Zillow Group Inc at Morgan Stanley Technology, Media & Telecom Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Brian Nowak - Morgan Stanley & Co. LLC - Analyst : So far, so good. Okay, so there is a lot going on from a macro perspective with real estate. There's a lot going on with Zillow specifically. So maybe let's -- I want to start bigger picture with you with some of the long-term targets that you've talked about. So on the last conference call, you talked about a future year where you see 6 million existing home sales, the potential to generate $5 billion of revenue with really healthy profitability, 45%, maybe even higher percent EBITDA margins. That's a lot bigger than the company is now. So when you sort of look at the key KPIs and what you have to execute on to sort of get to that point, walk us through what you're most focused on this year and the next couple years.

Question: Brian Nowak - Morgan Stanley & Co. LLC - Analyst : Got it. That's a very helpful bridge. There's a lot to sort of dig into there. I want to sort of peel into a few of those more specifically. Maybe let's start with that enhanced market offering. You've expanded it now. You're in 43 metros. I think it's around 21% of connections. Maybe talk to us about what you've observed and learned from those markets, and how do you think about the slope of driving more markets and even further penetration of that business?

Question: Brian Nowak - Morgan Stanley & Co. LLC - Analyst : That's helpful context. I mean, I guess you -- yes, can you talk about any of the learnings you've had of these early markets that maybe can help in the go-to-market with the future markets to come of the way you establish those relationships? How do you sort of scale it faster than you did in the first three, four, five markets?

Question: Brian Nowak - Morgan Stanley & Co. LLC - Analyst : The next $1 billion potential business you talked about is rentals. Doubling the business effectively is sort of the way you think about the opportunity. In the near term, it's growing really well, like 25% year on year in the most recent quarter. So let me just start there. So near term, what is driving the strength in that line and sort of just the overall rentals and the mortgage dynamics you're seeing in that?

Question: Brian Nowak - Morgan Stanley & Co. LLC - Analyst : Are there geographic areas that are sort of more in the near-term greenfield to go after from that? Or how does it sort of break down of how you add the next 20,000, 30,000 properties?

Question: Brian Nowak - Morgan Stanley & Co. LLC - Analyst : Okay. And then you have the Redfin partnership. So maybe for everyone in the room, just walk us through the structure of the Redfin partnership. And then as a follow on, what metrics are you most focused on internally just to ensure that the partnership is sort of delivering on what you and Redfin both hope it does?

Question: Brian Nowak - Morgan Stanley & Co. LLC - Analyst : Okay. Let's talk about share of transactions versus TTV. I mean, externally, when we all build our models for how big the company can get the next three, five, ten years, we have many models that sort of break down share of transactions. And I know you've spoken about hitting 6% share of residential transactions potentially by the end of 2025. Is that the right way to sort of evaluate internally? Are you focused on share of transactions? Are you focused on something else? What should we be focused on externally?

Question: Brian Nowak - Morgan Stanley & Co. LLC - Analyst : Okay. I'll keep using those models then. Let's talk about generative AI and GPU-enabled capabilities. I mean, with Zestimate, and you've had Zestimate since '05, '06, something like that. So you've been doing a lot of machine learning and sort of estimations on your leading data for a while. But maybe with everything that's happened with GPUs and changes the last 2.5 years, can you give us some examples of technologies you're using either internally or on the customer-facing side that have started to be integrated more into the company in the last two years that are really having sort of a meaningful kick?

Question: Brian Nowak - Morgan Stanley & Co. LLC - Analyst : On the coding side, or where are you seeing employee productivity?

Question: Brian Nowak - Morgan Stanley & Co. LLC - Analyst : How long does it take to build out and scale some of those external products? It seems like such a big opportunity on the consumer side to improve your engagement, improve your overall matching; and then the agent side, making them more productive and turning more cold beads into warm, warm into hot. How long does it take to deploy those types of assets? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 05, 2025 / 6:45PM, Z.OQ - Zillow Group Inc at Morgan Stanley Technology, Media & Telecom Conference

Question: Brian Nowak - Morgan Stanley & Co. LLC - Analyst : It's almost another way when you sort of think about that first bridge of the big revenue growth, the extent to which you can drive more engagement and higher conversion of that engagement, it's more ways to get there, even maybe upside. I'll say that you don't need to, but it just seems like there's a lot of torque that could come from that. Let's talk about -- not as exciting as AI, let's talk about clear -- clear cooperation. So we get a lot of questions about the NAR and sort of clear cooperation and sort of all their policy. I guess let's just sort of start with your overall view of where we are right now, and clear cooperation is -- let's start there. Big picture, your view on it.

Question: Brian Nowak - Morgan Stanley & Co. LLC - Analyst : Okay, that's helpful. You mentioned commissions. You are correct that every year we ask about commissions. It is always a topic. And with Sitzer, it's still a topic. So maybe now that we're sort of through all that, has anything changed in sort of your approach on the residential side? How do you think about the potential for commission adjustments and commission changes going forward? The obligatory question.

Question: Brian Nowak - Morgan Stanley & Co. LLC - Analyst : Got it, okay. Let's talk about competition in sort of the different housing portals across the web. We all sort of track the third-party data for better or for worse of what we think is going on with traffic trends. Is there anything you see internally or hear from your agent population about incremental competition from some of the different portals and sites across the web or apps across the phones?

Question: Brian Nowak - Morgan Stanley & Co. LLC - Analyst : Housing is such an interesting market because the lead times and the research time of the actual transaction is long. Is there anything you can share about just the last few years as you've sort of had the multi-year lifecycle of those users on your apps? Have you gotten better at conversion? Have you gotten better at engagement? Are there signals that you're seeing in your user base where you're saying, yes, we're actually making changes that are increasing the probability that when someone starts using the app two years ago, they use Zillow to buy the house two years later?

Question: Brian Nowak - Morgan Stanley & Co. LLC - Analyst : Okay. We will take questions from the audience. Who has questions for Jeremy? Feel free to raise their hands. They'll be mic runners. A couple more from me as we're running mics. On the cost structure you talked about how in the near term we should think about variable costs growing faster than revenue because of home loans and enhanced markets. How long does that take? When should we think about more stability in the relative growth rates between revenue and the variable costs from those investments?

Question: Brian Nowak - Morgan Stanley & Co. LLC - Analyst : The incremental margins on the revenue on the platform are so healthy. Question in the back, on my right. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 05, 2025 / 6:45PM, Z.OQ - Zillow Group Inc at Morgan Stanley Technology, Media & Telecom Conference Unidentified Participant Thank you. I walked in late, so I apologize if you addressed this, but on the rental side of the business, could you speak briefly about whether you think you can overtake your number-one competitor in that space, what the strategy is to do that, and then specifically whether this agreement with Redfin is sort of material accelerant to that vision.

Question: Brian Nowak - Morgan Stanley & Co. LLC - Analyst : Let me ask one more. At the start of the discussion, you used a four-letter word that for a while was not used around Zillow in GAAP and GAAP earnings. So that's exciting. So walk us through sort of how much has GAAP earnings and GAAP EPS become a bigger focal point now, and how do you think about sort of the timing when you could get to trailing four-quarter GAAP EPS consistently? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 05, 2025 / 6:45PM, Z.OQ - Zillow Group Inc at Morgan Stanley Technology, Media & Telecom Conference

Question: Brian Nowak - Morgan Stanley & Co. LLC - Analyst : Great. Jeremy, thank you very much. I look forward to seeing you next year with a full year of GAAP earnings.

Question: Brian Nowak - Morgan Stanley & Co. LLC - Analyst : Thank you, everybody.