Release Date: October 22, 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 strong third quarter with revenue of $693 million, marking an 11% increase year-over-year and aligning with their guidance.
- The company achieved its 54th consecutive quarter of double-digit growth, showcasing consistent performance.
- Apartments.com, a key segment, reported a revenue of $272 million for the quarter, with a 16% growth rate, maintaining its leadership position in the multifamily segment.
- CoStar's adjusted EBITDA of $76 million exceeded the guidance range, indicating effective cost management and operational efficiency.
- The company is expanding its sales force across CoStar, LoopNet, and Apartments.com, indicating confidence in market opportunities and future growth potential.
Negative Points
- The pivot of the sales force to focus on the new Homes.com product led to lower productivity and renewal rates, impacting overall sales performance.
- The commercial real estate market has been challenging, with office prices down 18% over the past year and multifamily prices down 11%, affecting market conditions.
- Net new bookings were $44 million, reflecting a decrease in core bookings, which could impact future revenue growth.
- The transition of sales resources back to core products from Homes.com has been slower than expected, affecting short-term sales productivity.
- The residential revenue guidance was adjusted downward due to sales force productivity issues and less favorable property market conditions.
Q & A Highlights
Q: It seems like your commercial real estate backdrop is improving. How are you thinking about the growth outlook in 2025 for businesses like the Suite and LoopNet?
A: Andrew Florance, CEO: We have done remarkably well in a difficult market, and as conditions improve, this should switch from a headwind to a tailwind. There's plenty of room to grow, especially with a larger sales force and improved pricing models. We are optimistic about growth in the coming year, barring any unforeseen external events.
Q: Can you elaborate on the uptick in sales as you reprioritize sales resources back to their core responsibilities?
A: Andrew Florance, CEO: We've seen an uptick in CoStar sales as salespeople refocus on their core products. Initially, they spent more time on Homes.com, which slowed their productivity. As we build a dedicated sales force for Homes.com, the core teams will return to their products, reenergizing growth.
Q: Could you discuss the potential seasonality in the Homes business and how you plan to address it?
A: Andrew Florance, CEO: The primary issue was not seasonality but rather the sales force's initial lack of experience with the new product. As they become more familiar with the value proposition, we expect Homes.com to be viewed as an annual subscription with high renewal rates among agents with consistent listings.
Q: How much of the reduction in residential guidance is due to sales force productivity issues versus client demand?
A: Andrew Florance, CEO: It's more about sales force mechanics than client demand. We are hiring and training new salespeople, and while demand is strong, the pace of hiring and training limits how quickly we can capitalize on it.
Q: With the core bookings down, how should we think about the impact on next year's growth?
A: Chris Lown, CFO: Net bookings ultimately translate into revenue for the following year. We are focusing on reengaging and investing in the sales force to improve net bookings in upcoming quarters, which will impact growth in the second half of 2025 and into 2026.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
