Z - NASDAQ

Good afternoon. My name is Elliot. I'll be your conference operator today. At this time, I would like to welcome everyone to the

Thank you. Good afternoon, and welcome to

Thanks, Brad. Good afternoon, and good evening for those on the East Coast. Thanks for dialing-in to hear our first quarter 2024 results. We saw strong revenue numbers that flowed through to the bottom line, helping us outperform our outlook on revenue and EBITDA as we successfully execute on our growth strategy. We continue to upgrade and scale our housing super app, and we've seen further proof-points in our enhanced markets that support a continued push on both breadth of market coverage and depth of penetration within those markets for our integrated, digital moving solutions for consumers, their agents and their loan officers. Today, I'll remind us about what makes

Thank you, Rich, and good afternoon, everyone. It's been an exciting few years at

Thanks, Jeremy, and hello, everyone. As you heard from Rich and Jeremy, we are pleased with how we are executing on our strategy and our results once again demonstrate that our strategy is working well. I will start with our Q1 2024 results, which exceeded expectations across the business for revenue and EBITDA. Revenue growth accelerated in Q1, up 13% year-over-year to $529 million, which was $26 million above the midpoint of our outlook range. The broader residential real estate industry grew 4% in the quarter according to data from NAR, meaning that we outperformed the category by 900 basis points. Each of our revenue categories across residential, mortgages and rentals contributed to our outperformance. On a GAAP basis, Q1 net loss was $23 million, representing 4% of our revenue. EBITDA was $125 million for the quarter, resulting in a 24% EBITDA margin, a year-over-year margin expansion of 200 basis points. The combination of our revenue outperformance and effective cost management delivered the improved year-over-year EBITDA results despite a macro housing environment that remains constrained. Our Q1 residential revenue of $393 million outperformed our outlook range and revenue growth accelerated to 9% year-over-year. Premier Agent benefited from the ongoing investments in our top and mid-funnel experiences that drove improvements in our overall connection rates. Additionally, our growth was driven by accelerating growth in our new construction business, growth in ShowingTime+ as we began our nationwide rollout of Listing Showcase with additional contributions from Follow Up Boss. Rentals revenue grew 31% year-over-year in Q1 to $97 million, primarily driven by our Multifamily revenue, which grew 46% year-over-year. Our Rentals strategy is working well and our team is executing on growing the number of Multifamily properties on our apps and sites, which reached an all-time high of 40,000 Multifamily properties as of the end of Q1. Total listings across our entire Rentals marketplace were up 20% year-over-year to an industry-leading 1.8 million listings in March. Mortgages revenue of $31 million in Q1 was up 19% year-over-year with purchase loan origination volume growing more than 130% year-over-year to $601 million. Our mortgage strategy is to help more of our customers get financing through

Thank you. [Operator Instructions] Our first question comes from Brad Erickson with RBC. Your line is open. Please go ahead.

Yeah. Thanks. I guess two for me. One, obviously, sounds like the residential business has slowed down here. You mentioned the full year guide though hasn't really changed. So I guess, steeper second half ramp implied. Clearly, you guys are investing in Rentals and that was baked in. But I think relative to last quarter, maybe just talk about your confidence in that second half ramp. And besides Rentals, what else is kind of instructing that confidence on maintaining the guidance?

Yeah. Thanks, Brad. It's Jeremy Hofmann. I'll take that one. I think similar to what we've said in the past, we don't overfocus on quarter-to-quarter fluctuations, just given how fluid macro has been and will continue to be. What gives us confidence is, we're outperforming our internal plan. We expect to do so with what we guided for the second quarter and expect to do so for the first half of the year on both revenue and EBITDA. And when I look at our strategy and what we're executing across, we feel really confident that the second half is going to accelerate and will grow double-digits against the flattish housing market. And that comes from a few factors. So I think first, more contributions from our enhanced markets will come in the second half as they come online, and that's all back half weighted. We're seeing continued share gains and positive signals in the 13 enhanced markets to date. Jeremy hit that earlier, but across revenue per total transaction value and customer adoption rate, so we feel good there. Mortgages, we expect to continue to accelerate showcases rolling out nationwide and accelerating. And then, obviously, Rentals is growing quite nicely and we expect that to continue as well. So that's what gives us the confidence around the reacceleration that we expect to see in the second half.

Got it. That's helpful. And then just secondarily on the regulatory front, specifically around the buyer's agreement, you mentioned that arrangement, the product you announced, I guess it was yesterday, leading to maybe higher conversion rates. I think there's some investor concern out there where there's still going to be some friction, maybe higher up in the funnel. Can you kind of talk about how you manage that part of it? And maybe why it's not a headwind relative to kind of how the old way used to work? Thanks.

Yeah. Hey, Brad. It's Jeremy Wacksman. Yeah. As I said earlier, I mean, we see this as a great opportunity. What we're testing is post connection, right? So after a consumer has already requested or in the Real Time Touring case, booked a tour, can we help educate them and provide them a really consumer friendly digital education agreement. And we see that as better educating the customer and also expectation setting the customer for when they meet the agent as what to expect from the agent, both in that initial relationship, but in what they might expect in a buyer agency agreement generally. And anytime we can help educate a customer that typically leads to a higher quality customer for our agents. We've seen that as we've built things like Touring and Real Time Touring. And I gave this example earlier. In states that have been using agreements earlier in the funnel, you typically see higher conversion rates. The Connecticut example is a good one. 90% of buyers are using buyer's agents and the conversion rates are higher. So I think important to frame it in the context of this is down in the funnel once a customer has already raised their hand, really declared their intent, we work with them to make sure we're getting them to the right place. They've had this magical book a tour experience, and they're getting ready to go. And this is an additional education opportunity. It's not friction.

Got it. That's helpful. Thanks.

We now turn to John Campbell with Stephens. Your line is open. Please go ahead.

Hey, guys. Good afternoon. Just back to the new

Yeah. This is Jeremy. I'll hit both. I think it's optional, right? So it's not something that

Okay. That's helpful. And then one more to tackle on here on Matterport. I mean, obviously, it looks like it's heading to one of your competitors. I know you're not going to probably comment on pending transaction or maybe what that ripple effect calls for the market, but maybe if you could just talk to your own 3D tour capabilities and how you feel that stacks up?

Yeah. We are really excited about our own homegrown 3D Tech. We're excited about virtual touring generally. We support Matterport today. It's a small percentage of listings today, and our 3D technology is on a small percentage of listings today. And that virtual touring capability is going to continue to grow as consumers discover, love it, and as we all improve our own technologies. So we're really happy with our home grown effort. And as you know, that is what powers Listing Showcase and all of the really unique interactive floor plan AI-generated listings. I talked about earlier that drive a ton more buyer engagement and are helping listings go pending and sell faster and sell for more money. So we love the investment that we're making here and we really see this as where the consumer experience is going. But it's early and all of us are small. And retraining the consumer to allow more touring in the virtual world, we think complements the physical touring investments we're making. Again, back to the earlier conversation. Helping consumers find what they want to buy, helping them dream and shop more online in our app, and getting them into the hands of our great agent partners.

Makes sense. Thanks for taking our questions, guys.

We now turn to Ron Josey with Citigroup. Your line is open. Please go ahead.

All right. Thanks for taking the question. Rich, I wanted to ask on the Rentals business only because clearly it's a big strategic priority and the deck was very helpful. And we're on a $400 million run rate currently and I think the view is to get to that $1 billion, if I read the deck correctly, in revenue. So I wanted to maybe focus more on Multifamily growth. And we talked about, I think, 35% penetration of the, call it, those that are available properties to 40,000 properties today. Just talk to us about the lifecycle for getting these Multifamily properties onto the platform, the importance to rentals for first-time buyers. And then maybe as a quick follow up to that, how Rentals, it's been a big business for

Hey, Ron. Guys, maybe I'll start out with a little bit of a strategy answer and then Jeremy Wacksman maybe talk about, or Jeremy Hofmann talk about the Multifamily question that Ron asked. Yeah. We -- I really love the Rentals play as you know, Ron. It is a textbook example of a two-sided digital marketplace opportunity. It's the kind of opportunity that our Board Director, Bill Gurley, who many of you know, who's really a thought leader on digital marketplaces, would really love. It turns out that I've been partly involved in -- intimately involved in building several kind of successful digital marketplaces since the dawn of the Internet as well. And it makes me excited. Let me just take through why. One, it's hyper-fragmented and locally distributed inventory on the supply side of the marketplace. Likewise, it's really fragmented on the renter or the demand side of the marketplace. Okay. Also, there is volatile pricing and volatile availability, which promotes market monitoring. So high engagement from both sides of the marketplace. Additionally, there is heavy shopper interest in content as both practical and for entertainment as part of the shopping process, which lends itself well to a digital marketplace. It's a very high gross margin, which we all, as investors, love. And finally, marketplaces have a positive network effect, which is more supply begets more demand, which begets more supply. So we're seeing all of those things in action here in our rental marketplace. We knew from the beginning that acquiring demand at a really reasonable price, basically near zero marginal expense, is key to making these kinds of marketplaces work, and that keeping the supply-side inventory acquisition costs very low was going to be key as well. And we feel very good on both of those. On the demand side, it's pretty simple.

Yeah. I mean, I think the answer is similar to the framework you gave around it being a two-sided marketplace. We have been building the overall organic traffic and listings for the renter experience, and that's driven the demand side broadly. Now we're focusing in on increasing demand, more specifically in Multifamily. And you're seeing that both in our partnership with Realtor.com, and in our advertising campaign following a really successful test last year. And that's on the demand side of Rich's two-sided marketplace. And then the supply side is bringing those high-intent renters to the professionals Rich talked about and increasing our sales efforts to go help those folks connect with our renters and get their -- get what they need from their advertising dollars. So it is really about the flywheel Rich talked about and it's just the focus in on Multifamily, on both the demand side and the supply side that we're now turning more focus and energy to.

That's great. Thank you, Rich. Thank you, Jeremy. I'll go back in the queue for another question.

Thanks, Ron.

Thanks. We now turn to Mark Mahaney with Evercore ISI. Your line is open. Please go ahead.

Okay. Let me try a few, please. The Q2 guide, you don't have this kind of outpacing of real estate industry total transaction value that you've had pretty consistently for a while. Maybe you covered this before, but if not, could you please go through that? What -- why wouldn't you outpace? And then on the Showcase new listings, can you just talk about what kind of traction you're seeing with that? I know you covered a little bit in the Shareholder Letter, but reactions you've had to the pricing models that you rolled out at the beginning of the year? Thank you very much.

Yeah. Thanks, Mark. It's Jeremy Hofmann. I'll take the first one on the guide. Yeah, we called out a few factors that are headwinds right now. One is first time homebuyers are just struggling in this market and we lean that way. So we're feeling that a bit. And then, additionally, just when rates spike like this as quickly as they did over the past few weeks, our premier agent partners just tend to be in a more of a wait-and-see environment. So we're feeling both of those at the moment. This is not dissimilar from what we felt this time two years ago where PA partners took a bit of a wait-and-see approach when rates spiked and then, ultimately we worked through it. So like, I said earlier, not necessarily too focused on the quarter-to-quarter fluctuations, and just reiterating that we think revenue reaccelerates in the back half of the year to get us that double-digit revenue growth against the flattish housing market. We continue to feel good there for a variety of reasons just the way that we're executing across residential, mortgages, showcase, and rentals as well. And then, Jeremy, maybe I'll pass it to you.

Yeah. I can hit Listing Showcase. Yeah. I mean, as I said earlier, we're really excited that the increased engagement from the buyers continues, right? So more page views, saves and shares as we get showcased out there more and more. We're also now seeing seller benefit, which I talked about. So homes are selling faster, 20% more likely to accept an offer in 14 days, and they're selling for more money, 2% more money. And most importantly, agents who are using Listing Showcase are winning more listings. So all that says to us that as we've been rolling this out and scaling this up and offering in more locations, we're seeing a really good product market fit, both with -- we knew with buyers, we're now seeing with sellers and with sellers agents. And that's why we're so excited about the intermediate-term goal we've talked to you all about and getting ourselves to 5% to 10% total active listings because then we think there's potentially more to do once this gets to that state.

Do you have markets where that coverage is materially higher like a lead market where it's materially higher than 5% to 10%?

Not yet. I mean, we've talked to you all about it for a while now, but it's important to remember it's only been live for a couple quarters and it's only been live nationally since February. So, team has grown, as Jeremy talked about. We have staffed up sales folks to start to hit more coverage and talk to agents in more places. But, as much as we're excited about, as much as we see a really exciting product here, it is still really early in our journey.

Okay. Thank you, Jeremy. Thank you, Jeremy.

We now turn to Ryan McKeveny with

Thank you very much. On Follow Up Boss, you mentioned in the letter being even more excited about the opportunity for conversion gains. I guess if you can provide kind of two sides of an update, one would just be initial receptiveness and maybe retention of legacy Follow Up Boss customers post the acquisition. And then secondarily, I know it's only been a handful of months. But where does integration stand with the PA business? And anything to call out about any benefits to conversion rates thus far or is that more opportunity as we move forward? Thank you.

Yeah. Thanks, Ryan. I think on initial reception, we've been really pleased with the retention of the core customers of Follow Up Boss as we've gotten through closing and integration and starting to work together now for a couple quarters. And we're really pleased to just see the continued positive agent feedback on the Follow Up Boss product. I still get anecdotes all the time talking to agents about how much they love it and how much they're excited about our ability to help the Follow Up Boss team grow and invest more in this team focused CRM that they've built their business on. So we continue to be pleased with the post-close, post-acquisition performance of the Follow Up Boss agent base. And then on your second question, I would say it's still a lot of opportunity. I think you heard both me and Jeremy talk about in the prepared remarks. They're starting to ship things for all advertising partners or, sorry, all agent partners. And we're also starting to think about ways to help from your agent partners use Follow Up Boss to better convert their business, both their

Got it. That's very helpful. Thank you. And then just to follow up on the 2Q revenue guide in residential and the comment about some partners taking a wait-and-see approach. I guess if I step back, there's the industry noise related to all the litigation and everything that's going on. There's noise on the competitive side of things, neither of which seem to be kind of the called-out headwinds. So maybe just help us think through that disaggregation of the headwinds in a bit more detail, like, is there any change on the margin coming from competitive/industry types of dynamics or at this point in time is the best estimation that it's largely kind of macro-related factors at this point in time? Thank you.

Yeah. Thanks, Ryan. It's Jeremy Hofmann. I think we monitor our sales funnel really, really closely, and we have software that sits over top of it, monitoring agent calls and agent sentiment and just telling us what they're hearing. And the situation right now is just -- it's a temporary rate shock. We've been through that before. It happened in the spring of 2022, and we know how to navigate through it. We want to be there for our partners during this time, and not necessarily going to push too hard as a result of that. And then with respect to NAR and competitive, we're just not seeing that in any data that we see. We just don't see impact from either of those. So it really has been much more macro-related and macro in a way that we think is navigable. And again, coming back to the full year, we just continue to feel quite good about the ability to accelerate revenue over the course of the year and let us get through the quarter-to-quarter fluctuations, just given how fluid the macro is.

Okay. Great. Thank you very much.

We now turn to Chris Kuntarich with UBS. Your line is open. Please go ahead.

Great. Thanks for taking the question. Two-parter on the Rentals business. Just as we think about this billion-dollar-plus opportunity for Rentals, last quarter, you'd frame Listing Showcase as kind of a medium-term, $150 million to $300 million opportunity. Should we be thinking about this also as a medium-term, or is this more of a kind of a longer-term opportunity? And second part of the question would be, just as we think about the pace of Rentals' growth in '24, how should we be thinking about pricing as a lever you could potentially pull? Thanks.

Yeah. I'll take it. It's Jeremy Hofmann. I think on the billion-dollar-plus opportunity, I think the key word there is sustainable. We think it's a sustainable billion-dollar plus opportunity and we've built the business that way. Rich walked through a bunch of why we like the strategy so much, but we also like it as a multi-decade type opportunity. So with respect to timing, we're not going to commit to anything there. We just believe there's a lot more for us to do. And we think what we're building is differentiated versus anybody else. And we have an opportunity to be the place where all renters come and all property managers come as well, whether that's in the single-family or multifamily category. That's what we think the opportunity is. And it's done under one brand,

Got it. Thank you very much.

Our final question today comes from Dae Lee with JP Morgan. Your line is open. Please go ahead.

Great. Thanks for taking the questions. I have two. So back to the NAR settlement, I mean, is this something that your partners are anticipating having a meaningful disruption around the time of implementation or could this be more of a change that takes a while for you guys to see?

This is Jeremy. I can hit that. I mean, I think, no, I think as Rich outlined earlier, we don't see a ton of revolutionary change here. We see more evolutionary change that results in more educated and more transparent consumers, which we see as leading to higher quality, higher intent leads and connections for our partners. And I think we're seeing that already start to play out in the early innings after all the news is cleared of how partners are processing connections and how they're learning to work with those consumers. And as I talked about, just take our Touring pilot here as an example of leaning in on consumer education in a consumer friendly way to help them understand what they're going to be dealing with. And in the states that have been doing that, we're seeing still fairly ubiquitous independent representation and higher conversion rates. So as folks like us and others roll out more buy-side agreements, again, back to our principles, we think a more educated consumer who can understand what they're getting from their representation that they choose and understanding that the compensation is fair and negotiable and can be negotiated, that leads to a better conversation with professionals. And we think that leads to our professionals, which as Rich talked about are a small subset of the most productive agents winning more business. And so, we see that anecdotally today and we see that in some of the states that we're further ahead on this today and we expect to see that continue as more folks rollout changes to deal with the evolution.

Got it. And as a follow-up, I don't know if you addressed this, but like what's driving the first-time homebuyer activity underperformance? I mean, is it just related to the mortgage rate hike or is there something else happening? And those are 2Q, I assume activities at these levels?

Yeah. It's Jeremy Hofmann, just to make sure I heard it. Yeah, I mean, really it is the rate shock that we felt. It's less about the absolute interest rate level, it's more the shock. And when rates spike by 50 basis points over a couple of week period, first-time homebuyers are the folks that feel that the most, and they're underperforming pretty significantly. We don't expect that to be forever, but it is a temporal thing. And as a result, it's a bit of a headwind for us, but one that we think we can navigate through pretty seamlessly.

All right. Understand. Thank you.

This completes the allotted time for questions. I'll now turn the call back over to Rich Barton for any closing remarks.

All right. Thanks, everybody. Hey, look, it's noisy out there and there is a lot of confusion and there's a lot of distraction. And I'll tell you, we're calm. We're driving forward. We're putting up numbers. The product is getting better and better. And we have a long road ahead of us because of all of this incredible kind of pent-up potential transaction energy that lives inside of our wonderful marketplace. So you know, it's noisy, but we're feeling really good. Thanks for being on the road with us. We'll talk to you soon.