Good day, welcome to the Redfin acquisition of RentPath conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Chris Nielsen, the CFO. Please go ahead. Good morning, and welcome to the call. Joining me on the call is Glenn Kelman, our CEO. Before we start, note that some of our statements on today's call are forward-looking. We believe our assumptions and expectations related to these forward-looking statements are reasonable, but our actual results may turn out to be materially different. Please read and consider the forward-looking statements section from our press release issued this morning, along with the risk factors in our SEC filings, together with the content of today's call. Any forward-looking statements are based on our assumptions today, and we don't undertake to update these statements in light of new information or future events. With that, let me turn the call over to Glenn. Hi, everyone. As you probably surmised, Redfin announced this morning that we've signed an agreement to acquire the Atlanta-based owner of Apartment Guide, redfin.com, and rentals.com for $608 million in cash. We'll need the Federal Trade Commission and a bankruptcy court to approve the deal. When approved, this acquisition will bring together a leading site for buying a home with a leading site for renting a home, giving anyone trying to move a complete view of her options. We'll dig into the thinking behind this acquisition to customers, investors, and the public. First, we have to speak our hearts to the people in this deal who matter most, RentPath employees, the believers, the fighters, the hell-and-backers, the never-say-die-ers. We're excited to meet you. We love your business. We're mission-driven, so we know what it's like to believe in a vision through thick and thin. We have a culture of dissent, so we want to hear all your ideas, especially the controversial ones. We believe that everyone sweeps the floors, so we'll approach your business with humility. We've got a lot of love to give. Now let's talk about how we win. Over time, RentPath can bolster Redfin's traffic by drawing a younger audience of renters to redfin.com, but also by increasing our stature among home buyers and renters as one of North America's premier real estate sites. Redfin's brand will get bigger. We'll show up higher for Internet searches on Phoenix housing or St. Louis real estate. Redfin's 2020 traffic growth has already transformed our prospects, giving us a powerful channel for meeting customers and marketing listings directly to buyers. Together with RentPath, which grew traffic by more than 25% in 2020, Redfin will aim to compete with the largest portals on every front for every visitor. It'll be a wild battle. Redfin will also increase RentPath's reach, creating more rental opportunities for the rental properties promoted on RentPath's sites. We estimate that 10 million of Redfin's 40-plus million online monthly visitors may also be interested in renting a home. RentPath on its own got 13 million visitors in December 2020. RentPath's rental listings should show up on redfin.com in late 2022. We'd like to spend a couple of minutes talking about our expectations for how Redfin and RentPath will work together if and when the deal closes. Here are five key points. Number one, the first order of business will be more apartment buildings on RentPath. As we welcome RentPath to the Redfin team, RentPath's first priority is delivering the best value to its customers, more property managers list properties on RentPath sites. Number two, no financial projections, at least until May. We'll welcome customers who pay RentPath a fee to list their communities on RentPath sites. We'll also pilot a program for property managers to pay only for signed leases. No other site should match our reach and value. Since signing up new customers, not just revenue, is our first priority, we won't be able to forecast RentPath's financial performance until the two companies can work out our sales strategy a few months after the merger closes. Number three, we aren't going to be rental agents, at least not in 2021. Of course, our long-term project isn't just to get bigger, but to make real estate better for the people buying, selling, and now renting homes. With more than a third of North American adults renting rather than owning a home, showing rentals is an important expansion of Redfin's mission. At least for now, we aren't going to hire real estate agents to represent renters. It's common for real estate agents to represent renters in only a few North American cities, and we still have thousands of agents to hire for buying and selling homes in 2021. Number four, selling to businesses, not just serving consumers, will be new to Redfin. Even if we don't employ rental agents, we still need a rental sales force. What will be new for Redfin is having to serve both consumers on one side of the marketplace and businesses on the other. The local Multiple Listing Services used by real estate brokerages to share listings have been the main source of listings on redfin.com. We haven't had to ask brokerages for their listings, but to get most rental listings, we need RentPath's 250-person sales team to sign up thousands of new apartment buildings, one building at a time. We're excited to see what that team can do when given room to run. Number five, our mission is the same, to redefine real estate in consumers' favor. This doesn't change our mission to redefine real estate in consumers' favor. What rental consumers want first is to see all the properties for rent. Over time, we'll figure out how we can make the whole process of renting a home better, not just the initial search. This deal is just the beginning of a new, exciting journey. The trust we have with consumers will guide our every step. That's it. We're ready for your questions. Thank you. Ladies and gentlemen, if you would like to ask a question, please signal by pressing star one on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Once again, that is star one to ask a question. We'll take our first question from Edward Yruma with KeyBanc Capital Markets. Please go. Hey, good morning, guys. Thanks for taking the question. Congratulations on the acquisition. I guess first, I think this was back from 2019, but RentPath at the time was doing about $227 million in revenue, and I think about $47 million or $50 million of EBITDA. I know you're not giving any kind of specific accretion guidance today, but just can you give an update on how the business performed during 2020? As a follow-up, I know this has been in bankruptcy for some period of time, and I know that CoStar had a failed acquisition. I guess, how comfortable are you that you can get FTC approval? Just as a clarifying point, are you assuming any kind of liabilities in the business, or it's strictly just the cash proceeds? Thank you. Chris, do you want me to answer that first, or do you want me to take it on? Yeah, sorry. This is Chris. I'll go ahead and answer. With regard to 2020, it was a challenging year for the business. We'll provide more details on that as we get through more pieces of the transaction. Let me go to the last part of the question also with regard to liability. Any pre-petition liabilities for the company, any funds that were owed to vendors or suppliers, will not come over as part of the transaction. Redfin will be picking up some liabilities that have accrued since the time of the bankruptcy, just in the normal course of the operations of the business. As far as the FTC approval, we just think we're in a different position than CoStar, which operates the number one rental site, apartments.com. We're new to the rentals business, and we think we represent a new alternative for property management companies to get better value. We would expect the government to welcome that. Great. Thank you. We will now take our next question from Stephen Sheldon with William Blair. Please go ahead. Hi, thanks for taking my questions. RentPath is certainly an asset that has had its issues. Certainly get that the combined traffic bases should drive better monetization opportunities on both sides, but what else do you think it will take to get RentPath back to a stronger growth trajectory? Sure. One major reason we're excited about this company is that it has been growing traffic at a very high rate in 2020. We believe that the uncertainty over its future was the reason that RentPath struggled to sign up new customers in 2020. The fact that you have fewer customers needing more renters from RentPath than ever suggests to us that we have a great sales opportunity now that salespeople can go out and explain that this company is owned by Redfin, which has the opportunity to nearly double the audience for RentPath's customers. We expect to be signing up customers at a very good clip. Got it. I guess as a follow-up, if you think out over the next few years, how far down the rental value chain would you plan to go? Sounds like you're not planning to add rental agents near term, maybe longer term. Do you also see opportunities to get into areas like digital leasing execution to not only find a lead on the rental side, but also provide the workflow tools to convert prospective tenants? We're excited about that opportunity, but it's hard to comment on it in detail because we are just now combining the two companies. The deal hasn't closed. It hasn't been approved. Of course, we're going to look for ways to deliver more value to property management companies, but especially the consumer, because that's just at the heart of what Redfin is. Got it. Thank you. We will now take our next question from Ygal Arounian with Wedbush Securities. Please go. Thanks. Good morning, guys. You mentioned not taking financial projections until at least May, and then piloting a program where property managers only get paid based on leases. Can you talk a little bit more about what the model has been? Has that been part of what the challenge has been over there at RentPath? Bigger picture, I think for Redfin, a lot of your strategy is always kind of centered around the fact that you're a brokerage, and all the various pieces tied together to that. This one feels similar, but also different in some ways. Can you just talk about how this fits into that strategy? Thanks. Sure. Let me address the second question first. The reason that Redfin's had such a competitive advantage in building our brokerage and delivering value to consumers is because the world is beating a path to our door through redfin.com. Any investment we can make to drive traffic to redfin.com is going to let us serve consumers better. It lowers our customer acquisition costs, but it also helps us sell properties. What we found is that adding rentals to our website will actually not only increase the audience of renters on our site, but also increase the audience of home buyers on our site. We rank very highly for individual properties on redfin.com when you search Google for an address. When you search Google for Phoenix real estate, we don't rank as highly because Google recognizes the limits of our expertise. We are narrow in our expertise, not a broad real estate destination. If we are going to take on realtor.com, zillow.com, other big real estate websites, we need to offer rentals and for sale listings. Both of those sites do, and we don't. I think we're going to build relationships with consumers earlier in their lives, because you start out in life looking for an apartment before you look for a house. We're going to rank higher in searches on broad real estate terms just because we're going to answer more real estate questions. As for the pricing model and how we approach property management companies, we've always just been a value-driven company, where we want to give whoever our customer is a better deal. We think the reason that the RentPath sales force has had trouble signing up customers is pretty simple. When a competitor tries to buy you, and the competitor's sales folks are going around saying that you don't need to sign a deal with RentPath because you're going to get all those opportunities to meet renters for free, when this CoStar deal closes, well, many customers are gonna pull back. At the same time, RentPath was increasing traffic. If you have more leads to sell and you have fewer property management customers to get those leads, then you're in a situation where already you're giving those customers a good deal, and we think clarifying the future of the company is gonna open things really wide for new customers to come to us. We also recognize that we want to deliver value to customers by offering a pay-per-leads model. When you are the number one player in the space, you can force customers to ask for a subscription. When you're a challenger, you want to price the product the way that they want to buy it. Right now, property management companies really want pay-per-lease pricing as an option. It's not gonna be the only option, but it needs to be one way that we take share so that we can build this platform and get more buildings on the site, which drives traffic, which in turn drives more sales. Okay, thanks. Really helpful. Maybe one follow-up on the first part of that, and how you're planning on integrating. It sounds like you're gonna list all the apartments on redfin.com, but also keep the various RentPath sites as well. Can you just talk to how you plan to integrate those? Sure. It'll take us until 2022 to get the RentPath listings on redfin.com, but that'll benefit both businesses. The industrial logic is really strong for RentPath property management customers. It nearly doubles the audience because we already know that about one in five redfin.com visitors is interested in rentals and is looking at rentals on other websites. We also recognize that, when we add rentals to redfin.com, it'll just increase our stature as a broad real estate destination. We plan to continue running RentPath websites. These are great websites. There's three principal sites that are getting a significant amount of traffic. They have great domain authority. Incumbency matters more than ever on the Internet. They've just been in the rental space for decades. Those are gonna be valuable assets for as far out as the eye can see. Thanks, Glenn. Thank you. take the next question from John Campbell with Stephens Inc. Please go ahead. Hey, guys. Good morning. Very early morning here on the West Coast, and congrats on a great deal. Yeah You guys got, obviously, you've got CoStar charging for listings. You've got Zillow, who's made some kind of big terms or pricing changes with the rental business. My question is, Glenn, you kind of hit on these, but just want to make sure I'm clear here. On the first one, did those things change, or mainly just the Zillow pivot, did that influence your desire to own an asset on the rental side? Then B, Glenn, you also talked about focus point number one being bringing more apartment listings to RentPath. It's obviously now more expensive for property owners and managers to advertise. Just did those changes of late, particularly again, Zillow, did that open up the kind of pricing opportunity, and that's really where you're gonna drive the listings to the site? No, nothing Zillow did recently influenced our interest in RentPath. We just saw a set of websites that were growing traffic very fast, where those sites were under-monetized, and we saw an opportunity to broaden our mission. It's not lost on us that one in three Americans can't afford to buy a home, and we talk about our mission of redefining real estate for consumers, but really, we've only been able to redefine that for 2/3 of consumers. We just need to do the whole freaking thing. Certainly, we see an opportunity to be the value leader in the space. We want all the property management customers who are listening to this call or who are reading our blog posts to embrace this idea of competition with open arms, because we know that we want to increase the number of properties on RentPath sites. That's the first order of business. It's the first thing we talked about. That's why we're just going to be aggressive about different types of pricing models to make sure that we give our customers the value that they want. Yeah, makes sense. Then Chris, maybe one for you. Obviously, you have to close the deal first, but just considering the $600 million or so deal price, you've got close enough cash on hand. You probably maybe use a little bit of a revolver. As we get a little bit down the road, does a deal of this size influence your appetite for iBuying and putting more of this strain on the balance sheet as far as just building that out? Any kind of thoughts as we get a little bit further down the road? We do have sufficient cash and near-cash instruments to close the transaction. We feel very comfortable with that, but we also feel good about the cash position that we have to operate the business that we are today. We don't believe that that creates any complications or constraints on our ability to grow. Okay, thank you. We will now take the next question from Jack Micenko with SIG. Please go ahead. Hi, good morning. I wanted to ask a couple of strategic questions beyond the first maybe year or so. Zillow has got a product now that is really geared towards helping the mom-and-pop landlord or maybe the single-family owner or small handful of units who take it out of their hands, background check, et cetera. Is that something you see as an option here, or is it mostly going to focus on the larger buildings? As I think about tying that gap between the for-sale side and the for-rent side on single family, is there something this acquisition can maybe offer to sort of tie those more closely together? Yeah. Well, Redfin has extensive relationships with many homeowners because we help them buy and sell houses. All the time we meet people who say, "You know what? I'm not going to sell my place. I think I can rent it out instead and get someone to pay my mortgage in the first two or three weeks of every month." It's a natural synergy for us to be able to get those folks to put their properties on redfin.com because we have the Redfin Estimate, which estimates what your home is worth. People are already looking on our website when evaluating their liquidation options. Do I want to sell this house now that I'm leaving it, or do I want to rent it out to someone else? I think we just have a natural audience for listing those properties. We'll focus on the apartment buildings as the primary source of digital revenue for this business. It's also just the simplest way to add listings in bulk. Long term, there's a real competition for that long tail of inventory, and we've just always been very inventory-focused. The reason that so many people love redfin.com is we have more listings than almost anything else for almost our entire history. At least in the markets where we're available, I know that we're not a completely national site. We are just going to be very aggressive about getting inventory. We want to start with the apartment buildings, but once we get beyond those multi-family communities, we will then be aggressive about adding houses. There are different sites in the RentPath portfolio that focus on different types of inventory. This is going to be something that can be a real strength for the company because they just have different brands in different parts of the market, and there's one brand that's really effective at getting houses instead of just apartment buildings online. Right. That makes sense. The next question, New York City is a unique animal for a lot of reasons. You had a competitor buy StreetEasy a while back. Is there anything here that maybe would allow you to compete or establish more of a pronounced beachhead in New York City proper, given that it is more skewed to the rental side? You've got high average sales prices. It's one market that could be interesting on the for sale side in a larger way. I'm just thinking a lot of this data that this deal brings that makes you better to establish a stronger presence in the city itself. Yeah. I've never wanted Wall Street money worse than when StreetEasy was on the block. That is just a great website. Zillow, if you're listening to this call, hats off to you. It was a great deal a long time ago. That is going to be a tough nut to crack. There's many opportunities across the U.S. We're obviously going to compete in New York, but I would say we'll be more competitive in other places. There are many reasons that it's very hard to crack the New York nut. There's also not an MLS that is widely used in the same way that it is almost everywhere else. StreetEasy really has the market by the toes. Appreciate it. No more questions. We will now take our next question from Naved Khan with Truist. Please go ahead. Hi, congratulations on the acquisition. This is Robert Zeller on for Naved. Thanks for taking the question. We're just wondering how will this change the consumer experience on the Redfin site, and what are the biggest markets for RentPath, and how might that overlap with Redfin's current market? Thanks. Sure. Both Redfin and RentPath are intent on covering every nook and cranny of the United States and Canada. We're not going to comment on local share in more detail than that, at least not on this call. I think the user experience on redfin.com is really simple. When you search for homes, we'll try to figure out if you're looking for for-sale listings or rental listings, and we'll let you search for both if that's what you're interested in. When you look up what your home is worth, we'll tell you what you could sell it for, but also what you could rent it out for. We'll try to get you to list it with us either way. Thanks. Maybe I can just squeeze one more in there. We've seen projections for the housing market that are really strong for 2021, and 2020 was a strong housing market overall. What is Redfin's outlook for the rental market in 2021? We're just not going to provide broad forward-looking guidance. I think that there are puts and takes on the market, because right now there is mortgage forbearance, but also eviction moratoriums. I'm glad we're doing that because it's humane to the people who need a roof over their head, especially when it's so cold outside. That has limited turnover in the rentals market. Property management companies are very interested in paying to meet more residents. We think that the number of units that are available will increase once the economy is in a place where more people are moving around in the rental market. For-sale market is probably stronger than the rental market. Okay, great. Thank you. We will now take the next question from Tom White with D.A. Davidson. Please go ahead. Great. Thanks, guys, and good morning. Most of mine have been asked, but maybe just a high-level one, Glenn, on the M&A environment. It seems like it's kind of picking, and it's always sort of been, I guess, hot in real estate tech and a lot of these disruptive companies, but it seems to be maybe picking up a bit. Just kind of curious to hear your thoughts on the environment out there, and maybe is there anything that's surprising you in terms of some of the deals you're seeing? Well, every company that could be sold to Redfin or Zillow or Opendoor or Compass or eXp or whatever company it is, can also now credibly say, "Well, we're going to use a special purpose acquisition company instead." It is very hard to find value. We're going to be disciplined about it. Obviously, we've got some currency because Redfin has traded up, and that means that we're also going to be aggressive where it makes sense, but it just has to make sense. If you're buying a company just because you got the currency and not because there's a real strategic rationale, well, I don't think that serves our investors well. When we see an opportunity where the industrial logic is overwhelming, then fortune will favor the bold. Great. Thanks, guys. We will now take the next question from Tom Champion with Piper Sandler. Please go ahead. Thank you. Good morning, guys. Congrats on the deal. Glenn Kelman, I'm wondering if you could just talk a little bit more here about your decision to buy versus build. I don't recall too many M&A deals in the past, and I'm just curious why now, why is RentPath the right asset, and whether or not operating a couple different brands in Apartment Guide and Rent and Rentals presents any complications, or how you think about that when the focus to date has always been around core Redfin. Then maybe, Chris Nielsen, just one quick one for you. Can you just talk about maybe the timing around the process going forward and maybe any gating items we should think about and FTC approval, what that might mean and over what time period that might take place in? Thank you. Sure. This is Chris. I'll start with the second set of questions. There are several approvals that this will need to go through. There's a bankruptcy court approval, there's FTC approval also. We do expect that that will go into the second quarter of this year. The timing is obviously subject to lots of pieces related to that that we don't entirely control. We are excited about working through all that with the lawyers and with RentPath. Just to respond to the question about an organic effort versus buying a company. If you look at redfin.com's recruiting pages, you'll see that we have been trying to build this organically, and that effort will continue to create technology to run rentals on redfin.com. There are job descriptions that show engineering directors, engineering leaders, individual contributors, to build out that effort, that's something that we've been working on for months prior to this. The challenge is that it's not just technology, it's inventory. We're not going to be able to access a Multiple Listing Service. We're going to have to go hand-to-hand, street fighting for p roperties where you try to get one property and then another and then another through a sales force. It probably would have taken us four years to get the inventory on our site. In those four years, we would have been cringing because people would have been searching for rentals on rent.com and only seeing a few. We saw a way to get to scale very quickly with the inventory. In any two-sided marketplace, it's hard to compete for consumers if you don't have the goods that they want to see, and RentPath has those goods. We're certainly wary of the organizational or operational strain this will create. That's why we've emphasized so clearly that we're going to run RentPath mostly independently. Obviously, Chris needs to be able to represent their financials. Our general counsel needs to understand the legal risks. With traffic growing as strong as it has been, we think it's a straightforward proposition to sign up more customers. We also just acknowledge that Redfin has its hands full with the for sale market. We are hiring real estate agents hand over fist. Demand is through the roof. As you already know, just from having listened to Zillow's earnings call. We need to keep our eye on the for sale ball and really focus on getting RentPath listings onto redfin.com as an engineering project. Makes sense. Thanks, guys. Once again, to ask a question, press star one. We will now take our next question from Ryan McKeveny with Zelman & Associates. Please go ahead. Hey, good morning. Thank you. Congratulations on the deal. Glenn, I'm curious to that last point. The synergy is from kind of a consumer search perspective, make tremendous sense that a lot of customers just love the opportunity to more seamlessly search both rentals and for sale. I'm thinking about some of the synergies kind of specific to Redfin. Aside from some of the traffic and just the consumer reach, the SEO, et cetera, I guess I'm just curious if you could talk to how much overlap there is or there is not related to the tech and infrastructure you already have on the for sale side. With things like touring, scheduling, and starting an offer online. It feels like there's at least some groundwork in place that seems like it could be utilized more on the rental side as well. Just curious if you can kind of dig into those potential kind of areas of synergy with the existing infrastructure that you guys have on the for sale side. Thank you. Sure. We are excited about using that infrastructure for renters. We know not only how to get more people to step forward from a website into actually seeing a property, but in making sure that those people are serious about the tour. That has always made us unique. I think property management companies are really focused on that, because if you have websites that are just generating leads without respect for whether those leads are high quality or low quality, the apartment building sales force, property management companies' salespeople just really struggle with that. We've been on the receiving end of the people who want to buy a home from our website, and we know how to make sure that those folks are serious. We know how to give those people a good experience on the home tour and through the entire transaction. I want to be clear that the logic of this deal was entirely based on just combining the two audiences. You don't have to look three years out into the future and get excited about all the Buck Rogers possibilities. Even though I am, you don't have to do that to rationalize this price. The websites that are ahead of us as real estate destinations in North America have rentals. We don't. The only way we're going to climb that mountain is by getting that inventory. We need to build relationships with consumers earlier in their life. We need to be a bigger brand. We need to take up more space in Google's index, and this is going to help us do that. I want to do everything that you're talking about. I'm excited to reinvent the renting experience. All of us here at Redfin are. The first order of business is just to build an incredible search experience. Very helpful. Thank you, Glenn. It appears there are no further questions at this time. I would like to turn the conference back to our host for any additional or closing remarks. Chris, is that you or me? I'm trying to remember. Oh, good. It's you. I'll take it, Glenn. Thanks everyone for all your questions, and thanks again for joining us on short notice. Really appreciate it, and we'll speak with you again next week on our fourth quarter earnings conference call. Thanks so much. Take care. Thanks. This concludes today's call. Thank you for your participation. You may now disconnect.