent and a mortgage, and they want their experience with both to feel seamless. We are executing this integration well, with consistent customer adoption rates in the mid-teens across our most seasoned enhanced markets. And we're seeing Zillow home loans drive conversion as buyers transact through Zillow at an 80% higher rate after connecting with both Zillow home loans and a premier agent partner versus with a premier agent partner only, which further proves our integration thesis. Driving adoption of our premier agent and Zillow home loans offerings together has, in turn, increased our purchase loan origination volume by 2.6x over the past two years. And as purchase mortgage origination volume has begun to scale, growth in our mortgage's revenue has accelerated, up 86% year-over-year to $41 million in Q4, as purchase loan origination volume increased by 90%. This success comes even amid ongoing challenges in the rate environment. Fourth, we are expanding our adjustable market by developing and scaling seller services, because two-thirds of buyers are also sellers. We are excited by the success we're seeing with Zillow Showcase, which elevates agents' brand presence on Zillow and provides a better shopping experience through our homegrown, AI-powered, rich media and floor plan technologies. Showcase listings sell faster and for more money than similar non-showcase listings on Zillow, meeting sellers' top two priorities. 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 sales price. Showcase is also helping agents win 30% more listings, making it an attractive offering for real estate professionals. We made Zillow Showcase available nationwide in 2024, and by the end of the year, it was on 1.7% of new U.S. listings. We aim to reach 5% to 10% of all US listings in the intermediate term, which we believe represents a revenue opportunity of $150 to $300 million. Fifth, we are consistently looking for ways to add new services to make Zillow experience more integrated and increase our revenue per transaction along the way. Each step of the move comes with corresponding Zillow Group products and services, meaning each step represents an additional driver of potential revenue per transaction for us. through buyer and seller referral fees, as well as revenue from loan originations, showcase listings, and title enclosing. We're pleased with the progress we're making as all of these efforts come together in our enhanced markets, our go-to-market motion that we have been methodically scaling for the past few years. Enhanced markets covered 21% of all connections in Q4 2024, and we expect to increase their share of connections to more than 35% by the end of 2025 as we continue our land and expand strategy, going deeper in current markets and adding more markets. As we keep working across the business to increase connection and conversion rates, we expect to continue to drive share growth relative to the total industry transaction value in our for-sale revenue. We've seen newer enhanced markets behave similarly to our earliest markets in terms of share gains, which gives us confidence our strategy is working and our success is repeatable. Looking beyond 2025, we expect 75% of all Zillow transactions to be in the enhanced market experience in the coming years. Now on to rentals, which had a remarkable year, gaining more property listings, more traffic, and more revenue than ever. In rentals, we are eyeing an estimated $25 billion total addressable market. To give you a sense of the scale of this opportunity, almost every mover starts out as a renter, and about three times as many movers are looking to rent versus looking to buy or sell. Yet, unlike with for sale homes, many more rentals turn over every year, and there is no single marketplace where a mover can see all available homes for rent. We've spent the past several years building a highly differentiated two-sided marketplace with a comprehensive suite of 1.9 million active rental listings as of the end of 2024. By assembling a sustainable long tail rental platform with small and single family properties, then building on that by accelerating our multifamily property listings, Zillow is rapidly becoming the one-stop nationwide marketplace renters and landlords have sorely needed. That has earned us the largest consumer rentals audience with an average of 29 million unique visitors every month, a widening lead over the next company in the category and the number one preference among renters. And we are applying the same product expertise and relentless consumer focus we've shown in the for sale experience to fixing the fragmented rental experience. Renters on Zillow can shop, tour, apply, sign a lease, and pay rent securely on participating listings. And property managers can list, book tours, screen applicants, create leases, and sign them electronically, and collect rent payments, all on the Zillow platform. These efforts to create a more seamless and convenient experience on both sides of the rental process are paying off as we attract more renters and more multifamily and single-family property listings, yielding increased revenue. Having built a unique rental platform with the largest rental audience, we're now focused on scaling revenue across the marketplace. We expect multifamily properties to be the main driver of growth here. Today, 50,000 multifamily properties are on our platform, up from 37,000 at the end of 2023. And there is room to expand with an estimated 140,000 total multifamily properties across the country. To that end, today we announced a partnership with Redfin to provide all of the multifamily listings on their sites, further expanding the reach of multifamily properties that advertise with us and giving renters on Zillow access to more apartment listings over time. Zillow Rentals growth has been buoyed this year by our successful partnership to distribute multifamily listings on realtor.com, as well as by our multifamily advertising campaign, both exciting developments that we kicked off in 2024. While our marketing spend has been relatively modest, we strengthened our traffic advantage in the rentals category in 2024 according to Comscore data. As I said, 2024 was a seminal year for Zillow Rentals. The growth we saw last year and expect this year supports our belief that Zillow Rentals is well on its way toward the billion-dollar-plus revenue opportunity we see in front of us. To close, we are pleased with the progress we made in 2024, which has set us up well for strong execution in 2025 and beyond. We stand in a fortunate position because we have the leading brand in real estate. We have significant growth opportunities in both for sale and rentals. We are executing on a strategy that is working well, and we are doing all of this while maintaining cost discipline, which we expect to drive strong gap profitability over time. It's a unique and exciting time to be at Zillow, and I am proud of the team's efforts to get us here. With that, I'll turn the call over to our CFO, Jeremy Hoffman.