Great. Thanks, everyone, for joining us for this session. My pleasure to be introduced or to be joined by Chris Nielsen, CFO of Redfin. Chris, thanks again, and appreciate your time. Thanks for having us, Bernie. Glad to be on. Great. Maybe just to start, as we're getting to the end of the calendar year here, we'd just love to get the top of the priority list as you're entering 2025. Sure. It is driving to profits in the business. We didn't get all the way to where we wanted to in 2024, but we feel like the combination of continuing to compete really well at the top of the funnel, rolling out our Redfin Next program to allow us to hire more agents, and then holding down our fixed costs while still investing in growth, that's the combo that we are driving hard towards and really excited to start the new year. Great. I certainly want to make sure we dive into all those, but maybe just to start on some macro commentary, certainly a big focus for investors right now. We'd love to get your thoughts on what the housing market will look like next year. Obviously, we have interest rates with the seven handle right now, so Fannie Mae just lowered their growth forecast last week for the housing market from 11% to 4%, but Zillow is coming out today and said 10%, so we'd love to see what the, and I know you guys have a great e-comm team, so we'd love to know what your updated thoughts are. Sure. We haven't provided any kind of formal feedback on 2025 growth rates. I can tell you a little bit about what we're seeing right now, which is we have seen consumers with some pent-up demand being pretty responsive to some positive catalysts the last few months. The Fed interest rate cuts seem to have caught people's attention, even though, to your point, it hasn't moved mortgage interest rates a lot. That positive news seems to be impacting consumers. We've also said more recently that people have been more active post-election. In some ways, we think of all this really as being pent-up demand, but now there are a couple of things that have passed, a couple of good reasons potentially that people may have held off, but now feel like it's time to move forward. So it's hard to assess all of that looking forward that much to 2025. The way we're planning the business is very cautiously here, which is we're not expecting big market growth next year to allow us to get to those profits. Instead, we'll just be careful about our costs. And if it turns out that there's more growth available, that'll be good news. Yep. Makes a lot of sense. What about rates though in general, or more specifically just seven handle now? I know we've talked about stability before as being a major driver here in terms of what matters the most, but do you think they come down throughout the year? I mean, we just had a different CEO of a brokerage on talking about we could see a five handle by the end of the year. I'm not sure if you guys would be willing to be that aggressive, but contemplate in your cautious stance to the housing market, what do you assume rates do? Sure. I do think we'll see some rate relief as we get into next year. I would be surprised if we got down to a five handle by the end of the year, but obviously a lot of kind of new information still being digested by the markets about what's likely to happen from a macro standpoint next year. And I think rates will follow some of those other macro indicators, macro catalysts. And so we'll be ready to maneuver depending on all those things. But again, we're certainly not expecting a five handle at this point. Right, and then so maybe just bringing it all together, last one on the macro housing, just affordability versus pent-up demand. I don't think anyone's calling for home prices to go down next year. I mean, it still seems like it's a seller's market here, so just your thoughts on affordability. Affordability is an issue for many potential home buyers, but at least in the kinds of volumes we can see right now, pent-up demand is just a bigger deal, that there's a chunk of transactional volume to be absorbed just from the demand that is available right now. And so affordability, if we were to have much higher industry volumes, might start to be more of a pressure point. But there are many people who've accumulated equity either in their existing home or otherwise over the last few years. And so that does mean that that pent-up demand is the kind of next chunk of activity that's likely to come through the market. Okay. Understood. Wanted to touch on Clear Cooperation next. I mean, this is just the next kind of NAR thing that folks are focused on. Would love to know how big of a deal do you think this is and just clarify Redfin's stance on it. Sure. So clear cooperation is a set of agreements where brokers share their listings with other brokers. And we do think that this is really important for the market. It's the right thing for consumers to have good transparency about what's available for sale. And I do think it's important for sellers as well that if you're selling an asset, you want to get the greatest number of eyeballs on that asset. So for all those reasons for consumers, we think this is a big deal. In terms of the impact on our business, if it turns out that those policies change significantly, then we'll be ready to respond. Our corporate position has been quite clear that we're in favor of Clear Cooperation. But again, it's just nice that we have 50 million monthly visitors on our website every month. If it turns out that listings are held more tightly by brokerages, we feel like we have really good mechanisms, really good avenues to compete well in that kind of market as well. Makes sense. And then how about the other part of the NAR that people are focused on in terms of just buy-side rates or buy-side commission rates and the contract associated with it? Now that it's been a couple of months since implementation of the buyer agreements, are you seeing any impact on fees or just how it's impacting the home buying process in general? Sure. I think our view is that this transition has been pretty smooth. So we've provided some data here from what we can see on fees. Obviously, we don't have as broad a data set as we'd had in the past because these fees aren't coming through the multiple listing service. But in terms of buyers' fees, we've not seen a material change from before and after the period of time where the rule changes went into effect. I think more generally, we have heard anecdotally from our agents that there is more discussion of fees, more questions both by buyers and sellers. In particular, that's been true for more expensive homes. So our thought here is that over time, there could be some more fee pressure than we've seen so far. But to date, just again, stepping back, looking at the data, we've not seen a material change in that fee structure. And just in terms of how things have operationalized, I think our teams did just a super job of getting set up to be able to have these agreements in place, the communication about fees. And so it's not been disruptive in terms of our business operations. And if anything, I do think that there is the potential to improve some of our costs related to touring customers. In the past, sometimes a customer would reach out to a Redfin agent for a tour. That customer may or may not have been kind of super invested in or super serious about their transaction and might even have been working with another brokerage. And now that customer gets disclosure from us and the other broker that says, "We want to represent you all the way through to closing a transaction." And I do think that that might discourage some back and forth or kind of window shopping that in the past consumers had. So it's too early to conclude that, but there's at least some evidence that things have been flowing really smoothly. And again, maybe there's a little bit less of that window shopping that goes on now. Yeah. No, that's great to hear. Maybe moving on to your own business, so for real estate services, complete the transition to Redfin Next, so it's going to be rolled out nationwide. Just what do you see that gave you confidence to make this transition? I mean, at the beginning of the year, it was that this is going to be a slow transition, going to be measured, tested in various markets, and then really kind of second half of this year felt like you guys got a lot more bullish. Just would love to get more of the reasoning on why. Sure. So Redfin Next is our program where we are changing the way agents are paid, moving from what used to be a combination of fixed and variable pay to now entirely variable pay. So you're correct that we started with four markets at the beginning of this year. We quickly moved to another set of markets in the second quarter, more in the third quarter, and then as of October of this year, have rolled that program out nationwide. What we were seeing really from the beginning was that we were able to attract more agents, in particular, more experienced agents. That was one of the things we wanted from the program, was to be able to bring in agents who were good at closing homes, including more expensive homes. So able to attract right from the beginning, we could see that that was then pulling through to some more market share gains in those markets. So really pleased about that. And then we've been able to retain agents through the program. And then finally, the program has pulled through to the kinds of economics that we were expecting to. Most fundamentally, what we're doing, again, is really just taking dollars that were previously fixed compensation and moving those same dollars over to the variable side for agents. And that's gone really well. So the combination did have us pretty aggressive through the course of the year where we can just see that this is better for agents. It's better for consumers because the customer gets an agent who has proven to be better at closing homes. And then the economics are also better for Redfin in that with more variable compensation, our costs are just more connected to the seasonality and cyclicality of the housing market and moving away from a situation where those things can get kind of out of alignment. Right. And the implication of that, when we look at your gross margins now, that should be more kind of steady state first before there was certainly that swing where they'd be lower at the end of the year. That's right. And you can really even see that in our Q4 guidance where the guidance for real estate services we provided has gross margin up to 29% this year, which is a 600 basis points improvement year over year and pretty consistent with the third quarter of the year. So it certainly won't be entirely flat across the year. There will still be more costs in Q1, for example, because customers start touring a little bit before they close transactions. So it won't be totally level, but it will be much more level than it has been in the past. Got it. And then now that we do have a couple of quarters now of data, at least in some select markets, what have you been seeing in terms of what agents are getting in terms of the leads either from Redfin or bringing on their own? I'm sure in the beginning, there's the backlog that they have, so it's easier to transition over. But have you seen those kind of older cohorts of Redfin Next agents start to rely more on the portal? That's certainly been the case. So you're right. Agents join often with a few transactions that are in process from their prior brokerage, from their prior customer base. And they do continue to work with customers they might have had from five years ago where they helped them buy a home, now that person is selling a home. And that's been great. And we're glad for agents to be able to serve those customers well. But over time, the majority, by quite a lot of their transactional volume shifts to customers they're meeting from Redfin. So that's mostly where we expect the volume to be is those customer introductions from Redfin.com, from our mobile application, as opposed to agent source volume. Got it. And whether it's a cost or operational standpoint, just making this massive shift within the company, has there been a big impact on the platform this year? And either one, financial or operational, and then what does it mean for next year in terms of if there are easy comps or not? We have had some extra compensation costs during the course of this year. On the Q3 call, we talked about $2 million of extra pay in the third quarter that we don't expect to repeat. That was mostly related to having attracted agents to the platform during the quarter in that we've had a stipend for people who are joining so that they could kind of transition over from their prior pay to the new pay, and we've already adjusted that program to be less expensive, so we don't expect that kind of cost to repeat. There were also some earlier in the year retention payments for Redfin agents in the first cohort because we wanted to make sure that, hey, that first group, that they can stick around just as there's uncertainty with this new program. I don't expect those to repeat as well. So there have been a few extra costs that way that you'd see in our real estate services cost of revenue. But beyond those, the costs really are just a switch of fixed to variable. And then we haven't incurred a lot of extra expenses really elsewhere in our operating costs. So this is mostly about agent pay transition items. Got it. Okay. So now as we're looking at your agent count, it's kind of back to pre-pandemic levels. It's down from the peak. I mean, this just might be a less relevant question now given more of the variable compensation structure than fixed. But do you have the right number of agents on the platform now? Or is that anything before you used to have to manage it, right? Now, is it just kind of bring as many on as you can and don't worry about it? It is a big shift, and it's a good shift, so it does have us less reliant on exactly setting the expectations for the number of agents we'll need in every market, and instead, where previously this time of year, we'd say, "Hey, let's be careful. Don't hire that last agent in San Diego because we don't want to incur those costs if the housing market's a little bit slow." We're really in a different position now where we can say, "Let's make sure that we can deliver what the agents expect from a volume standpoint of customer introductions," but other than that, there's just actually quite a lot less risk in hiring, and so we feel good about the agent counts we have today, but we did say on the call also that we are looking to hire hundreds of agents more into next year. And we really have just an awful lot of confidence both in our ability to do that, but our desire to do that. Even with the uncertainty that I mentioned previously on the housing market, we know there's plenty of volume for that number of agents. And so it just puts us in a really good position to be able to drive market share because we'll have the agent capacity to do that. Right, and again, this all makes the portal, I mean, it was important before in the fixed model as well too, but it's like that's what you need to make sure you're managing that to make sure you have the right amount of traffic to meet those agents, given what you said earlier. That's right. Okay, so what is the pitch to a potential Redfin Next agent? How do you get them to come over to your platform and leave their current brokerage? Yeah. It starts with this 100 customer introductions per year. Most real estate agents don't know enough potential consumers. They look to spend dollars, find signs on bus stops, or find leads on Zillow. And we've just found this to be a really successful pitch that we'll make these introductions for you that allows you to grow your business. And so the second part of the pitch then is we'll provide to you what we describe as business in a box. So support staff to help close those transactions. We'll help take care of some of the administrative parts of being an agent. And so it really just allows you to focus on serving customers as opposed to kind of managing all the aspects of your own business as an independent contractor. So it starts with leads. It leads with leads and then providing good support for the agents along the way. And again, the reception that we've had from agents has been really encouraging so far to that combination. Maybe just one more piece here that's important to mention, and that's that previously we sometimes had agents say, "Oh, I'd love to be on Redfin, but I've already got a little bit of my own book of business, and I don't want to give up the economics of that." One of the components of our pay under Next is that we have really competitive splits with other brokerages. You'll get 60%-75% of the transaction economics if you as an agent are sourcing that deal. And then we pay quite a bit less for the Redfin-sourced volume, more like 30%-40%. So that higher split for the agent-sourced volume is even higher than that. We consider that as a company, we're paying your medical benefits and some of the other costs here, and so we've wanted to be attractive to an agent who can get these customer introductions, but then on top of that, expects to close some of their own volume. Okay. Got it. How competitive is the market right now for agents? I think some of these rules, whether it's NAR, buy-side agreements, even Clear Cooperation, part of the pitch has been like, "Oh, well, there's 1.5 million agents in the U.S. right now. This could actually lower the number of agents." So I guess just like the recruiting team or however you guys go out and source potential agents, how does it feel maybe relative to in years past? It feels really good compared to prior years. So it's hard to say what the whole competitiveness of the market is. But as we're entering into that market to hire, we've been just getting a really good reception from other agents. So what we can see right in front of us is the competitiveness we face, and we're doing really well against that. So do you think you'll gain market share next year? We do expect to gain market share next year. I think we'll have more agents, and that'll set us up to gain market share. Great. And then just lastly, in real estate service, I know we've been talking about for a bunch, but it is the most important part of the business. Partner program. So revenue's been declining. I'm assuming this is just an output of the transition to Redfin Next, but just want to make sure we're thinking about the right way. Sure. So as we're hiring more brokerage agents under Next, that does put some at least near-term pressure on the partner business. At the same time, we're continuing to make improvements in that partner business, including several programs to drive close rate going forward. So I can imagine there being a little bit of pressure in the near term on the percentage of transactions closed through that program. But I do think that we'll expect it to be an important part of the overall mix over time as well. And it'll probably balance out in a little bit longer run. Okay. Understood. Maybe moving on to just, we can call it the portal wars or competition with Zillow and Homes.com. Just what is the state of compensation? I mean, Homes.com made some big splashes earlier this year. It seems like it's cooled off more recently, but I don't know. Given the importance of these leads going into Redfin Next, what are you seeing in terms of competition for the top of funnel? I think it's been a competitive year. It's always competitive with others in this space to gain customers at the top of the funnel to compete just for raw website visits, and so again, I would describe it as similarly competitive to prior years. We've certainly seen Homes.com with an aggressive advertising campaign. That That does seem to be driving some visits to the website, but we're really focused on the second part of that, which is what does it look like from a customer introduction standpoint? Those are the people who are going to close deals, and we feel good about how we've been competing on that front, so I expect it to be competitive in 2025 as well. We're certainly putting that into our plans and wanting to make sure that we have plenty of capacity available, even back to my earlier comment, driving for profits, but making sure we've got plenty of capacity available to compete well from a marketing standpoint for consumer awareness and eyeballs. Okay. And you guys have been rolling out some GenAI technology on the platform. Would love to just get a sense in terms of features like Ask Redfin, how they're helping to improve this customer experience. It's been great. So Ask Redfin is a toolset where customers can ask questions. It's often the case that either on the website or elsewhere within Redfin.com, we have the answer to a question that a consumer has. In the past, the consumer might instead call an agent to ask about, "Hey, what school district is this in?" or, "Does the house have a pool?" or something like that. And now we're able to answer some of those questions just straight away using AI capabilities. This was, from the standpoint of CFOs, one of the best pieces of innovation, which is it's not like we had to go build our own AI engine to make this work. Instead, we've been using other people's toolsets here, but hooking it up to our data and have been just really pleased at how that has come together. So I think what you'll see from us is continuing to be thoughtful about where, just like we always have, where we can apply technology to the home buying and selling experiences, but do it in the most cost-effective way. Okay. Got it. And so this other revenue, it's shown significant growth year over year over the past two quarters. I know digital revenue's in there. I know also it's like title and escrow's in there as well too. So has this been driven by digital advertising? And then kind of how sustainable is it since we're thinking about 2025? Both businesses, both title and our advertising revenue have been growing nicely. There's not one that's contributing kind of in an outsized way against the revenues and profits in that other segment. We're really pleased with how the title business has operated this year. We've said the attach rates are above 60%. There's still some geographic expansion that we can have. Gross margins also have come up nicely during the year, just as we've been able to have more volume against the fixed costs in that business. It's been terrific. On the advertising revenue front, we've continued to make more inventory available on the website for that advertising. Into 2025, we believe there's room to run. We're already starting to see the opportunity to work directly with some advertisers. In the past, mostly we would work through an advertising network. But the economics, of course, are better for us if we work directly with another party. And so we're starting to do some of that. And I think that there's plenty more opportunity. Great. Just want to remind everyone, I forgot to say it on the onset of the fireside, but if you have any questions, please type them into the portal. We'll be sure to get to them. But on that point, I wanted to just make sure we skip ahead in the financials, and Chris, you said the most important thing for next year is about getting to EBITDA profitability, so we'd love just to talk more about the path to get there. I know you talked about what kind of macro environment are you baking in? It sounds like it's pretty conservative, but just thinking about how to prioritizing efficiencies versus also making sure you're leaning in on the right areas and going through growth still, so there's lots of different data or lots of different points to be thinking through, so we'd love to just get your thoughts. Yeah, so maybe just describe the combination here. We do think that we're set up to gain some market share into next year. The changes that we're making to Next and some market share gains, we do think that that'll create some opportunity for improving gross margin into next year, and so there's opportunity to expand the total gross profit available. That does carry over to the mortgage business and title business as well, but the main way that we get to profits is by then capturing any kind of gross profit improvements by not having significantly more fixed expenses, operating expenses, and so both on G&A and tech and dev, we're squeezing down on our footprint. We're just really careful to take advantage of every synergy that we have across the different businesses here between Redfin, brokerage, and our rentals business. Similarly, on title and our mortgage businesses, where we can just hold down the fixed costs to serve those businesses, we're going to be looking to do that. And then really the only place where we want to make sure we've got plenty of capacity to be able to invest is just in more advertising, particularly if the housing market is better. We'll want to make sure that consumers have awareness of Redfin.com. But that's the combo here. And again, our viewpoint here is to be really careful about expectations for housing market growth. Part of the way that we can do that under how we're operating the business now, it does connect back to your earlier question about Next, where it is just a different approach that we can take to hiring agents because the agent compensation is more variable. We can be more aggressive than we have been in the past, even acknowledging some amount of housing market uncertainty. Understood. Okay. That all makes sense. Maybe thinking about how EBITDA should then convert into free cash flow. I think there might be a working capital headwind this year, but if there is, let me know what's driving that. But how should we be thinking about this on a normalized basis? There's probably been a little bit of a working capital headwind in the first part of this year. And there'll always be a little bit related to our mortgage business, where we fund loans using a warehouse line of credit. And so if you're just taking a look at operating cash flows, you'll see a little bit of cash flow consumption coming from the mortgage business. In part, that slows as the housing market slows into the fourth quarter. But also just acknowledging that that's fundamentally financed through our warehouse lines of credit. So that's kind of the setup there. There are really only two things investors should think about in terms of the flow through adjusted EBITDA to free cash flow. So we have called 15 or between $10 and $15 million of annual software capitalization that we have. And then on top of that are any interest payments that are due. So those are the two kind of core components to think about. Yep. And maybe while we're here, just talking about interest payments, capital allocation, how to think about balancing investments with these converts that are coming due. I mean, the October of 2025, I think they're only down to $73 million. So you guys have done a nice job reducing that balance. And then still $500 million due in 2027. So I mean, just want to know how focused you are on those. We're super focused, so driving the profits, but then also being opportunistic about capital markets, timing of needs, what makes the most sense along the way. I think our viewpoint here has been to be opportunistic over the last two years, where we've repurchased a lot of those 2025 notes. I'm glad that we did that. We were able to do a lot of it at a significant discount, and we'll look to continue to kind of whittle down those balances as much as we can and then have an even better viewpoint a year from now on what the housing market looks like. Understood. Just coming across the tape right now, it says DOJ's regarding DOJ's taking an interest of the proposed settlement for the NAR Commission litigation. So I don't know. It's hard to put you on the spot too much on that, but just FYI. Okay. I guess maybe just going so appreciate all those commentary on the financials. You did mention mortgage, though, in terms of when you're talking about working capital. Just wanted to make sure we touched on mortgage because, I mean, I think the attach rates must be leading in the industry. I mean, they were 27% in this past quarter, up 500 basis points year over year. How has Redfin Next impacted those attach rates? I would think maybe it would be under pressure almost, but are you seeing the I mean, clearly they're up year over year, so it must be helping. Sure, so I'm not sure Next has been a positive or negative catalyst on mortgage attach rates. What you've been seeing this year is just continuing to get our loan officers connected with the agents all across the U.S. I think we're optimistic that there's more room here in that we have markets that are significantly above that 27% level. We're pretty focused right now on helping to drive up the markets that are lower than 27%, using examples from what's worked well in the higher attach rate markets. It is our view that this is industry-leading attach rate, and we don't intend just to stop where we are, so the teams are already fired up about the rest of Q4 and into 2025 and how we can make sure that customers have the greatest opportunity to get a mortgage from Redfin. Is there a flavor that you can give us in terms of what some of the leading penetration rates? Are we talking like 40%, 50%, or? Yeah. Above 40% is what we can see in local markets. And we have individual agents who are even higher than that. And so that's part of what gives us some confidence here that when we get into a good rhythm, a good connection between the agent and the loan officer, we've been able to see even more progress. And so this will always be challenging. These are two people who work very closely together. The relationship has to be productive for everybody involved. And that means that there will always be individual challenges to make sure that we've got those things lined up in the right way. But I just really like the way that the two business teams have worked together. And as long as we take that approach to it, we do see there's more opportunity. At this point, a Bay Equity loan officer is now like the majority of their revenue from Redfin agents? Or just trying to think about how they're sourcing deals. Sure. So Bay Equity loan officers still source a lot of volume on their own. It's right to think that it's moved more and more to being 50/50, just as the housing market's been slow and Redfin volume has been picking up. But the only other thing I'd say is that if there were a lot more housing activity, those loan officers could do a lot more self-source volume. It's not as if we're capacity constrained in this business. The compensation for loan officers is also quite variable. And so it does mean that we're not incurring a lot of extra costs but have the capacity to serve more. We did see it was short-lived, but as interest rates came down this summer, we saw almost immediately a tick up in terms of refi volume. That's not going to be our primary business, but we know that the loan officers have the ability to serve that. Go after it, yeah. To go after it. If it turns out that rates come down during the year, there'll be an extra profit kicker that comes from that. So we're not counting on that either, but it would be good news if it happened. Yeah. It'd be nice. It's a nice surprise tailwind. Maybe just lastly, as we get the last minute or two here, just rentals continues to grow sequentially. I know the year over year is coming down, but the actual absolute revenue is going higher. I know we don't talk about this segment much, but just how you're thinking about it as we enter into 2025. Sure. So that's the right description. The team's done a really nice job of moving the business to break even profitability. We're continuing to see some revenue growth. In part, the revenue growth over the last couple of years has been buoyed by extra construction in the apartment industry that then leads people to want to advertise more. So we've probably gotten a little bit of a tailwind, but the focus right now is making sure we compete really well for website traffic. More of the responsibility for that competition has moved to the teams who have long been responsible for growing Redfin.com traffic. And the combination has been really productive, where the teams are working together well. We've got some good ideas about how to compete at the top of the funnel. And ultimately, that's what sets up the business for success, is more customers on the website leads to more advertising opportunities for the apartment buildings. And so that's where we'll focus. Great. Sounds good. Well, Chris, let's leave it there. Thank you so much for joining us today. Always appreciate the discussion. And thanks, everyone, who joined on the webcast. Take care, everyone. Thanks so much.