Z - NASDAQ

Hello and welcome to

Thank you. Good afternoon and welcome to

Thank you, Brad, and good afternoon, everyone. Thank you for joining us today. We're excited to share our fourth quarter and full year 2024 results with you.

Thanks, Jeremy, and good afternoon, everyone. As you just heard, we delivered another quarter of strong results in Q4, and we are well positioned to continue doing so as we execute on our strategy in 2025 and beyond. Our Q4 2024 results exceeded expectations for revenue and EBITDA with revenue up 17% year-over-year to $554 million which was $21 million above the midpoint of our guidance range. The broader residential real estate industry grew 13% year-over-year in Q4 as reported by NAR and grew 15% in Q4 according to industry data tracked by

Thank you. [Operator Instructions] Our first question will come from Ron Josey with Citi. Please unmute your audio and ask your question.

Great. Thanks for taking the question. I guess a question for both Jeremy. So the first one is just on Enhanced Markets. And I think, Jeremy, you talked about 35% of connections by the end of the year with Enhanced Markets on the way to 75%. Talk to us how you get there, the path to getting that 75%? And any early benefits and not so early, but what are the benefits that you're seeing thus far with the transition to Enhance Markets? And then with the Redfin deal, very clear on the opportunity with Rental that you laid out on the call. But I wanted to hear a little bit more just on the strategic rationale with the partnership, the benefits to it. And then Jeremy if you can talk about the payments and the distribution, what it means for the balance sheet? I guess. Thank you very much.

Yes. Thanks, Ron. Jeremy, why don't I start and you can chime in with some of the deal specifics. On Enhanced Markets, you're right, we talked about ending last year at 21%. And then our goal is to get to 35% of customers by the end of this year. The big drivers of that for us is methodically scaling to additional partners, right, agent partners and teams and capacity of those partners as well as scaling our loan officer capability and integration with those partners. And you can see how we've done it over the last couple of years and the results we gave out a bit in the refreshed investor deck. We're seeing mid-teens

Yes, I can start on the deal terms and then he asked around strategic rationale as well. So maybe I'll hand it back to you on that one. Yes. So Ron, the deal terms, we're making $100 million payment upfront. It's a five year term with two year extensions as well. So that's what we've announced publicly. Mechanics for it. We will pay Redfin for leads generated from their network. They'll be supportive on the sales front through the transition of new properties onto

I mean I would echo a lot of with what Jeremy said. We're very excited about the partnership with Redfin. We're very similar mission companies. We're trying to digitize the industry and turn on the lights. This agreement is really a great win-win. It strengthens the value of partnering with

Super helpful. Thank you.

Our next question comes from Ryan McKeveny with

Hey, thanks, guys. Appreciate you taking the questions. I wanted to start on the 2025 outlook for positive GAAP net income for the full year and revisit some of that breakdown between fixed variable advertising and SBC. So the fixed cost sounds very straightforward. I guess on the variable side of things, in the investor deck, you've got the slide showing that was 25% of revenue in '24, up from 24% in '23. I guess is that 100 bps growth that we saw '24 a decent guidepost for 2025 on the variable cost? I guess that's part one. And then on the advertising piece, I know you described it as kind of opportunistic the step up this year, I think, was largely attributed to the efforts on the Rental side. I guess I'm just curious where you sit today how you're thinking about the advertising piece into '25 relative to that expense category in 2024? Thank you.

Hey, Ryan, it's Jeremy Hoffman. I'll take that. You're right on we're targeting GAAP profitability for the year. The way in which we do that is pretty straightforward, which is we need to continue to meaningfully outperform the housing market and grow revenue. We need to hold our fixed cost base flat, it can grow with inflation, but really even fight against that. And then stock-based comp is a big lever as well. 90% of our stock-based comp charge sits with fixed headcount employees, so we can get leverage as we hold those fixed costs in line. And obviously, it becomes less and less a percent of revenue as we're growing revenue. With respect to variable and marketing, no further guidance at the moment. But we feel like we have a real opportunity to expand margins while we continue to invest for growth in Rentals and

Got it. That's helpful. And I guess a follow-up maybe somewhat related to cost structure over time, but maybe just the ways AI can benefit the business, whether it's the search experience or elsewhere. I guess maybe just curious if you could share some thoughts on how you're generally thinking about the influence of AI on the business over time?

Yes, happy to. We're really bullish on the potential of AI for our customers, for our partners, our agents and for our employees. We have long been in innovators around AI, really since our founding, many folks forget that the very first product

That's very helpful. Thanks so much.

Our next question will come from Brad Erickson with RBC. Please unmute your line and ask your question.

Hi. Thank you. Can you guys hear me?

Yes. We got you, Brad.

Great. Yes. Cool. So a couple of questions. First, can you just hit for Q4, the revenue growth was a little bit below the market that you reported just kind of why that was? And then in the guide for Q1, why does that apparently revert to share gains? That's question number one. Question number two. You're starting out this year with a lot more Enhanced Market, call it, horsepower than you did have last year at this time. And I guess market share gain wise, it seems like you're kind of roughly baking in maybe a similar amount year-over-year. So I guess there's kind of decent logic there as to why the market share delta should expand. Is that the right expectation or maybe if you could guide us a little bit more on that, that would be great. Thank you.

Yes, Brad, it's Jeremy Hofmann, I can take those. So just on the first question, you've heard this from us many times, regardless of a quarter, but we just don't overfocus on the quarterly fluctuations. The housing market definitely got softer at the end of last year into starting this year. And I think that's reflected in the guide, particularly given the weaker pending sales activity in December and January. So I think with that said, we're expecting revenue to grow at 10% at the midpoint across the company versus flattish for the housing market, which implies roughly 1,000 basis points of outperformance. And we expect to grow as a company low to mid-teens in '25 against the housing market that we think grows low to mid-single-digits for '25. So I think overarchingly feel like it's another year of we're set up for another year of good outperformance. We did it in 2024. We expect to do it again in '25 and we'll do it while expanding margins and generating positive GAAP net income. So we're definitely excited about where we are and how the year is setting up. I think on the Enhanced Market side, I'd say, we continue to see strong growth in the oldest Enhanced Markets, right? The first four Enhanced Markets are up greater than 100% relative to the housing market since the beginning of '23. And we're seeing repeatable success across all subsequent Enhanced Markets. So the early to mid-funnel metrics look good versus older markets. We're seeing consistent mid-teens adoption in

Got it. Thank you.

Our next question comes from Mark Mahaney with Evercore ISI. Please unmute your line and ask your question.

Okay. Thanks. I just want to ask about the cost structure going forward. I know you made a couple of comments just maybe long term in the next two or three years when you think about your headcount levels and your overall, I guess, fixed expenses like your confidence in being able to keep headcount growth relatively modest and your confidence in a two to three year outlook and being able to keep these costs relatively close to the current fixed cost base? Just talk about that please. Thank you.

Hey, Mark, it's Jeremy Hofmann, thanks for the question. We like the setup of the cost structure at the moment. We think we're well invested for our growth strategy if we continue to get leverage on the fixed cost base, you can obviously see it expand margins. So I think we feel good there. Nothing too specific over the next two to three years, but I think the 2025 guide should help inform you in terms of how we're thinking about cost structure for '25. And then the mid-cycle targets imply a $5 billion revenue path and 45% EBITDA margins and we feel quite comfortable with both of those and feel like we're on a really nice slope to go get there.

Okay. Thank you very much.

Our next question comes from Nicholas Jones with JMP Securities. Please unmute your line and ask your question.

Hey, thanks. I think I'm muted now. Thanks for taking the questions. Two. One on kind of 2025 outlook. Can you maybe speak to how are agents behaving today as you roll out all these new solutions? You've kind of outlined this kind of suite of products in the deck. Are agents being more discerning and if transaction volume were to maybe pick up, they potentially get more opportunistic in taking on new solutions or is it the opposite I guess. Just what have you learned kind of talking to agents and their willingness to adopt all these new solutions as you roll them out nationally. And then kind of the follow-up is based on that dynamic does that kind of make it easier to accelerate Enhanced Markets roll out over time or is the loan business and hiring folks kind of a gating factor and as we think about it longer term? Thanks.

Yes, great questions. We are hearing, I would say, great support and partnership from our agent partners. As a reminder, in the Enhanced Market experience, we really focus in on the top producers and top professionals in the industry, 80% of the agents we work with are in the top 20% of all, right? So these are the folks that have built systems, scale, staff, discipline around digital-enabled real estate experiences with us. And so when we bring them new things, of course, it's a change in their workflow, but it's an opportunity for growth and a lot of them lean in. And you've seen that with everything from Real Time Touring, where we brought them an entirely new lead type and they had to change how they engage with customers from

Thanks, Jeremy.

Our next question comes from John Colantuoni with Jefferies. Please unmute your line and ask your question.

Great. Thanks for taking my questions. Can you hear me?

Yes. We got you.

Okay. Great. So just starting with the full year outlook, just wanted, it looks like you're expecting faster growth relative to the first quarter. So just maybe walk through the drivers of that improving outperformance relative to your expectation for the housing market as the year progresses? And second, in the Rental segment, it looks like your first quarter outlook implies an acceleration relative to the fourth quarter. I imagine Redfin has something to do with it, but maybe walk through the key drivers of the acceleration in the Rental segment. Thanks.

Yes, John, so I can take both of those. I think on the full year comment, you're right that it implies some acceleration. And that's just through a function of more Enhanced Markets being opened deeper expansion into existing Enhanced Markets, ramp in

Our next question comes from Tom Champion with Piper Sandler. Please unmute your line and ask your question.

Hi, guys. Good afternoon. Hopefully you can hear me. I guess the mortgage revenue, 86% accelerating again. It really stands out. Can you talk about what you've learned here? What are the innovations you figured out? How connected is that outperformance to Enhanced Markets? Just any details on mortgage would be really helpful. And then I'd just be curious, your view of the market, we've been kind of at this 4 million home sale level for a long, long time. That would seem to be well below the long-term base rate. So do you think pent-up demand is building? Is the market at some point headed for a kind of step option change in a catch-up? Thank you.

No, Tom, I'll hit both. On mortgage, yes, we continue to be pleased with the mortgage growth. Jeremy talked about it in his prepared remarks, there's going to be ins and outs and fluctuations in seasonal quarter-to-quarter, but it's really strong growth against a really challenged market. And our Enhanced Market strategy is really driving the bulk of that as we introduce customers to

Thank you.

Our last question comes from Jay McCanless with Wedbush. Please unmute your line and ask your question.

Hey. Thanks for taking my questions. The first one I had is on, you talked about the Rentals and you're up to 50,000 properties now. I guess what was the level that you need to have to where this becomes more durable than maybe some of the benefit you received from multifamily starts and construction probably being the highest level we've seen in 40 years. I guess what's the number of properties or listings that you'd have to make this a durable longer-term model?

Yes, Jay, I'll take that. I wouldn't necessarily equate the success we've had in Rentals around starts. It's really been an organic growth story for us. And that's been a function of a long-standing strategy and a lot of investment over the years to really build out the most comprehensive set of listings on the Internet. So I would think about the growth and the opportunity from here. The more listings we can get both single-family and multifamily the more we can attract renters, the more value we can provide to partners and it's just got this two-sided marketplace dynamic and one that we're really excited about. I think we've performed quite well over the last few years and we see a very clear path to $1 billion plus revenue business in Rentals. So I would think of it that way versus anything macro specific.

Understood.

Maybe I'd add there. I mean, if you zoom out to the Rental strategy, as Jeremy was alluding to, it is organized as much of the supply in the Rentals marketplace as possible because that solves the primary problem all renters have. And that, of course, builds this great business for us, but it also everyone started out as a renter and becomes a buyer and a seller someday. So it also helps introduce them to the

This completes the allotted time for questions. I will now turn the call back over to Jeremy Wacksman for any closing remarks.

Great. Thank you. Thank you all for being on this journey with us. We are proud of all we accomplished in 2024 and we look forward to speaking with you throughout 2025 as we continue to execute on our strategy. Thanks again for joining us and following our progress over the years. We are excited for what's ahead.

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