Q2 2024 Earnings Summary
- CoStar's commercial business maintains strong EBITDA margins of around 41%, and expects this to continue, demonstrating robust profitability.
- Apartments.com is outperforming competitors with consistent traffic growth and superior lead-to-lease conversion rates, seeing significant growth opportunities in underpenetrated market segments like mom-and-pop units.
- Homes.com is experiencing phenomenal traffic growth, with end users preferring it over competitors and agents finding significant value, indicating strong demand and substantial growth potential as the company builds out its dedicated sales team.
- Decrease in residential revenue guidance by $20 million to $25 million due to challenges in building a dedicated sales force for Homes.com, suggesting execution risks and slower than expected monetization.
- Core commercial bookings are down year-over-year, as sales teams diverted focus to selling Homes.com memberships, potentially impacting the core commercial business.
- Continued significant investment in Homes.com is required, with no immediate relief in costs, indicating that profitability in the residential segment may be delayed over a multiyear period.
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Residential Revenue Guidance Reduction
Q: Why did you lower full-year residential revenue guidance by $20–25 million?
A: The primary factor is that many members of the borrowed sales force are returning to selling their core products. This natural shift means we need to focus on building a dedicated Homes.com sales team. While the initial results were strong, we believe this adjustment provides a more appropriate and hopefully conservative build of the business. We remain confident in our product and are seeing phenomenal traffic and user preference. , , -
Salesforce Productivity and Dedicated Team
Q: Is salesforce productivity affecting Homes.com's growth?
A: Yes, the borrowed sales force tends to migrate back to their existing products over time. To sustain growth, we are focusing on expanding our dedicated Homes.com sales team, which has higher Net Promoter Scores and better post-sales follow-up. This dedicated team is performing well, and we need to continue growing it to capture the full potential of the market. , -
EBITDA Margin Expectations
Q: Are your EBITDA margin targets still the same?
A: Yes, we expect our exit rate EBITDA margin target for the residential business to remain within the 15% to 16% range. For the commercial segment, we anticipate margins around 41%, consistent with the second quarter. , -
Apartments.com Trends and Competition
Q: How will you maintain leadership in Apartments.com amid increased competition?
A: We believe we are in a 'Goldilocks zone' economically for Apartments.com. We are maintaining our competitive advantage through robust product development and consistently growing traffic. There is significant room for growth, especially in smaller and mom-and-pop rental units where penetration is low. While competition may increase, the market is large, and we are well-positioned to continue our leadership. -
CoStar Suite Growth Drivers
Q: What are the future growth drivers for CoStar Suite?
A: We are focusing on developing products for corporate users, owners, lenders, and institutions—segments with low current penetration. Expanding into international markets like Germany, France, and Spain, as well as enhancing global hospitality functions with STR, will also drive growth. Additionally, we see opportunities as residential firms increasingly engage in commercial real estate. -
Residential Business and Buyer's Leads
Q: How do you balance value to home buyers with generating listings for agents?
A: Our priority is to produce the best site for home buyers, offering a superior user experience. We focus on a 'your listing, your lead' model, which benefits both buyers and agents by connecting interested buyers directly with the listing agent. This approach generates buyer agency leads more harmoniously and sustainably, supporting agents in winning more listings and serving buyers effectively. ,