Z - Earnings call transcript Q2 2019 | Zillow Group, Inc. Class C

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Operator

Good day. And welcome to the Zillow Group Second Quarter 2019 Earnings Conference Call. All participants will be in listen-only mode [Operator Instructions]. After today's presentation, there will be an opportunity to ask questions [Operator Instructions]. Please note this event is being recorded.

to of conference Investor like Jones, to now President Vice Relations. would turn over the RJ I Please go ahead.

RJ Jones

Thank you. XXXX call. quarter Zillow Group's Good afternoon. And financial welcome results to second conference

Co-Founder our Zillow Parker; President Greg President and Offers, are discuss of CFO, Zillow Brand, to of Wacksman; today Rich Barton; me Zillow Joining Schwartz. Group's Jeremy and Co-Head Media CEO, Allen Marketplaces, results and and

will performance, we call, make operations events. the regarding financial forward-looking During future and statements

reasonable, in are cannot reflected consider cause in filings, materially the results. forward-looking in differ Although, caution guarantee which from to we believe We the statements these statements the expectations the forward-looking risk our could we you on to made call. those results factors actual described SEC this

broadcast this call recording of statements events, except new section A Group's is future site. as will and no assumptions call based on being Investor Web obligation the XXXX accessible X, of required as Internet made of information This Zillow Relations the statements of these are a by is of this is We forward-looking through and as August available result to on today. later or The be date. undertake today law. call date the update

and share-based our about expense, Investor EBITDA the referred which will expense, our we GAAP is interest excludes Relations income, results, financial EBITDA, including historical taxes. you measures. amortization and to Web results compensation income financial non-GAAP to non-GAAP reconciliation as discuss read of expense, adjusted measure costs, our call, the financial on depreciation measures. remarks, site, During acquisition-related and non-GAAP as In contains other our be non-GAAP can press and GAAP We information important found encourage release, it which

Relations We have letter our posted quarterly financial site. Investor and shareholder on Web tables our

We remarks Q&A. the with call followed will brief live by open

over to turn I call Rich. will now the

Rich Barton

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the the early bold media expansion estate estate enabling in opportunity are We of into TAM real of streamlining real solely and trillion-dollar itself. a the transaction company a from stages residential

find hard and a be complicated messy more and all of home, experience a swirls would a buying the that It transaction. snarl consumer around to than selling of

in the marked reported we Zillow when QX. really segment share today to I'm in Zillow Offers. one-year July $XXX home, that drive owned progress this to is are are this coordinated efforts business, the to the thing across many new bringing the our underway increasingly exciting. anniversary sold and our nearly first pleased expansion, technology million modern Homes for of and we possibilities There We our finally and company are but big revenue giant

impress revenue, one us. just The Zillow not team to Offers in want zero going continues commend rate $X signal Zillow we in year billion whole from rate billion run our just are I year. a run the on to Offers demand team, seeing $X to for to

XXX all QX. XX,XXX. doubled sold what than XXXX. nearly more from twice and up in close And period, to sellers the than homes, times quarter we receive as of In last cash more to the we almost purchased offer homes X,XXX the of During number nearly a from quarter, X homes, we XX% requests sold to same

In match bringing the giving home total markets QX, markets, QX. we stepped we group to on to uncertainty. in new and sell another we gas Offers Nashville, our consumers launched Monday, live On Zillow that launching hassle to way a a seven rate XX, without of their plan

our We by be City, and the our applies are team XX data expect insights, lessons early-to-mid of new Cincinnati, markets and to XXXX. to we to to Jacksonville, move Oklahoma scale. also With increasing plans as efficiencies and Tucson we the number and in every adding market, faster gain learns

making our premier market directly pushing the in business. are down we In funnel to towards addition agent with Zillow Offers, in participating transaction

our are high we're partnership touch in generation transactions goodness agent customer Agent. mutually success we the in comes building customer client professionals model local rewarded. transitioning partnerships future deliver one reflect is seamless teams and in built-on shared connection Offers which with the We brokers The every with to lessons service applying and lead We're the of and market. and that where into Zillow these focused from the highest-performing with Premier aligning Zillow

success we a with plans a model when Zillow and and in pays they codes upfront our Under During no Connecticut lead. fee transaction call, expand zip QX Colorado. only to announced agents costs Flex, to our Flex close us a Premier pay Agent little

are signals are the test initial receiving these markets While still favorable. we in early,

and Our engagement they're indicate consumers connections, Flex quality levels their high from receiving intent high Zillow report agents. of agents

QX two Phoenix decided indicators, Flex test to expand these Atlanta. Given markets, Offers Zillow and have we our the to established of positive in

We also conjunction The a tectonic Agent. in other testing increase programs work Offers markets partnerships industry monetization and with these the coincides believe driven by in at can that Zillow businesses and and will industry while our of Premier with with allow to evolution us lead technology. shift large in our insights experimenting learnings,

our combine of shared are expectations to of today's advanced partners customers professional anticipate expertise on best in the Zillow -demand, local Our proprietary best world. the with who the and deliver smarts on optimal agents their high technology and always-on

feedback Flex agents We're broker most experience customer in highest and direction. transaction helping machine Offers of our levels. close partners the real moving identify learning already using to the is and vision. are key data The likely in markets, to satisfaction algorithms to seamless Zillow to our partnerships deals with estate these future select our We're already this

note more future letter, As Flex the in quarterly and QX into you'll discuss EBITDA will markets in which detail. shift expansion revenue our some into Allen to Zillow expected from Offers XXXX is periods,

with about transaction because recognition We and the affect accelerate recognition. some part but potential this towards it's confidently early. of make of of Flex our and our because short-term will it amount the We're trade-offs revenue learnings these is about it still move long-term time you, strategic talking expense Flex, spending to

Our lead feedback perform core which well. We're and consumers and Premier the more new Agent seeing driving positive is connection business process, higher distribution on validation agents customer and continues to satisfaction. from

of less Zillow Let Mortgage during a been we Lenders rebranded me switch as It's since mortgages. year which Home Loans than to acquired America, we gears QX.

Our strong that pipeline legacy QX fulfillment performance on platform. the originated our of MLOA reflects the

than we rollout Offers. digital initial MLOA Loans, streamline mortgage and building we to software, the Home Zillow full Zillow is our testing version proprietary loans already platform from transition are for longer the of expected. integrate payments as We're our As a new home bit but taking technology to

to build an the in to essential progress affects foundation deliver We're you'll the for feel adjacencies are of hiring and our technology originations updated continue our business, excitement need loan about officer test out an we operational other this expectations future part until our infrastructure long-term we that remains and of way out have for -- platform, to experience reflected outlook. Zillow in slowed the test the and integrated our solid to scale, Loans our we see This ability and our As we build we Home customers. segment. Loan own which no transaction transaction-related unchanged. making

streamline exciting close other knowhow operations. are the experience, has size, way we a to estate relative businesses Zillow it our and science, with partnerships and brand in company awareness, audience technology own and of with operational mission all together our our our moon comes provide No integrate but and get Shelter to transaction vertical integrated is seamless data opportunity. done. with So, technology, to harder a No position little woven transaction. industry real consumers to this other company transform, the on massive lucky to required

of new skills and and We more every have to we best day team the add mission enable smarts with inventurers, success. people the to

treat are you for a support. dream, your investors, team also in We to our in investment group hold and with ground, your We have lucky of on respect you, our believe mission supporters thank and who accountable. but us who and the the support

now to over the microphone I'm turn Allen. to going

Allen Parker

this $XXX line was year-over-year, million, of of $XXX the revenue segments and with exceeded our met XX% growth outperform expectations In summarize a few expectations. key sequentially. and Much nearly QX, nearly going with results. that's is to up XX% expectations generally And in which EBITDA million, outlook. reported of as in I'm exceeded revenue quickly each was segment, revenue Rich. driven home or for noted, Rich growing continuing Overall, all we for high-end our segments. Thanks to our we by our financial

nearly in line QX strong XXXX. up technology, and X% to revenue QX basis year-over-year exceeded guidance IMT million, $XXX XX was Internet, media at a grew million with points expectations or Premier segment, our to compared revenue range. and Agent $XXX our very

and moment highlight to to the I'll provide update Before item on you one in we start results will with take outlook outlook. some your comments you our as as want this questions, our a priorities see on my well as I quarter, CFO. take

And our rollout Demand momentum strong. markets is to for year. consumers from Offers' continue. the accelerated expected into we've this Zillow is new service throughout

at We the revenue for to of QX. are range anticipating XX% sequentially segment midpoint grow guidance Homes the

guidance of of Agent Premier for we midpoint We revenue Agent expect revenue in the XXXX IMT X% guidance the full X% year. range, and ranges. growth year IMT updated our growth revenue have At of XXXX the Premier and

I means where from existing QX first, periods our just related Flex now of shortened decision of future impact Our to from portion by future full-year Flex revenue expected driven the the we tests This that period of the from a in attributed on Premier life EBITDA we is segment to two-fold; XXXX that the recognize expanding in closer portion the the and sales IMT full expected in as QX expect a Agent to is transactions. Zillow QX are are expense correspondingly Premier primarily the closing changes expand in Agent EBITDA additional of QX will test. expected second, estimated previously The due from in markets commissions. to impact described; shift shift our to capitalized of to outlook year XXXX our revenue to commission in test

in Additional included letter. related to are details our of Flex treatments the shareholder accounting

do of our stabilized. not These Agent adjustments on have which health the marketplace, reflection any Premier has

development and anticipated. will loans our home Zillow of than time mortgage more integration the we software, of originally of some mentioned, Rick As require

So slowed scaling. pace we to officers the of loan in operations have the have support and hiring infrastructure place we until

full well a outlook As changes year These XXXX. our for accordingly. position adjusted us result, we've

I an managing QX and Homes, these valuation Homes of was our adjustment represented to Like of expectations. cost a as segment our is Now, primary adjustment the to an would percentage of less in is driver business. physical that incur an of QX our like This of the as adjustment recorded anticipated expect well results. forward inventory the the any amount item of inventory, within in impacted increase compared revenue of course maintains inventory we going company We our cost that a quarter. to in X% segment regular and included the QX. balance This our discuss at Homes of as end, for during revenue part than portfolio adjustments revenue immaterial period

QX, be hold those homes XX end our the contract of of their to about under held time, X% with vast inventory greater homes past majority of were underwritten As the only than in days of sold.

of operational transformation processes new order supportive excellence CFO segment across to opportunities; clear. our my as additional the at in IMT investments remain segments, company disciplines three new as execution focused with scale. priorities discretionary growth time Group mechanisms and I this implementing and establishing things; we on Zillow during our in cost in our businesses; and along Finally, are fund within scaling

home the long-term company our to exciting at well within be the fundamentally change reach. both within confident the in are middle transaction consumers, It's of we for industry. And strategy remain a to we as the such on targets our and our execute significant evolution,

With open for that, we'll operator, the questions. line

Operator

you. Thank

[Operator session question-and-answer the begin now will We Instructions].

Our of go Angela first Newell ahead. from question comes Please Macquarie.

Ben Schachter

market the specifically. of really long you're guys. It's and iBuyer the term term a understand I the the on Ben the related how that, to just talk, how the I Hey, Schachter. wanted there's homes, to issues how lot over marketplace focus cetera? in mortgage, to and And buying insurance, let's thinking title TAM discuss, then just near of but want long-term are TAM, about and for of time. changed that's you selling businesses, evolved ancillary these et the long-term for or specifically to size framing all

Jeremy Wacksman

one. that's aggressively. we're This really, is so rollouts mean why that this term new markets. and I is Jeremy, we in I'll scale, market why at take a announced market we've That's accelerating really big investing think our we're long

the like think talked time. were types and buy reach around, and you're expand ultimately our we if about cover homes homes I think half we not an something And offer to the we country available we at box, them scale, at us offering in to about not. as the as over would with buy really we should can when to today, their of everywhere, the way a to but about make Zillow selling from standing Offers, offer way eventually us selling, starts looking every requesting or homeowner whether just options, a this think be seek

given as transactions transaction. year than step XX,XXX and opens when a around that, those business, as a we're knock-on bigger the see you private able so today. we've a the of That's far, and the market target, a to as of along far $XX clearly just around like deliver X% the on services title, transactions to that's business. rate, billion get And We opportunity way. a consumers, that's Offers and that's transaction these the this might itself, the So, top well adjacent service five-year three- opportunities, to escrow that that mortgage, all Zillow run up

Operator

John comes from Our of ahead. Stephens. next Please question Campbell go

John Campbell

doing for We've you think of wanted just touch lot I -- guys. pilots. we’ve a I heard pretty agents the like from Flex of That a just feedback to opportunity seems the back obviously, on positive pricing. kind big

starting How you any kind the lean but my we're guys listing estimated first, about secondly, question yet? impact? bit to into sell in are So, that for little could accounted backlog? Flex the And you is stages talk of then to sense more rates see then happy guys you on the And revenue side in pilots? the it, a in of any leads conversion early of of or kind for the mix

Greg Schwartz

the will And modeling. that Allen the take It's business you up, Greg, that. I'll through pick part of then

Flex, right. you're right, is promising. So pretty We've some got looking leading indicators,

lead, about through So, time asking it the takes some to you're mature a that customer leading we're getting here first estate so that real is indicators satisfaction.

Our experiences these getting in that's with by increasing program. really pleased with working Flex our Agents, consumers they're are the Premier

doing And in looking downstream that's our these we real then pretty And touching consumer to and unique we these Premier is are real Connecticut rate. the we meet, these. for good. in connections small the being our nearly is two-state we're to they a Agents want interacting in a tests area and right of engage by every they app, to and do Agent estate. getting them estate agents, appointment The meet very second important Colorado, is one consumers Premier are these indicator Do thing with that Premier touched the successfully now with app. positive our important Agents in in leading and looking actually of measure that that's that really transactions. And connections to, match in That's an

let that… tests. leading And Allen So, are talk far really scale these so indicators from small about good the I'll

John Campbell

Greg? mean, speakers, talk you did I about [multiple

Greg Schwartz

did, I yes.

Allen Parker

of the in impact tests in respect in the we we've revenue we Allen on to this in future is thought area, out Phoenix Atlanta And out periods. impact that the increasing With revenue, of of recognize pushing as previously letter, and the number the accelerator has and QX shareholder the called Parker. effect would taking

testing. outlook our our So, Flex the of the size impact of now reflects increasing

it revenue that significant And push range, about when to as primary our change the then it's is outlook through to accelerate our we you -- it only related as testing. for so, revenue this rest does of from future in QX the primary And affect out EBITDA. think not our change, the Flex that it's those And amortization, impact periods, accelerate have commission increasing two new QX, revenue costs markets. of also costs, we to falls to sales which has to capitalized and XXXX the an

Rich Barton

a this decisions. is because better these is This these in -- looks making decisions, Rich. be The to this a for far, unfortunate, at our making model. why not we're it but a testing experience, customer better it's and better least it's so accounting is business We're

we decisions, right the for the it's think we and for so customers because long the And thing term. making are these for business

Operator

comes go of Our next Capital ahead. Please Markets. from question Mark Mahaney RBC

Mike Chen

on I you and is Chen the shareholder Atlanta. just wondering programs for monetization a you that Mark. about This expand could Flex opportunities about you're on. if was Mike letter, Phoenix bit and little lead mentioned working In the in

color would Offers on and how Thanks. Premier any that between dynamic So Zillow work Agent?

Rich Barton

So, are Phoenix And important. really part make we using at with in buyers the area. see And are familiar pacing between from performance pretty conversion moment some what It home to And another is Zillow lead We've type and that few matches additional us an and particular that that distribution. us significant Offers the calling autonomous real PPA. market, to to algorithm, able allows is, lead that. particular to expect you're agents that lead to types model Atlanta. just optimal course is estate that of gains distribution to right. There's and super allows that of experiment things and with optimizing optimizing launched do. it we're what We're we strong a

Greg Schwartz

agents quality the As algorithm too. those into of factors the

Rich Barton

Yes, you bet.

and score, then expertise experience customer past transaction in us. score. driven moment market, history that is algorithm engaged at CSAT to by the then you're if the So And inaccessible

experience, going to gain So flow will rates. a why Again, and off are Colorado through pretty pretty and some big can strong to to feeling reason be in see Connecticut metros scale. smaller we we're some so transaction we're we going to wins the strong get a in good. markets the customer both, low the in we're believe and signal doing work few That's conversion tests to Offers awesome two which volume we're Zillow

Operator

go ahead. of question comes Please from Zelman. next Our Ryan McKeveny

Ryan McKeveny

acquired valuation was possible sense I that forward? So I of if you. the you the balance better about it you on process inventory going finished called about or inventory? adjustment just underperformers sitting adjustments of tail inventory. to the managing, underwritten maybe process a Can talk percent hold in I homes curious that'd process times. are commentary on XQ just question there that that 'XX the break thinking of I'm the very of on that so guess million sheet, XQ in Is think than relative guess that have be 'XX a longer Thank helpful. was And what you way to apart of those so just at. look $XXX kind a that And the the inventory look aging goods to Q. the in versus I at within outside

Jeremy Wacksman

I'll Jeremy, that. is take This

couple of So things. mean I a

about think marker a You're way of tail right. It's and we to it's pricing good the think about portfolio. how a the

a each in and outperform and the some going there little some market tail. to longer As going in we be are Offers, homes of Zillow ahead, can across to distribution take price, are

XX we're our late as by about And way by see you X% sizing segment, the days, reflection actually you think of about stat sorry, a the less a is the to than gave for breaking by probably the -- age age Allen of of so value by inventory to a or adjustment or that. you'll That's inventory of market, too, timeframe. it. out not think way best as the

Ryan McKeveny

average is And frame relative is a percent XX underwritten of said the another the X%. so hold period? Or the way hold to time there is period? late to any I maybe guess time what the I follow underwritten way, what I up. the past mean hold mean, days

Jeremy Wacksman

the that as inventory reflection market cleanest point. it's by about the why any to price it's is relative value mean, adjustment changes metric. best vary by the to to think a I on of the it. going way about way we'll probably balance the is And to reflect That's underwriting thinking

will results. market pricing for balance hold unique time have then markets each and underwriting solve performance appreciation in home. the Our and a a of the And our for portfolio target to will across costs the financial

each So flow where what's it's what and do. -- and to it expected in unique through do actually obviously we then home see and is

Operator

Walmsley from of Deutsch Our Please next comes go Bank. question Lloyd ahead.

Greg Vlahakis

on Vlahakis Greg Two I Lloyd. is This for may. if

it's Agent that there? think Flex. some majority factors I a Since guide IMT expectations, better are of the of So going Allen raise what guide the you term was Flex? like why going business attributed a long other than long I if better to better Premier down the And term it just think about that should are on continuing and guess things were Thanks. were mentioned curious IMT? expected, And then the guess not seems we of context the had I in than But provided? the for guide cause this things decision. this How that

Jeremy Wacksman

to to the from the So -- top XXX. XXX took and down respect with we

was As I moving Flex QX that into revenue all the to future due and mentioned, of significantly effect periods. of

anything really out call not much of there. talk there's So to

All of and key premier agent the stabilize, continues business for the metrics that. about to input excited we're

respect no Agent the and Premier to there's of I'm other And with story part so question? real IMT. your than sorry, Flex And second

Greg Vlahakis

-- does how through feel long-term How it we do period… affect about the IMT our

Jeremy Wacksman

feel targets five-year -- three we So remain confident. still very to

well As that I mentioned reach. my opening in remarks, they're within

Greg Vlahakis

three to year $X IMT, think -- was don't five were we million? what Yes, we guide, the

Jeremy Wacksman

billion still EBITDA. It of with feels million appropriate. $X $XXX Yes,

Operator

ahead. question JMP go next Ron comes Josey of from Our Please Securities.

RonJosey

two things Agent first Premier really, on to Just wanted retention. just on ask

homes, last have you acquiring that then service I in forward? return lost fee quarter, norms. and Can to transition you perhaps X.X% with think in doing with PA said I prior. that the conversion those with historic the I on And the think overall in us how then update be maybe the just you're might think letter during just compares year, agents X% just rates on

Just more what's helpful. consumer be markets, that for convenience. it's maybe range. Any would on But fee? into the the I perhaps fee Thank very about to you it willing newer talk going a much. driving know is pay insights

Greg Schwartz

Greg. I half up the It's will pick that. of first

So as we noted run on forecast. we Premier Agent,

that we again where So thought made driver to was would estate we're on that. served, the real now, we connections The we between it's the to and need connections professionals fewer pleased retention, we're of exactly great we be consumer through. normal higher and a this returned these flowed step that made. we that real so about right bet be quality on it, big is And

Our are that. live now covering premier please we're so agents about high-quality connections,

a relationship holding high five between standards. is for professionals a big the real we're of group of a The our are and agents of of was of Agent's professional, both we happens selective incredibly best millions of rating to during And this consumer of -- millions Zillow. and that made make and is bet our have Flex reminder the would finest of thing. consumer we important We'd Zillow best scale, times measure elements on estate too other down and this at now multiple Zillow feedback system star it's consumer Premier -- -- a transition these that's The best anywhere. that high

and for to-date. that's focus wonderfully us Flex, been our that's implemented fully and So positions

lives, these these based and are their go business come on people. customers, because returning folks small On

been But pretty the Flex and us, And consistent once was recognized question you do to is there so flowing there? half but folks they that, valuable focused good what take a as connections the team Allen, on we've these second want were had. pretty to we of back about always feel that. with financial

Allen Parker

Yes, market and home and box it buy mix. is. It's

into from So market and fee. we're and holding carrying types have input the different up into more those taxes market all fees zips get even costs, to and Each home underwriting and rolled getting markets. within

we more see as spread. as will go, and vary we especially we're you as in So opening that markets

Operator

ahead. Our comes Oppenheimer. from next Jason of question Please go Helfstein

Jason Hoffman

This is Hoffman on Helfstein. for Jason

entering We about all slight in should throughout mind? don't markets. we are XQ of iBuyer should for XQ, year? inventory saw we economics that How think you to of XQ. how rest and the and trending As XQ iBuyer these think from But if uptick you the

Jeremy Wacksman

is Jeremy. This

points the we're the unit So plus before so interest. basis minus same, to return be economics XXX or targeting continues

And performance you'll QX, QX and performance to see saw level. expect and and that that so range between -- well a within similar us at continue you we to

Allen Parker

as percentage And just Parker. I'm our this about of revenue, have overall, EBITDA improvement terms trending economics is Allen see in may to we we say, in talked expect going margin a negative of not be range have linear. and in negative our negative QX, at of But on XX if we guidance QX range, in we at XX.X were XX.X you look based and a our ranges. that

Operator

Jason Please ahead. go from Jaffray. Deleeuw next comes Piper question Our of

Jason Deleeuw

question. Great, taking thanks the for

that plus fee. think And there's rate? seller the is of a been buyers more also a factor then How I seller the on think process? and on get offer home that look important wondering something sale traditional instant listing iBuying they offering much would at? the you. that then And taking to about through the Zillow you the How traditional house? acceptance the what do for Just agent Thank that talk price is seller be a is home to

Jeremy Wacksman

Jeremy. is This

So consumers to sensitive mean super I the are fees.

but rate right. fee you'll change relative see to the as varies, their acceptance that's So alternative,

explain to having many they're And selling when fee, having we're is that pricing in no that are still matter still they they incur the working would conversation, through the into that and cost how So process. get them something of those sold. we're they as costs learning

Greg, of listing moves, moves you to fee in it's relative take when it terms about to mean it want but So if to… don't does And I know what alternatives. then, the

Greg Schwartz

in of business interest. Certainly, term we But there's think happen good a adjacent to opportunity adventure have offers. developing some Zillow a some here. it's been a to We topic long

beautiful, out they Of Zillow and get sorted don't We're the cross off thing figure cross covet product to footprint. the typically, on course, promise, instant to to the a in compact box is there's but this listing we it's our And have buy of out confined tails it to them amazing or working our that them experience. sell the fit which we when premier agent. into Zillow sell Offers' how it's still iteration And not year. is have Offers' footprint, pretty focused with

Operator

Our of Please Jefferies. next from go Thill ahead. question comes Brent

Brent Thill

Alex on for It's Giaimo Brent.

color growth. still guide premier the you been Just X% year agent the based implies positive. recent the on in feedback letter, seems just But as it provided has if full

if that So is much Thanks. And available business you PA runway in would still that the how just you think TAM can think remind business? be us for the helpful? you what is

Allen Parker

is Allen that. under what this of agent just that would adjustment mean, QX Parker. the implied I'll with that that X%. the Flex is say growth the we in I premier guidance the gave, -- that for end is rate at guidance, we guess implied I But is by impacted this take described. the So top I about

build last done we the up. that we We this flex to would had transaction. significant would that think I we back more and we in expected growth have turn that that saw recurring revenue with see not year

through growth, be three revenue. look recognize at We a term As within TAM term can business that years, way EBITDA mentioned, still I terms progress. in the our just we five XX% and long of rich long believe But billion it's margin. IMT to $X would

Rich Barton

this transaction this with model We're the is to as a program Flex got the we've to finest larger professionals new to in land. much a real frame And estate transaction doing to address with get to TAM apply we we're it. the moving model. the And

data some will got on good. up we we these to and upside in back get there's scale Zillow got full from just lined important So get markets, of higher the then these a We everything tests bunch to and bids.

Operator

Brad Our Craig-Hallum. next question comes from go Please ahead. Berning of

Brad Berning

Just that what to us And little profile bit more follow you of TAM? that PA TAM process, you Just the versus margin could is at a business? Premier the advertising flex think Flex on if versus historical see touch bit look you the maybe little upon help it up can curious traditional Agent a on how thought through? likely further the

Rich Barton

upfront, it of been and business of budgets, Who've to. when wildly looking take towards is the economics multiples you this these people, who've and economics them, when financial profitable, we margin these up strong The so those can when by way great line then were by decisions we moved return. top And the to advertising -- risks, small to like on we've pay about were hit prices they de-risked Allen about when you upfront, went -- had they they to advertising move budgets even to cards the to pay talk want is agents. had credit Flex. think the the limited profile, which will if of pretty I profitable, for in

our Let's the average the for economics, be take improved transaction on company. an clear,

us, a take can distribution capitalizing better to better best connections XX% for lead transaction of bit is professional that will aren't by a per to more, sell more standard, talked in. with folks And experiences amazing experience we The transactions. or think fee we're drive to where basis we we where economics improved see providing the know consumers, the we industry we and right because we've referral So transaction. drop of this the we a roughly providing you Zillow on well and

more we great transactions. that's then and drive will So

have should real and professionals. So it good incentives and both with us the this for for aligns us, really leverage estate those consumer

Allen Parker

once bring satisfaction. It's experience matters. a an income And it we again, I'll up way, is and this customer to input better doesn't statement. customer -- a that That it's appear But think on growth. the

Jeremy Wacksman

guidance profile, giving to out not as I super we margin itself to a direct again, just we're respect excited to outlook we're learn still customer. the positive. would And flex. long-term any years. But curves outside about the mentioned, next lot elements the work rest the the to a about got we with current Rich of with to And will with the currently And our you three lot respect think our the starting over to five of targets

Operator

of go Our Please next question comes from Cowen. ahead. Tom Champion

Tom Champion

offers be around if curious Atlanta, close that? markets Can you you really on just volumes why growth Maybe you loop just individual would profitable. and why thoughts it's switching you. one become and then as volumes. helpful? Any that where really am maybe gears were markets maybe transaction I'm curious around share well. more could the I comments on those scale to offers, could Phoenix and and any important that markets impressive if Thank Flex. clarify And just

Greg Schwartz

Yes, This buyer Phoenix, I pretty the We've hot opportunity lead is seller there. there. And us the Why opportunity got Greg. there, is up lead will brand pick on iterating and with there. us the first. The Atlanta. agents working great partnered and we're with

Tom Champion

for laboratory a testing… more controlled It's

Greg Schwartz

you Yes, bet.

markets based those signal. we're on metros the strong the data enough why strong leading want… signal, seeing big that's will a from two they've few created two Jeremy, and And signals give Colorado. it's really to markets going indicators we've these are us signal. strong areas enough -- this large that So in give important you And that a Connecticut on and us midsize in

Jeremy Wacksman

offers come couple we're on markets and how starting and see scaling up now about we Yes, we I Yes, on being more, quickly markets. first year-over-year adding able and think the of as we're to we're to mean go. even just on

So it's while is profitability and to obviously think long and be term target dynamics. composition is thing say market still early a to can scale The really about can I on we too. input an before that going it's market-by-market only

markets that across to the to down going able So the true to across drive both be it's the each going what costs being whole get, are scale to going true our the big in platform provide drive platform. markets data, and and in signal, offers That's and the the stronger demand market grab we business. get and be best

Operator

Morgan of comes question from Brian ahead. Please Stanley. next go Our Nowak

Brian Nowak

questions my to to Flex. -- taking another just have throw I one for Thanks at

understand. I we of to sure So kind just want make

revenue better And look And than just PA? where platform you sold your transaction that the if Are the home monetization, so testing saying this. you're at actually per initial markets you home you're your is So generating per to so to you talked about to old how understand clear Just that we then then trends time. -- Flex kind the up. that of through over actually is be the more business sales see more quality have Flex more so you're idea model? could Is leads do kind time? higher that fall able over world further transactions successful If the and is to more the to through you about time, you'll you count where higher agents, of the quality a thinking that over and then going leads home send way Flex agent changing agents.

Rich Barton

Yes, so the two questions. good

early point we're just the So in those would economics program the I yet. in June. out, areas We launched

let So a bit, little so plant we're We've that mature -- and what to flag we a stuff what will on to believe issue. got occurs. this going occur

Brian Nowak

You said to the to on me the just heard up. took was call. I just I take note. going rate And go that a

still the at So small. pretty it's end,

Rich Barton

Connections driver This allow efficiency a live a be them them. it's transaction is working productive end most to pretty looking basis, We intend vetted, to should on talk to and for per the get on the who and the the go a in pick then like pretty really appointment, phone And house, small It a the is is customer but see have out of agents wants important business. up to been a to selection who's question to agent account. positive. positive. Yes, it and them them. connected have get

get that So we the best bigger. expect

the expect that's You occur. that certainly to We asked if question.

which coordinators hiring now A platform. of very And hiring listing our lot agents, the on this, become invested now in well buyers' agents, businesses, we've hiring wonderful hiring many, practitioners model years. showing suited to have transaction team individual many of is top for agents,

that expect to accelerate. We

the so customer downstream us, may the total working early… grow, we will send but agents of and of probably get the it's each but early that more volume of number from them count will decline business their And

Operator

comes of question Securities. Ygal Wedbush next from Please Arounian ahead. Our go

Ygal Arounian

double-digit kind the And markets in how now actually and transactions on based get is and to confident you're more look I that's in the the that much early as is it Flex assumption that that and the is are is in, it big we based are ballpark are the traditional today. signals. PA back so Flex. out the give have it often Flex want understanding make to of that to -- only and we pushing What's the outs. how on around there little a three core working those seeing So rate all in to on bit targets, that you still up numbers five-year returning year a through markets? following of growth just framework -- you've then more some years, much I the the the those Anyway then between that Flex. understand positive And right this mix And How or is model? to of confident growth you you're sure many How step closed targets. ins maybe to understand if seen? much of to

Rich Barton

so then out. there, few pick one and There are help will a will questions in a off I at you me time

how roll question the what's It's the are the market and entire is So first market. the it live today in out? dynamics we actual that

pay or card changes, go and ahead typically they get the that we We voice doing stop been move the in but into teams train post a credit to model, put pay same real market. to our two model. hasn't So customers. the run post We their share month we hard We a model there. frame They our up to accretive had. on on shift prepay a per from

then performance and And from heavy allocations, best it the set input scale start we it needs because up, performers. data rates, to maturing algorithm that the facing has or performance to overweight starts left then algorithm to this of algorithm the I facing satisfaction the do mentioned, up the customer appointment

before is of these our been whole That welcoming market and Phoenix this how change. dialog that's launch, we how Atlanta with they've a And Premier of lot go. Agents were launched. launches very and so And there's typical

the and for that's or June, metric. maturity this is a So the we just too Question launched so in team a sharing been highlight comfortable far. to in on so me transactions early be it

Greg Schwartz

while we -- being transactions not -- we're happen. So a takes it for to just these

close… have to We

Jeremy Wacksman

and that's hasn't window. six the been yes, typical It months

stronger we're markets scale So to we're yet again that's larger not flag get it's And to going signal. scale that to in a looks what on and plant why a going these like. small

Greg Schwartz

wasn't it the yes. model two so predicated not five -- was on, test, a it's year to And

I Okay. this… success mean or failure with of

Rich Barton

the yet to and year. come three to we think to more explain We it the exactly this what achievable. on we enough back affects it. what information to But be five-year that really five will don't with impact three we Yes, think if targets will roll in we comfortable test have feel we are and the in the learn could

Operator

ahead. question from next Our comes of go SunTrust. Please Khan Naved

Naved Khan

are at the opening a inventory, think are markets amount there the X,XXX. and been in we Just new things of few looking because around ramping peak seasonality, you're homes, season. number is there across, I then of And obviously that's your and on

we inventory you're versus So how the it basis, seasonal on understand more increased because like-for-like in going of factors how a markets? should because up,

Jeremy Wacksman

This is maybe Jeremy. growth, and just I even raw expansion it's market less seasonality. mean, both

yes, an So amount month is volume we're business. increasing therefore every in markets the more and of opening

you're so And to going see continue that build. to

as were markets able buying be across continue continue we every the we So sell well. grow more will but to inventory scaling, because just to that the previous we'll that not in than to -- we'll we're cohort. from the while And continue we expect month open to

Naved Khan

do in markets that or you you you're a Zillow a on so effort in place? advertising? in to And good the are maybe question, with going Homes. How related what's brand spending already Is up then think plan? much the And ramp you're that

Jeremy Wacksman

Zillow Offers. a is come all we can of homebuyers building business Offers in Zillow IMC dividends that other that to So the our and for the I with and this demand we to with customers handle, as is have big amazing start the decades mean the our great for have brand and paying story concert all place we businesses spent

coming here source for we Offers. traffic to a a these with machine do every inundated and Zilllow to marketing businesses. But the try the across dialed been we've up the have the already in start to there out how market. little we And have or enlarge, get went is figure demand we that frankly, So time we by testing

to these big quickly markets demand. open to our trying satisfy out so to figure goal actually effectively how that and efficiently, is And

Rich Barton

million announced… have is what we that And just just quarter not sense, of because makes $XXX the you course we use for

Allen Parker

Something like that, yes…

Rich Barton

you of coming of so have are stop the just Okay, is selling to way because a those this not but thinking home. about lot a we use, for a on estimate your because ton

tremendous had And cleverness amount a we haven't merchandising. exhibit of in to so

exhibited say we haven't their we certain to had hand that but and they raise much honestly, -- fact, Offer. haven't to a Zillow amount In like in the trying get cleverness them to

Operator

Our next Barclays. question comes from Deepak Mathivanan of go Please ahead.

Deepak Mathivanan

one. question to related the Somewhat prior --

a and a share are the Phoenix million continuing similar $XX a these pace and easily contribution XQ is we market your cost with in level expectations been to that you're for for very now growth markets non-variable with So looking basis city the per on is a associated associated business, margin Homes gain for you to markets? while. to Or at all it loss expansion think Vegas compared related the on cost on volume where still happen now achievable Os in inventory little reached a itself end. active And plays there? iBuying guide bit to Thank the home market second Homes EBITDA that you've the in also sell? then to where the city? much dynamic of the on business, reasonable the going be market share at it's these adopting the How high So point fixed more out you. the in has early costs, a level one a that

Jeremy Wacksman

is cost I revenue revenue way and it that related high the revenue, revenue, XX% growth about So think to to XX% this range, between first has and as percent Allen, you I'll our XX assessment. of of I one. would take I Homes describe a was the guess fluctuated when and inventory the the QX guess in value our

with to the back the be of associated you'll infrastructure move would the So that number the I not building fixed cost rest think XX, that's revenue part see over of the will and that the of that is business time Homes. what closer down and costs

fluctuate, then a maybe range variable that the XX in use you at estimate, around the the is. least I costs on mean, remember versus I on gains build. Homes of that fixed And to I important share how state. early it's a market So think costs one versus good it can the but will think related steady to the near just to term, second

So of trying of to and have really we about we're starting demand people we this this a has ton… of trying getting that teach is for know around people talk But said, as The with experiment have with home inundated site. been coming because not though this to yet what way. to our segment sell them, for there don't is. been even and the to majority up to we're And we years couple consumers a vast Web frankly clever don't

Rich Barton

out busy building We're markets…

Jeremy Wacksman

offering you come consumer from awareness share hopefully in to and about home it overtime, very, gains understanding see this market homeowners is, it, the But what converting understanding we're out will learning of and trying and more it. of very early And sellers innings this.

Operator

Please of And ahead. our from go last question comes Heath Terry Goldman Sachs.

Heath Terry

Adam guys balance is saw This the the the sheet for we Thanks of we Homes of XX% think question. the at And in on turnover that roughly the sold you end on XQ. business, for Heath. Schukantz roughly XQ. just homes thousand in When about a

value a sheet to other for businesses that around turnover? agent do with markets. those are a when the being we You've threshold. particularly of homeowner. previous to you When relationships value entered it's talk some we over essentially of as How newer think XX the more you've particularly instant offers hear agents offers think evolved And more versus evolved? has we representing homeowners the the about proactive using who of market, that day agents, How to Zillow and way balance you markets talked with coming these create lot that, that you opportunities new how those process about as value about sort and about then time, in a thought in

Jeremy Wacksman

margin I our the mean point on unit I hold will So time, targets. to you back

minus sell, into points XXX before homes. for that get basis plus specific home or we more So market. each into interest. cost and of time more to underwriting type We hold solving a get all We're to

about you times vary it's go, market target see that, in as going but that about we So across feel hit really that good are margin. hold vary to as target. to and unit And solving we season, for continue that

markets around there agent of like option -- just to think are, I things terms in In Zillow Zillow question was as Offers about second an Offers, where talking your sell.

I standpoint, us, that working or that our agent of what They partners. think in question we're we a one great market hopefully that end least super of traditionally was. with. each have from your with selling partner we whether have important, And choice to that's one up conversation At they our these is well. think

will contribute to of awareness what growing think this is. I help that

which like, how regardless Rich get starting think a and of looks about button hands really those primarily folks go selling them right their start, way journey about as path for becomes them to and their they Zillow As next a most said around estimates, think on to selling are down. home think earlier, to way we their what to head that

Operator

This concludes our question-and-answers conference concludes presentation. and attending call. you the today's session for Thank

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Zillow Group, Inc. Class C (Z) 8 Aug 192019 Q2 Earnings call transcript