CoStar Group, Inc.
CEO : Mr. Andrew C. Florance
Quarterly earnings growth(YoY,%)
| Period | Revenue | Operating Income | EPS | Release Date |
|---|---|---|---|---|
| 2023 Q2 | 13.0% YoY | -28.2% | 19.0% | 2023-07-25 |
Andy Florance says,
Revenue Growth
- Revenue for the second quarter of 2023 was $606 million, a 13% growth year-over-year.
- Commercial Information and Marketplace business revenue grew by an impressive 15% year-over-year.
- Apartments.com revenue was $224 million, accelerating to 23% year-over-year growth.
- Apartments.com sales team delivered a record net new sales quarter with net sales bookings increasing by 84% compared to the same quarter last year.
- CoStar revenue for the second quarter was $229 million, an 11% increase over the same period last year.
- LoopNet revenue was $66 million for the quarter, up 16% year-over-year.
Visitor Traffic and Market Share
- CoStar Group’s websites reached a high of 105 million monthly unique visitors in June.
- CoStar Group’s residential portal network became the second most heavily trafficked residential marketplace in the U.S. with 84 million average monthly unique visitors.
- Homes.com is the fastest-growing residential portal with network traffic growing 130% year-over-year in June to 38 million monthly unique visitors.
- Apartments.com monthly unique visitors grew 9% year-over-year in June, significantly outperforming the market.
Customer Growth and Sales Performance
- CoStar Group added over 66,000 paying communities on their network, representing a 12% increase over the second quarter of last year.
- Apartments.com sales team delivered the highest sales quarter ever with $82 million of net new bookings in the second quarter.
- Mid-market efforts contributed to the growth of paid subscribers by almost 40% in the second quarter.
- 65% of all new 100-plus unit communities are advertising with Apartments.com.
- CoStar Lender product had its best sales quarter ever, with net new sales nearly doubled the sales results from the first quarter of this year.
Product and Content Strategy
- Homes.com launched proprietary content, including neighborhood videos, informative write-ups, photographs, and comprehensive school profiles.
- Early focus group responses to Homes.com product features and content were very encouraging.
- New Homes Pro product integrating Homesnap Pro features and tools received positive feedback from agents.
- CoStar introduced property investment fund data and a new corporate user feature on their platform.
Guidance and Outlook
- Apartments.com revenue growth is expected to accelerate to 25% through the end of this year.
- Vacancy rates in the apartment industry are expected to continue to rise, peaking at around 9% in mid-2024.
- CoStar expects strong revenue growth to continue despite the challenging commercial real estate cycle.
Scott Wheeler says,
CoStar Revenue
- CoStar revenue grew 11% in the second quarter, slightly above the guidance of 10%.
- Strong net new sales contributed to the revenue growth.
- New customer sales to owners, investors, and lenders were particularly strong.
- Stabilization of broker sales with almost 800 new broker agreements signed.
Apartments.com Revenue
- Apartments.com revenue grew 23% in the second quarter, in line with expectations.
- New property volumes increased 12% year-over-year.
- Mid-market category volumes grew rapidly at 40%.
- More customers are upgrading to higher tier ads, particularly for 100+ unit properties.
LoopNet Revenue
- LoopNet revenue grew 16% in the second quarter, consistent with the first quarter.
- Sales fell short of expectations, leading to an adjustment in the full year revenue outlook to approximately 15% year-over-year growth.
Information Services Revenue
- Information Services revenue grew 9% in the second quarter.
- STR and Real Estate Manager posted strong double-digit revenue growth, particularly in their subscription parts of the business.
- Renewal rates for STR and Real Estate Manager are impressive at 97% and 100% respectively.
- More banking customers are moving to the new CoStar lender product, shifting some revenue from Information Services to CoStar.
Other Marketplaces Revenue
- Ten-X revenue was lower than expected in the second quarter due to low transaction volumes and deal uncertainty.
- Lands and businesses for sale marketplaces revenue grew 11% year-over-year in the second quarter.
- Revenue outlook for Ten-X has been moderated for the second half of the year.
- Full year revenue outlook for other marketplaces reduced by approximately $20 million.
Adjusted EBITDA and Outlook
- Adjusted EBITDA for the second quarter was $127 million, above the high end of guidance.
- Adjusted EBITDA margin was 21%.
- Full year revenue outlook is in the range of $2.45 billion to $2.46 billion.
- Subscription-based businesses are expected to deliver strong sales and double-digit revenue growth in the second half.
- Revised adjusted EBITDA guidance range is $510 million to $520 million.
- Third quarter revenue is expected to be in the range of $622 million to $627 million.
Q & A sessions,
Monetization Progress
- Anticipate significant progress in traffic in Q1 2024 and Q2 2024
- Strategically, it might be wiser to monetize when expecting a second stair step function of growth in 2024
- Goal is to demonstrate proof of monetization ability to investors
Content and Value Proposition
- Currently in the second inning on content
- Volume of content being produced is enormous
- Expect the content to be a compelling value proposition for the platform
Return Traffic and Lead Flow
- Return traffic from direct sources is up about 400% YoY
- Lead flow is believed to be twice the flow of well-known residential platforms in the US
- High-quality traffic and lead flow attributed to putting the actual listing agent’s information on the listing, compared to competitors using call centers and syndicating leads
- Engaged group of residential agents driving traffic and leads to the platform
Pace of Delivery and Sales
- Pace of delivering modules and functionalities is increasing
- Addition of international markets to coverage area creating more demand
- CoStar sales team responding and shifting focus to selling to lenders, owners, and corporate users with strong growth
Content Investment and Consumer Response
- Investment in differentiating product through content strategies
- Consumer response to real products, data, and content has been positive
- Content investment is a relatively modest percentage of revenue
Brand Awareness and Marketing
- No broad consumer marketing occurring for Homes.com at the moment
- Consumer marketing important for improving SEO and SEM
- Unaided awareness for Apartments.com is 49%
- Building loyal following of repeat users for Homes.com
No bad stock 