Release Date: July 23, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- CoStar Group Inc (CSGP, Financial) reported a 12% year-over-year increase in Q2 2024 revenue, reaching $670 million, which was above the midpoint of their guidance range.
- Apartments.com saw an 18% revenue growth, while CoStar's core business grew by 10%, indicating strong performance in key segments.
- Adjusted EBITDA was significantly higher than expected at $41 million, surpassing both the guidance range and consensus estimates.
- The company achieved a record 183 million average monthly unique visitors to its global websites, an 81% increase over the prior year.
- Homes.com reported a 197% increase in average monthly unique visitors, demonstrating strong traction and user engagement.
Negative Points
- There was a noted shift in sales force focus, with many salespeople returning to their core products, impacting the growth momentum of Homes.com.
- Despite strong traffic numbers, the company revised its full-year residential revenue guidance down to $105-$110 million, reflecting a more conservative outlook.
- The transition of STR into CoStar led to a 20% year-over-year drop in revenue from information services.
- Commercial bookings were down year-over-year, attributed to the sales force's focus on Homes.com, indicating a substitution effect.
- The company faces challenges in building out a dedicated Homes.com sales team, which is crucial for future revenue growth.
Q & A Highlights
Q: Can you talk about adjusting the sales force to sell to residential agents and address the notion of refunds or cancellations throughout the quarter?
A: The broad sales force can sell the Homes.com product, but there's a natural tendency for them to return to their core products. We are focusing on building a dedicated Homes.com sales team, which has higher Net Promoter Scores. Regarding refunds, we initially had a lenient cancellation policy, but now we are educating agents on the value of our listing-focused model.
Q: What drove the decision to lower the residential revenue guidance for the rest of the year?
A: The initial results were strong, but we are now seeing a more appropriate build of the business. The main issue is the rotation of the core sales force back to their primary products. We are focused on growing the dedicated Homes.com sales team.
Q: Can you confirm the exit run rate EBITDA margin target?
A: Yes, it is still within the 15% to 16% range.
Q: What factors are determining the budget for the Homes.com initiative over the next few years?
A: We are focused on building the best state and creating substantial value. We do not anticipate growing the net investment in the product but will continue investing at the same loss level. The ARR guidance for Homes.com remains at the lower end of the $475 to $500 million range.
Q: How are you balancing the value of the platform to home buyers versus providing advertising for agents to win more listings?
A: We focus on a "your listing, your lead" model, which is preferred by sellers and agents. This model generates buyer leads more harmoniously with the industry and is more sustainable long-term.
Q: Can you provide an update on the commercial EBITDA margin for the year and expectations for LoopNet?
A: We expect commercial EBITDA margins to remain around 41% and LoopNet revenue to grow in the mid-single digits.
Q: What are the growth drivers for CoStar Suite over the next two to three years?
A: We are developing products for corporate users, lenders, and international markets. We are also expanding into Germany, France, Spain, and global hospitality functions. There is still significant room for growth in these areas.
Q: Can you elaborate on the factors affecting commercial bookings in the quarter?
A: The reduction year over year is primarily due to the sales force's focus on selling Homes.com, which substituted some of their core product sales efforts.
Q: How are you addressing competition in the apartment space and maintaining your leadership position?
A: We have a robust product development pipeline and continue to outperform competitors in lead quality, conversion rates, and brand awareness. We are also expanding into smaller rental units and individual houses, which have significant growth potential.
Q: How are you balancing the focus on driving app downloads versus web mobile traffic for Homes.com?
A: We prioritize web mobile as it is the fastest way to collect traffic and offers a better user experience. While we are developing app functionality, the majority of traffic in the industry comes from web mobile.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
