Group 1 - The core viewpoint is a positive outlook on CoStar Group (NASDAQ: CSGP) with a buy rating due to strong commercial revenue growth and robust engagement on Homes.com [1] - The company is expected to benefit from a long-term growth story, emphasizing the importance of fundamental analysis and identifying undervalued companies [1] - The investment strategy focuses on value investing principles, aiming to purchase quality companies at a discount to their intrinsic value for long-term holding [1]

CoStar Group (CSGP) Q2 2025 Earnings Call July 22, 2025 05:00 PM ET Company ParticipantsRich Simonelli - Head - IRAndy Florance - Founder & CEOChristian Lown - CFORyan Tomasello - Managing DirectorPeter Christiansen - DirectorAlexei Gogolev - Executive DirectorConference Call ParticipantsStephen Sheldon - Research Analyst - Technology, Media & CommunicationsCurtis Nagle - Director - Senior US SMID Cap Internet AnalystGeorge Tong - Senior Research Analyst - Equity Research & Business ServicesJeffrey Meuler - ...

CoStar Group (CSGP) Q2 2025 Earnings Call July 22, 2025 05:00 PM ET Speaker0Thank you for standing by and welcome to the CoStar Group's Second Quarter twenty twenty five Earnings Conference Call. At this time, all participants are in listen only mode. After the speakers' presentation, there will be a question and answer session. Today, we'd like to ask that you please limit yourself to one question and no multi part questions. As a reminder, today's program is being recorded.And now I'd like to introduce yo ...

Core Insights - CoStar Group (CSGP) is expected to report second-quarter 2025 earnings on July 22, with projected revenues between $770 million and $775 million, indicating a year-over-year growth of 14% at the midpoint of the range [1][11] - The Zacks Consensus Estimate for revenues is currently at $771.67 million, suggesting a growth of 13.85% from the previous year's quarter [2] Revenue Growth Drivers - CoStar Group's second-quarter performance is likely to benefit from its strong portfolio of marketplaces, including Apartments.com, LoopNet, and Homes.com [4] - Apartments.com is projected to grow by 10% in Q2 2025, driven by increased traffic and higher advertising spending [4][11] - Homes.com has reached 104 million average monthly unique visitors in Q1 2025, contributing to overall traffic of 130 million unique visitors across CoStar Group sites [5] Segment Performance - LoopNet's revenue growth rate is anticipated to be 7% in the second quarter, supported by a revamped sales strategy focusing on broad subscription packages [6] - The Homes.com segment is expected to experience low single-digit revenue growth due to the impact of first-quarter cancellations [7] Acquisition Impact - CoStar Group's acquisition of Matterport is expected to enhance its real estate marketplaces by integrating 3D capture technology, contributing approximately $40 million to second-quarter revenues [8][9][11] Earnings Expectations - CoStar Group has an Earnings ESP of 0.00% and a Zacks Rank 3, indicating that the odds of an earnings beat are not favorable [12]

Core Insights - CoStar Group (CSGP) reported non-GAAP earnings of 14 cents per share in Q1 2025, exceeding the Zacks Consensus Estimate by 27.27% and showing a 40% increase year over year from 10 cents per share in the same quarter last year [1] - Revenues reached $732.2 million, surpassing the Zacks Consensus Estimate by 1.78% and reflecting an 11.5% year-over-year growth, marking the 56th consecutive quarter of double-digit revenue growth [2] - The Matterport acquisition contributed $15.9 million in revenues during Q1 2025, enhancing overall performance [2] Revenue Breakdown - CoStar's revenues from its primary segment accounted for 36.2% of total revenues, amounting to $265.1 million, which beat the consensus estimate by 0.11% and increased 5.9% year over year [3] - Apartments.com generated $282 million in revenues, an 11% year-over-year increase, with 38 million average monthly unique visitors [4] - Multifamily revenues totaled $282.5 million, a 10.9% year-over-year increase, although it missed the consensus estimate by 0.34% [5] - LoopNet's revenues were $72.8 million, up 5.4% year over year but missed the consensus mark by 0.78% [5] - Other marketplace revenues reached $44.8 million, exceeding the consensus mark by 51.61% and increasing 46.4% year over year [6] Operating Performance - Selling and marketing expenses rose 0.8% year over year to $368.9 million, constituting 50.4% of revenues, down from 55.8% in the previous year [7] - Adjusted EBITDA was reported at $66 million, significantly up from $12 million in the year-ago quarter, with an adjusted EBITDA margin expansion of 710 basis points to 9% [9] Financial Position - As of March 31, 2025, CoStar had cash and cash equivalents of $3.68 billion, down from $4.68 billion as of December 31, 2024 [10] - Long-term debt stood at $992.2 million, slightly up from $991.9 million at the end of the previous year [10] Guidance - For Q2 2025, CoStar expects revenues between $770 million and $775 million, indicating a year-over-year growth of 14% at the mid-point [11] - For the full year 2025, revenues are projected to be between $3.115 billion and $3.155 billion, reflecting a year-over-year growth of 15% at the mid-point [11][12]

Financial Data and Key Metrics Changes - Q1 2025 revenue was $732 million, a 12% increase year over year, marking the 56th consecutive quarter of double-digit revenue growth [4][5] - Adjusted EBITDA for Q1 2025 was $66 million, representing a 429% increase over Q1 2024, with a profit margin of 43% in commercial real estate and information marketplace businesses [5][63] - Company net new bookings were $56 million in Q1 2025, up 6% sequentially from Q4 2024 [5][70] - The company reported a net loss of $15 million primarily due to one-time costs from the Matterport acquisition [69] Business Line Data and Key Metrics Changes - CoStar revenue grew 6% year over year, with net new bookings at their highest level since Q3 2023 [6][64] - Apartments.com revenue increased by 11% year over year, with a significant rise in quality interactions and new community additions [18][65] - LoopNet revenue grew 5% in Q1 2025, with expectations for revenue growth to accelerate throughout the year [66] - STR's integration into CoStar contributed to its best quarter ever for net new bookings, up 17% year over year [6] Market Data and Key Metrics Changes - The commercial real estate environment remains challenging, with historic high vacancy rates around 16% and real asking rents at a 30-year low [8][9] - In retail, real asking rents are at ten-year lows, but signs of improvement are emerging as vacancy rates begin to fall [10] - The international business achieved over $5 million in annual recurring revenue (ARR) in Q1 2025, representing 56% year-over-year growth [5] Company Strategy and Development Direction - The company is focused on enhancing its product offerings and integrating various brands to create a comprehensive solution for clients [13][14] - A new marketing strategy for LoopNet aims to increase the number of paid properties on the platform, enhancing consumer choice [12] - The company plans to expand its sales force by 23% in 2025 to capitalize on market opportunities, particularly in the multifamily sector [19][20] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about returning to double-digit growth as market conditions improve over the next few years [11] - The company anticipates slight headwinds from government contract cancellations but expects revenue growth to remain stable [64][72] - The integration of Matterport is expected to enhance the company's offerings and drive future growth [63][68] Other Important Information - The company repurchased 240,000 shares for $18.5 million and plans to repurchase a total of $150 million in shares in 2025 [71] - The company is in the process of acquiring Domain Group, which could significantly enhance its market position in Australia [71][54] Q&A Session Summary Question: Comments on the delayed market listing exemption and Zillow's reaction - Management noted overwhelmingly negative feedback from agents regarding Zillow's actions, indicating a potential opportunity for the company [76][77] Question: Nonresidential EBITDA margin in Q1 and outlook for residential spending - The commercial margin was reported at 43% for Q1, with no changes to the residential spending outlook [78][79] Question: Integration and monetization of Matterport - Management discussed plans for integrating Matterport into the CoStar platform and its potential for monetization [82]

Financial Data and Key Metrics Changes - Q1 2025 revenue reached $732 million, a 12% year-over-year increase, marking the 56th consecutive quarter of double-digit revenue growth [5][63] - Adjusted EBITDA for Q1 2025 was $66 million, representing a 429% increase compared to Q1 2024, with a profit margin of 9% [5][63] - Company net new bookings were $56 million in Q1 2025, up 6% sequentially from Q4 2024 [6][71] Business Line Data and Key Metrics Changes - CoStar revenue grew 6% year-over-year to $265 million in Q1 2025, with annualized net new bookings increasing by 68% year-over-year [7][64] - Apartments.com revenue increased by 11% year-over-year to $282 million, with significant growth in quality interactions and new community additions [19][65] - LoopNet revenue grew 5% in Q1 2025, with expectations for revenue growth to accelerate throughout the year [67] Market Data and Key Metrics Changes - The commercial real estate environment remains challenging, with a historic high vacancy rate of about 16% and real asking rents at a 30-year low [9][10] - In retail, vacancy rates are beginning to fall, indicating signs of improvement in the market [11] - The international business achieved over $5 million in annual recurring revenue (ARR) in Q1 2025, representing 56% year-over-year growth [6] Company Strategy and Development Direction - The company is focused on integrating its various brands and enhancing product offerings to create a comprehensive solution for clients [15][16] - A new marketing strategy for LoopNet aims to increase the number of paid properties on the platform, enhancing consumer choice [13] - The company plans to expand its sales force by 23% in 2025 to capitalize on market opportunities [20] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about returning to double-digit growth as market conditions improve over the next few years [12] - The company anticipates slight headwinds from government contract cancellations but maintains a revenue growth outlook of 6% to 7% for the full year [64][73] - The integration of Matterport is expected to enhance the company's offerings and contribute to future growth [55][69] Other Important Information - The company repurchased 240,000 shares for $18.5 million in Q1 2025 and plans to repurchase a total of $150 million in shares throughout the year [72] - The company has made a nonbinding offer to acquire Domain Group, which could significantly enhance its market position in Australia [72][54] Q&A Session Summary Question: Comments on the delayed market listing exemption and Zillow's reaction - Management noted overwhelmingly negative feedback from agents regarding Zillow's new rules, indicating a potential opportunity for the company [76][77] Question: Nonresidential EBITDA margin in Q1 and outlook for residential spending - The commercial margin was reported at 43% for Q1, with no changes to the residential spending outlook [78][80]

Financial Data and Key Metrics Changes - Q1 2025 revenue reached $732 million, a 12% year-over-year increase, marking the 56th consecutive quarter of double-digit revenue growth [5][63] - Adjusted EBITDA for Q1 2025 was $66 million, representing a 429% increase compared to Q1 2024, with a profit margin of 9% [6][63] - Company net new bookings were $56 million in Q1 2025, up 6% sequentially from Q4 2024 [6][71] - The company reported a net loss of $15 million primarily due to one-time costs from the Matterport acquisition [70] Business Line Data and Key Metrics Changes - CoStar revenue grew 6% year-over-year in Q1 2025, with net new bookings at their highest level since Q3 2023 [7][64] - Apartments.com revenue increased by 11% year-over-year, with significant growth in the number of listed properties [19][65] - LoopNet revenue grew 5% in Q1 2025, with expectations for revenue growth to accelerate throughout the year [67] - STR's integration into CoStar contributed to its best quarter ever for net new bookings, up 17% year-over-year [7] Market Data and Key Metrics Changes - The commercial real estate environment remains challenging, with historic high vacancy rates around 16% and real asking rents at a 30-year low [9][10] - In retail, real asking rents are at ten-year lows, but signs of improvement are emerging as vacancy rates begin to fall [11] - The company expects market conditions to improve over the next few years, shifting from headwinds to tailwinds [12] Company Strategy and Development Direction - The company is focused on integrating its various brands and enhancing product offerings to create a comprehensive solution for clients [15][16] - A new marketing strategy for LoopNet aims to increase the number of paid properties on the platform, enhancing consumer choice [13] - The company is expanding its sales force to capitalize on growth opportunities, particularly in the Apartments.com segment [20][21] Management's Comments on Operating Environment and Future Outlook - Management noted that the current commercial real estate environment is one of the worst in decades, but they anticipate a return to double-digit growth as conditions improve [9][12] - The company is maintaining its revenue growth guidance of 6% to 7% for the full year 2025, despite some expected headwinds from government contract cancellations [64][73] - Management expressed confidence in the Homes.com brand, which has seen significant growth in unaided brand awareness and traffic [70][31] Other Important Information - The company repurchased 240,000 shares for $18.5 million in Q1 2025 and plans to repurchase a total of $150 million in shares throughout the year [72] - The company made a nonbinding offer to acquire Domain Group, a significant player in the Australian real estate market [72][54] Q&A Session Summary Question: Comments on the delayed market listing exemption discussed by the NAR and Zillow's reaction - Management reported overwhelmingly negative feedback from agents regarding Zillow's new rules, indicating a potential opportunity for the company [76][77] Question: Nonresidential EBITDA margin in Q1 and outlook for residential spending in 2025 - The commercial margin was reported at 43% for Q1, with no changes to the budget for Homes.com [78][80]

Core Viewpoint - CoStar Group is expected to report first-quarter 2025 earnings on April 29, with projected revenues between $711 million and $716 million, indicating a year-over-year growth of 9% at the midpoint of the range [1]. Revenue Estimates - The Zacks Consensus Estimate for CoStar's revenues is currently at $719.37 million, suggesting a growth of 9.59% compared to the same quarter last year [2]. - The consensus estimate for earnings remains at 11 cents per share, indicating a 10% growth from the previous year's figure [2]. Historical Performance - CoStar Group has consistently beaten the Zacks Consensus Estimate in the last four quarters, with an average surprise of 47.26% [3]. Factors Influencing Performance - The first-quarter performance is likely to benefit from a strong portfolio of marketplaces, including Apartments.com, LoopNet, and Homes.com [4]. - Apartments.com is expected to see an 11% revenue growth in Q1 2025, driven by increased traffic and higher advertising spending [4]. - Homes.com reached 110 million average monthly unique visitors in Q4 2024, up 11% year over year, contributing to overall traffic growth [5]. - CoStar's total site traffic reached 134 million average monthly unique visitors in Q4 2024, reflecting a 17% year-over-year increase [5]. - The international segment and positive outlook for real estate marketplaces are anticipated to enhance LoopNet's performance [5]. Acquisition Impact - CoStar's growth is supported by a consistent acquisition strategy, including the acquisition of Matterport, which integrates 3D capture technology into its real estate marketplaces [6]. - The acquisition of Visual Lease strengthens CoStar's Real Estate Manager business line, providing comprehensive lease management solutions [7]. - The STR product, a benchmarking tool for the hospitality industry, is expected to show strong revenue growth in the upcoming quarter [7]. Earnings Model Insights - According to the Zacks model, CoStar Group has an Earnings ESP of 0.00% and a Zacks Rank of 3 (Hold), indicating that the odds of an earnings beat are not favorable [8].