Group 1: Earnings Performance - CoStar Group reported quarterly earnings of $0.14 per share, exceeding the Zacks Consensus Estimate of $0.11 per share, and up from $0.10 per share a year ago [1] - The earnings surprise for the quarter was 27.27%, following a previous quarter where actual earnings of $0.26 per share surpassed expectations of $0.22 per share by 18.18% [2] - Over the last four quarters, CoStar has consistently surpassed consensus EPS estimates [2] Group 2: Revenue Performance - CoStar's revenues for the quarter ended March 2025 were $732.2 million, surpassing the Zacks Consensus Estimate by 1.78% and up from $656.4 million year-over-year [3] - The company has exceeded consensus revenue estimates three times in the last four quarters [3] Group 3: Stock Performance and Outlook - CoStar shares have increased approximately 14.2% since the beginning of the year, contrasting with a -6% decline in the S&P 500 [4] - The current consensus EPS estimate for the upcoming quarter is $0.16 on revenues of $747.83 million, and for the current fiscal year, it is $0.93 on revenues of $3.04 billion [8] Group 4: Industry Context - The Computers - IT Services industry, to which CoStar belongs, is currently ranked in the bottom 44% of over 250 Zacks industries, indicating potential challenges ahead [9] - The performance of CoStar's stock may be influenced by the overall outlook for the industry [9]

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]

Financial Performance - CoStar Group reported Q1 2025 revenue of $732 million, a 12% increase from $656 million in Q1 2024[1] - The company experienced a net loss of $15 million in Q1 2025, with a diluted loss per share of $0.04, impacted by a $31 million cost related to the Matterport acquisition[1] - Adjusted EBITDA for Q1 2025 was $66 million, reflecting a 429% increase compared to $12 million in Q1 2024[1] - CoStar Group reported a net loss of $14.8 million for Q1 2025, compared to a net income of $6.7 million in Q1 2024, representing a significant decline[20] - Total revenues for Q1 2025 reached $732.2 million, up 11.5% from $656.4 million in Q1 2024[22] - EBITDA for Q1 2025 was $(0.8) million, a decrease from $12.4 million in Q1 2024, indicating operational challenges[26] - CoStar Group expects full-year 2025 revenue between $3.115 billion and $3.155 billion, indicating approximately 15% year-over-year growth at the midpoint[5] - For Q2 2025, revenue is projected to be between $770 million and $775 million, representing about 14% year-over-year growth at the midpoint[5] - Adjusted EBITDA for the full year 2025 is anticipated to be in the range of $355 million to $385 million, with a margin of 12% at the midpoint[6] Business Growth and Engagement - CoStar's commercial real estate businesses saw a 68% year-over-year increase in net new bookings, while LoopNet achieved a remarkable 200% increase year-over-year[2] - Apartments.com added 4,300 properties in Q1 2025, marking the highest quarterly addition since Q1 2016[2] - Homes.com has grown its salesforce to 370 representatives, with plans to reach 500 by the end of June 2025[2] - The Homes.com Network has become the second largest in the U.S. with 104 million average monthly unique visitors, and unaided consumer awareness rose to 36% from 4% prior to its February 2024 launch[2] - CoStar's websites attracted over 130 million average monthly unique visitors in Q1 2025, highlighting strong user engagement[31] Financial Position and Investments - CoStar Group's cash, cash equivalents, and restricted cash decreased to $3.78 billion at the end of Q1 2025, down from $4.95 billion at the end of Q1 2024[20] - The company reported significant investments in acquisitions, with net cash used in investing activities totaling $910.6 million in Q1 2025[20] - Stock-based compensation expense increased to $30.4 million in Q1 2025, compared to $22.8 million in Q1 2024, reflecting higher employee incentives[26] Forward-Looking Statements and Guidance - CoStar Group's forward-looking statements are based on information available as of the date of the report[33] - The company assumes no obligation to update or revise any forward-looking statements unless required by applicable law[33] - The company does not provide specific numerical guidance in this document[33] - Investors are encouraged to monitor the SEC website for the latest updates on CoStar Group[33] Regulatory and Compliance - CoStar Group's filings with the SEC include Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q[33] - The "Risk Factors" section in these filings outlines potential risks to the company's performance[33] - Current Reports on Form 8-K are also available for further insights into the company's operations[33] - The company emphasizes the importance of reviewing its SEC filings for comprehensive financial data[33] - CoStar Group's performance metrics and future outlook are subject to change based on new information and future events[33] - The company remains committed to transparency in its financial reporting and disclosures[33]

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].

Core Insights - CoStar Group has entered into support agreements with D.E. Shaw and Third Point for board refreshment and corporate governance enhancements [3][6] - The agreements include the addition of three new directors and the retirement of three long-tenured directors, indicating a significant board refreshment [6][8] - CoStar's core business generates approximately 95% of its revenue, primarily from CoStar Suite and Apartments.com, which have strong competitive advantages [4][5] Company Overview - CoStar Group operates online real estate marketplaces and analytics, managing brands like CoStar Suite, LoopNet, Apartments.com, and Homes.com [4] - The company has historically traded at a premium to its peers but is currently valued in line with them due to aggressive investments in its Homes.com business [4][5] Financial Dynamics - CoStar is diverting about 75% of its $1.3 billion EBITDA to fund $900 million in losses from Homes.com, leading to a significant increase in capital expenditures [5][8] - Capital expenditures are projected to rise by 878% from 2021 to 2024, with a 347% increase expected in 2024 alone [5] Governance Changes - The newly formed capital allocation committee will focus on funding the Homes.com business without relying on core business cash flow and will assess international expansion opportunities [7][8] - The committee's goal is to enhance the valuation of CoStar's core business, potentially increasing its enterprise value from around $30 billion to approximately $45 billion [8] Activist Investor Involvement - Third Point holds a 2.04% position in CoStar, while D.E. Shaw's position remains undisclosed but is expected to be significant given its size as a $70 billion hedge fund [9]

Core Viewpoint - CoStar Group (CSGP) has seen a slight increase in share price of approximately 0.2% since its last earnings report, outperforming the S&P 500, but estimates have trended downward significantly, indicating potential challenges ahead [1][2]. Group 1: Earnings and Estimates - The consensus estimate for CoStar has shifted downward by 41.46% over the past month, reflecting a negative trend in earnings expectations [2]. - CoStar's most recent earnings report is crucial for understanding the key drivers affecting its stock performance [1]. Group 2: VGM Scores - CoStar currently holds a poor Growth Score of F, a Momentum Score of F, and a Value Score of F, placing it in the lowest quintile for investment strategies [3]. - The aggregate VGM Score for CoStar is F, indicating a lack of attractiveness across multiple investment strategies [3]. Group 3: Outlook - The overall trend of downward revisions in estimates suggests a negative outlook for CoStar, with a Zacks Rank of 3 (Hold), indicating expectations for an in-line return in the coming months [4]. Group 4: Industry Comparison - CoStar is part of the Zacks Computers - IT Services industry, where Jack Henry (JKHY) has performed better, gaining 5.9% over the past month [5]. - Jack Henry reported revenues of $573.85 million for the last quarter, reflecting a year-over-year increase of 5.2%, with EPS rising from $1.22 to $1.34 [5]. - For the current quarter, Jack Henry is expected to post earnings of $1.35 per share, indicating a year-over-year change of 13.5% [6].

Group 1 - The core thesis for CoStar Group (NASDAQ: CSGP) is that the growth runway remains very positive, with solid execution observed in Apartments.com and Homes.com [1] - CoStar Group has continued to demonstrate strong performance despite ongoing investments [1] Group 2 - The investment approach focuses on identifying undervalued companies with long-term growth potential, blending value investing principles with a long-term growth focus [1] - The strategy involves buying quality companies at a discount to their intrinsic value and holding them for the long term to allow for compounding of earnings and shareholder returns [1]

Business Operations - CoStar Group operates leading online marketplaces for real estate in the U.S. and the U.K., with the largest commercial real estate research department in the industry [22]. - The company has spent over 35 years building a comprehensive database of real estate information, which includes hundreds of data fields related to properties, tenants, and market trends [27]. - CoStar Group's revenue streams are highly diversified, with no dependency on a few customers, and services are typically distributed under subscription-based license agreements [40]. - Recent acquisitions include Business Immo, OnTheMarket, and Visual Lease, which are being integrated into the CoStar network to enhance service offerings [48]. - The company plans to continue investing in its business and services, focusing on strategic growth opportunities and expanding its online marketplace services [47]. - CoStar Group's principal online services include CoStar for commercial real estate intelligence, Apartments.com for apartment rentals, and LoopNet for commercial property marketing [34][35][36]. - The company utilizes a subscription-based model for its services, with contract rates based on various factors including the number of properties advertised and the client's geographic location [39]. - The company operates in two reportable segments: North America (U.S. and Canada) and International (primarily Europe, Asia-Pacific, and Latin America) [50]. Marketing and Client Acquisition - CoStar Group's marketing strategies include digital marketing, social media, and targeted campaigns to attract new clients and retain existing ones [44][45]. - The company emphasizes the importance of developing and introducing new or upgraded online marketplace services to maintain competitiveness [70]. - Brand awareness is crucial for attracting users and subscribers, and failure to enhance brand recognition could adversely affect business performance [83]. Financial Performance - Revenues increased by $281 million, or 11%, to $2.736 billion for the year ended December 31, 2024 [207]. - Net income decreased by $236 million, or 63%, to $138.7 million for the year ended December 31, 2024 [207]. - Subscription revenues represented approximately 96% of total revenues for the year ended December 31, 2024, an increase from 95% in 2023 [192]. - Annualized net new bookings for subscription-based services were approximately $250 million for the year ended December 31, 2024, down from $286 million in 2023 [192]. - Total operating expenses rose by $491.8 million, or 29%, to $2.173 billion [207]. - Selling and marketing expenses rose by $374 million, or 38%, to $1.364 billion, increasing as a percentage of revenues from 40% to 50% [209]. Risks and Challenges - The company faces risks related to attracting and retaining new clients, which could adversely affect revenues and financial position [69]. - The company is exposed to additional business risks from international operations, including volatility in foreign currency exchange rates [67]. - The company faces significant indebtedness, which could decrease flexibility and adversely affect business and financial condition [71]. - The company is vulnerable to cyberattacks and security breaches, which could require substantial resources for monitoring and remediation, although past incidents have not materially affected operations [101]. - The company faces risks related to acquisitions, including integration challenges and potential increases in operating costs [88]. Employee and Operational Structure - As of January 31, 2025, the company employed 6,593 employees, with approximately 88% based in the U.S. and 10% in European, Asia-Pacific, and Latin American countries [59]. - The company has experienced no work stoppages and none of its employees are represented by a labor union [59]. - The ability to hire and retain qualified personnel is critical for revenue growth, and challenges in this area could adversely affect revenues [78]. Technology and Data Management - The company leverages proprietary technology to enhance data quality and research efficiency, integrating sales, research, and customer support information [49]. - The company relies on internet search engines for traffic to its websites, and fluctuations in search result rankings could adversely affect user growth and revenue [84]. - The company measures average monthly unique visitors using Google Analytics, transitioning from Universal Analytics, which may impact comparability of visitor data [84]. - The company faces risks related to maintaining accurate and reliable data, which is critical for client confidence and demand for services [121]. Acquisitions and Investments - The company expects to complete the acquisition of Matterport in the first quarter of 2025, subject to regulatory approvals and other conditions [93]. - The company incurred a termination fee of $52 million related to the unsuccessful acquisition of RentPath in 2021 [88]. - The company is investing in the development of its advertising platform to attract advertisers, which may increase research and development and marketing expenses [74]. Compliance and Regulatory Environment - The company’s services are subject to various governmental regulations, which may differ among jurisdictions [58]. - The company is subject to evolving privacy laws, including GDPR and CCPA, which may increase compliance costs and operational changes [146]. - The company is subject to compliance requirements from MLSs, and failure to comply could restrict access to listings data, adversely affecting business operations [130]. Future Outlook - Revenue growth for CoStar is expected to decelerate in 2025 compared to 2024 due to the lack of benefits from converting legacy STR customers [185]. - Information Services revenue growth is expected to accelerate in 2025 due to the Visual Lease Acquisition [186]. - The company plans to expand CoStar and LoopNet products internationally, including launching LoopNet in France and Spain [195].

Core Insights - CoStar Group (CSGP) reported non-GAAP earnings of 26 cents per share for Q4 2024, exceeding the Zacks Consensus Estimate by 18.18%, but down 21.2% from 33 cents in the same quarter last year [1] - Revenues reached $709.4 million, surpassing the Zacks Consensus Estimate by 1.20% and reflecting a year-over-year increase of 10.8%, marking the 55th consecutive quarter of double-digit revenue growth [2] - Despite strong performance in digital platforms, CSGP shares fell 4.25% in after-hours trading due to concerns over rising expenses [2][3] Revenue Breakdown - CoStar's revenues from its primary segment amounted to $260.3 million, missing the consensus estimate by 0.15% but increasing 9.5% year over year [4] - Apartments.com saw a revenue increase of 17% year over year, with net new bookings of $53 million, up 21% sequentially [4] - Multifamily revenues totaled $276.5 million, missing estimates by 0.29% but up 13.4% year over year [5] - LoopNet's revenues of $71.9 million exceeded estimates by 0.26% and increased 5% year over year [5] - Residential revenues reached $28.1 million, missing estimates by 1.40% but showing a significant year-over-year increase of 181% [5] - Homes.com became the second-largest residential real estate marketplace in the U.S., attracting 110 million unique monthly visitors, an 11% year-over-year increase [6] Operating Expenses - Selling and marketing expenses rose 25.1% year over year to $308.5 million, accounting for 43.5% of revenues compared to 38.5% in the previous year [7] - General and administrative expenses increased to 16.6% of revenues, up 90 basis points year over year [7] - Total operating expenses increased 21.6% year over year to $528.5 million, representing 74.5% of revenues, an increase of 660 basis points [9] Financial Position - As of December 31, CoStar reported cash and cash equivalents of $4.68 billion, down from $4.93 billion as of September 30 [10] - Long-term debt remained relatively stable at $991.9 million as of December 31 [10] - Cash generated by operating activities was $392.6 million in the reported quarter, up from $298 million in the previous quarter [10] Guidance - For Q1 2025, CoStar expects revenues between $711 million and $716 million, indicating a year-over-year growth of 9% at the mid-point [11] - For the full year 2025, revenues are projected between $2.99 billion and $3.02 billion, reflecting a year-over-year growth of 10% at the mid-point [11] - Adjusted EBITDA for Q1 2025 is anticipated to be between $25 million and $35 million, with a full-year expectation of $375 million to $405 million for 2025 [12]