CoStar Group, Inc. Q1 FY2025 earnings call

Management Statement and Operational Highlights:

• CoStar posted strong Q1 '25 results with revenue of $732 million, a 12% year-over-year increase, and adjusted EBITDA of $66 million, a 429% increase year-over-year.
• Various product segments showed robust performance: CoStar had 6% Y/Y revenue growth, STR saw record net new bookings, LoopNet had significant net new bookings growth, Apartments.com added new communities, and Homes.com made progress in awareness and sales force expansion.
• Key operational highlights included integration of STR, product enhancements across segments, sales force growth, and progress in data integration and market expansion.

Segment Performance:

• Commercial real estate and information marketplace businesses: Q1 '25 revenue was $732 million, a 12% year-over-year increase. Adjusted EBITDA was $66 million, a 429% increase year-over-year. Profit margin was 43%.
• CoStar: Q1 '25 revenue was $265 million, up 6% year-over-year. Annualized net new bookings grew 68% year-over-year.
• STR: Best quarter ever for net new bookings, up 17% year-over-year, driven by 40% of net new bookings from owner operators.
• CoStar for lenders: Best quarter ever for net new bookings, up 116% year-over-year, used by 385 institutions for $1 trillion of CRE debt.
• LoopNet: Annualized net new bookings skyrocketed 200% year-over-year, the highest in nearly 3 years.
• CoStar Real Estate Manager and Visual Lease: Annualized subscription revenue growth near double digits, with 50% year-over-year EBITDA growth.
• Land.com: Net new bookings increased 58%, integrating with Homes.com.
• BizBuySell: Revenue was $8.7 million, a 10% year-over-year increase; net new bookings up 85% year-over-year.
• Apartments.com: Revenue was $282 million, a 11% year-over-year increase; added 4,300 new communities, with a 94 Net Promoter Score.
• Homes.com: Unaided awareness was 36%, unique visitors were 104 million monthly, sales force grown to 314 reps, and pricing optimized.
• Matterport: Contributed $15.9 million revenue in Q1, expected to drive growth across CoStar platforms.

Guidance:

• Full year 2025 revenue expected $3.115 billion to $3.155 billion, representing 14%-15% annual growth.
• Second quarter 2025 revenue expected $770 million to $775 million, a 14% year-over-year increase at the midpoint.
• 2025 adjusted EBITDA expected $355 million to $385 million, with a margin of approximately 12%. Matterport's inclusion reduces adjusted EBITDA by ~$30 million.
• LoopNet revenue growth expected to accelerate, with full year 7%-8% growth.
• Apartments.com revenue guidance 11%-12% for full year, with 10% growth in Q2.
• Homes.com revenue growth expected to accelerate into 2026 and beyond.

Risks:

• Commercial real estate market uncertainties: High vacancy rates, low rents in office, industrial, and retail sectors pose challenges.
• Competition: Zillow's aggressive policies and lead diversion models present threats.
• Integration risks: Challenges in integrating new segments like Matterport and Domain.
• Regulatory risks: Changes in real estate regulations could affect business operations.

Q: Alexei Gogolev with JPMorgan asked about the delayed market listing exemption discussed by the NAR and Zillow's reaction, and brokerage firms' views.

A: Andy Florance said the reaction from agents was overwhelmingly negative, seeing Zillow's move as anticompetitive and showing weakness.

Q: Pete Christiansen with Citi asked about Matterport integration and monetization over the next 12-18 months.

A: Andy Florance said Matterport will be embedded deeply into CoStar platforms, with R&D projects to add value, and has a ubiquitous value prop.

Q: George Tong with Goldman Sachs asked about residential investment spend in light of the capital allocation committee.

A: Christian Lown said the $900 million investment is unchanged, with $50 million savings from Homes.com reallocated to the sales force.

Q: John Campbell with Stephens asked about CCP and ways to lean in on private listings.

A: Andy Florance discussed the changing dynamics in real estate marketing and the popularity of non-lead diversion models.

Q: Ryan Tomasello with KBW asked about multifamily growth, bookings, and pricing vs. property count.

A: Christian Lown said second quarter decel is due to timing, with acceleration in the second half, and apartments had mid-20s million net new bookings.

Q: Stephen Sheldon with William Blair asked about pricing increases in CRE.

A: Andy Florance said pricing is more aggressive in improving markets, with volume increasing.

Q: Jeff Meuler with Baird asked about Homes.com attrition and renewals.

A: Andy Florance said in-period cancellation rate is down, NPS is up, and renewal rates are expected to be solid going forward.