Good afternoon. My name is Andrea, and I will be your conference operator today. At this time, I would like to welcome everyone to the Zillow Group second quarter 2021 conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press the star key followed by two. Please note this event is being recorded. Thank you. I would now like to turn the conference over to Brad Berning, Vice President of Investor Relations. Please go ahead. Thank you, Andrea. Good afternoon, and welcome to Zillow Group's second quarter 2021 conference call. Joining me today to discuss our Q2 results are Zillow Group's co-founder and CEO, Rich Barton, and CFO, Allen Parker. During the call, we'll 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. We encourage you to consider the risk factors described in our SEC filings for additional information. We undertake no obligation to update these statements as a result of new information or future events, except as required by law. This call is being broadcast on the internet and is accessible on our investor relations website. 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. We encourage you to read our shareholder letter and our earnings release, which can be found on our investor relations website, as they contain important information about our GAAP and non-GAAP results, including reconciliations of historical non-GAAP financial measures. In addition, please note, we will refer to our internet, media, and telecom segment as our IMT segment. We will now open the call with remarks followed by live Q&A. With that, I turn the call over to Rich. Thanks, Brad. Hello, everyone. I hope you're all enjoying the summer wherever you may be. I am Zoom connecting once again from Zillow Cloud HQ. We had another strong quarter for Zillow with our consolidated business as well as each segment, meeting or beating our outlook ranges. We've begun to show good execution on Zillow 2.0, our dream of building a seamless, integrated experience for our customers and partners. I will talk more about that in just a moment, but first, I will top-line some quarterly highlights. On the buy side, Premier Agent revenue grew 82% year-over-year and 50% compared to two years ago. Our goal on the buy side of the real estate transaction is to connect high-intent customers with high-performing partners, and our performance was driven by strong execution against this goal, as well as continued housing industry tailwinds. We continue to improve the quality and quantity of connections we send to our partners by enhancing how our customers shop on Zillow with a particular focus on touring. In addition, once a customer raises her hand to work with a Zillow Premier Agent, we are constantly refining how quickly we introduce that customer to her agent, which makes all the difference in such a competitive buyer environment. On the partner side, we continue to focus on building a network of high-performing agents who are aligned with us on providing a high-quality experience to our customers as they move to a new home. On the sell side, Zillow Offers continued to accelerate in Q2 with a record 3,805 homes purchased. We sold 2,086 homes, generating a record $777 million in revenue on our home segment, surpassing our internal expectations for both revenue and EBITDA. Importantly, the Zillow Offers value proposition of a fast, fair, flexible, and convenient close has proved more than durable, even in this sizzling hot sellers market. It's a nod to just how dreadful and dreaded the prospect of selling, buying, and moving is to people. Likely, this is not a surprise to any of you. In our surveys of homeowners who want and need to move, when we present the Zillow Offers concept, the largest objection is, there must be a catch. I'm pretty happy to market to that objection. As we discussed on our last call, we entered Q2 with strong customer interest in ZO, which accelerated throughout the quarter and into Q3. Allen will get into more details, but as we said on our Q1 call, we saw significant customer demand at the beginning of Q2 that we expected would drive revenue growth on a lagged basis in Q3, which is now leading to our strong Q3 outlook. We continued to see strong growth in customer demand as we entered Q3 that we expect will favorably impact revenue in future quarters. With that in mind, we are focused on making progress automating key workflows in support of building a large-scale operation. Also, as we discussed last quarter, we recognized that our Zillow Offers unit economics are above our ± 200 basis point guardrails as we build and scale the business, a trend that continued in Q2 despite our efforts. We expect these unit economic trends to normalize over time as we iterate, continue to learn, and as home price appreciation inevitably slows. We've been testing price elasticity in this hot housing market, and we saw rapid conversion gains throughout the quarter as we improved our offer strength. We believe these tests will serve us well across future market conditions as we strive to be a market maker across housing cycles. We expect the homes we are scheduled to purchase will trend towards our ±200 basis point target over the course of the second half of the year. Additionally, earlier this week, a Zillow Offers subsidiary launched and priced a securitized debt offering, which is expected to close next week. Allen will provide more details on this later in the call. As the Zillow Offers business continues to accelerate, we are seeing lift to our Zillow Home Loans with approximately 40% of purchase originations in Q2 sourced from Zillow Offers. In total, our Q2 purchase originations grew by 90% year-over-year as we continue to build a mortgage factory that serves both purchase and refinance transactions. An example of this is our new self-service mortgage pre-qualification offering, which automates the process and makes it more efficient for our customers. All of these efforts came together this quarter to deliver a total company revenue of $1.3 billion, up 70% year-over-year. Importantly, our newly provided gross profit measure, which I will talk to more in a moment, was $538 million in Q2, up 92% year-over-year and 79% from the same period two years ago. Now, on to what's happening around us. We believe there is strong, durable support for the housing market. Historically, work and location have been inextricably bound together. The pandemic has joltingly and dramatically unbundled work from location for many, creating a new flexibility by enabling people to optimize for work and location separately and simultaneously. Moving to the big city is no longer a requirement for many job seekers, and that shift will inevitably disperse talent and economic opportunities. This untethering of location from work feels deeply important to me for the future of work and life, and by implication, housing, what we've been calling The Great Reshuffling. It is also why we at Zillow lean in hard and early on the cloud HQ idea as the future of work, as you can read about in today's New York Times front page business section article by Sarah Kessler, featuring Zillow Vice President, Meghan Reibstein, one of our many folks who cut the cord from our old Seattle HQ and moved to Asheville, North Carolina, to be near and support her family. On the recruiting side, year-to-date, we have had 153,000 candidates apply for a job at Zillow, which we believe has been fueled in part by the possibilities of our permanent location flexible policy. This is one of the factors we see driving the housing market for some time. The other important factors being millennials entering their prime home buying years and low interest rates. Stepping back, we have always had audacious goals, guided by our strong urge to empower people vis-a-vis the expensive, confusing, emotionally and financially fraught process of buying and selling a home. Our initial dream was to build the most trusted and vibrant home-related marketplace, and to solve a big problem in real estate, the lack of transparency in home shopping. To turn on the lights. This dream started with both the Zestimate, our killer algorithm that put a price on every rooftop in America, and zillow.com, one marketplace where everyone could search and find homes with data easily at their fingertips. Something not possible prior to Zillow. This transparency and convenience became the accelerant for establishing Zillow's brand in real estate and making it the most popular place to dream and shop, with an average of 229 million monthly unique users coming to our mobile apps and websites in Q2, including our great adopted sister brands, Trulia and StreetEasy. Zillow brand became synonymous with real estate empowerment, the fundamental transaction continued to be painfully stuck in the 1950s, resisting the gravity of digitization. Our dream and ambition moved from the top of the consumer funnel down to the bottom of the funnel to the transaction itself. We, of course, recognized that our huge brand and traffic, as well as our DNA as software engineers, many of us grew up at Microsoft in the 1990s, would advantage us relative to this large and daunting challenge. Our expanded dream is to re-engineer, streamline, and digitize the moving process, or as you've heard me call it many times, Zillow 2.0. We believe customers want speed, simplicity, integration, and value. Fairly safe consumer desires in which to invest, in my opinion. To deliver on this dream, our strategy has been to build an integrated set of real estate products and services, both owned and operated, and with professional partners, that can be mixed and matched to make it radically easier for all the dreamers and shoppers on Zillow to transact and move to their next chapters. We are executing nicely on this ambitious growth strategy and progressing well towards each of the three-five-year growth objectives that we communicated two and a half years ago when we announced Zillow 2.0. In our IMT segment, our stated three to five-year objective was $2 billion in revenue, up from $1.2 billion for 2018, we are on track to deliver. Additionally, our current run rate has already exceeded our original three - five-year objective for IMT segment annual EBITDA of $600 million and a 30% margin. Our Homes segment is performing well, despite completely shutting down purchases in the early phases of the pandemic and building operations during the most rapid change in home prices ever recorded. As I said above, we are now back on track with our original objective to purchase 5,000 homes per month and to generate annualized revenue of $20 billion within the original three -f ive-year timeline. For Zillow Home Loans, we are also on course to achieve our stated goal of 3,000 mortgages originated per month within the original timeframe we set. Today, we are seeing more and more signals from our customers that validate our integration thesis and growth strategy. Home shoppers and buyers who once just thought of Zillow as a place to search and find are starting to understand and take advantage of the reality that we now offer so much more. As one example, we are building a program called Zillow 360 that enables our customers to sell their current home to Zillow Offers, buy their next home with a Premier Agent, and finance it with Zillow Home Loans. The customer then uses Zillow Closing Services to finalize the transaction and ultimately receives a discount for using the bundled package. While we still have a long way to go on scaling Zillow 360, we are seeing strong interest in higher close rates when offering packages of services to customers versus single standalone services. Looking forward, we see our ability to execute on programs like Zillow 360 as competitively differentiated. Due to the volume of visitors to our apps and sites on a daily basis, we are able to spread our low customer acquisition costs across these additional adjacent services, which allows us to pass along savings to our customers while generating returns for our shareholders. As we broaden and integrate our services, our business lines are beginning to merge in service of our end customers. In an effort to pick a long-term success measure that considers this integration, we have increasingly been focusing on total company gross profit dollars. For context, in the last 12 months, our total company gross profit was just over $1.9 billion, growing 54% compared to the prior 12-month period. Moving forward, we plan to focus on gross profit dollar growth as a key measure of success. First and foremost, the metric is increasingly how we are measuring the business internally. Instead of optimizing for gross profit dollars generated by one particular service, we are increasingly finding ourselves thinking about the total enterprise gross profit pool that is produced when we offer multiple services to our customers. We think this creates the right incentives to run our business and is much more in line with how we want our end customers to think about what we offer to them. Second, this metric levels the playing field for comparability between our seemingly disparate businesses that are actually showing up to customers under one Zillow-branded umbrella. Said another way, gross profit enables us to simplify comparisons across the various segments, including Zillow Offers, where we report revenue based on the full sales price of the home. This simplification allows us to measure our operating efficiency in a more holistic and understandable way as we ultimately strive to grow total company cash flows over time. From an external perspective, our gross profit measure reminds us that we have built a differentiated platform for growth, one that is tackling all parts of the moving process with so much room to grow across all of our services. Last, as we scan across the competitive set, we look at our sizable gross profit pool as a competitive advantage to further invest in innovation with the end goal of building terrific customer experiences and driving sustainable long-term profitable growth. Since we launched Zillow 2.0, we have vastly broadened our services, which has allowed us to grow our gross profit dollars well beyond real estate industry growth. My expectation is that we will continue to grow our currently small market share of transactions by continuing to broaden our services and increasing the number of services each of our customers use per transaction. Embedded in our ability to drive secular growth are some confident assumptions about our business and opportunity. First, consumers will demand an e-commerce experience for their real estate transactions. Second, our scale and strength of brand gives us a customer acquisition cost advantage. Third, our suite of connected offerings fit together well to serve our customers and partners. Fourth, our location-flexible workforce will allow us to attract and retain a deeper and more representative talent pool from across the country to best serve our customers. A recent customer example validated all four of these assumptions. Ina and Tony of Atlanta recently wrapped up a seamless move to their new home with the help of Zillow 360. Feeling overwhelmed by the prospect of balancing closing dates with their daughter's school schedule and other commitments, Ina and Tony decided to accept an offer to sell their home to Zillow. Recognizing the ease that Zillow brought to this experience, they were intrigued when our teams told them they could buy, finance, and close their new home with Zillow, too. The opportunity to align the buying and selling process so it could work on their timeline was too good to pass up. We connected them to one of our awesome agent partners who helped them find their dream home. By this point, financing with Zillow was a no-brainer for the couple. To put icing on the cake, I found out last week that Tony was so impressed with Zillow during his move that he subsequently applied for, got offered, and then accepted a role with our Zillow Offers team as an estimator. Wow. To close, as a significant Zillow shareholder, I evaluate our opportunity in three ways. Is our TAM large and untapped? Are we in a strong position to capture that opportunity? Are we able to execute? It is clear in my two and a half years back in the CEO seat that the answers to these three questions are all a resounding yes. I'm really proud of the progress the team has made, but we do have miles to go before we sleep in our new home, on a soft pillow, above a kitchen with marble countertops and a doggy door to the backyard. We truly appreciate your continued support, confidence, and investment. I will now pass the microphone over to Allen. Thank you. You're on mute, Allen. I'm off mute now. Thank you. Thank you, Rich. Zillow Group delivered another strong quarter, reporting Q2 consolidated revenue of $1.3 billion and EBITDA of $183 million, both exceeding the high end of our outlook range. While we accelerated investments into our business in Q2, it is important to note that total EBITDA of $183 million was up from $2 million in the same period two years ago. We are at the point in our Zillow 2.0 journey where it makes sense to evolve how we measure our success. As our business becomes more integrated, our focus is shifting towards growing our total gross profit pool. This will allow us to continue to invest in innovation for our customers and partners, and drive sustainable, profitable growth for shareholders. Beginning this quarter and going forward, we are now presenting gross profit within our statement of operations. We have made adjustments to our prior period cost of revenue figures to reflect the calculation of gross profit in accordance with GAAP. These adjustments are summarized in Note 2 to our Form 10-Q. Gross profit for Q2 was $538 million, up 92% year-over-year, and was $1 billion for the first half of 2021, up 70% year-over-year. As we look forward, it is important to note that we will optimize for total gross profit and EBITDA versus individual segment results as we execute to best serve our customers. Moving to our segment results. Q2 IMT segment revenue was $476 million, growing 70% year-over-year and 40% on a two-year stack basis. Our IMT segment continued to benefit from improved execution that drove growth in higher intent connections in Premier Agent, continued demand for services in our other IMT segment marketplaces, as well as tailwinds in the housing market year-over-year. IMT segment EBITDA was $218 million in Q2, or 46% of IMT segment revenue. The revenue outperformance and continued operating efficiency translated into more than 130% year-over-year EBITDA growth in Q2 when excluding the impact of our Better Together discounts from the same period a year ago. Growth in Zillow Offers continued to accelerate in Q2 and exceeded our expectations, with 2,086 homes sold, driving $777 million in Home segment revenue. We made progress this quarter in improving our pricing models, including launching the Neural Zestimate, which sharpened our offer strength. The Neural Zestimate puts more weight on attributes of homes and allows more granularity at the asset level, placing less emphasis on repeat home sales price comparisons. In addition, we continue to make progress building automation at the top of the funnel when providing offers to customers. These improvements drove rapid gains in conversion rates in Q2 when compared to Q1, resulting in record purchases, more than catching up to our pre-pandemic pace. We purchased 3,805 homes during the second quarter, more than double what we purchased in Q1. Our Q2 Zillow Offers unit economics of 576 basis points before interest expense was above the ±200 basis point guardrails we set for ourselves while working to scale the business. The outsized unit economic results that were 665 basis points higher than Q2 2020 did benefit from the ongoing strong housing market, which we fully recognize as temporal in nature and largely contributed to the 312 basis points lower home acquisition costs of 87.1% in Q2. We also note that the 353 basis point improvement from a year ago in renovation, holding, and selling costs were largely durable operational improvements. Clearly, some portion of the holding costs and a smaller portion of the renovation costs likely benefited from the strong housing market, but we also see opportunities for continued operational improvements over time. Mortgages segment revenue increased 68% year-over-year in Q2 to $57 million, and Mortgages segment EBITDA was a loss of $6 million compared to the midpoint of our outlook range of a loss of $7 million. We made significant progress in our integrated origination platform during the quarter, with Zillow Offers contributing approximately 40% of purchase originations, helping to drive 100% sequential purchase growth in Q1 and 90% purchase growth year-over-year. With the increased purchase originations and the slowdown in refinance activity, purchase originations now comprise 26% of the total loan origination volume, up from 10% in Q1. The purchase mix will bounce around from quarter- to- quarter based on the refinance market, but we are focused on growing our purchase origination platform. This is just one more example of how our services are becoming more integrated and complementary to one another following our success in launching Zillow Closing Services. Turning to our outlook for the third quarter. At a consolidated level, we expect revenue to be $2 billion at the midpoint of our outlook, and EBITDA to be between $94 million and $126 million. In our IMT segment, we expect 15% year-over-year revenue growth and 43% growth over 2019 in Q3 at the midpoint of our outlook range. Within the IMT segment, we expect Premier Agent revenue to be between $352 million-$360 million, up 19% year-over-year, and up 48% over Q3 2019 at the midpoint of our outlook. The progress we have made in growing and improving our higher intent connections is allowing us to maintain our PA growth rate on a two-year stack basis, despite the impact of continuing low inventory in the housing market. We expect Q3 IMT EBITDA margin to be 37% at the midpoint of our outlook, down sequentially from 46% in Q2. As we discussed last quarter, we plan to accelerate investments in marketing, staffing, and technology in Q3 to drive our 2.0 vision. This includes things like touring, bundling integration products such as Zillow 360, expanding 3D photos and floor plans, along with better integration between Premier Agent and Zillow Home Loans. We expect these investment levels to be consistent in Q3 and Q4. When modeling, it is also good to keep in mind the seasonality of typically lower Q4 revenue. Thinking about full year 2021, it's important to remember that IMT EBITDA exceeded our expectations for the first two quarters of the year. We expect the incremental outperformance in the first half to flow through, resulting in IMT EBITDA dollar growth outpacing revenue growth for the full year. In Q3, we expect our Home segment revenue to increase sequentially from Q2 to $1.45 billion at the midpoint of our outlook range. This step-up in pace demonstrates our confidence in our ability to scale, resulting from the progress we have made in strengthening our pricing models and automating the top of the funnel. Evidence of our accelerated pace can be seen in our homes under contract, which was $1.2 billion at the end of Q2, up 126% from $511 million at the end of Q1. I will reiterate that our goal here is to become a true market maker. As we think about unit economics on a go-forward basis, we would expect to see unit economics trend towards our stated goal of ± 200 basis points before interest expense over the course of the second half of the year. Please also note that this quarter we provided a wider forecast range for our Homes segment, which incorporates a range in resale velocity that we think is appropriate given we are finding market pricing levels and approaching the slower seasonal period of the year. We expect Mortgages segment revenue to be between $55 million-$62 million in Q3, which is roughly flat from Q2. Our Q3 outlook reflects slower industry refinance activity, consistent gain on sale spreads, and continued growth in purchase originations. As a result of flat revenue and continued investments to grow mortgage originations, we expect Mortgages segment EBITDA to be between a loss of $13 million and $6 million. We ended the quarter with $4.6 billion in cash and investments, which puts us in a strong position to fund our vision for Zillow and make strategic long-term investments both organically and inorganically. As a reminder, we have a $500 million commitment to acquire ShowingTime as we continue to cooperate with federal regulators to work diligently towards closing the pending acquisition. Earlier this week, a Zillow Offers subsidiary launched and priced a securitized debt offering, which is expected to close on or around August 11th. The company anticipates gross proceeds of approximately $450 million from the offering. The securities will have a 30-month term and a 24-month reinvestment period, and a weighted average interest rate of 2.43%, which is lower than the rate on our existing credit facilities. Similar to our existing debt financing, this is a non-recourse to Zillow Group, subject to limited exceptions. Proceeds of the offering will be used to finance the growth of Zillow Offers business. Nothing in this call should be interpreted as an offer of the securities. As we look forward to the balance of the year, my priorities are focused on building processes and mechanisms to support rapid scaling of Zillow 2.0 products and services, prioritizing investments in sustainable gross profit growth opportunities across the company, improving our cost structure by increasing productivity and transaction services through operational discipline. With that, operator, we'll open the line for questions. At this time, I would like to remind everyone, in order to ask a question, please press star then the one on your telephone keypad. We will pause for just a moment to compile the roster. Our first question will come from Brent Thill of Jefferies. Please go ahead. Good afternoon. Rich, you mentioned that you're on track to your 2019 original goal to hit over the next three to five years. Could you just articulate the pathway of what you need to do now to achieve the full vision of that goal? Then I had a quick follow-up. Hey, Brent. Thanks. Yeah. Zillow Offers is back on track, which is nice. In terms of the kind of constraints to the plan going forward, and then achieving the ultimate dream here, I guess I'd classify them in three categories. One, ourselves. Two, consumer awareness, and three, capital. The biggest one and most important one, constraint, is ourselves. By that, I'm just saying it's execution. We're growing this thing as rapidly as we can and really quickly in an operationally complex way, and we're tuning it simultaneously. It is a challenge. We've got to focus on increasing automation. We've got to get better and better at pricing. We have to reduce costs all at the same time. There is a executional constraint or challenge that I do, I believe, and I'm confident we're up for, that's the biggest. The consumer awareness one I talked about a little bit in my prepared remarks. It's not insurmountable at all. It is a relatively straightforward marketing challenge to have such a compelling consumer proposition. I think we're okay there. We will have to focus on increasing consumer awareness of it, though. Again, we have a big advantage with these hundreds of millions of people that come to Zillow looking at Zestimates, many of which are Zestimate offers now. We're up to that challenge. Capital, you heard Allen talk in a very legally scripted way due to SEC regulations about where we are in that offering right now. I'm really excited by the progress we are making on cheapening, deepening, and lengthening our access to capital. While it is a really important constraint, it's kind of the fuel for the ship. We're looking very good on access and securing access to that fuel. I know I'm getting long-winded. You asked a bit of a kind of ultimate opportunity and TAM question. I confess to being quite excited by how well Zillow Offers is doing in such a hot sellers market, which has me, for one, kind of probing at the perimeter of my kind of penetration and TAM expectations here, and thinking about We don't know, of course, but just how much of the market will end up moving towards an iBuying and Zillow Offers solution. I don't know, but I'm comparatively more confident now than I was even a quarter ago. It feels good to me. TAM is a good question, but it is a question for later. We're so under-penetrated right now, at way less than 1% of home transactions, that we can kind of begin to explore that in more detail later just because it's such early days. Thanks for the question, Brent. Thank you. The next question comes from Ron Josey of JMP Securities. Please go ahead. Great. Thanks for taking the question. Rich Barton, just wanted to say I really appreciate your podcast this quarter on How I Built This. I wanted to ask a little bit more on Zillow 2.0 and the launching of Zillow 360. I know we're in the early stages, and I think you said miles to go. We also talked about 40% of purchase originations were sourced by Zillow Offers, and so we're starting to see this integration happen in the real world. Maybe talk just about what needs to happen for all these integrations, maybe the bigger picture. We know the consumer value prop, but just the bigger picture, the roadmap of how PA integrates with Offers, it integrates with mortgages, et cetera. Since we're more focused on gross profit, would love to understand the financial benefits of call it the bundling. Thank you. Okay. Thanks for the question, Ron. Yeah, that Guy Raz thing it was fun. It was a bit of a death march, though. I think that interview went for four hours, he clipped it down to an hour. I was kind of exhausted by the end of that thing, it was fun. Okay. Yeah, clearly ZO is going and accelerating, as you noted, you also noted that kind of interestingly, so is everything else. All right. It's not just the market that's doing that for us. PA is cooking really nicely and has plenty of room, our Premier Agent business. Rentals is growing nicely. Mortgages is going, Zillow Closing Services is going really nicely as well. It just turns out, well, it's not a surprise, it's a bet we made, but it just turns out that all of these businesses are interrelated because it really is, they're all just part of one transaction. I've come to think of them as different doors into the same room. That room is, I want to move. Make it easier, please. Our ability to increasingly package, integrate, and offer these mix and match menu of services is clearly working. The numbers tell the story there. That anecdotal data point we gave you that you just cited, the 40% of purchase mortgages originating with the ZO door is one of the kind of specifics we're sharing to kind of give some light on that. We also have had some early success with our Zillow 360, which is a new package that offers a discount that we're playing around with, and that's showing real promise. Zillow Closing Services attach is going well. We can begin to look at these little breadcrumbs of it working, but I think the best evidence is really staring us in the face, and that is just simply looking at segment gross profit. $1.9 billion of trailing 12 months segment gross profit, that's big, and it's growing quickly. It is that pool of gross profit that funds all of this other cool stuff that we're doing, all of this R&D, all of this marketing, all these new services that are in development for our customers. As we're able to invest all of that money in these things, the lovely scale economy wheel begins to turn, and it's turning nicely right now. It's that integration of the businesses that has driven us internally to look at this overall gross profit dollars rather than by vertical business. We also want to be able to play with pricing as well without having internal competition. It's all just one transaction. On a go-forward basis, you asked what are we watching. I would say that we're focused on the normal, typical transactional e-commerce-like drivers, okay? That you experience with your e-commerce companies. Very different from the old Zillow, very similar to your e-commerce companies. How many transacting customers do we have? How many transactions do we have? How many services per transactions are there? What is the profit per transaction, okay? We have an eye on the overall customer package profitability rather than optimizing for any of these individual ones. That's one of the key reasons we like it. We like the comparability too. Our guidance implies a ramp in gross profit, right? I, for one, as you can hear, I'm quite excited by the potential growth of each of these variables that go into the gross profit equation. Each one of those drivers that I just laid out, I see lots of opportunity for driving higher, which will multiply the growth leverage we see. We now have organized the company, we're organizing our filings and segment reporting. We're getting organized around these new e-commerce transactional metrics. Anyway, tons of interesting stuff ahead, in my opinion. Thanks, Rich. Very helpful. The next question comes from Brad Erickson of RBC Capital Markets. Please go ahead. Hi. Thanks. I guess a question for Allen. Allen, you talked about the accelerating investment across the IMT business. I guess within that, there's a lot of moving parts, but maybe just talk about how sustainable the IMT margins are feeling, certainly through the second half of the year and then maybe beyond. Separately, can you just give us any details, I guess, on how some of those investments are being allocated here in the second half of the year? Thanks. Hey, Brad, thanks for the question. Well, I'll start, just to reiterate what we said before, we believe the margins that we saw in the second half of 2020 and continuing into the first half of 2021 for IMT are indicative of the inherent underlying margins of a steady state business, but we're still very early in our journey, and we see opportunities to invest into growth. We participate only in a small percentage of transactions relative to our audience and the industry. Our Q3 outlook implies 37% EBITDA margins at the midpoint, which is down 875 basis points sequentially. We expect our Q4 investment levels to be consistent with Q3, factoring in that Q4 revenues do experience historically a little weaker seasonality as compared to Q3, but fairly consistent into Q4. I'd note that the 37% margins are still up significantly over 2019 full year levels, which are 23.8%, and up from our three-five year objectives of 30%. While we're increasing our investment levels in the second half of 2021, we continue to generate leverage across the segment as we've made progress even during the pandemic. In terms of areas of investment or where we're thinking of investing, I called out some tangible examples in my prepared remarks. The priorities we have is to drive better customer experience, broader integrated product offerings, and continued scalability through operational rigor and automation across the businesses. It gets back to Rich's point, that the consumer's going to demand an e-commerce solution for the industry, and we're well-positioned to serve that. We do expect these investments deliver strong ROI via gross profit growth, and we believe it's prudent given our focus on the customer and driving transactions to make these investments. It's the right thing to do to continue to invest here. Got it. Thanks. The next question comes from Brian Nowak of Morgan Stanley. Please go ahead. Thanks for taking my questions, guys. Wanted to sort of drill a little bit into the PA growth in the quarter. There's a lot of discussion around sort of the macro housing market and sort of will a deceleration in transactions impact growth. Maybe talk to us about what you saw on growth in price per impression or transaction growth you mentioned earlier, Rich. What are you seeing in sort of the underlying auction dynamics driving this PA growth? What are you sort of incorporating in the guide from a transaction or a price per transaction perspective, just so we can sort of understand the macro assumptions underlying the business right now? Yeah. Maybe I'll start, Rich, and you can follow on. Okay. Thanks for the question, Brian. First I'll say I have been really impressed by our PA team's execution. While the macro over the last 12 months has provided some tailwind, this really is, I think, a story of execution in terms of our performance. We're continuing to grow the quantity and quality of connections. We've said that a few times. Our Q3 guide implies PA revenue growth of 19% year-over-year at the midpoint, but 48% growth over the two-year stack compared to Q3 2019. We have demonstrated our ability to improve and grow our higher intent connections by enhancing how our customers shop at Zillow, with a particular focus on touring. We believe this is the next opportunity, and it's part of our endless quest to improve the integrity of our funnel and improve customer experience for our consumer customers looking to move and buy a house. When a customer raises their hand to work with one of our partner agents, we are constantly refining how quickly we introduce that customer to our agent, and that makes all the difference in such a competitive buying environment. Again, what I'd say is, a lot of the factors that we look to that are driving growth are our ability to take our customers that are in the funnel, based on the actions they take. Take the high-intent customers, provide them with a great-performing agent quickly to help them get to the home that they want to buy. Again, we're continuing to introduce our customers to higher-performing agents as well, as we go through our agent base who share the same goal as us, which is helping our mutual customer buy their next home. Lastly, we continue to see opportunities to invest in innovation and technology. We're investing because we think there's a really good return here and a big opportunity. While we have a large audience, we're still a very small percentage of the transaction share. Rich, I don't know if you would add anything. Well, hey, Brian. Yeah. Recent macro stuff in the industry, like skinny inventory of homes, coupled with super rapid sales cycles, and skinny rental inventory as well, is obviously factoring into our business in some way and factoring into our guidance. I think we're lucky, though, in that the really big trend that sits above all, the throne to rule them all for us here is this kind of big shift of offline to online. That's the big lever, kind of the old way to new way, the analog to digital, and we're really a great beneficiary there as the digital leader. We see that as the dominant trend. There are some kind of smaller, shorter wavelength cyclical things going on in the industry right now that certainly affect things, I don't want to ignore them, but are a little less important. That said, even in those cycles, we see the big tailwinds being demographics from millennials, low interest rates, and The Great Reshuffling as good, durable, positive housing market macro winds. On the PA guide in particular that you're asking, I'll also say that, yes, the PA transaction and revenue guide is important, but it is just one of many transactions that are happening now and happening in an increasingly integrated way. I'd be remiss without pointing out that looking at transactions overall is what tells, I think, the big story and the really good news for us going forward. Great. Thank you both. Thanks, Brian. The next question comes from Spencer Tan of Evercore ISI. Please go ahead. Spencer, you might be on mute. Hello? Can you hear me? Yes, we can. Oh, it's Mark Mahaney. Sorry. I think we got our codes- Hey, Mark. ... mixed up. Sorry about that, Rich. I like the gross profit maximization optimization reporting strategy ethos, whatever it is. I'm not sure about segment gross profit, but gross profit I get. I think that's good. I like that. The one question I had to do with the guardrails, getting back to that ±200 basis points. Now, you've been saying this for a bit. In the last couple of quarters, you've been well above that. What's the most logical way for which of those expense items is going to show a little bit of deleverage and get you back down to that -200 to +200? Thanks. Yeah. Do you want me to- Yeah, I can start, Rich. Yeah. I think if you look at the improvement I called out in my remarks, the 312 basis points that we've seen versus this time last year, Q2 of 2020, in acquisition costs, that's going to be the area where we see most of the decline as we move back into our guardrails. We'll likely see if resale velocity goes down a little, we'll likely see a slight uptick in holding costs. The big change is just going to be this. Right now, we've got a 13% spread between what we sell the house for and what we acquired it for. Again, as a market maker, that spread is being impacted by HPA, and we expect that to go down over time and be more temporal. Yeah, it's just price is moving really quickly, Mark, and it's hard for us to keep up with it. On the segment gross profit, let me argue, though, just make the argument. I did, but maybe I wasn't clear. As is normal. It's just a big pool, and that big pool enables us to invest a ton more in tech and R&D than competitors. It's kind of a way of us making sure that we can internally compare things on a level playing field. You all were looking at gross profit already, honestly. That's maybe why it's not big news to you. We have begun to really focus on it internally. Anyway. Yeah. No, no. Makes a lot of sense. Thanks. Thanks, Brian. Thanks, Rich. Yeah. The next question comes from Ryan McKeveny of Zelman & Associates. Please go ahead. Hey, guys. Congrats on the results and also on the securitization. Thank you for taking my questions. Following up a bit on Mark's question just now around the guardrails and maybe asking a bit differently. Where are the service fees today? If you can't say directly, maybe directionally, how have those changed? I think, implied in your commentary about testing the price elasticity and seeing the conversion on the improved offer strength, effectively implies a better fee to the customer. I guess part two of this question is ultimately if we move to a housing market, that home price is growing at a more normal pace as opposed to the rapid gains we've seen. What do you envision as that consumer fee maybe relative to the competitive set of traditional commission rates? B ecause I think ultimately that's what investors are somewhat grappling with on the margin profile of iBuying is ultimately where the margin shakes out in a more normalized environment. I would love to hear your thoughts on kind of the consumer fee piece of things, where that has trended and ultimately where that may shake out in a more normal environment. Thank you very much. You want to start, Allen? I can. Yeah. I guess how I would describe it, one, thanks for the question, is we've provided kind of long at scale type profitability we think we can get on a return on home sold before interest of around 400 - 500 basis points. Again, given the low penetration numbers of iBuying right now and the opportunity to scale, the guardrails that we've set are the ±200 basis points. We don't think about it, I guess, in individual components of fee versus value. We look at it, what's the overall transaction cost to the customer to incent them and that we can still turn into a profitable business. I think the fee is likely to continue to vacillate and change as we test pricing and elasticity. What we're focused on is trying to get the most accurate pricing to be fair to the customer and to continue to reduce our cost structure with the benefits of scale, automation, and productivity. I guess to answer your question, we still believe on a standalone basis the 400-500 basis points at scale is likely a number that we would see as a market maker. It'll come in a lot of different forms. Then as Rich mentioned, what will also be there is as we have our customers come through various funnels on Zillow, their ability or their willingness as we introduce multiple services to them to take those multiple services allows us to provide even sharper pricing across those services because we're not having to go out and use CAC to acquire each customer for each service. Rich or Brad, would you add anything? I thought that was pretty good, Allen. Really good. We'll play with all these different levers that we have, Ryan. With fee, home price appreciation, net price, et cetera, we'll play with it, but ultimately what we're trying to do is get people an amount of dollars in their pocket that they would have gotten approximately what they would have gotten via any other way that they would've sold. That's the goal. We think doing that, offering a fair price, it's a terrific consumer proposition and a great business for us. That's really helpful. Thank you both. One follow-up question on the cost side of the iBuyer model. The selling cost as a percent of revenue, I think this is the third quarter in a row, maybe longer, that's been 3.8% of revenue. I think one of the assumptions has been that using in-house agents on the iBuyer transactions would over time move that selling cost lower, effectively more leverage in the model on that. Is that still a fair expectation going forward? Maybe just big picture, where are you in the process of transitioning to the in-house agents? Thank you. Yeah. I think the answer to your first question is we continue to see opportunity to reduce to 3.8% as we build Zillow Brokerage Services as well as continue to partner with our agents. We are still very early in the number of markets that we have Zillow Brokerage Services in. We are focused on scaling the business as well as Zillow Brokerage Services, but it's still relatively early as we roll that out. Got it. Thank you very much. This completes the allotted time for questions. I will now turn the call back over to Rich Barton for any closing remarks. Okay. Well, thanks everybody. Thanks for your time today. I know it's a busy earnings day. I'm on the East Coast, so I know it's approaching cocktail hour as well. We appreciate your continued support and confidence, and we all look forward to talking with you again really soon. Have a nice night. This concludes today's conference call. You may now disconnect.