Earnings Transcript for Z - Q2 Fiscal Year 2023

Operator: Good afternoon. My name is Elliot and I will be your conference operator today. At this time, I would like to welcome everyone to the Zillow Group's Second Quarter 2023 Conference Call. [Operator Instructions] Please note this event is being recorded. And I would now like to turn the conference over to Brad Berning, Vice President, Strategic Affairs and Investor Relations. Please go ahead.

Bradley Berning: Thank you. Good afternoon and welcome to Zillow Group's second quarter 2023 conference call. Joining me today to discuss our results are Zillow Group's Co-Founder and CEO, Rich Barton; CFO, Jeremy Hofmann; and COO, Jeremy Wacksman. During today's call, we'll make forward-looking statements about our future performance and operating plans and the housing market 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 on our Investor Relations website. recording 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. We will now open the call with remarks followed by live Q&A. And with that, I will turn the call now over to Rich.

Richard Barton: Thank you, Brad and thank you, Elliot. Good afternoon, everyone. Thanks for dialing in today. We're excited to share our second quarter results and speak to the progress we've made on our growth strategy since we last spoke in May. You've heard me say many times that 2023 is a crucial year for Zillow. As the year progresses, we're pleased with what we've accomplished thus far. Second quarter revenue of $506 million surpassed the high end of our outlook by $27 million and returned to slightly positive year-over-year growth. and EBITDA of $111 million surpassed the top end of our outlook by $30 million. This outperformance compared to our outlook continues to be driven by a combination of progress we've made since reorienting the company in early 2022, are focused on cost management and relative macro tailwinds as we navigate the ongoing poor housing market. As we gain to the results with you this quarter, we are particularly pleased that our residential revenue outpaced the broader real estate market decline of 22% and by 1,900 basis points, marking 4 consecutive quarters of outperformance. As you will recall from the investor deck we shared in early 2022, we believe approximately 25% of all actual U.S. homebuyers sought a Premier Agent partner in the previous year, yet we estimated that only 3% of home buyers and sellers ultimately transacted with us, a major opportunity gap to be bridged. We framed our solution to focus on growing customer transaction share, the Zillow Housing Super App. Our big strategy bet with the super app is that customers and partners alike want and need a much more digital convenient and integrated housing transaction. And that Zillow is likely the only company in the industry with the technical skills, the audience reach and partner network to pull it off. We are clearly making progress on this long runway growth strategy. We will continue to invest and prioritize for a steady drumbeat of features and services for both customers and partners which should set us up for long-term profitable growth. Our super app investment manifests in 5 growth pillars we talk about frequently with you all but it also shows up in the core day-to-day work which is a result of having our 6,000 employees orient around the same goal

Jeremy Hofmann: Thanks, Rich. Great to be on the call with you all and looking forward to connecting in the coming weeks and months. Given this is my first earnings call, I want to set the table for what I'm going to cover. First, I will go into additional details about our Q2 results and our Q3 outlook for continued strong relative outperformance versus the real estate industry. Then I want to provide new transparency on our cost structure and how we plan to manage costs going forward, including share-based compensation, with our intent to be a profitable growth company. Last, I will provide some clarity on our capital management strategy, including plans for further improvement to the quality of our already strong balance sheet. In Q2, we delivered total revenue of $506 million, $41 million above the midpoint of our outlook. This revenue outperformance drove $40 million of EBITDA outperformance as well. Our costs were in line with our expectations and we were able to flow revenue through directly to EBITDA, showing the high incremental margin business that we have today. Total revenue returned to positive year-over-year growth albeit slightly so compared to the $504 million we did a year ago. On a GAAP basis, net loss was $35 million in Q2 and net loss as a percentage of revenue was 7%. EBITDA of $111 million resulted in a 22% EBITDA margin. Residential revenue was $380 million, down 3% year-over-year, outperforming the high end of our outlook range. Our residential revenue performance was 1,900 basis points above the industry decline of 22%, according to data from the National Association of Realtors. Our relative outperformance continues to be driven by delivering better-than-expected number of customer connections to our Premier Agent partners and favorable tailwinds relative to the industry that Rich discussed earlier. We estimate that over the past few quarters, approximately half of our outperformance has been driven by actions taken by us and approximately half has been from relative macro influence. As Rich discussed, our ongoing investments in our top of funnel and mid-funnel experiences are paying off. Rentals revenue increased 28% year-over-year. Rentals traffic grew 15% year-over-year to 31 million average monthly rental unique visitors per comScore. This industry-leading rentals traffic drove 21% year-over-year growth in the number of multifamily properties on our apps and sites. We also continue to see industry tailwinds with occupancy rates declining from historically high levels, highlighting the need for landlords to advertise their vacant rental properties with us. Mortgages revenue was $24 million, with purchased loan origination volumes growing 30% sequentially from Q1 and 73% year-over-year. Further, total origination revenue returned to positive year-over-year growth as we lap the slowdown in refinance activity from early 2022. In Q2, we delivered a 50% increase in loan officer productivity compared to Q4 2022 based on the number of locked loans. We are adding new tools and capabilities for customers, agents and our loan officers that we expect to drive further efficiency improvements in the quarters ahead. Given this progress, we plan to increase our number of loan officers in the coming months, while we closely monitor operational efficiencies. New construction revenue growth was also strong during Q2, increasing 18% year-over-year as customers turn to new construction homes given the limited existing home inventory. Earlier this week, we also announced that Zillow will be the exclusive provider of new construction listings content on Redfin and we look forward to serving our mutual customers. With the largest selection of new construction communities of all real estate websites in the U.S., we expect our new construction marketplace to benefit with increased connections with prospective shoppers. EBITDA expenses totaled $395 million, in line with our Q2 outlook with cost of revenue slightly higher than expected, primarily due to higher revenue and select operating expenses slightly lower as a result of favorable headcount and advertising expenses. It is worth noting that share-based compensation expense this quarter was $130 million, up from $103 million in Q1. Approximately $17 million of the sequential increase was driven by the impact of departing personnel as well as the impact of our March 2023 annual employee grants. We ended Q2 with $3.3 billion of cash and investments, down slightly from Q1 which includes the benefit of net cash provided by operating activities, as well as the impact of $150 million in share repurchases during the quarter. Convertible debt was $1.7 billion at the end of Q2. Turning to our outlook for Q3. We expect total revenue to be between $458 million to $486 million, implying a year-over-year decline of 2% at the midpoint of our outlook range. We expect residential revenue to be between $339 million to $359 million, down 6% year-over-year at the midpoint of our outlook range, as compared to our estimate for an industry transaction dollar decline between 15% and 20% year-over-year in Q3. Note that we expect a total industry decline of 17% and at the midpoint of the range to nominally improve compared to the Q2 decline of 22%. Homeowners locked into their current mortgage rates are having an impact on the normal seasonality of move-up buyers who typically move between school years. Despite the challenging macro environment of higher for longer mortgage rates, we expect to continue to outperform the industry in Q3. We expect the investments we have made in our funnel will continue to deliver benefits in Q3 while experiencing less relative macro tailwinds versus previous quarters. For Premier Agent, we estimate revenue will decline between 4% to 9% year-over-year. As the macro backdrop remains choppy, we continue to focus on the inputs we can control, adding value to our customers and shipping great products and services. Despite the tough macro existing home sales environment, our customer connections with Premier Agents have been nearly flat year-over-year for the combined past 2 months. That said, we do remain cautious that buyers will find it difficult to buy homes with such low inventory levels and our outlook reflects this dynamic. For Q3, we expect EBITDA to be between $67 million to $87 million, implying a 16% margin at the midpoint of our outlook range. Consistent with the outlook that we provided at the end of Q1, we expect Q3 EBITDA expenses to be flat compared to Q2. We are announcing today that we closed on the acquisition of ARIA, a leading software provider to real estate photographers across the country. ARIA's platform capabilities and network of third-party real estate photographers will help enable us to scale ShowingTime's listing showcase product. Separately, in late June, we announced the sunsetting of Zillow Closing Services. As it did not have the tech forward and integrated product we believe customers and partners need, having originally been built for our iBuying effort. That said, integrating the real estate transaction to make buying and selling simpler for customers remains our core strategy. We are actively exploring other title and ester solutions and we'll follow up when we have more details to share. Next, as I discussed in my introduction, I want to dive deeper into providing new transparency on a few topics. I will start with our cost structure. Given the uncertain macro environment and the associated challenges with accurately forecasting revenue, we want to be more explicit with investors regarding how we plan to manage our cost structure moving forward. We evaluate costs in 3 categories

Operator: [Operator Instructions] Our first question today comes from Lloyd Walmsley with UBS.

Unidentified Analyst: It's Katie [ph] on for Lloyd today. Just a quick question on the Opendoor partnership last quarter, Open announced that your partnership has been launching 5 markets. I know you guys said 2 in Feb. Now we're at 25. Is there any update on the rollout and progress you're seeing so far? Any color you guys can give us there?

Jeremy Wacksman: This is Jeremy Wacksman. I'll take that one. Yes, as Rich talked about earlier, we're now live in 25 markets, up from the 2 in February. And on top of that, in our Seller Solutions growth pillar, we just announced and have launched listing showcase by ShowingTime+ in our select markets. So we're really pleased with the expansion and coverage of our seller solutions. As Rich talked about, increasing our service addressable market to the sell side and sellers who become buyers as well as accessing more types of agents, not just from your agents and listing agents, across those solutions. So more to come in the future quarters but we're pleased with the continued progress there.

Operator: We now turn to Brad Erickson with RBC.

Bradley Erickson: I just had a couple. The first, you obviously talked a lot about the share gains in the letter and here in the prepared remarks. Just for what we're seeing right now, I guess, just in the report and the guide, can you just unpack that a little bit more in terms of the factors that you're viewing as maybe a sustainable versus maybe not as sustainable or at least out of your control? That's the first one. And then second, you called out the accelerating the rollout of real-time touring. Just curious what that does to the mix of leads that you're sending out or if it changes at all? And just curious if that's something we could see contribute to those share gains here going forward. Just talk about the effect of the mix of touring leads that has on the PA business.

Jeremy Hofmann: Yes. Thanks, Brad. It's Jeremy Hofmann. I'll take the first one and then hand it to Jeremy Wacksman for the second one. On the outperformance, I think, similar to prepared remarks, it's roughly 50% in our control that is driving the outside share gains and 50% relative tailwinds. On our side, it's a ton of little actions that add up with a funnel that's as big as ours and then we're getting benefit from touring as a prominent call to action. So the more touring that folks see on the sites and apps the more than it makes up more of our connections, the better off we are and are seeing our performance as a result of that. On the macro side, it is the fact that there's more first-time homebuyers as a mix of all homebuyers. So those are sort of the dynamics that we see at play. Like I said in the prepared remarks, I think we expect the macro to be less helpful but we are still projecting 1,100 basis points of outperformance at the midpoint. So that gives you a sense for the -- how we feel about the investments we're making and the ability for us to keep improving our funnel. So that's that one and then I'll hand it to Jeremy for the other.

Jeremy Wacksman: Yes. And Brad, on real-time touring, as Rich said, we've been over time, increasing tour exposure on Zillow nationally, while also building real-time touring in our enhanced markets. And so both of those things contribute to our part of the share gain that's in our control. And so on the national, that's just about removing friction in the funnel, getting more customers interested and aware of a tour and then when they want to book a tour, making that easier for them. And then in real-time touring specifically, that is now in our enhanced market that we announced is coming to more markets, that's really about creating that reservation like system for a buyer to remove entire steps in the funnel and be able to book a tour when they want to go see it more often. And we continue to improve that product as well, right? We're expanding our product offerings, agents can now expand their self-service to our management capabilities, rescheduling and viewing and then booking subsequent tours are all features we're adding. So these are all things that we're hearing feedback from customers and partners that has been on our product road map that we're excited to get into market. So we're improving the product while also scaling and rolling out the product to more customers and partners.

Operator: Our next question comes from Ron Josey with Citi.

Ronald Josey: Maybe I wanted to get in a little bit more on just expanding the number of markets. I think you talked about Charlotte and Durham, North Carolina. Talk about just the process of expanding that -- expanding newer markets, how we think about newer markets going forward? And then, Jeremy, I heard earlier, I think you said loan officer delivered 50% increase in productivity versus 4Q '22. Just any insights on that would be helpful.

Jeremy Wacksman: Yes. This is -- on the first one on enhanced markets, I mean nothing further than what we announced today which is we're adding 2 more markets to our enhanced markets and rolling those out now. So Charlotte and Durham. And the other thing I think Rich talked about was also bringing real-time touring to 4 markets beyond those. So while we're not bringing the entire enhanced market playbook to those next 4 markets, real time touring is coming first and we're doing that because as we've talked to you all about before, we want to expand these capabilities as we can. And as we are getting the playbook and the technology right for real-time touring, we're able to bring that to more partners and try more things versus the entire enhanced market playbook. So that's on the touring part. And then remind me your second question.

Richard Barton: Loan productivity.

Jeremy Wacksman: Yes. I mean it's a combination of a couple of things. One, it's about just continuing to help find higher-intent customers. As Rich talked about, we have so many mortgage shoppers on our site because 40% of all homebuyers want to start with that question but they're all in different stages. And so helping those folks as they raise their hand and start to ask questions with things like our personalized payment experience and our prequalification system, helping find the right customers and get the right customers to our loan officers is one big piece of it. And then just tools in the factory, we're releasing products and services so that our loan officers can more efficiently work with our customer, working in fewer systems, being able to do more digitally real-time while on the phone with the customer and not having to call them back. All those things help them be a better consultant, a better adviser and that leads to conversion gains but also just leads to productivity and efficiency gains.

Operator: Our next question comes from Mark Mahaney with Evercore ISI.

Mark Mahaney: Okay. Two questions, please. And I'm sorry if you already touched on these. But talk about the puts and takes to getting EBITDA margins. Once we get back into growth mode, hopefully, at some point, the macro and company-specific, hopefully, we get back into that sustained growth mode. Getting the EBITDA margins for the business as a whole back up to 30%, 30% to maybe 40%. So the biggest drivers there, what you can control, what you can't? And then, if I could just stick on the enhanced markets. And is there any evidence yet, maybe it's too soon but is there any evidence in that those enhanced markets that you're actually gaining share of transactions in those markets? Trying to figure out whether there's something we can extrapolate to the rest of the country, if you're successful in those markets.

Jeremy Hofmann: Yes, Mark, it's Jeremy Hofmann. I can answer your first one and probably take your second as well. On the first one on EBITDA margin drivers, yes, we feel good about our ability to get to those levels as we drive revenue and leverage our cost structure over time. I think we are making progress in a number of places and believe that we have a highly leverageable cost base. So as we drive revenue, we believe that will flow through. And you saw that in the performance this quarter, right? We outperformed substantially on revenue and it flowed through to EBITDA. So feel really good there about our ability to drive that over time. And then on the share gains question, I mentioned in my prepared remarks but I'll say it again here. We -- in Q2, we saw 50% year-over-year customer transaction share gains in Phoenix and Atlanta which are our 2 most mature enhanced markets. So it's obviously early days. There's a lot more markets to come from here. We're going to be methodical about rolling those out but it is a great proof point to say, hey, the strategy feels like it is working early days.

Operator: Our next question comes from Ryan McKeveny with Zelman & Associates.

Ryan McKeveny: A question on the residential outperformance versus the industry. I'll ask it a bit different way than Brad's question before. So if we isolate to the half of the outperformance that is kind of secular it's the benefits of the changes you've made or some of the newer initiatives, I know you don't speak to the exact breakdown between transactions on the buy side and the sell side. But can you talk to us about how that incremental penetration is trending between those categories buy side, sell side? And I guess is it happening in both areas or are one of the 2 aspects driving things more so than the other at this point in time?

Jeremy Wacksman: Yes. I think on buy side versus sell side, I mean we don't tease it out specifically, especially in the incremental which I think is what your question is about. But primarily most of our transactions to date are buy side, right? And so the share gains you're seeing, the relative outperformance you're seeing is all mostly coming from the buy side. And you heard that from Rich and Jeremy, that's one part friction removal and higher-quality customers getting to higher-quality partners and one part relative macro tailwinds with the buyer mix. That said, we are really excited about our ability to gain and see more share gains as we layer in seller solutions as well, right, both between our multiple selling offerings, experience for our customers, right, introducing them to an open door offer if they're interested or a Premier Agent partner if they want and Showcase, Listing Showcase which we just launched this quarter which Rich talked a bunch about as well. So we expect share gains and customer transactions to come from both over time, even though right now, we're seeing the benefits of our own efforts and macro efforts primarily on the buy side.

Ryan McKeveny: That's helpful. And for Jeremy Hofmann, congrats on the new role. And yes, I appreciate the extra color, especially around the cost structure. I guess, teasing it out a little, so the fixed cost run rate around kind of the right levels at this point. Is that to suggest that on the mortgage side of the business, kind of the infrastructure, the fixed costs associated with the mortgage lending operation is in a pretty good spot today to scale over time? Or could that remain a potential area of investment, whereas maybe some of the other segments see some more cost rationalization? Yes, just curious how that overall comment might tie directly to what's going on in the mortgage side of things.

Jeremy Hofmann: Yes. Ryan, it's a good question. On the fixed cost side, we do feel pretty good about the amount of infrastructure we have in place for mortgage. That's to say over the next couple of years. And of course, as it grows, we'll see. But based on the current plan, we feel pretty good about the fixed cost. On the variable side, we will grow costs there because that means we're hiring loan officers but that's obviously a good thing so long as we're manufacturing loans profitably. But on the fixed side, yes, we feel pretty good on the mortgage side. And then on the overall business, I'd say, we feel like the fixed cost investment we've made to date should serve us well for the current growth initiatives we have.

Operator: We now turn to Tom White with D.A. Davidson.

Thomas White: Maybe first one for Jeremy H. First off, congrats on the new role. The cost structure commentary, again, super helpful. On the variable expenses, you gave some examples of kind of recent efficiencies and progress. Could you maybe update us on what parts of Zillow's business today represent kind of maybe the biggest opportunity to drive further efficiencies and variable expenses? And then, maybe one for Rich on Zillow Closing Services being sunsetted. Just curious to hear you talk about maybe how you envision Zillow disrupting kind of the title and escrow space. Clearly, there would appear to be opportunities to make it a more transparent, better experience for customers but just be curious to see how you view Zillow participating there?

Jeremy Hofmann: Yes. So I'll take the first one. Good question. I think we're looking for efficiencies all over the business, our most mature businesses to the ones that are newest. I would say the biggest opportunities for us on the variable efficiencies are the newest products over time, right? So between mortgage, seller services, those should get leverage as we scale. But those are the places where we are most focused ensuring we're getting efficiency as those products come into life. And then I'll push to Rich on the second question.

Richard Barton: Only because you asked me directly, Tom. And I haven't spoken yet in the Q&A. So thank you for including me. Yes. So we sunsetted ZCS now because we don't think title and escrow is important as part of the transaction but because we built that thing for Zillow Offers. And for our iBuying business and it wasn't -- it just wasn't the right solution for us with what we have envisioned now. I think Jeremy Hofmann in his prepared remarks, talked a bit about how we think it's an important thing. And to watch this space. We are working on alternatives right now. So watch this space. Anything to add, Jeremy Wacksman?

Jeremy Wacksman: No.

Operator: Our next question comes from John Camber with Stephens.

John Campbell: Jeremy, I'd like echo as well, congrats on the promotion and the OpEx disclosures are very helpful. You guys have obviously torched your guidance in recent quarters. I'm thinking that you've probably set the stage here again. But the EBITDA, that's always going to hinge on obviously the top line. So I just maybe wanted to double-click on the Premier Agent guidance. mainly the industry forecast, it looks like you guys are baking in a down 15% to maybe down 20% year-over-year. It looks like the NAR is calling for down 7%. Fannie and MBA it looks like they averaged down 8%. So you guys are a little bit out there. I think that year-over-year decline also is implying that the market would drop a good bit sequentially off of what kind of already feels like trough levels at this stage. But my question here is, are you seeing something internally there that might signal softer trends from here? Or is that just a conservative approach against, I guess, the continuation of market uncertainty?

Jeremy Hofmann: Yes, it's a good question. We guided based on the best information that we have. And I think existing home sales an inventory just being as low as they are right now, puts us in a spot that we have to make the best information available that we have. We have internal economists that look at this every day. So really, given the best information that we have what we're most focused on, I would say, is ensuring that we continue to outperform the industry. So we're feeling quite good about the ability to outperform the last 4 quarters and we're guiding to outperform 1,100 basis points at midpoint to midpoint in PA versus the industry for Q3 as well.

Operator: We now turn to Brian Fitzgerald with Wells Fargo.

Brian Fitzgerald: Maybe a quick follow-up to Mark and Ron's questions on enhanced markets. Can you remind us what kind of things you're looking at or you're looking to see in locations to expand as an enhanced market? And then as your new products are aging in your first enhanced markets, are you seeing any changes in usage or agent behavior? Any dynamics to call out with respect to kind of enhanced market cohorts, if you will.

Jeremy Wacksman: Sure. Thanks, Brian. The things we're looking for in our enhanced markets are -- I mean, ultimately, the outputs or customer transaction share. And the indicators to that, I think we've talked to you all about before in the funnel are reducing the friction and so customer engagement and customer agent engagement and work with rates between those two. And so these things take a long time to mature, transactions take a long time but we watch those kind of mid-funnel indicators on both the customer side and the agent side. And as Jeremy Hofmann talked about, we're really pleased that we're seeing significant customer transaction share growth in our 2 oldest enhanced markets, even as we're early in seeing the benefits of the rollout of a bunch of those capabilities. So again, increased focus on partner quality and really aligning ourselves with partners that work more deeply with us across these product experiences, the rollout of real-time touring, the rollout of Zillow Home Loans and the rollout of seller solutions across all those things, we think is a recipe for success in the share growth you're seeing and that's why we have confidence is going to continue. And then in terms of what we think about going forward, that's why we've started to bring those to more markets even at the same time, while we're continuing to improve and mature the products themselves. We're not done building the things we're talking to you all about. We are building and deploying at the same time. And so, the capability improvements for both customers and our Premier Agent partners and our loan officers will continue, as you heard a bit from Rich and Jeremy about.

Operator: Our final question today comes from Dae K. Lee with JPMorgan.

Dae Lee: First one for Rich. A question on the [indiscernible] it sounds like you guys are exploring all of the options right now. But when you're looking at it from a near-term perspective, what we can achieve on those from a longer-term perspective? And then another question on the mass market. about market one with your 6% transaction and share target by any the need to be rolled out more broadly to all of your markets? Or are something that can be added in a smaller number of markets within [indiscernible]?

Richard Barton: Dae, we -- I think we got the second question but you're -- we're having trouble with your audio a little bit. We didn't quite get the first question. Can you repeat it?

Dae Lee: Hopefully, this timing is better. First one was on AI. It looks like you guys are exploring all options. But when you look at the opportunity from a near-term perspective, where are you most excited about? And thinking for a longer-term perspective.

Richard Barton: Yes. Okay, got it. Got it. All right. I'll take that and then maybe kick it to Jeremy Wacksman for the enhanced market. Can we go faster question. I mean, look, we see real opportunity. I mean, I think a lot of the excitement and imagination has been sparked at kind of the ultimate user interface opportunity. with generative AI and moving towards a conversational UI. And then how might that change the kind of historic physics of the Internet and that's fascinating to us and obviously, very important. I do think though that that is also going to be one of the longest lead time behavioral change ones. So we're exploring that aggressively and are quite interested in making sure we feel like we are really well situated from an audience brand and unique data perspective and leaning into it such that we don't somehow miss the boat and missed the memo on the change. So we feel good there but that's probably a longer lead time one. The stuff that we're seeing in the short term really is like engineer productivity, marketer productivity, a little slower will be legal and accounting. We're seeing -- we're already seeing some productivity gains for people on phones. So sales folks, partners, loan officers. It is early days but I think we'll probably see more progress more quickly on the engine room stuff than the exposed stuff. All right. So hopefully, that helps you. And then Jeremy Wacksman, maybe hit the wind-up faster but I do want to know that, too.

Jeremy Wacksman: How enhanced markets contribute to our ultimate share goals. And the way I think about it is it's a combination of national progress and local progress, right? And that's what you've seen from us the last couple of quarters. You've seen relative outperformance overall nationally which largely has not been from the benefits of the enhanced market and the growth pillars in enhanced markets. And then now you're starting to see the results and the progress we can get market by market. And so as we scale our enhanced market recipe to more markets, that will become a bigger contributor to our overall national footprint. But again, that doesn't mean we're not going to continue to keep working on improvements nationally and things that we don't need to take in and market. So, we really think about it as a combo of both. And that's why we're excited about the progress we've seen in the enhanced markets, the ability to bring some of these components to more markets and then as we mature the offerings and work with our partners, the share gains to continue.

Richard Barton: And it feels like a long runway of opportunity. It feels like durable opportunity to us that we are attacking methodically. We kind of did a major reset in organization last year in 2022. And now you're seeing us both develop and engineer and launch new stuff across the board in enhanced markets and nationally. So this is kind of our year of execution and we're posting really good relative results. It's a terrible macro, housing macro and we can get really bummed out about that. But we internally are quite excited by our relative performance and the share gains we're seeing in our enhanced markets. The 1,900 basis points of outperformance for our residential revenue line item purchased mortgage business up 73% year-over-year in a crap mortgage market. we keep rolling out this real-time touring this real-time touring feature set that is really quite a game changer. And even rentals, like we're seeing 28% year-over-year growth. So internally, we it's tough weather outside but internally, I, for one, am really pleased at what I'm seeing. And I'm quietly reservably guardedly optimistic and excited as I look into the future, yes. I was assuming that that was the big wrap.

Operator: This completes the time for questions. I'll now turn the call back over to Rich Barton for any closing remarks.

Richard Barton: All right. I just did my big closing remark. Great chatting. Great chatting with you all. Thanks for making the time. We look forward to chatting with you soon. Have a good day.

Operator: Ladies and gentlemen, today's call is now concluded. We'd like to thank you for your participation. You may now disconnect your lines.