zillow group investor presentation - first quarter 2017
TRANSCRIPT
First Quarter 2017
Investor Presentation
Legal disclosure
This presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 about Zillow Group’s future financial performance and results that involve risks and uncertainties. The Company’s actual results may differ materially from those anticipated in these forward-looking statements due to actions taken by Zillow Group as well as from risks and uncertainties beyond Zillow Group’s control. Factors that may contribute to such differences include, but are not limited to, those discussed under the heading “Risk Factors” in the Company’s most recent Annual Report on Form 10-K for the year ended December 31, 2016 filed with the Securities and Exchange Commission, or SEC, and in Zillow Group’s other filings with the SEC. These documents are available in the Investor Relations section of the Company’s website athttp://investors.zillowgroup.com. The forward-looking statements made in this presentation are based on assumptions as of February 7, 2017. Except as may be required by law, the Company does not intend, and undertakes no duty, to update this information to reflect future events.
This presentation includes certain non-GAAP financial measures, including Adjusted EBITDA. Adjusted EBITDA is a key metric used by our management and board of directors to measure operating performance and trends, and to prepare and approve our annual budget. You should not consider these metrics in isolation or as a substitute for analysis of our results as reported under GAAP. Reconciliation tables and other important information about the Company’s financial results are included in Appendix A to this presentation, in the Company’s Current Report on Form 8-K furnished to the SEC on February 7, 2017, and in the Company’s other filings with the SEC, all of which are available at http://investors.zillowgroup.com/sec.cfm.
Additional information, including financial statements, is available in Zillow Group’s annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K, which are available at http://investors.zillowgroup.com/financials.cfm#results, free of charge, and on the website of the Securities and Exchange Commission.
Zillow Group snapshot
$847M 171M 17M
68M 28M 2,800
revenue in 2016 monthly unique users1 Leads to Premier Agents2
1Seasonal Annual Peak, May 2016 2Annual Total, 2016
homes updated by users monthly rental visitors3 employees across 9 offices3
3As of December 31,20163Annual Average, 2016
Investment highlights
Leading brand identity and scale
Largest real estate network on the web1
Significant market opportunity and margin potential at scale
Strong suite of innovative technology and products
Well-positioned to monetize on the mobile opportunity
1comScore Media Metrix Real Estate Category Ranking by Unique Visitors, January 2017, US Data
Mission
Build the largest, most trusted and vibrant home-related marketplace in the world.
Real estate
Mortgages
Rentals
Home-related services
Addressable media market opportunities
Advertising services related to home purchases and sales of residential real estate – one of the largest sectors of the U.S. economy
Information marketplace for potential borrowers and suite of tools for mortgage professionals
Information marketplace for consumers and suite of tools for rental professionals
Hub for home improvement and design
Zillow Group supports all stages of home lifecycle: renting, buying, selling, financing and home improvement.
Strong portfolio of brands
Consumer empowerment through information transparency
living database
buyers & sellers
renters
homeowners
real estate agents
mortgage providers
property managers
home-related services
110M homes
68 million homes on Zillow have been updated by our community of users
8%
71%8%
12%
Zillow Group’s revenue streamsm
ark
etp
lace
dis
pla
y
contribution 2016 products/services description
Other real estate
Mortgages
Premier Agent
Premier Agent advertising
Mortgages
Other real estate
Suite of marketing and business technology solutions to help real estate agents grow their business
Advertising and mortgage software sold to mortgage professionals
Agent services, dotloop, StreetEasy, Naked Apartments, rentals and other offerings to endemic advertisers that are not traditional display advertising, including New Construction
Display advertising Mobile and web display advertising that enables advertisers to market on Zillow Group and Zillow Group partner sites and applications
Strategy: Virtuous cycle of product developmentStep 2
Step 1 Step 3
Step 4
Step 5
Step 6
Build great products that attract consumer audience
Reinvest in product and marketing to further benefit consumers and pros,
and differentiate from competition
Invite professionals to connect with consumer audience for free
Offer pros premium media services to increase engagement
Reinvest in product and marketing to further benefit consumers and pros, and differentiate from competition
Provide software tools to improve pros’ success at growing their business with us
Target market is enormous and fragmented
$6.9B
$6.2B
$1.9B
$Billions
real estate agents1
mortgage providers1
property managers1
home-related services2
$15B+U.S. opportunity
total spent on online and offline advertising
1Borrell Associates 2016; 2IBIS World 2014
$3.8B $4.8B
$85.0B
$7.2B$3.7B
$6.7B
Investment case valuation
United KingdomAustralia United States
enterprise value
agent commission
1Australian Bureau of Statistics (total AUS home sale transactions x average AUS sale price / average AUS real estate agent commission)2Land Registry Public Data (total UK home sale transactions x average UK sale price / average UK real estate agent commission)3NASDAQ IR Insight as of February 27, 2017 4Zillow Group internal estimate (total new and existing homes sold, National Association of REALTORS ® 2016 x average agent commissions, REAL Trends)
1 23
3
3
4
$12M $26M $30M $50M $88M $145M $200M$66M
$117M
$198M
$326M
$644M
$847M
$1.04B
2011 2012 2013 2014 2015 2016 2017E
19.0%2
Investing in growth and steady margin expansion
EBITDAmargin3
18.0% 21.6% 15.1% 15.3% 13.6%
adjusted EBITDA
revenue
12016 Adjusted EBITDA was $14.8 million, or 2% EBITDA margin, which includes the impact of a $130 million litigation settlement. Excluding the impact of the $130 million litigation settlement, 2016 Adjusted EBITDA would have been $144.8 million, or 17% EBITDA margin, as presented above.2Based on the midpoint of guidance issued on February 7, 20173See slide 33 for a reconciliation of Adjusted EBITDA to net income (loss), the most directly comparable financial measure calculated and presented in accordance with U.S. generally accepted accounting principles, and presentation of net income (loss) margin.
17.0%
2017 targeting >23% revenue growth2
66% CAGR since IPO >10x since 2011
2
21
Long-term strategic priorities
Increase audience size and consumer engagement
Grow the Premier Agent business
Continue to grow emerging marketplaces
Attract and retain the best talent in the industry
Increase audience size & consumer engagement
Zillow Group operates the largest online real estate network
Across web and mobile, Zillow Group’s consumer brands have nearly double the audience of the nearest competitor. 1
25M
50M
75M
100M
125M
150M
175M
200M
Monthly unique users
1comScore Media Metrix Real Estate Category Ranking by Unique Visitors, January 2017, US Data2 Seasonal Annual Peak, May 2016
171M2
Zillow Group is the leader in mobile
Mobile-exclusive user market share leader in real estate category1
More than 2/3 of Zillow’s usage occurs on a mobile device2
Monetizing upon the shift from desktop to mobile
Americans search for “Zillow” more than “real estate” on Google3
60 apps from Zillow Group brands across all major platforms
>550M homes viewed on Zillow mobile – that’s 205 homes/second2
1comScore Media Metrix Multi-Platform, January 2017, U.S.2Google Analytics, December 20163Google Trends, February 2017
Sunset1234 Elm StreetSeattle, WA 98122
Recent developments
Reported record quarterly Revenue of $227.6M for 4Q16
Leads to Zillow Group Premier Agent Advertisers for 4Q16 grew nearly 33% YOY to 3.9M
Launched Seller Boost to connect Premier Agents with prospective home-sellers from Zillow and Trulia
Announced partnerships with Facebook® that leverage Zillow Group's Precision Targeting to allow agents and multifamily building managers to promote for sale listings and rentals
Completed roll out of dynamic auction-based self-serve account interface to Premier Agents nationally
Grow Premier Agent business
Premier Agent products and services
Grow transaction count by increasing lead volumes to agents and brokers
Help agents and brokers convert leads effectively by providing them with tools and training to improve lead conversion
John Smith
Premier Agent funnel 2016
Aggregate transaction value
Total industry commissions
Zillow Group incremental commissions
5.5M sales of existing & 592K new homes sold in 20161
U.S. real estate agents, brokers and developers spent an estimated $6.9 billion on advertising in 20163
Zillow Group facilitated an estimated 5.0% share of sales5
$1.7T1
$85B2
$4.4B4
1US Census Bureau and National Association of REALTORS ® 2016; Zillow Group internal estimate2Zillow Group internal estimate (total new and existing homes sold, National Association of REALTORS ® 2016 x average agent commissions, REAL Trends)3Borrell Associates 20164Zillow Group internal estimate (2016 total industry commissions, REAL Trends x estimated 5.0% share of sales)5Zillow Group internal estimate (total transactions attributable to ZG / total industry transactions, National Association of REALTORS ® 2016)
Premier Agent funnel 2016
Monthly unique visitors
Leads to agents
ZG incremental commissions
Premier Agent revenue
~4.0% lead conversion rate4
5.0% of total industry commissions6
7x ROI for Premier Agents7
171M1
17M3
$4.4B5
$604M
1Zillow Group Seasonal Annual Peak, May 20162comScore Media Metrix Real Estate Category Ranking by Unique Visitors, January 2017, US Data3Zillow Group Annual Total, 20164Based on Zillow Group internal survey of Premier Agents
5Internal estimate (2016 total industry commissions, REAL Trends x estimated 5.0% share of sales)6Internal estimate (total transactions attributable to ZG / total industry transactions, National Association of REALTORS ® 2016)7Internal estimate of ZG incremental commissions / Annual Premier Agent revenue
Zillow Group consumer brands have nearly double the audience of its largest competitor2
Premier Agent commissions growing rapidly
2014 2015 2016
Premier Agent commissions facilitated by Zillow Group growing faster than total agent commissions
$2.3B2
Premier Agent commission
Industry commission
$3.2B2
$68B1
$80B1
+18%
+40%
1Zillow Group internal estimate (total new and existing homes sold, National Association of REALTORS ® x average agent commissions, REAL Trends)2Zillow Group internal estimate (total industry commissions, REAL Trends x estimated 5.0% share of sales)
$85B1
$4.4B2
+6%
+38%
Self-serve account interface
Account management tool that allows advertisers to independently control their budgets and impression buys
Dynamic pricing potential increases as Zillow Group’s advertiser base gains experience and finds more success over time
Positions Zillow Group well for medium- to long-term to capture more of the TAM as additional advertising spending moves online
Grow emerging marketplaces
2013 2014 2015 2016
Mortgages
TAM: $6.2B1
Mortgages revenue
$1.5T in U.S. residential mortgage originations occurred in 20153
~30M mortgage loan information requests submitted by consumers on Zillow Group platforms in 2016
Cost-per-lead model
Estimated ZG Share: <1%2
$21.8M
$28.2M
$44.3M
+57%
1Borrell Associates, 20162Zillow Group internal estimate (ZG Mortgage revenue / $6.2B)3Mortgage Bankers Association, January 2016
$71.1M
+61%
+29%
Rentals
TAM: $1.9B1
Largest rental network on the Web3
Averaging 28M monthly rental shoppers on Zillow Group apps and websites4
46.5M rental units in U.S.; 6.8% national vacancy rate5
Estimated ZG Share: <1%2
Approximately 71% of movers in U.S. in 2016 were renters6
Cumulative percent change in the number of households
Over a third of U.S. households are rentals and that group is growing.
1Borrell Associates, 20162Zillow Group internal estimate (Revenue associated with ZG’s rentals marketplace / $1.9B)3comScore Media Metrix Real Estate Category Ranking by Unique Visitors, July 2016, US Data4Annual Average 20165U.S. Census Bureau, October 20166U.S. Census Bureau, November 2016
New York
TAM: $2B1
No MLS in state of New York
Product advances on mobile and brand advertising for StreetEasy have driven traffic to record levels, and significant revenue growth
Acquisition of Naked Apartments - New York City’s largest rentals-only platform - extends leading presence in region
Estimated ZG Share: <1%2
Nearly 70% of households rent in NYC3
1Borrell Associates 2015; Zillow Group internal estimate (total spent on online and offline real estate advertising in NYC) 2Zillow Group internal estimate (ZG revenue derived from NYC / $2B) 3American Community Survey, NYU Furman Center, May 2016
1234 Elm Street
Attract and retain the best talent
Zillow Group leadership teamExtensive history building successful consumer internet companies
Rich BartonExecutive Chairman
Lloyd FrinkVice-Chairman
Spencer RascoffChief Executive Officer
Kathleen PhilipsChief Financial Officer
Amy BohutinskyChief Operating Officer
Greg SchwartzChief Business Officer
David BeitelChief Technology Officer
Stan HumphriesChief Analytics Officer
Years at ZG Background
11
11
11
6
11
9
11
11
Strong company culture focused on innovation
9 locations
94% of Zillow Group employees say they would recommend working for the company to a friend2
~2,800 employees1
Recognized as a ‘Best Place to Work’across nearly all locations
1As of December 31, 20162Zillow Group employee engagement survey, May 2016
Investment highlights
Leading brand identity and scale
Largest real estate network on the web1
Significant market opportunity and margin potential at scale
Strong suite of innovative technology and products
Well-positioned to monetize on the mobile opportunity
1comScore Media Metrix Real Estate Category Ranking by Unique Visitors, January 2017, US Data
Appendix AReconciliation of adjusted EBITDA to net income (loss) and calculation of net income (loss) margin
1For the year ended December 31, 2016, Adjusted EBITDA includes the impact of a $130.0 million litigation settlement and $28.9 million in related legal costs.2The reconciliation of Adjusted EBITDA to net loss and calculation for net income (loss) margin for the year ended December 31, 2017 represent forecasted amounts as of February 7, 2017.
1 2
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