ZILLOW GROUP, INC. Q3 FY2024 earnings call

• Zillow Group is in a strong position with a leading brand, deep tech expertise, and solid financial foundation, successfully seizing the opportunity to digitize residential real estate.
• In Q3, revenue grew 17% and outperformed the residential real estate industry while demonstrating cost discipline.
• Focused on customers, investing in products/services for a superior end-to-end transaction experience.
• Enhanced Markets: 43 markets rolled out, surpassing the goal of 40 by year-end, with 80% of connections in Enhanced Markets managed through Follow Up Boss.
• Zillow Showcase: Nationwide rollout, now at nearly 1.5% of new for-sale listings, driving higher engagement, faster sales, and more money for listings.
• Rentals: 24% y/y growth, with 47,000 multifamily properties, industry-leading 1.9 million listings, and on track for $1 billion+ revenue opportunity.
• Mortgages: Accelerated growth with purchase loan origination volume up 80% year-over-year.

In Q3 2024, Zillow Group's total revenue was $581 million, up 17% year-over-year. Residential revenue grew 12% year-over-year to $405 million. Rentals revenue was $123 million, up 24% year-over-year, with multifamily rentals revenue up 38% year-over-year driven by growth in multifamily property count. Mortgages revenue was $39 million, up 63% year-over-year with purchase loan origination volume up 80% year-over-year. Residential contributed a significant portion to total revenue, Rentals saw strong growth in multifamily, and Mortgages showed accelerated growth.

• Q4 2024 total company revenue expected between $525 million and $540 million, implying a year-over-year increase of 12% at the midpoint.
• Residential revenue expected between $364 million and $374 million.
• Rentals revenue expected to grow in the mid-20% range year-over-year.
• Mortgages revenue expected to grow in the mid-60% range year-over-year.
• Q4 EBITDA expected between $90 million and $105 million, equating to an 18% margin at the midpoint.
• 2024 full-year total company revenue expected up 14% y/y, EBITDA margin 22%, implying approximately 200 basis points of margin expansion versus 2023.

• Regulatory changes and potential impact on industry cooperation and listing access.
• Affordability challenges in the housing market affecting transaction volume.
• Dependence on continued success of Enhanced Markets and new product rollouts, such as Zillow Showcase and Follow Up Boss.

Q: A multi-parter on Real Time touring. Can you give us some perspective on how lead conversion for Real Time Touring is comparing to other types of connections. And I believe Real Time Touring generally lends itself to agents transitioning to the Flex model. So I'm curious if you could detail how agents -- how many agents are transitioning to Flex in markets you rolled out Real Time Touring and if that transition is providing additional tailwinds to revenue given you're now more directly monetizing the commission through a product that has a higher lead conversion?

A: John, this is Jeremy Wacksman. On Real Time Touring, we haven't broken out Real Time Touring versus other touring types, but we have, for a while, talked about how the touring customer in general converts to transaction at about 3x the rate. And the other color I can give is Real Time Touring is going to be north of 25% of our connections at the end of the year. That's been our goal, and we're going to be ahead of that. We did talk a bit in the prepared remarks about seeing conversion improvements generally. Touring is obviously a piece of that. And so that's driving obviously the increased conversion generally as a component. In terms of payment model and kind of business model mix, Real Time Touring actually is available across both. And again, it just goes back to our strategy of trying to help identify higher-intent customers. Real Time Touring does a pretty big job of that and then trying to help land them with our best agent partners. As a reminder, we don't work with -- I mean, we work with lots of agents, but they represent the top end of the industry. The top 20% of the industry is the majority of our Premier Agent base. So we're really pleased, as we're able to identify and hand them higher intent customers, you're seeing the benefits of that play out in conversion.

Q: I guess I have 2. First, on the kind of regulatory changes and just curious, you guys have obviously rolled out kind of a light version of the mandated buyers' agreements for agents. Just curious if you're seeing any structural changes to conversion where particularly those are markets where that's kind of a brand-new practice. I'm just curious if that's maybe at all affecting your market share on everything. And then second, just on the Zillow Showcase. Can you just remind us -- you gave the overall share of new listings, I know, in the prepared remarks and everything. But just remind us where you've kind of seen your market share of total listings or new listings go in some of the more mature markets, like the individual markets if you could?

A: Sure. So let me take Zillow Showcase first and then maybe we'll go in reverse order. So on Zillow Showcase, yes, we said in the prepared remarks, it's now nearly 1.5% share of new listings. We just rolled it out nationwide earlier this year. And so the growth, while has some dispersion in markets, we haven't given out any kind of market mix details. I will say, across the board, we continue to be really impressed that the product market fit holds as we grow that scale. So that higher engagements that we talked about, 80% more page views, 75% more saves, 75% more shares, those stats hold across markets as we grow availability. And we're continuing to see homes sell faster and for more money, so 2% more which is about $9,000 on average per home. And we continue to see agents who use it, as we talked about in the remarks, win more listings. They're winning about 20% more listings than similar agents who are not using Zillow Showcase. So we're still really early. We just went nationwide earlier this year, and we see a long runway ahead of us. We talked about a 5% to 10% total active listing goal over time. And I think as we get to that level, Brad, I think we'll have more maturity in markets to talk about the machinations across price points or geographies. But right now, it's still really early. And then on the buyer's agreement, we aren't -- we don't have any concrete data to share other than to say we look at it as really helpful friction for the buyer. It's an education process. It's getting them through a really necessary education step, and it better prepares them to meet the agent. As we talked about in the prepared remarks, it's available on more than 90% of touring connections nationwide, and we've worked really hard to customize it where necessary by state. And we see this as a really healthy evolution in processing all these settlement changes to help start to educate the buyers on how this process works to make sure when they meet these great agents, they're even more educated on what to expect, both in the initial tour and then in what to expect in the relationship if they choose to move forward.