Zillow Group, Inc.

Hello and welcome to Zillow Group's second quarter 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 quarterly earnings 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 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 adjusted EBITDA, which we refer to as EBITDA. we encourage you to read our shareholder letter and earnings release, both of 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 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. I'm pleased to share our strong Q2 results today, including continued double-digit revenue growth and positive net income. We're gaining share in for-sale and rentals, and we're doing it while maintaining cost discipline to deliver on our 2025 targets for continued EBITDA margin expansion and gap net income. As we work to streamline residential real estate transactions with our Housing Super App, everything we build is designed to offer a benefit for both consumers and the industry. People want and deserve a better experience than the antiquated and analog one they've become used to in real estate. Consumers and professionals experience a digital, streamlined, automated, and delightful process in almost every other part of their lives. from rides and restaurant reservations to flights and lodging. And it's reasonable we'd expect the same in real estate. That's where Zillow comes in. We are building that truly integrated, digitized, end-to-end transaction experience. That relentless focus on creating great products and experiences is why we're growing share, in both for sale and rentals, and why Zillow is a beloved brand. People instinctively turn to Zillow when they think about home, Whether a mover is looking to buy, sell, or rent, they're likely visiting us along the way. Zillow maintains the number one position in both for sale and rental traffic. In Q2, we had 243 million average monthly unique users across our apps and sites, and about four times the app engagement of the next company in our category. This deep connection with our audience has been part of our foundation from the start. Just in the past month, season two of Zillow Gone Wild premiered on HGTV, and Zillow debuted a Marvel-sized collaboration with an immersive custom listing of the Baxter Building in New York from the new Fantastic Four movie, in addition to a steady drumbeat of organic mentions across the cultural zeitgeist. We've built that brand equity because Zillow is part of how people imagine their future and how they're able to turn those dreams into reality. Consumer affinity for Zillow continues to fuel our success. We're demonstrating consistently strong growth and are positioned for more. In Q2, total revenue was up 15% year-over-year, exceeding our expectations. For sale revenue increased 9% year-over-year against a broader housing and mortgage market that remained essentially flat. Residential revenue was up 6% and mortgages revenue was up 41%. Rentals revenue growth accelerated in Q2 to 36% year-over-year. These strong results combined with continued cost discipline helped us deliver 155 million of EBITDA in Q2 at the high end of our outlook range. We have a strong position, a sound strategy, and we are executing well, all of which will help us keep driving growth across both for sale and rentals. Looking ahead to the rest of 2025, we are on track toward the full year goals we outlined earlier this year. this includes now expecting mid-teens revenue growth for the full year at the higher end of our previous 2025 outlook for low to mid-teens revenue growth jeremy hoffen will take you through more detail later in the call we are successfully executing on our for sale strategy to deliver an easier streamlined tech enabled and integrated transaction experience across zillow with innovative products and services that solve problems for everyone involved in the move We know our strategy is working because consumers and real estate professionals like what we have to offer and because our foreshore revenue growth continues to outpace industry growth. This effective strategy comes to life in our enhanced markets, where we're connecting high intent movers with high performing professionals and delivering a more integrated transaction. In Q2, 27% of connections came through the enhanced market experience, on our way to a long term goal of at least 75% of connections. And now 96% of enhanced market connections are handled through follow up boss, our customer relationship management platform purpose built for agents and teams. We're seeing strong traction in existing enhanced markets as buyers are engaging and agents who work with us are gaining share. And in Q2, Zillow home loans continue to have double-digit adoption rates across our enhanced markets, a clear sign of progress for our integrated approach. As part of our enhanced market playbook, we continue methodically expanding the experience to more customers and partners and to more places. We're excited about the potential to unlock a billion-dollar incremental revenue opportunity just with that rollout, even in a flat macro housing environment. Just as important, we're focused on innovating to make the transaction smoother and more delightful. That continuous innovation is what fuels our long term growth. So today I'll walk you through some of the latest examples of what the team's been working on. Firstly, we're improving how we identify high intent buyers, whether they start by viewing a property, connecting with an agent or exploring their financing options so we can match them with the right support at the right moment in their journey. That's where products like Buyability play a key role. Buyability is a powerful tool from Zillow Home Loans that helps buyers shop based on what they can afford, instantly estimating the loan amount they may qualify for, and suggesting a price cap based on their budget. It quickly adapts to market changes, interest rates, and the buyer's own financial situation, helping them stay focused, confident, and well-informed as they shop on the Zillow app. More than 2 million people have enrolled in viability since it launched, and recent enhancements now let buyers shop by both their target monthly payment and their overall maximum buying power. These buyers are then even more knowledgeable and ready to act when they connect with an agent through Zillow. We're building these tools to empower decision-making throughout the journey for consumers and the professionals who serve them. As another example, for sale listings on Zillow now display offer insights, showing buyers and their agents how different offer prices are likely to perform based on real-time market data, and setting the stage for a productive, informed conversation about how to approach an offer. This is a huge benefit for agents. The call to action on offer insights is to connect with an agent, and the buyers it surfaces are likely higher intent and move ready, as they are exploring viable paths to making an offer with an agent. Helping movers understand what they can afford and what kind of offer they can make is especially important in a housing market like this one. To that same end, we continue to expand the Zillow Home Loans product suite. As of last week, we've broadened our down payment assistance program and enhanced our FHA loan offerings and select geographies in an effort to responsibly serve more qualified buyers. These updates are part of our ongoing work to improve access to financing and scale our mortgage operations over time. Complementing Zillow's consumer-oriented features is an increasingly powerful set of tools that boost agent productivity because we cannot deliver a truly integrated transaction without equipping the professionals who movers rely on with the software and support they need to make it possible. FollowUpBoss is a prime example of how we're innovating and delivering real value to agents. We're making FollowUpBoss even more indispensable by layering on a growing set of AI features that help agents work smarter, respond faster, and ultimately close more deals. For example, AI-powered smart messages provide ready-to-send text and email suggestions personalized to a client's recent activity and conversation history. Since smart messages launched for FollowUpBoss customers in early June, agents using it have collectively exchanged about 2 million smart messages with their clients. Team leads can now use Follow Up Boss reporting tools to help optimize workflows and coach their agents based on lead performance, follow up speed and conversion rates. And agents using Follow Up Boss can access organized client insights on buyers they connect with through Zillow, such as which homes they were most interested in. By easily seeing what matters most to their clients, agents can serve them better and engage more effectively as they move deals forward. They can chat directly with movers and ZHL loan officers inside the Zillow ecosystem and even get AI-powered call summaries and action items after a conversation. It is all designed to help them focus their time and energy where it matters most. Zillow in-app messaging, our proprietary feature that's closely integrated with Follow-Up Boss, builds on that workflow. Buyers in select geographies can now use it to communicate directly and securely with agents. and ZHL loan officers to share listings, schedule tours, and ask questions, all within the Zillow app. For agents and loan officers, we expect centralizing communication with this feature will help streamline customer engagement, improve response times, deliver better service, and ultimately boost conversion rates. Our most recent product launches continue the momentum for sale by enhancing the shopping experience itself. Zillow's new tour itineraries let buyers and their agents coordinate within the Zillow app to create custom shared tour plans with homes, dates, and times. And virtual touring on Zillow also just got a big upgrade. A few weeks ago, we launched Sky Tour, a dynamic, interactive video experience as the newest feature on Zillow showcase listings. SkyTour elevates the home shopping experience by using drone footage, rendering technology, and machine learning to create a smooth, realistic 3D model of a home's exterior. This enables buyers to zoom around and explore from different heights and angles, giving them a better sense of the place before they ever step foot on the property. It's a powerful way for sellers and agents to highlight a home's curb appeal and outdoor features, make their showcase listing stand out, and get serious buyers in the door. Showcase is now on about 2.5% of new listings, up from 2% at the end of last quarter and just over 1% a year ago. We are continually evolving and improving Showcase and our go-to-market motion to support scaled adoption and that is helping us gain share. I encourage you to watch the video linked in our shareholder letter that highlights the great feedback we're hearing from agents about how Zillow's suite of product offerings is supercharging their businesses. All of these tools and features across for sale work together to deliver a better experience for movers and better performance for professionals. That's what Zillow's Housing Super App is built to do. Now diving into rentals. As a reminder, our strategy here is twofold. First, to build the most comprehensive two-sided marketplace of homes for rent, and second, to modernize the transaction experience for renters and property managers alike. The opportunity in rentals is significant, with a large total addressable market. More homes turn over each year in the rental market than in the for sale market. In fact, about three times as many movers are looking to rent versus looking to buy. And almost every buyer starts out as a renter. Yet historically, there hasn't been a single platform where they can see all available homes for rent. Zillow Rentals is changing that. We are executing well on our strategy and scaling rapidly. Zillow Rentals is seeing strong property count growth and accelerating revenue, built on the back of a sound strategy and a compelling product. Our marketplace includes the full spectrum of rental inventory, from single-family homes to large multifamily buildings, because we know renters aren't looking for just one type of property. They want to see everything in one place. In Q2, Zillow Rentals had 2.4 million active rental listings, the most in the category. Multifamily properties are leading our rentals growth, with multifamily revenue up 56% year-over-year and property count up 45% year-over-year to 64,000 at the end of Q2. We're also gaining wallet share with large property managers who are choosing to upgrade their advertising subscription spend with us as they recognize the value of connecting with the largest consumer rentals audience, including an increasing share of apartment seekers. Zillow Rentals is number one in partner satisfaction in our category for return on marketing investment as we deliver high intent, qualified renters and add real value for our multifamily partners. Importantly, our reach now extends far beyond Zillow's own channels. Zillow Rentals' partnerships to distribute multifamily rental listings with the Redfin Rental Network and with Realtor.com are helping us provide a more comprehensive rental marketplace for consumers. Multifamily property managers who advertise with us can now reach renters not only across Zillow, Trulia, and Hotpads and StreetEasy in New York, but also through Realtor.com, Redfin, Rent.com, and Apartment Guide. This is a major value add for renters and property managers, and it's helping to drive more traffic, more inventory, and more revenue for Zillow rentals. But having the most active rental listings is just the start. We're applying the same product expertise and relentless consumer focus we've shown in the for-sale experience to building a more unified rental experience. Today on Zillow, renters can shop, compare costs, tour, apply, and in many cases, sign a lease, pay rent securely, and even build or improve their credit history by having their on-time rent payments reported to major credit bureaus. For property managers, Zillow Rentals provides one easy digital platform to list, book tours, screen applicants, create and sign leases, and collect rent payments. New tools like the AI Assist feature we announced in June, powered by an exclusive integration with Elise AI, simplify communication between renters and property managers, speeding up leasing. Additionally, rental listings on Zillow now support display of a full breakdown of upfront and monthly costs, as well as optional add-ons and a custom calculator that lets renters toggle fees on and off and see a personalized total. This tackles a top frustration for renters, hidden fees and surprise charges, especially important for cost burden renters trying to plan accurately. In turn, property managers get more qualified, serious applicants. Building a better experience for renters and property managers has earned us the number one position in rentals traffic, with 36 million average monthly rental unique visitors in Q2, and our lead continues to widen. We expect quarterly year-over-year rentals revenue growth to keep accelerating throughout 2025, with a clear path toward the billion-dollar-plus revenue opportunity in front of us. We're well-positioned to keep capitalizing on the momentum we've built, scaling our marketplace, and growing our share. This call marks one year since I stepped into the CEO role. It's an honor to be leading this company. I am incredibly proud of how our teams are delivering to get more people home while also helping our partners grow their businesses so they too can serve our shared customers. We are moving fast, we're staying focused, and we're building real momentum. Our Q2 performance reflects the strength of our position, strategy, and execution. We're delivering growth, managing costs, and leading industry innovation to provide a seamless, tech-enabled experience that helps movers and real estate professionals with nearly every step of their journey. We are on track toward the full year 2025 targets we've laid out, and we're confident in our ability to keep executing in Q3 and beyond. With that, I'll turn the call over to our CFO, Jeremy Hoffman.