Hello, and welcome to Zillow Group's Fourth Quarter and Fiscal Year 2025 Financial Results Call. [Operator Instructions] Also, as a reminder, this conference is being recorded today. If you have any objections, please disconnect at this time. Brad, you may begin.

Thank you. Good afternoon, and welcome to Zillow Group's quarterly earnings call. Joining me today to discuss our results are Zillow Group's CEO, Jeremy Wacksman; and CFO, Jeremy Hofmann. During today's 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. Please review the cautionary statement and additional information in our earnings release, which can be found on our Investor Relations website. This call is being broadcast on the Internet and is available on 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 and adjusted free cash flow, which we refer to as free cash flow. We encourage you to read our updated investor presentation, shareholder letter and earnings release, all of 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 open the call with remarks followed by live Q&A. And with that, I will now turn the call over to Jeremy Wacksman.

Good afternoon, everyone, and thank you for joining us. Q4 capped a year of strong execution for Zillow and continued progress on our long-term strategy to make moving easier. We delivered excellent results across the business and achieved all of our reported financial targets for full year 2025, including full year profitability, and we're carrying that momentum into 2026. This week marks 20 years since zillow.com launched with a simple idea, to give consumers access to clear information in a process that often lacked it. What started as a way to see what homes were worth evolved into the place to search and discover listings for sale and for rent and is now an integrated ecosystem spanning the entire experience of buying, selling, renting and financing. Zillow's evolution reflects 2 decades of relentless product innovation, grounded in consumer advocacy and strong industry partnerships. We're solving problems on behalf of consumers in a category unlike almost any other. Residential real estate is highly regulated, deeply local and organized around independent licensed professionals operating in hundreds of distinct markets. Transactions are high dollar, high stakes, highly personal and for most people, they happen only a handful of times over their entire lifetime. That combination makes real estate an especially difficult end vertical for general purpose AI to disrupt. Success requires trusted partners and systems that reliably support complex journeys that unfold over months, not moments. Zillow is built for that reality. We're not optimizing for leads alone. Our products facilitate the entire transaction. That means supporting everyone involved, buyers, sellers, agents, loan officers, renters, property managers. And enabling the essential workflows that move people from interest to action and from action to closing. What differentiates Zillow is the combination of assets we bring together at scale. We have a trusted brand and…

Thanks, Jeremy, and good afternoon, everyone. We delivered strong results in Q4 and are well positioned to continue delivering strong performance as we execute on our strategy in 2026 and beyond. Q4 2025 revenue was up 18% year-over-year to $654 million, near the top end of our outlook range. Our revenue performance, combined with effective cost management, delivered EBITDA of $149 million, near the midpoint of our outlook range. Q4 EBITDA margin was 23%, 260 basis points higher than a year ago. Our full year 2025 EBITDA grew 25% year-over-year as we continue to scale revenue and control costs. Importantly, as a result of these efforts, we reported positive GAAP net income in Q4 and for full year 2025. For Sale revenue grew 11% year-over-year in Q4 to $475 million, approximately 800 basis points above the 3% residential real estate industry growth as reported by NAR. We estimate purchase mortgage origination volume for the industry was roughly flat year-over-year in Q4, which is noteworthy given the majority of buyers transacting with Zillow purchase their home with a mortgage. Within the For Sale revenue category, residential revenue was up -- $418 million, up 8% year-over-year and in line with our growth outlook. Residential revenue growth was driven primarily by our agent and software offerings and our new construction marketplace. Agent offerings include Zillow Preferred, market-based pricing and Zillow Showcase. Software offerings primarily include Follow Up Boss, dotloop and ShowingTime. Within the For Sale revenue category, mortgages revenue increased 39% year-over-year in Q4 to $57 million. This was better than our outlook for approximately 20% year-over-year growth as we saw better-than-expected conversion rates from customers in our mortgage funnel. Purchase loan origination volume accelerated to 67% year-over-year growth in Q4, which was the main driver of our mortgages revenue growth. It is…

[Operator Instructions] Our first question will come from Nick Jones with BNP Paribas Security Corp.

Great. I have two, one on Rentals and one on AI. Can you elaborate a little bit on rental trends? You're gaining share in the long tail, you're gaining share with multifamily, driving 30% annual growth. So I mean what are you kind of hearing from the multifamily side as far as product market fit goes and how much more opportunity or wood to chop do you see there kind of maybe this year and beyond? That's the first question. And the second question, you had a great slide on your positioning for vertically-integrated AI. You're partnered with OpenAI today. Can you talk about how you see kind of a vertical AI future and Zillow's place in it, to the extent you can kind of share what you're excited about?

Yes. Thanks, Nick. Maybe I'll start and Jeremy add on anything you want. I think on Rentals, I mean, the growth you're seeing in the business, it's really just our strategy working, honestly. It's the -- as we talked about, we have a pretty unique strategy in Rentals in that we're the marketplace that's focused on trying to organize all of the types of supply, not just the big apartment communities, but the long-tail single-family listings. And as Jeremy talked about, more than -- or 2.5 million on average in Q4 listings, we think that's the most in the category. That's what drives the audience, right? I mean the 31 million unique visitors per Comscore, that lead is widening because we're solving their problem. They want to find as much inventory as possible in one place, and they want a digital transaction, right? Having portable applications, being able to sign custom leases, be able to make rent payments, report credit -- report rent to build credit, all those things. Those are tools the renters want. And then once you satisfy and delight the demand, that's when the advertisers really want to get access to that demand. So when you have this high-quality audience, increasingly multifamily advertisers want to bring more of their portfolios online. That's why you see the building growth and the revenue growth accelerate. And as Jeremy talked about, the ROI is really the signal there. we consistently hear we're the highest ROI advertising spend of all their sources of advertising spend, and they spend in a bunch of places. So that's really what's driving the revenue growth you've seen, you saw in Q4. It's why we expect revenue growth to continue, as Jeremy talked about. We feel very confident in our ability to get to that $1…

Our next question will come from Brad Erickson with RBC Capital Markets.

I have two. First, I think we all know kind of Zillow's stance on listing distribution requirements. But just curious how you think about maybe any effects from some of this recent consolidation going on in the industry and private listing networks and all that. Does that represent any kind of risk to the business from your perspective? And then I have a follow-up.

Thanks, Brad. I mean the short answer is no. We don't really expect any risk or impact to our business. Despite all the noise and questions, we are talking about a pretty small number of listings overall, I think, 1% or less. And the reason it's small is the vast majority of sellers and agents don't want that, right? Agents don't want to limit exposure and have a home take longer to sell or not maximize price, and they especially don't want to do that if to do so, they'd have to trade off access to Zillow's broad audience, right? What consumers want is more transparency. They want to sell their homes fast. They want to sell their homes for the most money, and they want to market them broadly. And we hear that from both sellers and agents. And that's why I think you've historically seen these types of approaches be a very small share of listings. There are a very small share of cases where things don't sell broadly on market, and we expect that to continue.

Got it. And then just a follow-up on the RESPA case, recognize you probably can't comment too much on the case itself. But just curious if that's creating any sort of adverse effects or friction on the ground for you as you go to market with ZHL or even just the enhanced market strategy overall?

Sure. Yes. I mean on that, no, it's not, right? Our long-term strategy here is based on consumer choice and building this integrated end-to-end transaction and helping buyers understand [ what ] they can afford when they're on Zillow, providing them a convenient application, giving them great loan officers to work with and then helping agents see that Zillow Home Loans is a great option for them and earning the agent's trust with Zillow Home Loans so that they want to use it for some of their customers, that's really the strategy here. And you're seeing the results of that play out in the mortgage growth, I mean really strong mortgage growth in Q4, 37% in 2025, and we're expecting continued strong mortgage growth into 2026. And the double-digit adoption rate you're seeing of Zillow Home Loans across our enhanced markets, I think, is a great barometer for continuing to methodically grow the ZHL experience and expose it to more agents and more customers.

Our next question will come from Ron Josey with Citi.

Maybe a quick follow-up on Brad's just now with all the legal challenges that are out there, maybe Jeremy, talk to us about just is there any change in approach to Zillow's business strategy that has to happen because of these challenges or anything that you feel needs to change just because of the multiple suits out there? And then maybe for Jeremy Hofmann, just a modeling question. There's lots of moving parts in terms of newer products ramping like Rentals and ZSL and mortgage is doing better. And then we have newer products launching like the rollout of Pro in the back half of the year. Just talk to us about the framework you're using as we build out revenue throughout '26. Obviously, we have 1Q guidance and we have EBITDA, but would love your thoughts on how you frame sort of the contributions of these newer products and enhanced markets throughout 2026.

Yes. Maybe I'll take the first one. I don't know if -- you can take the second. I mean the answer to your first one is pretty short. No, we don't expect any change. We're not making a meaningful change to our business that results in any issues, and we're really confident in our positions and approach. We don't expect the issues to have a material impact on our long-term strategy or our financial position.

Yes. And then on guidance from a revenue perspective, at the full company level, we're expecting mid-teens revenue growth. On Rentals, we're expecting 30% revenue growth for 2026. And that's on the face of a 39% revenue growth in 2025 and 27% in 2024. So continuing to see great -- or expecting to see great growth there. With respect to contributions on the For Sale front, it's going to be more of the same, which will be some combination of enhanced markets continuing to grow, Zillow Showcase continuing to roll out, Follow Up Boss getting in the hands of more folks, Zillow Home Loans adoption continuing to grow nicely alongside the enhanced market expansion and then our new construction business continues to grow nicely. That's all coupled with a Rentals business that we think is really well positioned, has executed well in the last few years, and we expect it to continue to be the case in 2026.

Our next question will come from John Colantuoni with Jefferies.

Okay. Great. I wanted to start with Zillow Pro, update us on where that rollout stands and any early learnings into how it's impacting lead conversion and agent adoption of your CRM tools. And second, on guidance, you've come in closer to the high end of your guidance in the past couple of quarters, which compares to more consistently delivering upside to the high end in recent years. Has your approach to guidance transitioned so you're looking to sort of get closer to the high end rather than beat the high end?

Maybe I'll take the first, and Jeremy can take the second. On Pro, we're really excited about Zillow Pro, it's in beta test now and we're planning for nationwide expansion kind of second half of the year. And a reminder, Pro is really a membership bundle, it's an offering to help the agents -- all agents, not just current Zillow customers, run their whole business and help them convert all of their customers, not just Zillow customers. And that includes, you mentioned our CRM, Follow Up Boss, that includes premium agent profiles with curated media, it includes branding and includes expanding the My Agent feature, which is something of particular interest for agents, helping the rest of their client database, get insights from Zillow about what those clients are doing. It includes all of our AI-powered follow-up tools, and it becomes a pathway to Zillow Preferred, right? So as more agents are on Zillow Pro, that becomes a place where they can raise their hands and try and become eligible for Zillow Preferred. And to your question on our CRM, because Follow Up Boss is a key part of the bundle, we expect as more folks eventually sign up for Pro, it will help Follow Up Boss growth and adoption. But I think equally exciting will be for existing Follow Up Boss customers, it's going to help increase the usage and the efficacy of Follow Up Boss because we're going to be bringing more AI and more insights to the part of their business that is not Zillow customers. And so many of them have great databases, great clients, great lead sources that are off Zillow and helping supercharge that and improve conversion. To your question, we expect that to help them get more efficient and improve both customer service and ultimately, conversion of more transactions. So again, we're really excited about it. I think it's a fantastic next step in helping really grow the SAM of our For Sale business. But I will say it's early, and that's why we're in beta, and that's why we were really clear on timing that we're going to learn a bunch with our beta customers in the first half of this year, and we're going to march onward in the second half.

Yes. And then, John, on your question around guidance and what we're trying to achieve there. I think the answer is we've always tried to be as close to the pin as possible. We've gotten better at forecasting conversion, in particular, in PA. So that's allowed us to get closer these last few quarters than maybe the magnitude of beats you've seen previously, but always trying to get as close as possible. And then with respect to Q4. The big difference on the cost structure was really around legal expenses and that was higher than we anticipated coming into the quarter and was ultimately 180 basis points of margin drag for Q4. Obviously, we laid out what we think for 2026 from a legal cost perspective as well, and it will be a drag, but it's not stopping us from expanding margins, which we expect to do throughout 2026.

Our next question will come from Mark Mahaney with Evercore.

Maybe two questions. You talked about getting to 75% of connections coming through enhanced markets. What are the biggest obstacles to go in from 44% to 75%? And when you talked about that as a medium-term goal, medium like 2 to 3 years? Is that how we should think about it? And then on Zillow Pro and that contribution. So we should start to see an impact of that in the second half of the year? And where in the revenue streams would that show up?

Yes. Thanks for the questions, Mark. Maybe I'll take the first, and Jeremy, you can take the second. On enhanced markets and the connection share, we haven't put a time frame on 75%. I mean you should expect the rollout will continue to look similar, right? It's both more geographies and then depth in those existing geographies. We did that this year. And maybe think about pacing to be a similar clip of growth to the last few years. So it's on the horizon. And again, remember, 75% was just kind of a mile marker. We'd like to get it to as many connections as possible and so once we got from 20% to 44% last year, we'll keep growing, we're going to find ways to bring that experience to as many customers as possible, just as we get over half and into -- more into the future years, it's going to be broader and deeper in even more places. And that's to your question on what the governor is, it's operational lift and scale and it's training partner teams and making sure our partner agents have the right capacity and quality and then ultimately, Zillow Home Loans officers. So you have to build all those things to go grow. We're really proud of the work we did in 2025, more than doubling that. And you're seeing the incremental revenue that's coming from this strategy coming to life even against the flattish housing market, and that's why we're so confident in the $1 billion-plus incremental revenue in our For Sale business just from getting this experience in more people's hands over time. So no explicit time frame, but we feel great, and we're well on our way.

Yes. And then, Mark, with respect to how to think about it for 2026, I would not expect it to be meaningful even in the second half of 2026 as we are rolling it out more nationwide. I think 2026 is really a year for learning, adoption and figuring out where the key value props are. So I would think about it that way for 2026, not a financial contributor but one where we really learn a ton. It will sit within residential as the revenue comes in. And today, we're offering it as a monthly subscription that's priced for adoption.

Our next question comes from Nikhil Devnani with Bernstein.

I wanted to ask about margins. So on the last earnings call, you had kind of anchored to the last couple of years, which implied roughly 200 basis points or so of opportunity in margin expansion for 2026. So I just wanted to clarify, is that still how you're thinking about margin expansion this year? And then considering the 100 basis points of headwind you're calling out from legal, does that mean that your underlying margin expansion is actually getting better than what you've seen in the past couple of years as the business scales and you get a stronger handle on the various cost buckets you've already talked about?

Yes, sure. It's a really good question. First, I'd say consensus feels right for the year on EBITDA, and that implies around 200 basis points of margin expansion. We do think the underlying margin profile is better than that, and there's a legal drag associated with the cost there of 100 basis points. So you're right to point that out that the cost structure and the leverage on the business model is getting better and then we have those legal costs to contend with. As you think about the shape of the year, the first half of the year, we're going to continue to hold fixed costs flat with inflation. We'll continue to invest in variable across rental sales, the Redfin syndication agreement and ZHL loan officers. And then we're expecting variable costs to run closer to revenue growth during the second half of the year as the sales forces mature and we lap the comps on the Redfin syndication agreement. Legal will be a drag. It's a 200 basis points drag in Q1. It's a 100 basis point drag for the year. But overall, we still expect to expand margins similar to what we've done in 2024 and 2025. And I'd be remiss if I didn't say stock-based comp will be down, we expect to be down more than 10% again, which should drive further expansion in net income. So I think it sets us up for another good year of execution. We're expecting strong revenue growth, we expect EBITDA will grow faster than revenue, and we're expecting net income will grow even faster than both revenue and EBITDA.

Our next question will come from Trevor Young with Barclays.

Great. On mortgages, years ago, when you had disclosed segment EBITDA, I think it was approaching EBITDA breakeven when the business was around about $250 million in revenue, so a bit bigger than where we're at today. Is mortgages EBITDA profitable today? And how should we think about margin here in the recovery scenario as we bridge to that mid-cycle 45% EBITDA margin bogey? And then second question, just to clarify the cadence of EBITDA of this upcoming year. It sounds like legal expenses were kind of outsized here in 4Q, embedding a bit more for the full year, 2 points hit in 1Q, 1 point hit for the full year. Should we lap that by 4Q such that we'll see that uptick in margin really hitting in 4Q?

Yes. Thanks, Trevor. I'll take those. On mortgages, we don't break it out, but we love the long-term opportunity in mortgage for growth and profits. We look at a landscape there that purchase mortgage is still very, very fragmented. And we think that in a more commoditized product like mortgage, brand and distribution tend to do quite well. And we have a great brand and we have great distribution as well. So we love the opportunity there, and we're seeing it play out in the results, right? Mortgages grew 39% in Q4. Zillow Home Loans purchase originations grew 67%, and we're expecting the category to grow 40% in Q1 as well. So I feel quite good about all that. And hopefully, that helps you give -- helps give some context on where we're headed on the mortgage front.

Our next question will come from Dae Lee with JPMorgan.

I have a question on macro. So could you elaborate on the improvements you're seeing in affordability versus your expectations for housing markets to bounce along the bottom. Are you seeing anything that might be curbing some of the optimism warranted by the affordability improvement? And separately, I guess, related to the -- are any of your investment plans meaningfully sensitive to the housing market growth? Or should we expect your expense framework to be less correlated to the housing conditions?

Yes, I'll take that. So on the macro front, we planned the cost structure, we plan the revenue for housing to not do much this year. We are starting to see affordability get better, but not necessarily seeing it play out in homes being sold faster or anything like that. We're just pointing out the fact that housing or housing expenses as a percent of total income is down to 32% versus at its high in 2023, it was 38%. So we think that's a good sign that should drive a broader recovery over time. We're just not necessarily planning for it in 2026. And just remind me, your second question was what exactly?

If your investment plans are meaningfully sensitive to the housing market growth? Or if your expenses framework should be less correlated to that?

I would think about expense framework as consistent regardless of the macro environment. I think macro is a real positive for us when it comes back, but our expense framework is going to be consistent regardless of what housing does.

Our next question will come from Lloyd Walmsley with Mizuho.

Great. Two, if I may. First, just can you give us a sense of if you're planning to step up enforcement of Zillow listing access standards to just sort of ensure that broad distribution of listings? And then secondly, when we look at the sort of percent of leads coming from enhanced markets, it was a big sequential step-up relative to what you've been seeing this quarter. So can you just help us understand like, I think you recognize a lot of the revenue at the time of the lead. But like is there a leading indicator component of that at all? And like are underlying lead volumes also accelerating as enhanced market scale up? Anything you could say there would be great.

Yes. Maybe I'll take the first one, and then Jeremy can take the second. Thanks, Lloyd. I mean on the listing access standards, there's nothing to step up. We're enforcing them now. Remember, this is really about education. What we find is when we educate an agent that might have been miseducated that there is a violation that would result in a listing not being broadly marketed and not being on Zillow, most folks don't want to do that. And so we end up helping them understand, hey, there's a trade-off to make there and they want their listing on Zillow. So that's been working well. It's why you continue to see this be a pretty small thing because most sellers and most agents who are helping sellers want broadest possible exposure for listing to sell their home fastest and for more money.

Yes. And then on the enhanced markets question, what I would remember or just remind you is the Zillow Home Loans revenue that tends to come alongside the enhanced markets expansion. And when we start to see more mortgages come through, that lags. So I wouldn't think about it as 1:1 as we increase the amount of connections and enhanced markets, it will go 1:1 with the overall for-sale business.

Our last question will come from Dan Kurnos with Benchmark Company.

Yes, great. Can we just touch on the opportunity to grow marketing in '26 that you guys called out? Obviously, you've got competitors still spending pretty aggressively, although traffic seems to be accruing to you rather than them. We saw Redfin advertise during the Super Bowl. And so just curious what channels you guys are looking to press and why you think this year is a particularly good year to step up on the marketing spend?

Yes, Dan, I can take that. I mean I think for what we're doing, which is a modest increase, it's more about being opportunistic, which is what Jeremy has always said, we'll be opportunistic, we see a little bit more room in enhanced markets and in Rentals. And so you'll see a slight increase, which I think is a little different than what maybe some competitors are doing with volumes of spend and where they're spending. And as you pointed out, I think the reason we can do that is actually implied in your question, as the category leader with such strong not just brand awareness, but brand preference, we tend to benefit when others in the category advertise. We saw that even this weekend and we'll continue to find the right places to teach people what we do, help make them aware of our new things, things like enhanced markets, to try and deepen engagement and earn the right with them to offer them more services. That's really what our focus is in our advertising spend and you'll see us do that this year. So no change in strategy in terms of how we think about advertising. Jeremy Hofmann has always talked about it as we want to be opportunistic with our parts of the business. And that's what we're doing this year is finding the right places to really pour a little bit more gas on because we think it really helps the business.

Does that imply channel shift at all?

No, nothing specific on channel shift. We've been really great, really efficient advertisers at driving both top, mid and bottom funnel. I mean, our marketing team does a great job of kind of branded response where we're building brand and reinforcing brand preference while also driving great performance into the funnel and into our businesses, and the team will continue to do that.

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

Thank you all for joining us today. We really appreciate your continued support. We are excited for what's ahead and look forward to speaking with you all next quarter.

Thank you for joining Zillow Group's Fourth Quarter and Full Year Results Call. This concludes today's conference call, and you may now disconnect.