Zillow Group, Inc. Class C Q2 FY2025 earnings call

Key Points - Jeremy Wacksman highlighted strong Q2 results with double-digit revenue growth and positive net income. Gaining share in For Sale and Rentals while maintaining cost discipline. - For Sale strategy: Enhanced Markets are connecting high-intent movers with high-performing professionals, with 27% of connections in Q2 and 96% of enhanced market connections through Follow Up Boss. Products like BuyAbility, Offer Insights, and Showcase are innovating the transaction experience. Software offerings like Follow Up Boss with AI features are boosting agent productivity. - Rentals strategy: Building a comprehensive 2-sided marketplace with the most rental listings (2.4 million active), improving transaction experience for renters and property managers, having 36 million average monthly rental unique visitors, and partnerships expanding distribution.

For Sale revenue in Q2 grew 9% year-over-year to $482 million, accounting for about 73.9% of total revenue. Residential revenue was $434 million, up 6% year-over-year. Mortgages revenue was $48 million, up 41% year-over-year. Rentals revenue was $159 million, with 36% year-over-year growth. Zillow Rentals had 2.4 million active rental listings, the most in the category, and multifamily revenue in Rentals grew 56% year-over-year with 45% year-over-year increase in property count to 64,000 at the end of Q2.

Q3 Outlook - Total revenue expected between $663 million and $673 million, implying 14%-16% year-over-year increase. - For Sale revenue growth in Q3 similar to Q2, with residential revenue in mid-single-digit range and mortgages category revenue in high 20% range. Zillow Home Loans origination volume expected to grow 40% plus. - Rentals revenue growth expected to accelerate in Q3, increasing more than 40% year-over-year. - EBITDA expected between $150 million and $160 million for Q3. ### Full Year 2025 - Expect mid-teens revenue growth at the higher end of previous outlook. - Rentals revenue growth expected to be approximately 40%. - Continuing to expand EBITDA margins and achieve positive GAAP net income.

Risks - Housing market macro uncertainty, including affordability challenges, supply-demand imbalance due to underbuilt inventory and sellers locked into low mortgage rates, which may impact transaction volume and value.

Q: Ron Josey asked about the Rentals business, specifically insights from large property managers, go-to-market strategy, and confidence.

A: Jeremy Wacksman and Jeremy Hofmann responded that the strategy works, team executes well, great partner satisfaction, building a comprehensive 2-sided marketplace solves renters' problem, largest audience, and partnerships like with Redfin expand distribution.

Q: Brad Erickson asked about the faster-than-market growth in For Sale excluding mortgages.

A: Jeremy Hofmann said For Sale outperformed the market over time, due to executing on Enhanced Markets, Showcase expansion, Zillow Home Loans growth, Follow Up Boss adoption, and new construction marketplace contribution.

Q: Ryan McKeveny asked about monetizing Zillow Showcase and new construction marketplace.

A: Jeremy Wacksman said Showcase is part of changing customer expectations, both seller and agent driven, and Jeremy Hofmann mentioned new construction business is table stakes for builders and does well as a good advertising channel.

Q: John Colantuoni asked about variable expenses and Redfin partnership.

A: Jeremy Hofmann said variable costs grow ahead of revenue now but will align as initiatives scale, investing in Rentals and Zillow Home Loans. Redfin partnership expands distribution for upselling to existing and new properties.

Q: Trevor Young asked about Redfin's dollar accretive in 2H.

A: Jeremy Hofmann said both 3Q and second half of the year, and expected to be more accretive beyond.

Q: Jeffrey Raymond Seiner asked about housing market assumptions and regulatory changes.

A: Jeremy Wacksman said not assuming much macro help, focusing on growing through share gain, and regulatory standards are well-received by the industry.

Q: Tom Champion asked about Enhanced Markets and mortgage trend.

A: Jeremy Wacksman said progress in Enhanced Markets with 27% connections in Q2 and goal to 35% by year-end. Jeremy Hofmann said mortgage revenue growth in high 20% range for Q3 with purchase loan origination volume growth.

Q: Dae Lee asked about rental wallet share and Enhanced Markets progress.

A: Jeremy Wacksman said growing wallet share by providing value and ROI, still low percentage of advertisers reached. Jeremy Wacksman said 27% in Q2 doesn't include new markets, focus on percent of connections.

Q: Stephen Sheldon asked about Zillow Showcase monetization and demand.

A: Jeremy Wacksman said Showcase is part of agent ROI, growing with improvements like SkyTour, beneficial in competitive listing environments.

Q: Andrew Boone asked about AI and automation.

A: Jeremy Wacksman said AI has potential to rewire the industry, improving customer experience for consumers and productivity for professionals with features like AI-powered Smart Messages and call summaries.