Good afternoon and welcome to the Zillow Group First Quarter 2020 Conference Call. [Operator Instructions] Please note this event is being recorded. Thank you. I would now like to turn the conference over to Brad Berning, Vice President, Investor Relations. Please go ahead..

Thank you, Cheryl. Good afternoon and welcome to Zillow Group’s first quarter 2020 conference call. Joining me today to discuss our Q1 results are Zillow Group’s Co-Founder and CEO, Rich Barton and CFO, Allen Parker.

During the call, we will make forward-looking statements about our future performance and operating plans based on current expectations and assumptions. These statements are subject to risks and uncertainties and we encourage you to consider the risk factors described in our SEC filings for additional information.

We undertake no obligation to update these statements as a result of new information or future events, except as required by law. This call is being broadcast on the Internet and is accessible in our Investor Relations website. A recording of the call will be available later today.

During the call, we will discuss GAAP and non-GAAP measures, including adjusted EBITDA, which we refer to as EBITDA.

We encourage you to read our shareholder letter and our earnings release, which can be found on our Investor Relations website as they contain important information about our GAAP and non-GAAP results, including reconciliations of historical non-GAAP financial measures.

In addition, please note we refer to our internet, media and technology segment as our IMT segment. We will open the call with brief remarks followed by live Q&A. And with that, I will turn the call over to Rich..

one, protect the enterprise, including protecting the health and safety of our people customers and partners; two, reduce costs; three, accelerate technology to deliver seamless and now more virtual real estate shopping and transaction experiences faster to the future as our team likes to say; four, enhance our relative competitive position to lead the industry to real estate to point out.

Overall, I’d say we feel very good about where we are and the key advantages that give us the flexibility and solid footing to be both bold and nimble. One piece of evidence is Zillow Group’s agility is the adaptability with which our team responded to working from homes starting March 10.

We have recently announced most employees will have the option to continue working remotely through at least the end of the year. We did this in order to give our employees the visibility and flexibility to make important life decisions like did I renew my lease in the city or move closer to my family without fear of losing their jobs.

That and we have been impressed by how productive people have been given the circumstances. Our valuable people have been truly appreciative of this flexibility and this policy sets us up well to potentially take advantage of a whole new way to work post-COVID. Turning to the future, we feel pretty darn good.

We have seen all our metrics bounce off the bottom. Some metrics at the top of the funnel exhibits have more fully recovered and are up more than fully recovered – and are up double-digit percentages year-over-year indicating to us even higher demand to move or at least fantasize about moving than before.

The bottom of the funnel metrics took a bigger hit, but we are pleased to have largely maintained our Premier Agent monthly recurring revenue pace. We are lucky that it’s possible to shop for homes and close transactions without much human contact.

That said, we are still watching antiquated processes like in-person appraisals, filings and closings cause unnecessary friction in real estate during this crucial time.

If interested, check out my tweet from this morning showing Dawn Lyon, our Corporate Relations Chief, signing her refi paperwork this past weekend with a ballpoint pen and ink stamping thumb prints, why? Time for a change.

Our proprietary 3D tours and floor plans appointment based virtual tours, physical self-tours, e-signings and remote closings are providing necessary solutions for social distancing today. Adoption is accelerating. Agents used Zillow’s proprietary tech to create 525% more 3D home tours in April than in February.

As customers embrace this new normal for virtual shopping and selling we can allow agents to focus their manual high-touch services on high intent qualified buyers who have already looked around, narrowed the field and are ready to make an offer.

I just heard a great story of this coming to life from our Premier Agent, Chris Spiker, a member of our agent advisory board who said his team recently helped a Washington DC area buyer who is facing the end of her lease, but works night at the ICU at Walter Reed Medical Center.

It is an extremely heart-wrenching busy and dangerous time for this buyer to be at work, but our partner agent was able to use virtual tours and showings to help her narrow her choices on her schedule to when under contract last weekend on a new home near the hospital with a backyard fire pit that will give her a place to wind down after her shift.

Another great example of how this is unfolding before our eyes is our recent Zillow Offers customers Estevan and Stacy Garza who shopped for 2 years before they found their dream home at Zillow Offers owned home outside of Phoenix last month.

The timing intersected with stay-at-home orders and social distancing requirements and the Garza said that sale would not have happened without the flexibility and piece of mind that came with buying a non-owner occupied home from Zillow, which allowed the inspector and appraiser to easily do their jobs.

Now, Estevan said they can take a deep breath and enjoy their beautiful new home. The virtual tools home shoppers need for safety today, will become their expectations for convenience tomorrow. Our focus now is not just on managing our way through this crisis we are also moving faster to the future.

Our vision of Zillow 2.0 is becoming a reality even sooner than we have had planned. Like we discussed with you during our pop-up successfully navigating storms requires the ability to know when to pullback and tap the breaks and when to hit the accelerator. We are beginning to see our passing lane.

Make no mistake we are clear-eyed about the public health and economic crisis on the ground and are doing what’s right to actively support our employees, partners and communities and we are mindful of how important it is for the company to have extra buffer for the uncertain future, but we are also not blind to the opportunities being unlocked to accelerate a new era for real estate.

We are not alone in this endeavour. We are leaning into lead, working closely with our partners and industry leaders to move the entire category forward and ensure that no matter what happens in our world we can assure our customers that real estate is always on to help them move safely into life’s next chapter. We are ready. Our customers are ready.

Time is now. Thank you for your partnership and support of us in these unique times. I will now turn over the call to Allen to walk you through Q1 results and Q2 outlook and then we will take your questions..

scaling our new businesses, executing within our IMT segment in order to fund investments in the new segments, along with additional growth opportunities, and implementing focused cost discipline and operational rigor across the company as we scale.

During this uncertain time, the team and I also focused on liquidity preservation to protect the enterprise and ensure we are well positioned to execute on opportunities to lead the industry to Real Estate 2.0.

We ended the quarter with $2.6 billion in cash and investments, the highest balances in our history, up from $2.4 billion at the end of December. I am pleased with how we have executed on these priorities in Q1.

While we did not plan for a global pandemic, our strategic position, operational rigor during 2019 and strong balance sheet put us in a solid position to successfully and flexibly navigate the current period of economic uncertainty.

Before moving to Q2 outlook, I would like to update you on the severe stress test that we discussed on our March 23 pop-up investor call.

We have updated our severe test modeling using the same framework, which is assuming 75% reduction in pre-coronavirus revenue levels for IMT and mortgages segments and having to repurchase most of the homes inventory with cash from our balance sheet.

Under this scenario, we expect that we would end the year with $1.7 billion in cash and investments, up from the $1.35 billion previously discussed on our March 23 call to primarily to us continued strong results since the start of Q2 and continued selling of inventories since our March 23 call.

That said such a severe scenario seems increasingly unlikely given the favorable demand indicators we've seen over just the past 5 weeks.

Next, I would like to provide some additional thoughts about our Q2 outlook and what our inputs indicate as are likely trajectory hailing into Q3 in the absence of providing full year guidance as we have indicated during our late March investor call we would be providing quarterly guidance only for the time being due to the uncertainty of the current operating environment we expect for mere agent revenue to decline temporarily in the second quarter to between a $165 million to a $175 million primarily due to the discounts we provided to our premier agent partners.

As Rich mentioned, the strong rebound in site traffic and agent connections we experienced in April and continue to see thus far in May have alleviated much of a pressure on issuing discounts.

We have not yet determined what discounts if any we will provide in late May for the following month, but we have assumed some discount levels in our outlook into June. We also expect other revenue within our IMT segment to be down sequentially.

Despite strong results in our rentals business, outside of New York, our StreetEasy brand is experiencing declining revenue due to the shelter-in-place orders. We are also seeing some pressures in some of the shorter term advertising related products for display and new construction.

We do expect these to recover as health conditions improve and shelter-in-place orders begin to lift in light of the temporary revenue decline and inclusive of costs actions we described. We expect IMT segment EBITDA for the second quarter to be in the range of $20 million to $30 million improving throughout each month during the quarter.

In the home segment, we expect total revenue to decline sequentially in light of the lower inventory balance going into the quarter we expect home segment revenue to be between $325 million and $350 million for the quarter we expect home segment EBITDA to be between a loss of $70 million and $80 million as un-pause Zillow Offers home acquisitions.

However we do not expect Q2 results to be materially impacted by this un-pausing. With regard to our mortgages segment, we expect revenue to be between $17 million and $20 million and EBITDA to be within a loss of $12 million and $9 million.

The sequential decline from Q1 reflects current conditions in our marketplace businesses as there is less demand for lower credit score leads due to tight underwriting in the financial sector. Overall, Zillow is on strong footing today. Despite the unexpectedly complex and rapidly changing environment around us, our balance sheet is strong.

Our demand indicators have largely recovered from the recent lows in our platform and partners are well positioned and ready to help our customers move safely into the next chapter of their lives. And with that operator, we will open the line for questions..

[Operator Instructions] The first question is from Ron Josey of JMP Securities. Please go ahead. Your line is open..

Great. Thanks for taking the question and glad to hear everyone again and really glad to see the rebounds as much as we are seeing. So great to see Rich I wanted to dig in a little bit more on the PA business and I am sure we will get more later in the color on the homes business but on PA.

specifically and the new chart I think on page 11 of the letter talks basically goes through the monthly trends for Zillow Group visits MRR index and the revenue index with traffic rebounding as much as it is here from the lows in March I just want to understand a little bit more how why the revenue index perhaps isn't rising as fast as the traffic understood the better together discounts has an impact and there is more targeted discounts potentially coming but, but maybe you can help us just understand how you are thinking about the PA business and how recovers is traffic is that leading indicator.

Thank you, Rich..

Thanks Ron. Thanks for the question. Maybe I'll throw that one over to over to Allen I think..

Yes thanks for the question Ron and Rich jump in if you need to. So first Ron we provided this chart to help we thought there was a need to provide a little more clarity as to our input trends that we are seeing through the period and the related impact on some of our business outputs.

And not just a quarter point but throughout the period and what this chart kind of what it does reflect is a strong start into Q1 reflecting the momentum we had coming out of Q4 and the continued strength of all of those trends through January and February.

But you can see there was a dislocation of our input metrics in mid-March and we took a quick action that we discussed that in our March 23 call and made a broad 50% better together discount to support our partner base and that allowed us to maintain much of our monthly recurring revenue base, which is what the intent was to work with our agents, but protect our base.

And after the initial round of discounts and you see that flow-through revenue on a lag basis as those discounts work through.

In the next period, while we were seeing some input trends improve, we also were seeing in some areas still some challenges, so we utilize a much more targeted market-based discount, which resulted in discounts coming in about half of the initial discount level that we made in the first part of the month and you see those flow-through the chart.

As of today, as Rich mentioned, we are seeing a lot of our input levels back to pre-coronavirus levels. We continue to monitor these at local markets.

So, while we have not determined yet what if any discounts, we will provide for June, our outlook does assume there is some continued level of discounts in the quarter and that’s what reflects the revenue slowly coming back up.

We believe in summary that this action and leveraging this tool with the discount allowed us to largely retain the majority of our MRR base that we came into the year with. And so we feel like we are really well positioned with our partners coming out of Q2..

Very helpful. Thank you, Allen..

Your next question is from John Campbell of Stephens. Please go ahead. Your line is open..

If you could just maybe talk a little bit..

I no longer hear, Cheryl..

Rich, are you there?.

This is Rich. Sure, sure..

Rich, are you there? Yes, I can hear you guys.

Rich, I would appreciate if you could maybe just talk to the competitive environment obviously is kind of managing on the slide, things have changed a lot, but how have things shifted in the market over there call it the last month or two?.

Yes, I mean it’s – it’s tough out there of course. And I guess I broadly say, well I guess I first say that coincident with the arrival of Allen Parker to the company, I don’t know how long ago that was now Allen but 18 months, feels longer than that. We embarked – yes, we embarked on getting fit.

Allen had Project Airstream and he is teaching the company how to get fit and so we were well on our way to being very fit coming into this crisis. But from a competitive advantage perspective, I really feel like this situation has enhanced our competitive position. We have the biggest brand and the biggest audience.

And in these kinds of times, people tend to fallback on familiar and trusted and big brands. I think you are seeing that across industries right now. We have a really strong balance sheet, the strongest balance sheet in the industry which is also terrific to have in a situation like now. We have the best partners. We have the best products intact.

We have the best services and all of these things make me feel good. Turning to the partner side, there are probably fewer choices on how to market themselves and how to generate customer demand, how to generate relationships and generate commissions.

And so we maybe finding that they are focusing their marketing energies on Zillow and Zillow Group’s brands. We are also advantaged, because we are seeing like in so many industries that you guys are looking at you are seeing really – you are seeing years of technology progress get accelerated down in a month.

And as the leaders – as the tech leaders in this industry, we are in a position to lead and we are the beneficiaries of that.

As I said in my script, I said something like today’s necessity for this kind of distance shopping and buying is tomorrow’s expectations, because of course, virtual buying rich media experiences, 3D floor plans, virtual touring, electronic trafficking of documents and signing of documents that's all exactly what people what people's expectations for a for a 2020 industry how it should operate but today's real estate industry has not been operating that way it's been operating as if it's been back in the 1960’s or 1970’s anyway because of all that we're in a really fantastic position to accelerate out of this period of uncertainty and as we've said we're seeing a lot of green signals lights that were red only two months ago are moving through yellow and beginning to flash green and so we're not out of the woods yet but we're moving with a lot more confidence..

That’s helpful. And a quick follow-up and Rich I agree with you.

I think we are going to enter a new normal kind of coming out this pandemic on the spike of virtual tours like to me that that's not really a flash in the pan I think that sticks and it’s going to be part of a new kind of process of buying homes if that's the case I am just curious in near term which you guys are seeing if that’s helping drive connections to me if feels it's helping lead home buyers to an action or its bringing them a little further down the funnel and creating a better connection is are you guys seeing that do you expect that to continue if so?.

Yes we are seeing it. We are seeing more a more qualified buyers show up because of it and we're seeing interestingly I don't know what was our comment whatever we released on connections I mean connections are good.

And the buyers are more qualified and yes it's just completely obvious that the industry has been really, really resistant to even the most basic media enhancements and the systems that run the business and we've been trying for years to get our partners and owners and sellers to use all of this technology that we've been working on for a long time but what they don't really need to they don't really need to and so adoption was not, not that fast now it's happening really, really quickly so we're not going back this is now people expectation..

Great. Thank you, Rich..

Yes, next?.

Your next question is from Maria Ripps of Canaccord. Please go ahead. Your line is open..

Thanks for taking my question and I hope everyone is doing well.

You shared a lot of interesting commentary about the housing market in the shareholder letter would love to hear your perspective in a little more detail on what you are seeing in the real estate market how you position grow relative to that and may be again how you are leveraging your tech capabilities to navigate this environment?.

Yes okay. Hi Maria. This is Rich. So I guess my first – my First comment part of the answer would say that the real estate market that COVID waded into in a very uninvited and rude way was a strong one okay so we went the industry went into this in good shape and strong.

back when we were having peak steer around the end of March middle to the end of March we didn't know if the market would continue to function properly because of safety concerns or legal concern that we thought that the market might close we and every and everybody else and it's very clear from the data we're reporting now and the data you are getting from other sources that the market is open okay it's not where it was exactly shopping is more than where it was but transactions are not quite where they were they were recovering on kind on kind of a check mark in a check mark pattern as you can see from that exhibit in the shareholder letter but the market is open.

so top of funnel rebound bottom of funnel little bit slower so as I said we are fortunate to be in a business I mean we're not like a restaurant or a shopping mall shopping in transactions can happen with a lot of human contact in real estate and people are figuring that out and even as future if and as future waves of COVID hits we are now putting all of the procedures the kind of clean mask distance all of the stock that we need to do to get in place to allow shoppers to shop safely and to transact safely.

Interestingly mortgage rates are really low. Right now for those who can qualify and that’s encouraging for the industry but new listings are down which means inventory is low for those shopping so if you pair this kind of low inventory with high demand. I heard said internally, there are lots of fish biting, but just not a lot of bait in the water.

We have got to figure out – so prices have stayed up. Supply and demand has had prices stay relatively level and we are – and our e-com team is not forecasting that prices come down that much.

Our challenge now will be to educate the industry and educate sellers on the fact that it is actually pretty interesting time to throw some bait in the water if you want. If you want to move the markets there, demand is there and so we are working on how to educate people as to that and as well the whole industry is. Anyway, I hope that helps.

We have a very talented and e-com team that has published a lot of stuff that I think we referred to in the letter that you can dig through on your own. So, thanks Maria..

Appreciate the color. Thank you, Rich..

Your next question is from Lauren Cassel [ph] of Morgan Stanley. Please go ahead. Your line is open..

Hey, it’s Brian on for Lauren. Thanks.

Just had two questions for you, Rich, I guess, the first one maybe sort of talk to us about how post-COVID, post-downturn, how do you think about any real structural changes in the real estate industry that you see developing and talk about the investment sides that you need to make Zillow to really capitalize and drive those? And then secondly, where is your head on the timing to rollout Flex into more markets as the economy kind of starts to light up in the back half?.

Hey, Brian. Yes, post-COVID like yes, we have been chatting about that before. This is not going – we are not going to bounce back to the way things were done before. We are seeing all kinds of systems, processes, business models, players change right now.

And there are going to be a bunch of sad stories there, but there are going to be a bunch of happy progress for our consumers and for the industry as a result. A lot of the technology that I have already been talking about this kind of Real Estate 2.0, a modern platform for virtual shopping and digital closing.

That’s all – it’s just – it’s really rapidly progressing right now and that’s not going to go back either. I think as an interesting one that is kind of a question right now, I think we all kind of feel a lot of pent-up demand to move, that maybe too simpler away to put it.

We are all rethinking how we live, where we live, the structure of where we live. I am right now in my bedroom, because I have three kids on Zoom school right now at all over the house. I don’t have an office in my house. My dad had an office when I was growing up. I never saw the need for an office.

While I see the need now, all of a sudden I have the need. There are people certainly don’t live in the city anymore. They may want to live somewhere else.

I do think we are going to see a lot of companies, including Zillow get a lot more permissive in accepting and embracing of people who might want to work from anywhere and also all of these factors plus economic turmoil will dislocate people too, but all of these factors are leading to what I am thinking of is this great reshuffling.

We are all going to a whole bunch of us who are able to force to or have the means to, are going to reshuffle where and the way we live our lives as a result of it. So, this is a major thing.

At least, we view this as a major thing and this part of it at least is leading me to believe that we are going to see the great un-sticking of the housing market.

The housing market has been stuck since the global financial crisis in this weird artificially low volume liquidity state and it just feels to me like this is going to be the thing that gets it unstuck..

Got it, great. And then….

Yes, it was so long ago that I was talking for so long that I almost successfully dodged to Flex – the Flex question. We don’t have any – we don’t have any – we are really glad like we like we are so happy, we have Flex in our quiver.

We are so happy that we have that as a weapon right now and a tool, because as you might imagine, pay later might be pretty attractive in a time when commissioning comes down for our partners. And so we are – we are really excited we have that in our quiver. We don’t have anything new to report.

We are methodically testing with a few additional kind of high-performing partners this quarter as we – just like we have previously announced.

Regardless of business model, what we are doing, what we are trying to do is create a better customer satisfaction experience for our customers, more money for our partners with better partners and higher revenue and profit per lead and we are looking at this as kind of an optimization problem at this – I don’t know problem, optimization opportunity at this point and working with different model – different business models to achieve those goals is what we are – is what we are focused on..

Great. Thanks, Rich..

Yes..

Your next question is from Heath Terry of Goldman Sachs. Please go ahead. Your line is open..

Hey, thank you. Just you think a little bit into the flex side of things further.

I guess one, and realized that this obviously has disrupted any chance of sort of having understandable metrics or trends or anything in any part of the business, but just any update on sort of what you are or maybe were seeing or it’s probably just sort of how conversion rates or your feeling about the impact that, that businesses is having on customer satisfaction, agent close rates, agent ROIs would be helpful, understanding that it’s all sort of taken within the context that we are in a very different world at the moment and probably will be for a while.

And then I guess to follow-up a bit on that question about flex timing, given this disruption that we are in right now, any reason not to use this disruption to accelerate the timing on rolling out flex, is it – is there an almost what do you have to lose kind of component to just going ahead since you know that, that seems to be where you want to go that maybe now and might not be such a bad time to just go ahead and get there given everything else is already is disrupted as it is?.

It’s the air cover. You have got air cover..

Right..

Maybe Allen you want to take the first one? Yes, sure..

I was just going to try to get some color. We even called out the impact on Q1. So I guess I would say right now, flex is going about as expected. We had planned – we have called out a 400 basis point impact in Q1 on our call in February. That was actually about a 430 basis points to be rounded. The actual number came in a little over 460.

So flex is going about as we expected. What I would say is that we are finding as we work through this and it’s not just a flip a switch and let it go, it’s a process, it’s working with our best partners to put mechanisms and operational rigor in place to allow them to scale and grow.

So, it’s not something you can just flip and expect to serve the customer better and so that is why we are being a little more methodical as we test. So, we are looking at opportunities to work with our best partners. As Rich mentioned, we are continuing to expand the program and expect to continue still into Q2.

But it’s just not something we can flip. So, I don’t know if you want to any more color? So I think we are finding and it does work, but there are things we are learning that make it work better and that’s why we are continually refining it before just flipping a switch..

Yes. And Heath, as you might imagine, it’s a little harder to measure. We are doing all kinds of testing to figure out how and where it’s working how it’s better for us, from a revenue and profit per lead perspective and how it’s better for our partners and customer satisfaction.

And that equation is – as transactions plummeted during kind of peak fear, it kind of throws a little bit of a monkey rent in our measurement devices on that.

And so you know what’s great is that we are working to focus and where we are moving more quickly in using this time to move more quickly is focusing our lead flow, our customer flow, those partners that are best able to give good service and convert and we're taking this time to really build out those predominately teams of people in various cities to make that happen and we're really encouraged I'm really encouraged by what I'm hearing coming out of the.

Coming out of the PA group they're super energized right now. .

Right. Thank you, both..

Your next question is from Naved Khan of SunTrust. Please go ahead. Your line is open..

Thanks a lot.

I just wanted to understand the dynamics between MBP and the fact that you are now doing some discounting in Q2 just wanted to understand once you let the MBP decide what the advertising is going to be what the rates are going to be maybe in Q3 is it possible for you to have the recurring rates kind of come back to one in on below the one index that you are showing on the chart?.

Yes, so I will take this. Thanks for the question.

So again, we were providing guidance just for the quarter however and we put that chart in place to kind of show the relationship between the input metrics and this discount so as we moved to be honest from the first decision point at the end of March when we saw this location who are our inputs starting to come back this targeted market approach is actually moving our MBP back more and more to MBP as we go and so we expect.

If these trends were to continue that we would be closer and closer to where we started the quarter if our inputs reflect that there is a lot of uncertainty and again we saw the we think we hit the quarter we're seeing the positives but our modeling would suggest that if we continue to see these input trends our discounting would become less and less and eventually to a very minimal amount our outlook as I mentioned did provide for some additional discount in the later part of the quarter but less so than even in the second round that was more targeted.

If that helps?.

Got it.

And maybe one follow-up question for Rich it looks like we are able to use some machine-learning techniques for selling the inventory you had on the iBuyer side, can you just maybe give us some more color on what are these techniques and how much of help they are?.

Sorry I was muted. I mean it’s just the machines getting smarter. This business is still big and old but this business is actually small and young for us and we have just gotten a whole lot better.

How to figure out what to buy where to buy and how to re habit how to price it how to price drop it and all of this is informed by data and as demonstrated by the outputs of our sales velocity on ZO it's definitely working, working way better honestly than we anticipated at the beginning of the crisis we were quite worried we would not we were just worried we were wondering whether or not we would be able to move a bunch of that inventory and I'm being really impressed we were already on that trend we were already speeding sales faster than we were acquiring inventory and so that trend has continued I've been really impressed with that it's time for us to stop celebrating declining inventory numbers.

However it’s time for us to get back to business the offers and get Han solo out of that out of that carbonite. So we are excited about turning on the acquisition side too..

Got it.

Would it be fair to say then maybe there was some kind of a step change in this the improvements that you derived may be in Q1 that helped you speed up the velocity or would that be a stretch?.

I think that’s a stretch. I mean the improvements, improvements with machine learning may be early days come in big steps and then afterwards come into lots of small increments and that's what we are seeing right now and even though the markets a little wonky we will continue to we expect to continue to see that..

Thank you, Rich. Thank you, Allen..

Your next question is from Edward Yruma of KeyBanc. Please go ahead. Your line is open. .

On the homes business, there is a little bit of competitiveness, but I think you guys said about 3 weeks from now, you will restart, what will the cash implications in that be as you re-ramp and kind of give us an idea of what gates you are going to use to evaluate kind of the re-ramp? And then second you indicated you are going to do some tactical discounts going forward in the PA business, I guess any kind of idea as to how much discounts will be and kind of what criteria you will use per market to determine what the discount should be? Thanks so much..

Okay, I will take the first one and then I want to make sure I understand the second one, but the un-pause of Zillow, again I do want to reiterate, we continue to believe in the thesis at Zillow Offers in that business model.

And as Rich has discussed today, thesis maybe even stronger and Real Estate 2.0 and our customer needs maybe a better value proposition, which is obviously a positive. So, our penetration maybe better.

With respect to the capital needs of that business, we made the pause, we talked about the actions we took we can startup again without a significant incremental cash or cost increase getting back to the volumes and run-rate that we were at.

And again, Rich mentioned, we are going to the plan on how exactly we will start that up and we expect to do that soon. We will continue as we always have to just asses our ability to fund either with equity for our portion of the houses, we will continue to leverage the asset-backed warehouse yields that we have for the homes.

We are excited about the resale velocity that we have, which allows us to move homes through quicker if those trends continue. So, we will just continue to monitor it on a cost of capital and a ROI basis looking at a long-term investment in that business.

But I don’t expect it to significantly change, in fact, it will likely be less than the capital we have talked about coming into the year just given that we have had to pause and we have to ramp up again, if that helps.

And then you had a question, I believe you said how we are thinking about MBP discounts?.

Yes. And just tying to really understand again the dynamics you are considering, some of your competitors are kind of continuing to step on the gas from a promotional perspective. So kind of what gives you confidence that a more tactical approach is what’s warranted in this environment? Thank you..

Yes. So, I guess what I stated just from the data point of that win after our first adjustment or discount, which was – I call this sledgehammer, but it 50% across the board and again inputs were dislocating.

As trends start to come back up and as we made a more targeted adjustment to our discount process in late April, we are continuing to see very good retention of all of our partners and the partners that we want.

So that’s the data point that says that we believe this tool is working that is showing we are in this with our partners for the long-term as well as it’s working to retain our partners to ensure our customer are serviced. So right now, we believe it’s a tool that will continue to work.

We are well-positioned if you look at our traffic, our brand, our balance sheet, I think we are in a great position to continue to win. We will continue to serve customers with technology, which will drive traffic.

And so I believe that the metric that we showed in our ability to go back to more of an MBP pricing when we are providing value to our customers is we own and again there is a lot of uncertainty out there, but we are happy where we are. We feel like we are in a really good position..

Great. Thanks so much, guys..

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

Okay. So, this period has clarified just how essential it is for people to be able to shop for a home and move. Now, we more clearly see that people have an innate desire to move and that this period may even be a catalyst for many who change their address for a variety of reasons that we have talked about.

Watching this unfold has given new meaning to our mission and the important role that Zillow was privileged to play in the lives of so many. So as my e-mail auto signature says, be calm, be safe and carry on. We will talk to you soon. Thank you..

This concludes today’s conference call. You may now disconnect..