Zillow Group Inc at RBC Capital Markets Technology, Internet, Media and Telecommunications Conference Transcript

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

Question: Bradley Erickson - RBC Capital Markets - Analyst : It is, it is, it is. So cool. We're a little late, so we'll get started quick here. Why don't we start with just one or two minute on the quarter, how you're feeling. And then we're obviously going to get into some of the product stuff that I think everybody is really interested to hear about.

Question: Bradley Erickson - RBC Capital Markets - Analyst : Yeah, got it. So let's get into the enhanced market strategy. Everybody -- the number one question I get asked on this is what is it? What is it?

Question: Bradley Erickson - RBC Capital Markets - Analyst : Yes, yes. Got it. And then just within that and I guess, digging in a little bit, what -- obviously, this is intended to all drive better conversion, right? And so maybe talk about like some of the mechanics that do that. And then maybe one for you, Jeremy H. How does the auction respond to that? Like, talk about the timing of how that occurs, right? I think of it as -- or we talk about it in the Internet sometimes as value creation and then value capture, right? And there can be a lag there. Maybe talk about those two things, if you could.

Question: Bradley Erickson - RBC Capital Markets - Analyst : Yeah. And I want to come back to that maybe in a little bit. But just first on the idea of real-time tours. I think you guys had a pretty big unlock in July, I think it was, for real-time tours. Where are we in terms of rolling those out? I know you've said you're going to be over 50% of leads, I think, of real-time tours by the end of the year, I want to say. But where are we in terms of the market rollout? What's it look like for nationwide at some point? Maybe just talk about timing and the impact there.

Question: Bradley Erickson - RBC Capital Markets - Analyst : Got it. And then just any comments on kind of further rollout?

Question: Bradley Erickson - RBC Capital Markets - Analyst : Got it. Okay. And then just one follow-up in terms of like relative impact and maybe take it to the model a little bit. When you think about real time tours, mortgage, and then the Zillow Showcase, what would you say is sort of most impactful today? What could be most impactful down the road?

Question: Bradley Erickson - RBC Capital Markets - Analyst : Got it. And then just -- sorry. Thinking beyond the current offerings that are out in the public domain, maybe just talk about things you guys whiteboard about (inaudible) for the future that could also fall within a enhanced market. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 19, 2024 / 1:45PM, Z.OQ - Zillow Group Inc at RBC Capital Markets Technology, Internet, Media and Telecommunications Conference

Question: Bradley Erickson - RBC Capital Markets - Analyst : Got it, okay. And on that point, I guess, the long-term targets, I do get this question a fair bit. Can you guys clarify the difference between the 6%, which I think is a transaction share target versus the whole trailing 12-month revenue divided by total transaction value?

Question: Bradley Erickson - RBC Capital Markets - Analyst : And is it -- on the formal 6% goal, how do you want us to think about measuring that or assessing the progress there? Because it's a little harder, obviously.

Question: Bradley Erickson - RBC Capital Markets - Analyst : Got it. Got it, cool. And then one last one on enhanced markets. Housing market comes back in '25, it doesn't come back, who the hell knows basically. Does that -- like if it's better or whatever, can you guys lean into that and that might actually amplify share gains? Or does it -- are you affected by any sort of normalization one way or the other in the housing market?

Question: Bradley Erickson - RBC Capital Markets - Analyst : Got it. Okay. Lowering level -- keeping that bar low on EHS expectations, it's fine.

Question: Bradley Erickson - RBC Capital Markets - Analyst : Yeah, got it. So let's move to rentals. This is the new shiny toy of the model or whatever. You're spending a lot on marketing. You obviously made a big push into multifamily. I guess two things. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 19, 2024 / 1:45PM, Z.OQ - Zillow Group Inc at RBC Capital Markets Technology, Internet, Media and Telecommunications Conference A, where has the business arrived that caused you to say, hey, this is the time we're going to go down and start spending on the marketing dollars? And secondarily, just when we think about the growth algorithm for this business, I want to dive into the products and the model a little bit. But like between adding new units and then just price, right, selling more value, essentially, what's the growth -- the mix there going forward for rentals?

Question: Bradley Erickson - RBC Capital Markets - Analyst : Got it. And maybe just a follow-up there. I guess, what kind of sales cycles look like on these multifamily units? How quickly do they ramp? And then what's the model here? I think a lot of it is subscription, but maybe just -- maybe a little more color on that.

Question: Bradley Erickson - RBC Capital Markets - Analyst : Got it. Got it, okay. And then I mean the business was already growing like pretty well, right, before you guys announced the intent to spend and put out the deck kind of giving people a better sense of the market. So as we move forward, I guess you started the spend. It sounds like it's going to be a little lighter in Q4. But maybe seasonally, logically, we might expect it to sort of pick up in the next year. Are we -- is it safe to assume we should be assessing these results as a sign of success from those efforts? Or are those -- is the payoff maybe a little bit down the road? Just talk about kind of results from the early read on spend -- on the ad spend, I should say, on rentals.

Question: Bradley Erickson - RBC Capital Markets - Analyst : Yeah, got it. Let's move to financials a little bit, talk margins. I think you guys have given actually a really nice formula for leverage in the business, right? You talked about 70% of the cost is fixed, pretty well baked at this point. The variable costs, the other 30%, maybe a little bit of deleverage because of -- I think, partially because of this rental spend. So I guess, maybe if you can break those up, how do you want people to think about the flow-through of this business, right? Because you've got drivers like mortgage, right, which everybody knows is a lower margin business and that thing. So put it all into context and maybe if you can, just to separate it between the variable and the fixed component.

Question: Bradley Erickson - RBC Capital Markets - Analyst : Yeah, yeah. And maybe just a follow-up on the variable cost side. Because oftentimes, what happens, right -- you guys have talked about. You have half a dozen-plus opportunities where you're already investing today, right? And you can sometimes find white space and find more room for investment. So help us like unpack or separate the near-term deleverage versus leverage over time?

Question: Bradley Erickson - RBC Capital Markets - Analyst : Talk about that just, I mean, culturally, et cetera, stock-based comp. It's obviously a question we get from investors and dilution over time, like how do you guys think about capital allocation, return on capital.

Question: Bradley Erickson - RBC Capital Markets - Analyst : Got it, okay. And I have an AI question, maybe I'll slip in a regulatory one here. But when you guys think about AI expense -- and this isn't like judging your infrastructure costs. Don't take it like that. But when you just think about generally running a company in your shoes or similar digital native at least, you're obviously allocating some portion of your budget to AI, right? And this year, I'm sure it's XYZ percent. When you think about years forward, I mean, is that piece of the budget going to grow faster than your overall IT budget? And are you going to find those dollars from somewhere else in the IT budget? Or do you allocate new dollars based on kind of what you're seeing early signal is?

Question: Bradley Erickson - RBC Capital Markets - Analyst : Got it, okay. One last one, just lightning round on the regulatory front because it's a hot topic. Buyer commissions, there's no real substantive of evidence yet that they're going down. We'll say they're holding flat for right now, give or take. Is that because it's just too early to judge, like not enough time has passed and sort of -- or do you think there are other dynamics going on where maybe it's just not going to be that big of a deal like everyone was worried about?