Zillow Group, Inc. (NASDAQ:Z) Q1 2019 Earnings Conference Call Transcript

May 09, 2019 • 05:00 pm ET

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Zillow Group, Inc. (NASDAQ:Z) Q1 2019 Earnings Conference Call Transcript

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Presentation
Executive
Rich Barton

days, but Zillow Offers is working. You'll see in this quarter's results that are Home segment, where's Zillow Offers resides meaningfully outperformed the high end of our guidance with revenue of $128.5 million. And we are publishing Home segment guidance range for next quarter of $230 million to $245 million, up from zero a year ago.

We are leaning into early success and are accelerating our investment in Zillow Offers. Today, we are announcing plans to enter another six markets by the end of Q1 2020, bringing our total announced markets to 20. In Q1, we received more than 35,000 seller request and that demand is rapidly accelerating. We now receive one request every two minutes, which is nearly $200 million in potential transaction value per day.

During the quarter, Zillow sold 414 homes and purchased 898 homes up dramatically from our Q4 transaction volume. To support Zillow Offers rapid growth and expansion, we're investing to scale this business as we build a world class operating platform. We are currently pricing homes to breakeven at the unit level and expect profitability and unit economics will improve over time as we gain efficiencies with scale.

Longer term, we are also expected to benefit from other adjacent businesses, such as title and escrow, insurance, moving and other services we might explore. In fact, in the second quarter, we are planting seeds for title and escrow services tied to Zillow Offers, which is another fundamental yet fragmented piece of the transaction we intend to streamline.

We've also been making solid progress in our mortgage business. Last month, we rebranded the recently acquired mortgage lenders of America as Zillow Home Loans. We've been focused on integrating this loan origination business into our operations, while building out a digital mortgage technology platform. In the future, we will more tightly integrated Zillow Home Loans with our Zillow Offers consumer experience. This will take some time, but I'm encouraged by progress today.

It's incredibly pleasing to me to see how well the whole of the Zillow Group team is performing to enable such rapid growth on our new bets. Zillow Offers is growing so quickly because it is standing on the shoulders of a huge real estate shopping audience, anchored by this estimate, that has been built up over 14 years. And it is supported by profits from the Premier Agent marketplace that have made us look more courageous than we really are as we invent the future.

Our Premier Agent marketplace performance is improving as planned. Consumer data that we monitor indicates that transactions and conversion are increasing and agent feedback about the recent changes has been positive. We're also continuing to test new models that are tied to transactions versus leads.

In June, we will expand our flex pilot and convert multiple zip codes in Colorado and Connecticut to 100% flex. As a reminder, in flex, agents do not pay us upfront for advertising exposure. Instead, they pay Zillow a success fee only when they