Ian Lee - Investor Relations Pete Flint - Chairman of the Board, Chief Executive Officer, Co-Founder Sean Aggarwal - Chief Financial Officer.

Lloyd Walmsley - Deutsche Bank Douglas Anmuth - JPMorgan Mark Mahaney - RBC Capital Markets Deb Schwartz - Goldman Sachs Chris Merwin - Barclays Neil Doshi - CRT Capital Tom White - Macquarie Brian Nowak - SIG.

Good day, ladies and gentlemen. Thank you for standing by. Welcome to Trulia's Third Quarter 2014 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. As a reminder, this conference is being recorded.

I would now like to hand the call over to Mr. Ian Lee, Trulia’s Head of Investor Relations..

Thank you, Operator. Good afternoon and welcome to Trulia's third quarter 2014 earnings call. Joining me today are Pete Flint, Trulia's Chief Executive Officer, and Sean Aggarwal, our Chief Financial Officer.

Before we start this call, I want to remind all of you that this presentation contains forward-looking statements within the meaning of the Federal Securities laws. Forward-looking statements generally relate to future events or our future financial or operating performance.

Forward-looking statements in this presentation include but are not limited to statements related to our business and financial performance and expectations for future periods, our expectations regarding the continued use of our products by consumers and real estate professionals, our expectations regarding macro trends in the market and our expectations regarding our national marketing campaign, expectations for our products and our expectations regarding the proposed merger with Zillow.

Our expectations and beliefs regarding these matters may not materialize and actual results in future periods are subject to risks and uncertainties that could cause actual results to differ materially from those projected.

These risks include those set forth in the press release that we issued earlier today as well as those more fully described in our filings with the Securities and Exchange Commission.

The forward-looking statements in this presentation are based on information available to us as of the date hereof and we disclaim any obligation to update any of the forward-looking statements, except as required by law. We also remind you that this call will include a discussion of GAAP and non-GAAP financial measures.

The non-GAAP financial measures are no intended to be considered in isolation or as a substitute for results prepared in accordance with GAAP.

A discussion of why we present non-GAAP financial measures and a reconciliation of the non-GAAP financial measures discussed in this call to the most directly comparable GAAP financial measures are included in our earnings press release that is available on our website.

Please note that our discussion of financial and operating metrics during the call today will primarily focus on consolidated data for Trulia and Market Leader. This conference call is also being webcast and is available through the Investor Relations sections of Trulia’s website. Now, I will turn the call over to Pete..

Thanks, Ian. Welcome and thank you for joining our third quarter 2014 earnings call. Our two-sided marketplace connecting transaction-ready consumers and real estate professional continue to make solid progress during the quarter.

In Q3, we continue to grow audience with Trulia standalone audience growing 39% year-over-year and our agent business we had a 4,000 new subscribers. In Q3, we recorded revenues of $67.1 million. This is below the anticipated Q3 revenue outlook we provided last quarter.

We experienced headwinds in our mortgage business related to the prolonged decline of the refinancing market, causing us to have a less revenue than anticipated in Q3. We expect these headwinds to continue in Q4 and to negatively impact revenue next quarter.

However, we delivered $67.1 million adjusted EBITDA in Q3, exceeding our expected range for the quarter. Sean will cover these items in more detail in section. Outside of this specific area in our mortgage business, our core marketplace remains on solid footing and we are excited about the long-term prospects for Trulia.

While our business continued to grow quickly, we are still only a fraction away towards penetrating a market that includes 1 million real estate agents and roughly $12 billion of real estate marketing spend in the U.S. Underpinning our path towards taking a greater share of this opportunity is the innovation and engineering-driven culture of Trulia.

This has enabled us to attract a sizable and growing audience of serious consumers and a rapidly expanding base of real estate professionals who increasingly rely on our products to connect with those consumers. We believe our pending combination with Zillow would contribute to our success in the years to come.

We both have consumer-first, technology and innovation-driven philosophies and cultures and we believe that together we will be able to create even better products and services for both, consumers and real estate professionals. Let me now move to review of our business in the third quarter of 2014.

Trulia's performance continues to be fall in the back of our three core strategies. These are one delivering superior experience to consumers, especially by mobile devices. Two, growing our agent place. Three, extending our marketplace into adjacent segments.

For consumers, Trulia's objectives has always been to transform the experience in looking for home by making it simpler, less stressful and more intuitive. This remains the core of what we do today. Mobile is in the heart of this transformation, given that consumers are increasingly searching for homes and agents on the go.

Trulia's dedication devoting amazing ease-of-use mobile products for the consumers coupled with a strategic marketing campaign that we launched in Q1 is producing tangible results. For the fiscal full quarter in history, the majority of uniques for mobile representing 54% of our total traffic in Q3.

The mobile portion of audience spiked to almost two-thirds on weekends. When consumers are most active and are out about looking to hunt. More than half of our visits and leads are also generated by consumers using mobile devices.

We currently sell millions of these agents every quarter and we continue to see significant opportunity to grow that number. In total, we surpassed $55 million unique visitors in the third quarter, up 36% year-over-year. Trulia's standalone audience continued its rapid expansion, up 39% year-over-year in Q3.

This represents our positive quarterly standalone growth for over a year. Total mobile traffic grew 89% year-over-year in Q3. Our marketing campaign has been a significant contributor to this growth. As with our product, our marketing strategy is targeted at attracting transaction-ready consumers.

Our goal is to achieve this with a focus on direct response, especially on mobile acquisition while also building a trusted brand. Visit growth in Q3 outpaces visitor growth, indicating that we are attracting a quality audience that is increasingly engaged with our products.

In addition to attracting more serious consumers, our paid marketing efforts are working efficiently. We previously discussed how we made significant progress in terms of the cost-effectiveness of our paid marketing in Q1 and Q2. This trend has continued in Q3.

Since we launched the marketing campaign in Q1, the cost per unique visitor acquired by paid marketing has decreased by more than 40% through the end of Q3. This performance has been achieved through the data-driven analysis and rigor of our marketing team's ability to target the right consumers through the most effective and efficient channels.

Moving to our second strategy and the other half of our two-sided marketplace, we are growing our agent base.

In the same way that we have diverted much of our energy and resources diverting beautiful, ease of use products for the consumers via focus on developing products for real estate professionals that are intuitive and deliver valuable connections with our consumer audience.

For busy agents, are not only one to leads, but also a system to manage, nurture and convert those leads into transactions Trulia and Market Leader provides a great technology solution. On the agent side of our marketplace, we introduced various exciting products and product enhancements in Q3. One of the new Trulia agent profiles.

A core focus for Trulia has long been to bring agents and consumers closer together by enhancing transparency and providing deep insights by an easy-to-use platform. The new profile enable consumers to research and contact agents with the right skill and experience by thinking advantage of features such as five-star ratings and reviews.

For agents, the new reviews and ratings act as endorsements on that power plant and offer the social proof needed to generate profile referrals. The new profile experience is fully mobile optimized to allow our consumers find the right agent while they are out looking for homes. The new profiles are helping to drive agent engagement on our platform.

To-date, we have seen over 7 million pieces of contents just popped out reviews and work history that have been added to profiles and this continue to grow quickly. In Q3, we also launched a co-marketing option for mortgage lenders and agents to share marketing expenses through joint advertising on Trulia.

With this new feature, Trulia profiles for the agent and lender a link to allow exposure alongside each other Trulia. In addition, a lender who co-markets with an agent will appear on that agent's feature listings and we also we also get leads from Trulia's users to request information on load prequalification.

We think this is a win-win by allowing consumers to access leading agents and lenders, all in one place, while enabling agents and lenders to increase their exposure in Trulia with potential home buyers. One of the primary drivers of our subscriber growth in 2014 has been our inventory expansion program.

The inventory expansion has enabled us to take advantage of pent-up demand from agents in many of our high-demand zip codes across the country over the past year. We are having additional advertising inventory in the form of a third agent slot or placement alongside home listings. The rollout was completed by the middle of Q3.

Given the completion of this part of the program, subscriber additions were lower this quarter compared with Q1 and Q2. Our execution on the agent side of our marketplace coupled with audience of serious home shoppers attracted approximately 4,000 new subscribers of Trulia in Q3.

Running parallel through efforts to attract subscribers has been our strategy of developing deeper industry relationships and enhancing the quantity of our listing data.

By partnering with key focus in MLS is quite able to work more closely With real estate professionals as well as gain forward access to home listing data that is more direct timely and accurate. This is an area in which we have invested significant time and resources and those investments are bearing the fruit.

In Q3, we announced relationships with several influential industry organizations. These included Edina Reality, Minneapolis-based broker one of the nation's largest real estate companies, as well as MLS is included in the New York State, MLS, Intermountain MLS in Idaho and Oregon and The Greater Tulsa Association REALTORS in Oklahoma.

In October, we announced [our] data connect program. Trulia now works with over 12,000 brokers and 100 MLSs. This data connect program, which was launched a year ago helps brokers, market our listings and brands from Trulia and from its accurate and timely listing data, clear momentum for the industry to connect with Trulia.

Third part of our strategy is expanding our business and grow in adjacent segments. In rentals, we are continuing to devote a rapidly growing and highly engaged consumer audience. Our playbook for our adjacent businesses is to create the best product, built scale and then monetize.

For rentals as we continue to even better products, we are also making great progress on scaling the business. For property managers, Trulia continues to become an increasingly important source of net tenants. In summary, while we experienced headwinds in our mortgage business in Q3, the trends in our core marketplace business remained solid.

Our audience of transaction-ready consumers continues to expand. Similarly, our agent business is well positioned to continue penetrating the immense opportunity that remains ahead of us. Before I conclude my remarks, let me provide a brief reminder of where we are in the process of our pending acquisition by Zillow.

There were two mainstreams of activity that account the emotion. One, SEC review of the joint prospectus and proxy statement filed by Zillow and Trulia and related shareholder approval process. Two, antitrust review with the Federal Trade Commission, we are continuing to work through both streams as planned and on schedule.

We expect that the transaction will close in the first half of 2015. With that, I will pass the call to Sean..

Thanks, Pete. My prepared remarks are accompanied by a presentation, which is viewable on this webcast and also available on Trulia's investor relations website. Today, I will cover an overview of key metrics and a review of third-quarter results. I will start with key metrics.

Before I get to the details, let me provide a quick reminder that we have reached the one year anniversary since he began incorporating Market Leader into our metrics. The year-over-year growth rates for many of our operating metrics, therefore reflect a comparison to the year ago period that includes Market Leader for a portion of Q3 2013.

I will first cover our three key consumer metrics. Total visitors, mobile visitors and user generated content. Q3 traffic totaled approximately 55 million monthly unique visitors, an increase of 36% year-over-year.

Breaking this down further, the year-over-year growth rate for Trulia standalone was 39%, our fastest year-over-year growth rate in a year and a reacceleration versus the 30% year-over-year growth rate in the prior quarter. In Q3, mobile traffic was approximately $29.9 million monthly unique visitors, an increase of 89% year-over-year.

This represents the first full quarter in which the majority of our topic was mobile. Mobile traffic growth for Trulia standalone in the quarter nearly doubled year-over-year. With regard to user-generated content, during the quarter our users made approximately 1.2 million new contributions to our site, a 5% increase over the third quarter of 2013.

We finished the quarter with a cumulative total of over $15 million user generated contributions in our database. The growth in our user-generated content tends to be driven by product features that we rollout to our platform and therefore can be somewhat lumpy.

The insights provided by this user-generated content are a unique and valuable part of the search process for homebuyers and Trulia and we expect that our database of user-generated contributions will continue to expand going forward.

On the agent side of our marketplace, we focus on two key metrics, number of subscribers and average revenue per user or ARPU. We added approximately 4,000 new subscribers in the quarter, ending the quarter with almost 77,900 subscribers.

Like the first two quarters of this year, the growth in our subscriber base was driven in part by the rollout our inventory expansion program. The rollout commenced at the start of 2014 and was completed by the middle of Q3. Given the completion of this part of the program, subscriber additions were lower this quarter compared with Q1 and Q2.

ARPU was $204 in Q3, up 8% year-over-year and down $2 compared with the prior quarter. The sequential decline in ARPU was driven primarily by the completion of our inventory expansion program during the quarter.

In Q1 and Q2, the program focused on selling additional inventory to agents in our highest price zip codes, where existing inventory is often sold out and ARPU is typically higher. In Q3, once the rollout was completed, our sales team shifted their focus to a broader range of zip codes, where there is a wider range of ARPU.

This contributed to the slight sequential decrease in ARPU. Having covered key metrics, I will turn next to a review of third quarter financial results. Third quarter revenue was $67.1 million, below our guidance range of $68.4 million to $70.4 million. Year-over-year growth rate was 67%.

Q3 revenue was our guidance for the quarter, primarily due to lower than expected performance in our mortgage business. I will get into the details of that shortly. Total revenue breaks down into two categories, marketplace and media.

Marketplace revenue, which is comprised primarily of revenue from subscription products sold to real estate professionals, including Market Leader was $55.8 million for the quarter, a 78% year-over-year increase. Media, which include sales of display ads to national advertisers, had revenue of $11.3 million, up 26% year-over-year.

Turning to our mortgage business, we monetize our mortgage traffic across both, the media and marketplace categories. We monetize display ads within the media category and we monetize clicks and leads primarily to a marketplace category. We experienced headwinds in our mortgage business during the quarter.

These headwinds were driven by the significant changes in the mortgage industry over the past year with the refinancing market slowing significantly and the focus moving to new loan originations for most mortgage providers.

Even with the slowdown in the re-fi, market, our large mortgage advertisers continued to spend with us at similar levels earlier this year, though with a focus on new loans. In Q3, our large mortgage advertisers began to reassess their overall business and subsequently their marketing spend.

A few advertisers decided to pause or reduced their spend, given that market conditions remain uncertain. This was a key contributor to the lower than expected overall revenue in Q3. Given the continued uncertainty we are hearing from our mortgage advertisers, we expect the headwinds in our mortgage business to continue into Q4.

I will next discussed earnings and then walk down to P&L commenting briefly in each given line item my discussion of operating expense items excludes compensation paid in stock. For details on operating expenses including compensation paid in stock please refer to the appendix of the earnings presentation accompanying this call.

Third quarter adjusted EBITDA was $6.7 million or 10% of revenue. Despite our lower-than-expected revenue in Q3, our adjusted EBITDA was above our anticipated guidance of $5.4 to $5.6 million. This was in part due to marketing efficiencies achieved during the quarter.

We were able to optimize our overall marketing spend in Q3, enabling us to achieve our adjusted EBITDA goal, while at the same time, meeting our traffic goal.

Another positive factor for adjusted EBITDA was the fact that Q3 was the first full quarter since we integrated Market Leader in our operations, removing some costs that were previously overlapping. Gross margin for the quarter was $56.2 million or 84% of revenue slightly about the 82% gross margin in the prior quarter.

Sales and marketing expenses with $36.5 million or 54% of revenue consistent with the 54% of revenue in the prior quarter, sales and marketing expense continues to reflect our investments in the marketing campaign that we launched earlier this year. Technology costs were $12.7 or 19% of revenue in line with the 19% of revenue in the prior quarter.

G&A expenses were $8.1 million or 12%, slightly lower than the 15% of revenue we recorded in the prior quarter. Please note that these numbers exclude approximately $10.8 million of costs related to our pending acquisition by Zillow and 1.2 million restructuring costs, Having covered the P&L, let me briefly touch on the balance sheet.

We finished the quarter with $212 million of cash and equivalents and $230 million of convertible debt. With regard to Q4 guidance we are not providing a financial outlook for the quarter due to our pending acquisition by Zillow. I will close by recapping the highlights from today's discussion.

First, our audience exceeded 55 million unique visitors for the quarter, with Trulia standalone growing at 39% year-over-year. Second, our subscriber base reached almost 78,000. We completed the second phase of our inventory expansion program and they remains significant untapped demand from agents that we will target going forward.

Third, while revenue was below our anticipated range for Q3, our adjusted EBITDA was above our expected range for the quarter, the call. I will now pass the call back to the operator for Q&A..

All right. Ladies and gentlemen (Operator Instructions) Our first question comes from the line of Lloyd Walmsley from Deutsche Bank..

Thanks. Just wondering if we can get a bit more color on, I guess, the weakness in the agent side of the marketplace business. You cited mortgage revenue being kind of the primary result of the weaker trends, but maybe you can update us on the size of this business.

I think based on some of the re-segmentation you did last year, it looked like this would only be about $3 million of revenue in the quarter that may be a misinterpretation given that would be the entire magnitude of the revenue weakness.

Is there something else on the agent side and do you think that is a reflection of just challenges keeping the sales force focused post the acquisition before the close or do you think there is broader caution among agents with some softer recent housing trends? Lloyd, the core agent business remains on solid footing.

We are pleased with the performance in that business. We are pleased with the metrics in Q3 related to the agent business, so really just you know trends are solid in that business.

The headwinds that we saw and the disappointment that we have seen on revenue in Q3 versus our previous guidance relates, primarily to the mortgage business and now let me provide some more color there, you know, we had shared at the start of the year that our mortgage business was at about at a run rate of $20 million a year, so that is roughly the size of the business at the start of the year and it is comprised of two pieces.

There is a set of display ads that we run and the revenue associated with that we record in the media category. Then we also monetize the clicks and the leads in the mortgage business and those get recorded as revenue in the marketplace side of the business. We have seen a compression in Q3 on both aspects, display ads as well as the leads and clicks.

Therefore, the revenue impact that we have seen shows up both, in the media category and it shows up in the marketplace category.

As I discussed in my prepared remarks, it's largely driven by the industry-wide macro re-fi trends and some large advertisers pulling back on their spend, and just one more color point here is, mortgage is still a relatively new business for us. We started really monetizing this about 18 months to 12 months ago.

As a result, our advertiser base is fairly concentrated. There is a small set of advertisers in the mortgage side that drive the bulk of our revenue.

Given the change in their strategy and pullback on marketing spend, I think, we were hurt by that more so than perhaps other people might have been in the industry, so that is some color around the mortgage business..

Okay.

Then I guess just as a follow-up, Zillow has been more focused on absolute revenue growth of late more so than subs, but wondering as we look forward do you expect to see your net new sub growth trend positively going forward or is it kind of more going to be in line with levels from last year do you think?.

Hi, Lloyd, so we are not giving a subscriber forecast. As we shared in the prepared remarks that the numbers for Q3 were lower than Q1 and Q2, it is principally because of the completion of inventor expansion program, so consequently we work which is somewhat inventory constrained this quarter to sign up new subscribers.

Our process internally of creating new inventory both from execution lacks that traffic growth, because of the nature of contracts, which is typically six months. It takes us time to realize that the benefits from the increased traffic growth. We are not giving a Q4 guide on subs growth.

I think two things of note there is that Q4 seasonally weakest quarter as you know from overall net subscribers ads. Then the other thing is that if we were to sort of more significant product launches we typically do that at the sort of inflection point of the seasonality which is typically in the beginning of the year, so Q1 or Q2..

All right. Thanks guys..

All right. Our next question comes online of Douglas Anmuth from JPMorgan. Please proceed..

Thanks for taking the question. Just two things I guess picking up there on the subs. You have rolled kind of second and third slots over the last couple years. Can you just talk more kind of philosophically that how you think about, the ability to move beyond that in terms of slots and then known user contributions seeing the deceleration here.

I think in the past you have talked about a decent amount of that because of the shift to mobile and not necessarily getting the same kind of contributions through those devices, but how big of a priority is it to turn that around or to introduce products to make it easier for users to add more of their own content into the platform. Thanks..

Yes. On the overall strategy and approach for us on the agent side of the business. The fourth slot is something that we are something that we all we and that is we shared in the past. It could make sense for us.

Like I indicated on the earlier question, it would not be something that we would do in seasonally weakest quarter, but it maybe something we would we would evaluate beginning of next year. The other thing that has been maybe no surprise is the evaluation of impression-based pricing.

Again, we are not evaluating that at this point, again will be something we would evaluate at the beginning of the colander year. We believe that are multiple options to achieve the subscriber benefit from an increased traffic, but at this point, we given the completion of inventory expansion program there is an open place.

We see that as a short-term element within the business is the audience trends are very, very strong. Just to your other question on UGC yet you're exactly right with it transition of the majority of our usage to mobile. UGC is, - engagement with UGC is generally lower. It still remains a core part of our strategy to achieve these insights.

We have generally achieved these insights by two means. One is our investment on the additional data-driven insights, mapping land et cetera. That is on the growth of a user generated content.

I would say that in the near-term, we have been primarily focused on the addition of user generated content in the form of adding additional agent insights, so agent profiles are really rich adding insights about, product lines, product sales, recommendations and we can see direct agent engagement and monetization benefits result.

The other piece that does translate to mobile has been the addition of these additional data layers giving really value insights quickly across the whole population in the U.S., so that has been another area of focus.

We remain excited and focus on voting out the most complete for real estate professionals and we will continue to invest in this area..

Thank you..

All right, our next question comes from the line of Mark Mahaney from RBC Capital Markets..

About the reacceleration in that 39% and kind of standalone traffic, did you get into the why behind that? Do you think it's just the impact of the marketing campaign the branding campaign beginning of the year.

Secondly, could you talk bigger picture about the MLS relationships in the future and specifically getting access to that the direct timely accurate home listings data and what the different options that you think Trulia and Zillow would have over the next three to five years in terms of getting access to that data more consistently accurately.

Are there big step-function improvements that are possible there or all this is going to be incremental. Thank you..

Yes, Mark, on the marketing campaign. We really kicked this off in full force in Q1 and the focus us has been driving transaction-ready consumers and as we have shared there is really a full fledge process. Acquire uniques, convert them into leads, leads drive subscribers and subscribers ultimately drive revenue.

This takes anywhere takes anywhere between 12 and 18 months to see the full fruition of these investments. What we have been focused on over the last several quarters is being kind of optimizing, driving efficiency within that spend and I would characterize that kind of channels that have been working for us.

We benefit and we find great ROI from search and surprisingly as competitors focus on the transactional audience enables us to tap into an audience that is inherently high in intent so we are able to efficient marketing we are able to target those users effectively.

Mobile is more complex as a number of channels that we are using both mobile WAP as well as mobile app. Probably going too much channel specific for competitive reasons, but it is an attractive and emerging place. Third piece within here was just products.

It's ultimately if your product is converting well, your marketing becomes more effective and we believe that this fueled investment, heavy investment in product in building the robust product plus analytically strategic and analytically driven market is a secret to success and we are very happy with the progress that we are making on both of those fronts.

On the listing side of things, you know this is clearly not being a new area of focus for us. We have been over the last 12 months investing much more significantly in this area.

The nature the real estate industry that is highly fragmented, so we did a big technology build-out last year, which enabled us to really seamlessly and quickly integrate with MLSs and brokers all across the country. Then in the last 12 months is really being a blocking and tackling of signing up these folks.

The benefit they get is frankly a tighter relationship with key distribution partner and more accurate and timely and comprehensive data, so this is not switch to flip to turn this on and light this across the U.S.

This is a lot of blocking and tackling, but I would say we have got all the machinery in place from the industry and sales and marketing side to make significant progress here.

I think also we are hearing from brokers MLSes that the relationship Trulia is a strategic for them, and they want to have direct control over that a highly strategic relationships, so we are seeing just a rally strong momentum within that. We remain that kind of multi-source approach here.

We have got great relationships with aggregators as well as an increasing number of direct connection integrations with our platform..

Thank you, Pete..

Our next question comes from the line of Deb Schwartz from Goldman Sachs..

Thanks. I have two questions. First you mentioned the efficiencies that you're seeing in marketing spend, can we read that as saying that you spent less than you initially budgeted in the quarter.

Would you attribute that at all to the deceleration that you saw in marketplaces? Then second, as it relates to ARPU, you talked about the dynamic of inventory expansion and some of the newer markets inherently have lower pricing.

I know you are not giving any guidance for Q4, but is there anything that would change the way we think about Q4 to change that dynamic or should we expect sort of a similar trend?.

Deb, on the first question around level of marketing spend, as we said at the start of the year, we expect to spend up to $45 million in our marketing program this year.

That remains unchanged, however given the efficiencies that we have seen over the course of the year, it has given us the opportunity on the margin trim back on some of the marketing spend and we very much did that in Q3.

That was one of the factors that helped us beat our EBITDA guidance in Q3 in spite of the fact that revenue came in lower than our guidance.

We were able to do this and feel confident in doing it, because as Pete mention earlier in this remarks, just since the start of the year, we are now spending 40% less to acquire each new user through a marketing spend, which just means that each marketing dollar is working a lot harder and we are able to get more done with less.

Even though we trimmed the spend back on the margin in Q3, the top-line traffic numbers were you know just excellent like 39% year-on-year growth for truly a standalone up from 30% year-on-year in Q2, up from 18% in Q1, so very pleased with the trade-offs we made that and the results we achieved.

On your second question around ARPU and sort of is there a new dynamic and sort of how to think about it going forward, I talked sort of what drove the sequential decline in ARPU, $2 decline and really just to kind of reiterate that it was a function our inventory expansion program completed sooner than we expected which is a good thing we rolled it out faster.

During that program, we obviously targeted the high-demand high ARPU zip codes. Then for the second half of Q3, our sales team was signing up in non-high demand Zip codes, which tend to have a lower ARPU. Hence the weighted average ARPU across Q3 came in modesty lower than the ARPU in Q2, so that's sort of a dynamic that went on.

As we look forward, the thesis on ARPU expansion remains unchanged given the strong ROI that the real estate subscribers continue to get we feel very confident that in the coming quarters and years.

We will be able to expand ARPU much in the same way that we have done if you look back over our two to three year history and we remain confident that we will achieve the long-term ARPU targets that we had set out as part of our IPO..

Great. Thank you..

Our next question comes from the line of Chris Merwin from Barclays. Please proceed..

Great. Thanks.

Just a follow-up to the question earlier on listings data, what percentage of your data comes from ListHub today and how important is that service to you on a go-forward basis? Then secondly, after News Corp's acquisition Move, has your approach to marketing spend changed at all either as a standalone company today or eventually as a combined entity with Zillow? Obviously, we don't know how much News Corp might spend on marketing, but philosophically has anything changed after that announcement?.

Let's talk about the agreement we have with ListHub continues to the first half of 2016. As we have are done for since the beginning - we have a multisource approach to ListHub. It is to give a percentage for ListHub simply because in a given the multisource approach.

We get the same listing coming from multiple platforms the directly from MLS are also through ListHub, so it is hard to give a kind of single number on that. Also, there are ListHub acts as a conduit for brokers and franchise who wants to strike individual relationships with us. They remain an important and valued partner for us.

We are happy to continue that, partnership, but we as you have heard investing heavily on expanding our range of partners and we see benefits for all participants with a direct relationship, because we able to give more accurate more complete and the data by going direct so that that's just a in the right thing to do for the participants to go direct and we got the momentum there.

Just one other comment on that, we've seen some sort of disruptions are the local market level.

What has been sort of interesting has been that focus because truly it is such a critical part of that distribution strategy have figured out ways around that, so there is always over the course of, say, last 12 months there have been a number of changes by brokers, by franchises, by MLSes and individuals rely on Trulia, which that is now a significant portion of the industry now find a way to get their listings on Trulia.

I think we significant passed the tipping point of importance from an industry's perspective. With regard, obviously, we have observed the acquisition of Move by News Corp. is really too early for us to say about kind of if that changes that [tackles] and marketing plans.

Spencer and I have shared, the strategy is very much to continue to invest in and maintain the Trulia brand, in a pre-close, we haven't done anything more specific and that is just too early to share any insights around that..

Thank you..

All right. Our next question comes from Neil Doshi from CRT Capital..

Great. Thanks for taking my question.

Pete, I guess just not to harp on the MLS listings question too much, but any indication as to how many direct MLS relationships you have today? What's the challenge? How long would it take to go out and get those relationships on your own without the help of a service like ListHub? Then can we get an update on new ad formats like seller ads, etcetera? How are those trending, and at what point do you think some of these ads can be more material to your overall revenue base? Thank you..

To give you some specific data, we announced on October 100 MLSes are part of data connect program. Like I shared this, this will - really strong momentum from this - the MLSes and the products participants of this MLS see the real benefit from that.

Now I would say that the process is pretty streamlined to get those relationships up in place, so as I shared on an earlier question, sort of technical machine is in place, sales, marketing (Inaudible) now is in place. You know this has been a 100 MLSes. This is a pretty standard part of the industry strike to at this point.

We haven't done the calculus about what it would take to go exclusive here, but you know we got a long while in the contract, but it is highly feasible if we were to choose that. The second part about new ad formats, we haven't broken that out.

The Trulia seller ads just launched in the beginning of the year and we have been delighted with the response. What we have historically been focus on is connecting homebuyers with buyers agents.

As you know a significant portion of the market is being connecting from sellers with listing agents and they are harder to find these individuals and they are also more valuable to real estate professionals to find these listings, so that is performing similarly to Trulia local ads and Trulia Mobile Ads, but just given it is a couple of quarters old, it is how boarding of this lower base, but we are really happy with it.

I think it is something that we would consider next year giving some more insights and more data on, but at this stage it is probably helpful to share with you more on that..

Thank you, Pete..

All right, our next question comes from the line of Tom White from Macquarie. Please proceed..

Great, thanks for taking my question. On the EBITDA outperformance you called out the marketing efficiency.

I was curious, are there any other particular expenses that were maybe pushed out and whether or not the pending combination with Zillow has any influence on your decisions there? Then just on the lender agent co-marketing product was there any impact on ARPU there in the quarter or should we expect that to impact ARPU over the next few quarters, say, or is it just too early? Thanks.

First question around EBITDA, for Q3 there were two factors that helped us achieve EBITDA above our guidance range and those were as I mentioned earlier, one, was the fact that we were able to trim back on our marketing spend, because we are getting more and more efficient with the marketing spend.

Second was that this summer we fully integrated Market Leader.

If you will recall, we completed a restructuring and eliminated a bunch of overlapping costs and positions, primarily in the G&A functions and that that sort of went into effect June-July timeframe, so Q3 is the first quarter where we had the benefit of a full quarter where those overlapping costs were not part of our cost structure.

Those were primarily the two things. There were no other cost actions of significance. Certainly, there was no action that was driven by the pending merger or anything of that sort. It really was these two actions on the OpEx side that helped us get to our EBITDA goals.

Then Tom, on your second question, co-marketing program that w launched and its effect on ARPU now and in the future. For now, negligible impact, the program is just in its infancy we just launched it, so is no material impact to ARPU as yet.

Our expectation would be as we move forward into the future it will be a contribution to expanding ARPU, undoubtedly.

You know it is going to enable us to know attract a bunch of lenders and agents that are working together, sharing expenses and thereby spending more than they otherwise might have and it should be in the long-term a positive contributor to growing ARPU..

(Operator Instructions) Our next question comes from the line of Brian Nowak from SIG..

Thanks. Could I have two please? The first one the 39% traffic growth is really good.

Can you talk though to the average agent lead conversion trends you are seeing? Is average lead conversion improving? If not, what do you have to do to improve that trend to provide more value to your agents? Then the second one, could you just update us on the Trulia standalone versus Trulia and Market Leader subs and talk to either progress or challenges you faced in up-selling your agents to Market Leader? Thanks..

Just to clarify questions, so when you say average agent lead conversion is that visit to lead conversion or lead to close conversion?.

Lead to close..

On the lead to conversion, the way that we track that unfortunately we don't have direct insight into that. It is really survey base and quantitative insights from agents. The trend over the last several quarters being consistent with what we have experienced.

That said, there are a number of initiatives that we are performing internally to increase that conversion rate. One is that the investment at a matching, consumers to agents and a key foundation for that has been our investment in major profile.

So far I am looking for an agents to help me buy a loaf in summer in [San Francisco] we can identify the top agent specializing in summer in San Francisco. That really aids conversion rate of lead to close. The second piece is the investment Market Leader.

As we shared at the beginning of the year that we are focused product investment with using the best of Trulia's agent placing tools with the best of Market Leaders' tools and we are set on track to get that up by the end of the year, so you will hear some announcements before the end of the year on that product development process.

Those are significant initiatives that aid lead significant flows, lead to close ratio which key beneficiary of that is the agents that benefit from a more efficient and effective marketing channel. I will let Sean take the second part of the question..

Brian on the subscribers related to Trulia versus Market Leader and how the thing are going up-selling and all of that. Now that we have bought the sales teams together with the integration that we did between Trulia and Market Leader this summer, it is difficult even for us on the inside unit really tell which subscriber belongs to which company.

That said, directionally I can tell you that in Q3 of 4,000 subscribers we added primarily they were driven by the Trulia products, so that's sort of a directional read on the source of the subscribers.

Certainly on the margin, it's easier, right? If a subscriber has and is using the Market Leader software product on the margin, it is a much easier conversation for us to have with them to talk to them about the Trulia leads products and up-sell them to the Trulia leads product, so it's early days with the sales team having just come together in the June-July time period, but on the margin we are hearing positive feedback from the agents and from our sales reps that by combining Market Leader and Trulia there is a strong value proposition in the market for our products..

Okay. Great. Thank you..

Ladies and gentlemen, this will conclude the question-and-answer portion of today's conference as well as the end of today's call. Thank you, all, for your participation, you may all now disconnect. Have a wonderful day..