CoStar Group, Inc.

Good day and thank you for standing by. Welcome to the Q1 2025 CoStar Group Earnings Conference call. At this time all participants are in a listen-only mode. Please be advised that today's conference is being recorded. After the speaker's presentation there will be a question and answer session. To ask a question please press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question please press star 1 1 again. I would now like to hand the conference over to your speaker today Rich Seminelli, head of investor relations.

Thank you so much operator and hello and thank you all for joining us to discuss the first quarter 2025 results of the CoStar Group. Before I turn the call over to Andy Florence, CoStar CEO and founder and Chris Lown, our CFO, I would like to review our safe harbor statement. Certain portions of the discussion today may contain forward-looking statements including the company's outlook and expectations for the second quarter and full year of 2025 based on current beliefs and assumptions. Forward-looking statements involve many risks, uncertainties, assumptions, estimates and other factors that can cause actual results to differ materially from such statements. Important factors that can cause actual results to differ include but are not limited to those stated in CoStar Group's press release issued earlier today and in our filings from time to time with the SEC including our annual reports on form 10k and quarterly reports on form 10q included under the heading risk risk factors in those filings as well as other filings with the SEC available at the SEC's website. All forward-looking statements are based on the information available to CoStar at the time of this call. CoStar assumes no obligation to update these statements whether as a result of new information, future events or otherwise except as required by applicable law. Reconciliation to the directly comparable gap measure of any non-gap financial measure discussed on this call are shown in detail in our press release issued earlier today along with the definitions for these terms. Press release is available on our website under the CoStarGroup.com under Pressroom. As a reminder, today's conference call is being webcast and you're on it so the link is also available on our website under Investors. Please refer to today's press release on how to access replay of this call. And with that, I'd like to turn the call over to our founder and CEO, Andy Florence. Andy?

Good day and thank you for joining CoStar Group's first quarter 2025 earnings call. We posted another strong quarter with Q1 25 revenue coming in at 732 million, a 12% increase year over year. This was our 56th consecutive quarter of double-digit revenue growth. Q1 revenue exceeded consensus and was at the top end of our guidance range. Adjusted EBITDA was 66 million, a 429% increase of Q1 over Q1 2024. Adjusted EBITDA also exceeded consensus and was at the top end of our guidance range. We achieved a very strong 43% profit margin, our Q1 25 commercial real estate and information marketplace businesses. That includes CoStar, Apartments, LoopNet, STR, Real Estate Manager, Land and Biz by Sell and Aggregate coming in at a 43% profit margin. Company net new bookings were 56 million in the first quarter of 25, up 6% sequentially from the fourth quarter of 24. Our international businesses have achieved three consecutive quarters of all-time net new bookings, reaching over 5 million ARR in Q1 25, representing 56% -over-year growth. We had 130 million average unique visitors to our global websites in Q1 25, according to Google Analytics. CoStar achieved 265 million in revenue in Q1 25. Revenue was up 6% -over-year while annualized net new bookings reached their highest level since Q3 23, generating 68% -over-year growth. This was the fourth consecutive quarter of increasing net new bookings as we continue to generate strong sales with banks, institutional investors and owners. STR's integration to CoStar contributed to its best quarter ever for net new bookings, up 17% -over-year. This increase was driven by significant rise in sales to owner operators, who were 40% of STR's net new bookings in Q1. We grew the number of CoStar subscribers in Q1 17% -over-year, largely driven by the migration of STR to the CoStar platform. CoStar for lenders, led by Mr. John Vacchione, achieved its best ever quarter of net new bookings, up 116% -over-year. Today, Lenders used by 385 institutions to manage risk on one trillion of CRD debt. In less than three years, it has achieved 80 million in annual revenue run rate. We have several product enhancements that will roll out in the course of the next few years that can take the total addressable market for lender well above $1.5 billion. CoStar remains a mission critical tool for our clients across all segments. Logins to CoStar were up 21% -over-year, and our subscribers averaged 100 million activities each month, the highest level of activity in the past nine quarters. Our quarterly renewal rate remains strong at 92%. During the past few years and through today, we're operating in one of the investment-grade offices. Although absorption is improving, we're still seeing historic high vacancy rate of about 16%. Real asking rents of $36.64 sit at a 30-year low. Real sales price per square foot is a decadal low of $257 per square foot. Market cap rates are at a high point of 9.17%. Sales volume or recovering is about one-third of normal levels. In industrial, we're seeing record lows for absorption and a 6% -over-year decline in real asking rents. In retail, real asking rents are 10-year lows. But I want to be clear, we see clear signs that the cycle is improving. Vacancy rates have hit their zenith and are beginning to fall. Availability rates have fallen 60 basis points. Sublet rents are beginning to rise. We expect that market conditions improve over the next few years. The headwinds we've experienced will shift to tailwinds and Costar will return to double-digit growth. LoopNet turned in an outstanding quarter as annualized net new bookings skyrocketed 200% -over-year. This was LoopNet's highest quarter of annualized net new bookings since Q3-22. In the quarter, per rep productivity was twice as high as Q1-24. This great sales performance was a result of changing our -to-market sales strategy. Our sales team is focused on selling a broad subscription package to owners and brokers to get all their properties on the platform rather than focusing on selling a few high-value signature ads that only address a small portion of the portfolio. Tents begin their search online and LoopNet is the largest commercial state marketplace in the world, so it's far more valuable to the robust exposure for one or two of their properties. The strategy will grow the number of paid properties on the platform, which increases the choice available on LoopNet for consumers and gives our sales team the opportunity to upsell silver ads to signature depth ads in the future. We're now also implementing asset-based pricing as silver ads come up for renewal. Our renewal rates on these ads remain strong at 97% as our customers understand it is important to tie the price of any given LoopNet ad to the value of the property being advertised. Our pricing will reflect that a billion-dollar five-star office building in Manhattan derives more value from LoopNet than does a hundred thousand dollar two-star retail building in Montana. Ultimately, as our goal to implement asset-based pricing across all ad tiers on both new sales and renewals. CoStar Real Estate Manager and Visual Lease attained annualized subscription revenue growth nearing double digits. In Q1 2025, we move forward with the consolidation of leadership and operations across the brands, positioning the leases businesses for integration in the greater CoStar data offering. This combined with other identified cost savings resulted in 50% -over-year even a growth for the combined brands. Both brands continue to take market share from the management competitors, many of whom are falling short on product innovation and focus on customers. The leases product team is now focused on combining the value of its portfolio management applications with CoStar's data and analytics Matterport and LoopNet offerings to create an unrivaled solution for occupiers for real estate. CoStar continues to develop a data set of leases from both anonymized customer data from the lease brands and publicly available sources like the SEC and UK land registry with the goal of providing full transparency on rent concessions and tenant improvements to real estate professionals. Q1 brought additional growth of customers electing to share data on an aggregate and anonymized basis. For the quarter, Land.com net new bookings increased 58%. Land.com continues integrating with Homes.com. Today over 8,000 Homes.com members are syndicating over 22,000 applicable listings to Land.com. Soon Land.com members will receive a similar benefit on Homes.com increasing value and opportunities for both sites. In mid-March, FarmerMac released the FarmerMac farmland price index powered by our recently acquired acre value. FarmerMac said the introduction of the FBI marks a significant advancement in tracking farmland price trends with greater precision and timeliness. We agree and look forward to providing greater more timely insight into farmland markets. Biz by Sell revenue reached $8.7 million in the first quarter representing a 10% increase year over year. Net new bookings increased 85% year over year driven by strong growth in both business owner and business buyer subscriptions. Subscription revenue from Biz by Sell Edge, which offers entrepreneurs advanced tools and market insights grew 48% year over year. Buyer demand continues to strengthen with website visits up 22% and lead volume increasing 33% year over year. Apartments.com turned in another strong quarter with revenue of $282 million, an increase of 11% over Q1-24. Apartments.com's sales team was very active in the first quarter. They conducted over 166,000 quality interactions with clients and prospects in the quarter and increased their -to-face meetings by 65% year over year. The increase in quality interactions is paying off as we added 4,300 new communities in Q1. The most properties we've added to Apartments.com in a single quarter in almost 10 years. We're benefiting from the shutdown of Redfin of their rent period business as we target those properties that were formerly on rent period, not apartments. We launched marketing campaigns to owners specifically comparing our traffic, leads, and leases to rent period with -to-face follow-up with communities with much success. We now have 80,000 multi-families on Apartments.com. The sales team maintained a 94 net promoter score during the quarter. We see a 2.6 billion opportunity in the 20-unit and above building space and is our intention to grow the sales team 23% this year to keep up with this potential. Since 2019, we've grown our apartments revenue 118%, but only grown our sales reps in production by 56%. So we'll continue to accelerate our sales growth to keep up with this opportunity. We've added 56 sales professionals so far this year with an additional 24 sales professionals that started training this week. I'm especially excited to welcome our 37 new sales team members that have come to us from rent period. I believe that we have added more salespeople from rent period than Zillow did despite Zillow spending a lot of money to acquire assets from Redfin. These individuals average 10 years of multi-family sales experience and are already producing good results. Our 2025 Apartments.com marketing campaign is in full swing and features the most content we've ever developed to reach the largest audience possible. In Q1, our five new TV spots were featured March Madness, the National Women's Soccer League, and for you NFL fans, you probably saw us last week on the NFL draft. Our campaign will also be featured throughout other profile shows and during the Major League Baseball, NHL, and NBA seasons. We have increased our paid search efforts in the first quarter and will continue to do so throughout the year to attract more potential renters to our advertisers communities by generating five times more number one positions than Zillow in the top 50 US rental markets. Our unaided awareness among apartment seekers remains higher than all of our competitors combined at 65% and our closest competitor is 30 percentage points below us. Among industry professionals, our unaided brand awareness is now at an all-time high of 86%, a 26% increase over 2024. Industry professionals tell us that delivering high quality leads and convert to more leases is the most important thing we do. In 2025, a brand study conducted by GovX, 47% of owners and surveyed said Apartments.com had a completely or very effective lead to lease conversion rate that's 38% more than Zillow's and 160% more than rent periods. The Apartments.com network had 38 million average monthly unique visitors in the first quarter. ComScore has released their March data and has us ahead of Zillow in visits in March by 5% with 90 million visits and has the Apartments network up 7% year over year for the first quarter while Zillow is showing down 27% for the same period. Very importantly, our lead flow to our customers continues to increase and is up 17% year over year. According to the most recent analysis by Entrata, through March of this year, Apartments delivered 1.8 times more leads than other rental networks. Apartments.com also delivers by far the highest quality of leads converting 2.7x better than other rental networks and ultimately delivers more leases than other rental networks, 5.1 times more to be exact. Our applied now leads, our highest converting lead type, are up 814% of our Q1 of last year as more and more properties enable this feature. In the first quarter, we added a record of a high of 142,000 single-family rentals posted on the platform and assisted our independent owner clients by collecting $1.4 billion in rental payments. We continue to see success from the utilization of Matterport on our rental sites with potential renters viewing Matterport's 53 million times in the quarter, up 59% year over year, while spending 71% more time on Listing's detail pages with Matterport. Apartments.com is also benefiting from the increased traffic on homes.com as Apartments.com paid advertisers also get exposure over at homes.com's rental area. Apartments.com Canada revenue grew 350% year over year with all-time highs in March for visitors, visits, and leads. According to recent data from DashIQ, Apartments.com now delivers more leads and leases than any other ILS in Canada. 14 months ago, CoStar Group launched the new homes.com with marketing blitz at Super Bowl 58. The new homes.com offers a completely different business model than do competing US residential portals in the US. The new homes.com is based on the premise that the most important thing a portal can do is to market a property for sale. This is in harmony with all the most successful and highly profitable portals around the world outside the US, which are based upon this market the property, not an agent lead gen business model. The legacy competing unprofitable US property portals are based upon lead diversion business models. These lead diversion models divert leads from the potential home buyers away from the listing agent and into the hands of a buyer agent willing to split their commission with a portal. Our research shows that these lead diversion models are very unpopular with home sellers, buyers and agents. These lead diversion sites are not designed to solve for the most important task, which is to sell the home. The new homes.com is a clean fast site offering a wealth of valuable content on neighborhood schools that home shoppers cannot find on competing sites. Based upon a wealth of consumer and agent feedback, we believe that homes.com offers a vastly superior user experience and is preferred by home shoppers. To build a massive audience for home sellers and listing agents, we launched one of the largest marketing campaigns ever in real estate. Using RPA, the same firm we successfully used to create the apartments.com brand, we recruit talent like Dan Levy, Heidi Gartner, O Morgan Freeman, little Wayne and Jeff Goldblum to create memorable and effective spots for the new homes.com. We have run 32,000 commercials and digital placements generating approximately 80 billion impressions. In Q1 alone, we generate 6 billion brand impressions across many of the biggest events in America, including the Super Bowl, the college football championship and March Madness. To be successful, homes.com, for homes.com to be successful, home shoppers need to be aware of homes.com and have intention to use it. Our target audience of several hundred million home shoppers is massive. Before we launched in February 24, only 4% of that target audience went as top of mind, what home shopping websites can you think of, replied homes.com. In 14 months of marketing campaign, we have steadily increased our unaided awareness nine times to 36%. So we are now at 36% unaid awareness. Early last year, our unaid awareness surpassed Trulia, last summer we surpassed Redfin's unaid awareness and last month we crossed Realtor.com. We began, Zillow was 64 points above our unaid awareness, we have closed the gap to 24 points and are still improving. Our unaid intention or the percentage people surveyed that say they intend to use our site has grown from single digit to 26%. We have also crossed Realtor, Redfin and Trulia on unaid intent. Zillow and Realtor have been trending down while we have been growing. I have consistently set the expectation of building a B to C brand takes three to five years. To reach this level of unaid awareness and unaid intent in an audience of hundreds of millions in 14 months is excellent progress. I feel that over the next two to four years we can take a solid and very valuable leadership position in the industry. With a superior product and aggressive marketing campaign and both growing unaid awareness and intent, we're seeing very strong audience and traffic growth in the Homes.com network. In just 14 months we've built a Q124 audience of 104 million average monthly unique visitors. That's according to Google Analytics. This now makes the Homes.com network one of the top two residential portals based upon monthly unique visitors according to the latest available public securities filings of our peer portals or near peer portals. We remain well ahead of Redfin and Realtor.com's traffic. With such a wide lead over these two, we've shifted our traffic acquisition strategy away from pure volume to targeting quality engaged traffic. Our bounce rate has improved 45 percentage points. Our session duration is up 200 percent and the number of page visits per visit has more than doubled. We're monetizing Homes.com by selling memberships to agents giving their listings priority placements on Homes.com which brings more buyer views, more leads, and on average enables them to sell the property faster and for more money. Members listings sort to the top of their market generally to the first page where 90% of all buyers click through to listings. We present their listings with our neighbor at the school content on competing listings and suggestion emails on our home page. With a billion visits to Homes.com in the past 12 months, we have unique insights in the market to buy a new home. We retarget members listings across thousands of websites to keep their listings top of mind. We also provide members with a Matterport and floor plan for their listings so that potential buyers can tour their listings 24-7. It is a comprehensive digital real estate marketing package no one else is offering. In a time where home sales are getting a little tougher to achieve, I think we're well positioned and in the right place at the right time of the cycle. One of the most important events for a real estate agent is the listing presentation where they meet with a home seller and try to win a listing to sell their home. Homes.com members use the marketing benefits we offer through membership to differentiate themselves from competing agents and win more listing presentations. We track the listing win rate advantage for members closely and it's steadily climbing and now member agents are winning 61% more listings than before membership. Since the average value of winning a new listing is $15,000 and monthly membership fee is less than $500,000, the ROI is outstanding. Last February when we launched the new homes.com, we faced several hurdles. At launch, we only had a very small dedicated homes.com sales force of about 50 reps to sell to more than a million agents. We were offering a completely new value proposition to an agent customer base with very negative feelings about the business models of legacy real estate portals in our space. There was a bit of undeserved guilt by association. Last May, just after launch, our first net promoter score was disappointing at negative 42. Many early members did not understand our new value proposition and believed that homes.com like Zilla was a lead diversion site and were disappointed we were not diverting other agents leads to them to generate buyer agency business. That had never been our intent. Our out of cycle early cancellation rate or failed payment at the time was high at 10% monthly. By late summer to early fall 24, our value proposition was better understood and our NPS turned positive and moved into the good classification in the low single digits and our early cancellation dropped significantly to 6%. In the last few months, our net promoter scores have been surging upwards and have reached 43, which is at the great classification and our early cancel or failed payment rate has dropped to between a quarter of a point and .5% per month. Great progress. Since we launched a completely new product concept in the US in February 24, the early cancellation rate on 12-month contracts has plummeted 65%. Since last May, our net promoter score has soared over 85 points to sit in the great classification. Under the very strong leadership of our senior vice president of sales Andy Stearns, we have grown that small initial team of 50 dedicated sales reps 600% over the last 14 months to 314 reps in production. Those reps with four months of production are turning in a steady 1612 monthly net new revenue, which implies our straight lines to 232,000 in buildings per average rep at the end of 12 months or 1.1 million buildings per rep at the end of five years of accounting. The sales force is still growing very rapidly with 64 more in training and with offers out to an additional 214 salespeople. In Q4, we anticipate we'll have 500 salespeople with four months of experience selling homes.com. That would suggest we could be adding over 800,000 a month new billing each month by Q4. We have recently optimized our pricing strategy to better align the price of our product with the stronger benefits listing agents and rental agents receive as homes.com members. The first iteration of our pricing strategy determined membership price based on equal weighting of buyer and seller agency deals. Now we largely pay price based on listings. In April month to date, our demo to close rate is 56%. So something's going right there. This is the highest monthly close rate I've ever seen for any costar brand. With one day left in April, the dedicated homes.com sales team is currently positioned to close 240,000 monthly net new bookings. They're still selling past some of the sales from the prior year that the general sales force did, but they're solidly into positive territory. This is the dedicated sales team's best net new bookings month to date and a 420,000 positive swing from the prior month. With improving NPS scores, our projected cancellations for May are falling approximately 70%. At the same time, our gross sales are climbing as we bring on more salespeople and they gain experience. I believe that by year end, our homes.com sales team will be our largest and will be turning in the most net new revenue of any product area and costar group with regular one million net new months for homes.com. We recently released a new purchase option for homes.com called Boost, which is a marketing option for single listing. For agents with unpredictable income and not yet ready to commit to an annual membership, they can boost one listing via e-commerce. Just like membership, once boosted, their listing sorts the top of results, receives a Matterport and is retargeted across the internet. This is a low risk purchase option for an agent because they can go into a listing presentation, use the boost as a differentiator, but they only have to pay for it when they win the listing and have offsetting commission revenue. From our perspective, boost is a great way for agents to get their foot in the door and we will be funneling boost purchases as leads into our sales team to call upon for up sales to the home sales team and to the home sales team to get their foot in the door and get their foot in the door. We are also offering the boost option directly to home sellers. These are home sellers with agents, but often home sellers want, you know, we've seen in Australia, it's really successful where home sellers regularly add marketing tailwinds to their home for sale, purchasing tens of thousands of dollars worth of boost from portals to market their home for sale online. We tested the boost option with home sellers and listing agents and focus groups in Southern California recently. The feedback was universally positive with almost all participants saying they would purchase a boost for their home or listing at about the $500 price point. In July, we expect to launch a new Homes, homes.com marketing offering for home builders. This is an attractive market for us to enter because new construction represents approximately 20% of all homes sold in any given year. Yet there's no great single place for a consumer to go and find all the available new communities. Building a site with full inventory of available new homes would be a very valuable option for both consumers and the industry, and it would allow homes.com to capture a piece of the estimated $3 billion annual marketing spend by America's home builders. We've already secured listing feeds representing 60% of the total available inventory, and I expect this number will grow as we approach July. Initial feedback from builders has been overwhelmingly positive as we meet with them. Builders tell us they're thrilled that a portal is finally delivering a beautifully designed robust new home search experience. We are carefully controlling expenses generally and with homes.com specifically. In the first quarter, we released over $50 million in annualized savings, mostly through cost reduction initiatives in our homes.com investment. Overall, we reduced headcount in the company by 423 in Q1. Zill recently announced an aggressive new policy of permanently banning homes that have been privately marketed for over 24 hours. Pretty aggressive. With the post-NAR lawsuit, industry changes around clear cooperation, no commingling rules, I believe that our lured diversion competitors are getting anxious that brokers with more choice may increasingly choose to market their properties away from those lead diversion platforms. The home is not listed on Zillow, as it'll lose the opportunity to use the listing to sell our buyer agency leads and take 40% of the buyer agent's commission. What's still for them is that if more and more listing agents stay off their platforms, then the listing count will fall and they could lose audience and fall into a down-roll spiral. We view this move not only as anti-competitive, but also shows a bit of desperation. I authored an open letter last week to the industry making sure anyone, everyone was watching the power grab Zillow was attempting. My communication surprisingly reached an estimated 50 million impressions across email, LinkedIn, earned media coverage. The reaction from agents was approximately 10 to 1 positive to us. In those most recent focus groups, one agent said, well, everyone hates Zillow, buyers, sellers, agents, or brokers. The word that many use describes Zillow as predatory. To the decades of mistreatment, agents are desperate for a viable alternative and they now have one at homes.com. My favorite quote of the evening was, homes.com brings us a lot and they're going to surpass Zillow very soon. The moderator asked where they're hearing that and the agent replied by saying, God, everyone at my brokerage meetings, lawyers, brokers, commercial agents, everyone. At the end of the one-year marks as we kicked off our sales efforts, I'm confident homes.com is a winning product. We're seeing excellent momentum in sales. If you look around the world at successful real estate portals that use our business model of marketing the real estate, not lead diversion, the EBIT opportunity is really impressive. The EBIT normalized the size of the US GDP of market leaders like REA Group, Scout, Rightmove, Domain, Hemnet, and Edialysta. For the United States, ranges between 1 billion of potential EBITDA to 9 billion of potential EBITDA in the US, suggesting that that residential portal opportunity in the United States is a lot larger than the 79 million adjusted EBITDA number one of our competitors turned in in 2024, about 100 times larger than that. On the market over the United Kingdom had another strong quarter, 11 straight months. We've seen net new bookings growth equivalent to 7.2 million annualized revenue. We are delivering fantastic ROI to agents that subscribed on the market. Lead volume increased 17% -over-year. We increased listings by 23% -over-year. The audience is engaged as we page views and time on site grow by 99% and 81% respectively -over-year. In February 2025, we made an all cash offer for Domain Holdings, one of Australia's two largest real estate portals and one of the 10 largest real estate marketplaces in the world. Domain is very profitable growing and is in a market with great dynamics for real estate portals with vendor or owner paid models. 2024 annual revenue was 250 million and using today's conversion rate and EBITDA of 88 million. Australia's real estate portals use the vendor paid advertising model unlike the competing US portals which have lead gen models for buyer agents. Australian portals generate revenue through marketing the real estate. Home sellers are regularly paying companies like Domain and REA anywhere from $3,000 on up to $50,000 to market their home for sale online and those would be $5,000 Australian, $50,000 Australian. One element from Domain that will benefit Homes.com and on the market is depth advertising. Similar to Signature Ads for Apartments.com and Loopnet, Domain offers four tiers of advertising that offer increasing levels of exposure as you move up their ad tiers by utilizing sort order, larger search placards, social application, retargeting. We will be adopting the best practices of Domain in the US and in the United Kingdom. We see numerous opportunities to create additional value for Domain following the potential acquisition. Domain's majority owner today is a media business which historically under invests in the product. Simultaneously REA Group's market dominance is not incentivized to innovate and prove their product. Both sites pale in comparison to the product we built with Homes.com. We will bring what we built in Homes.com to Australia and the United Kingdom to win over consumers. Domain is also a strong entry point into Australia's commercial real estate market. They operate .com.au, a top two CRE marketplace in Australia with thousands of listings we can migrate into Loopnet. Adding Australian listings to Loopnet would provide great value to multinational owners and brokers that list on Loopnet and the multinational tenants that are searching the site. Domain's inventory of commercial listings lays a strong foundation for building CoStar covering Australia. The board domain is majority shareholder 9 Entertainment has backed our offer and we're in the process of conducting due diligence. Of course there's no guarantee that our proposal will result in a transaction. We closed the acquisition of Matterport at the end of February and we have been long time users of Matterport and I'm very excited to have the opportunity to work with RJ, Gauspec and the entire Matterport team on the next phase of their impressive journey. The Matterport technology will be an incredible asset for us. They have an impressive product roadmap which will benefit our entire ecosystem. At the end of March Matterport had created Digital Twins for an astounding 54 billion square feet of space. Over the past four years Matterport has increased total spaces under management by more than 20% annual and total square footage of over by over 30% each year. Our new goal is to reach a trillion square feet of Digital Twins. That requires 35% year of year growth. Their sales success was achieved with a small sales team but mighty of 47. We plan to growth both their R&D and sales team. With Matterport technology combined with CoStar's global scale and reach the future is bright for both companies. I want to close by doing something important thanking our board members Mike Klein, Chris Nacetta and Laura Kaplan who are concluding their service on the CoStar board. Through the years they have offered excellent counsel and have been extremely valuable in helping us build CoStar Group into the global organization that is operating in 192 countries with a 34 billion dollar market cap. Mike Klein and David Bonderman they co-founded the business in 1987. I still marvel at Mike Klein mortgaging his house to invest most all of his net worth or maybe 150% of his net worth into a 22 year old's startup concept. Turns out he was a genius, he is a visionary and his support and counsel was matchless. As part of the ongoing refreshment of our board we made some important announcements earlier this month. Louise Sams who's been a CoStar board member since 2019 has been named chair of the board. She has strong international legal experience having served as EVP and general counsel of Turno Broadcasting System Inc. for nearly two decades and president for nearly a decade. Louise is currently the board chair of Princeton University which I hear is a good place. She has been an impactful board member and is the perfect person to chair our board. I'm looking forward to working with John Beresford, Rachel Glasser and Christine McCarthy. They bring a wealth of business experience with strong track records at leading global companies. Christine is a recognized corporate finance leader with over 30 years of experience most recently a CFO of the Walt Disney Company. John is an accomplished executive who most recently served as president of S&P Global Ratings. Rachel has extensive market experience as the former CFO of Etsy and direct residential industry experience as the former CFO of Move Inc. I'll be chairing our new board's capital allocation committee and John, Christine and Robert Musselwhite will also serve on the committee. The board established the committee to review and make recommendations to the board regarding the company's capital structure, capital allocation priorities and financial targets. The committee's review will also focus on operating performance including the setting of near-term long-term financial targets for resource and capital allocation. The committee's charges continue the company's outstanding capital allocation track record has resulted in the company's outperforming 98 percent of the NASDAQ companies since our IPO. And with my very brief remarks I'm going to turn it over to Chris Lowe.

Chris Lowe. Thank you Andy. First quarter 2025 revenue grew 12 percent year over year to 732 million dollars. Matterport contributed 15.9 million dollars of revenue for the quarter which represented one month of activity. Excluding the Matterport contribution, revenue was at the high end of our guidance and above consensus estimates. First quarter adjusted EBITDA came in at 66 million dollars and a nine percent margin also exceeding consensus and the high end of our guidance range. The up performance in adjusted EBITDA was primarily due to timing of marketing spend, lower personnel costs from cost saving initiatives and hiring timing. Matterport contributed an adjusted EBITDA loss of 2.7 million dollars for the first quarter stub period. Our commercial information and marketplace bands delivered healthy 43 profit margins in the first quarter. This measure does not include our investments at homes.com on the market Matterport. Co-star revenue grew 6 percent in the first quarter in line with our guidance. Even considering what continues to be a difficult commercial real estate backdrop, Co-star net new bookings continue to improve and are now at the highest levels since the third quarter of 2023. While we do not anticipate some slight headwinds from government contract cancellations expected throughout 2025, we still have a 6 to 7 percent revenue growth guidance for the full year. Apartments.com revenue grew 11 percent year over year in the first quarter in line with our expectations. We refocused our sales plans this year to emphasize new rooftops and we are seeing the benefits of this incentive structure with a considerable growth in our number of listed properties. The under 100 unit property cohort increased 19 percent year over year in the quarter. This addressable market is nearly four times the size of the over 100 unit property cohort. We expect to continue to penetrate the sub 100 property segment and as such we are maintaining our full year 2025 apartments.com revenue guidance of 11 to 12 percent. For 2Q 2025 we expect multifamily revenue growth of 10 percent. Loop net revenue grew 5 percent in the first quarter also in line with our guidance. Importantly we are building great momentum at loop net as it delivered its highest net new bookings quarter in nearly three years. We expect revenue growth to accelerate throughout the year with seven percent growth expected in the second quarter of 2025. We are increasing our guidance expectations for 2Q for 2025 and now expect revenue growth of seven to eight percent for the full year as growth accelerates throughout the year. Revenue from information services was 40 million dollars in the first quarter. Revenue growth for the second quarter in full year is expected to be in the 18 to 20 percent range. Visual leases integration with real estate manager is well underway and we are extremely excited about the lease benchmarking product and expect a beta launch by year end. Other revenue which now includes Matterport was 45 million dollars for the first quarter with Matterport contributing 15.9 million dollars. We expect other second quarter revenue of approximately 70 million dollars with Matterport revenue of approximately 40 million dollars. We expect full year revenue to increase by 100 to 115 percent to 270 to 280 million dollars with Matterport contributing 135 to 140 million dollars. Residential revenue was 27 million dollars in the first quarter. First quarter sales reflected the nadir of cancellations from our initial first quarter 2024 homes.com sales and we expect net new bookings to increase throughout the year. This will result in meaningful revenue growth acceleration throughout the second half of 2025. Our 2025 residential revenue growth outlook remains in the mid teens to low 20s percent range and we expect second quarter revenue growth in the low single digits due to the impact of first quarter cancellations. In just one short year we have rapidly increased homes.com's unaided brand awareness ninefold to 36 and have become the second most visited US residential portal. As we continue to scale the homes.com dedicated sales force we expect revenue growth to accelerate into 2026 and beyond and are excited about what could be CoStar's largest business. For the first quarter CoStar posted a 15 million dollar net loss due primarily to the one time cost from closing the Matterport acquisition. We earned 38.5 million dollars of net investment income on our 3.8 billion dollars in cash in the first quarter or a 4.1 percent net yield. We are making great progress on increasing our sales forces which totaled 1600 salespeople at end March. While much of the increase was concentrated in homes.com we are ahead of our sales headcount hiring plan across all of our brands. Our contract renewal rate was 89 percent first quarter of 2025 and remains strong at 94 percent for customers who have been subscribers for five years or longer. Subscription revenue on annual contracts was 80 percent of total revenue for the first quarter of 2025. Net new bookings for the first quarter were 56 million dollars representing a sequential increase of six percent from the fourth quarter and a 29 percent increase from the third quarter of 2024. Absent the one time headwinds from homes.com cancellations in the quarter net new bookings would have been 60 million dollars. Commercial net new bookings increased 14 percent year over year and 19 percent from the fourth quarter coming in higher than any quarter in 2024. During the first quarter of 2025 CoStar group repurchased 240,000 shares for an aggregate cost of 18.5 million dollars. We still anticipate repurchasing 150 million dollars of total in 2025. On March 27th CoStar provided a non-binding indicative offer to acquire a domain group for 4.43 Australian dollars per share. As part of this effort we acquired 107 million shares at an average cost of 4.22 Australian dollars or approximately 290 million US dollars. We now own 16.9 percent of demand's outstanding shares are in the process of performing due diligence and recently received a two-week extension to complete our due diligence by May 12th. For the full year of 2025 we expect revenue of 3.115 to 3.155 billion dollars implying an annual growth rate of 14 to 15 percent. This forecast is broadly in line with our original 2025 guidance and includes a four to five percentage point contribution from the Matterport acquisition. Second quarter 2025 revenue is expected in the $770 to $775 million range representing 14 percent -over-year growth at the midpoint. 2025 adjusted EBITDA is now expected in the range of $355 million to $385 million dollars reflecting an adjusted EBITDA margin of approximately 12 percent. The inclusion of Matterport is anticipated to reduce our adjusted 2025 EBITDA forecast by approximately 30 million dollars. So excluding Matterport we remain broadly in line to slightly above our original 2025 guidance. Second quarter 2025 adjusted EBITDA is now expected to be 50 to 60 million dollars reflecting an adjusted EBITDA margin of around seven percent. With that I will now turn the call back over to the operator for questions.

Thank you. As a reminder to ask a question please press star 11 on your telephone and wait for your name to be announced. To withdraw your question please press star 11 again. Our first question comes from Alexey Gogolev with JP Morgan. You may proceed.

Hello everyone. Andy, great to hear from you. Thank you for the introduction and I was wondering if you had any additional comments on the delayed market listing exemption that was discussed by the NAR and then the reaction from Zillow. Have you had a chance to speak to brokerage firms? What is their view on the Zillow's arresting reactions?

What I've heard is overwhelmingly negative. So I've heard, read hundreds of comments from agents and again I'd say 90 some percent negative. So there's a pretty transparent thought there that they're requiring people to put their listings up early in order to make sure that they have a chance to monetize them and people aren't taking their listings to market without going through Zillow first and I think that is sort of a surprising overt sort of act that probably I think shows a little bit of weakness but I think it's being confused a little bit with something related to Compass. I don't think it is. It is unusual to see something the NAR is allowing having a portal trying to set a new set of rules. So it created a good opportunity for us for sure.

Thank you Angie. And Chris a quick follow-up on your guidance. Would you be able to tell us what was the non-residential EBITDA margin in Q1 and if your outlook for the rest of the year for 2025 is still intact?

Yeah so the commercial margin was 43 percent for the first quarter and as Andy mentioned our- That's impressive.

It's a pretty good margin

and as Andy mentioned we have been very focused on expenses around Homes.com. A lot of our actions taken in the first quarter to manage and reduce costs did come out of Homes.com so we are very much on track from a budget perspective around the numbers we've discussed historically for Homes.com. No change there. Thank you Chris.

Thank you. Our next question comes from Pete Christensen with Citi. You may proceed.

Thanks. Good evening. Good progress in number front here. Andy and congratulations on closing Matterport. Thank you. You're welcome. Can you walk us through next 12-18 months if we could just double click on how you envision Matterport being integrated into the CoStar platform and how you think about monetization of that product and just curious on how do you think that Matterport evolves with CoStar over the next 12-18 months? Thank

you. Sure. So Matterport is going to have two different lives. One is it's being very broadly used around the world by construction companies, brokers, agents, developers, boat dealers, airplane manufacturers, anyone trying to digitize a space and then it will be more deeply embedded into all of our platforms from real estate manager to CoStar to LoopNet to apartments to homes to hopefully domain one day and we will be embedding it deeply natively and building unique and special features in those product areas that makes a Matterport available with more power in those spaces. I've had a chance to meet a lot of the Matterport folks. I would say that they and I have a real common vision for some exciting R&D projects that I think will add a lot of value. I believe Matterport is on the verge of producing some pretty interesting things in their technology. They'll have a lot of applications both for our platforms and outside our platforms. I think that I'm really amazed at how ubiquitous the value prop is for Matterport. I'm just recently touring some construction over in Europe and they've been Matterporting the construction site every week. Matterport up until recently has only had about five salespeople to cover Europe, Asia, Africa, all the world, ex the United States. Clearly, and I figure that those five salespeople had 1.3 million good prospects per salesperson. I think there's a wonderful opportunity to invest in both R&D side, the sales side, and grow significant revenue for Matterport, build it to a good margin, and then also fund more aggressive R&D within the product.

I'd expand on that a little bit and also add from a practical perspective, it will inevitably lower cancellations in products. As people have more time on site, they use it more. We hear of people renting apartments with Matterports without going physically there. People looking for commercial real estate will travel less and therefore will spend more time on site and become more ubiquitous. We believe real financial tailwinds will accrue as well, as Andy said, really deeply embed this application across all of our platforms, which will just strengthen their outcomes but also their financial outcomes as well.

Thank you. As a reminder to ask a question, please press star 11 on your telephone and limit yourself to one question. Our next question comes from George Tong with Goldman Sachs. He may proceed.

Hi, thanks. Good afternoon. You mentioned realizing about $50 million in residential savings in the quarter. Can you talk about how you're thinking about investment spend for this year in light of the work that the Capital Allocation Committee is doing on the board? How are you thinking about the $900 million in change originally targeted for the year?

Yeah, the $900 million investment is unchanged. The $500 million was really a capital allocation, a proactive capital allocation decision we made to take some costs out of homes.com and shift them towards the sales force. As was mentioned, our sales growth is exceeding our expectations, which is fantastic, but we're able to make capital allocation decisions to move costs from one place and invest that capital elsewhere. It's in line with plan and there are no changes.

Thank you. Our next question comes from John Campbell with Stevens. He may proceed.

Thanks, Andy. I want to maybe circle back on CCP. I think you probably expect a lot of questions there. It does seem like you're looking to positionhomes.com as I guess a site that kind of captures those private listings that don't abide by Zillow standard. I don't know if that's eventually as they make their way to the MLS or maybe it's just a straight connection or a feed into you guys. That seems pretty clear to me, but outside of that, I'm just curious the other ways you're maybe thinking about leaning in. I don't know if that's helping power maybe white label the private listing networks or something along those lines. I'm guessing there's probably some competitive dynamics that limit what you can say, but maybe just shed some light where you can.

Yes, I think that clear cooperation has always been in a people since the beginning of real estate have marketed listings off market. People have always looked to see if there's someone in the shop, in the neighborhood, a connection that wants to buy a property, especially at the middle upper end. Properties that happens in commercial real estate, it happens around the world. Typically 20% of listings around the world are going to be marketed off market or quote unquote private. I don't want to get too deeply into what Compass is doing or general theme. I think that there's an important dynamic changing here with clear cooperation being more flexible and with the no co-mingling rules on the MLS is changing. You've got people beginning to question where they want their listings to go and when they want them to go and if you've done some research, I'm sure you've heard that the lead diversion models are not popular. They don't exist in other countries because when people have a choice as to where they market their listings, they choose not to have their leads taken and sold off. I think there's generally some anxiety on the part of some of those folks that the people will make more choices to avoid the lead diversion platforms longer and that position is just really well because we're actually in harmony with everyone because we are actually presenting their listings with their names on them and are not trying to rewrite the rules or trying, we're not trying to regulate it. We're pretty much working with the clients as they want to work, but we're not going to get into any debates between different firms on the strengths of clear cooperation, private networks and all that stuff. I think they do it anyhow and they have done it since the beginning of time.

Thank you. Our next question comes from Ryan Tomasello with KBW. You may proceed.

Thanks for taking the questions. I wanted to double click on multifamily. I guess can you help us understand what's driving the growth decel in the second quarter to 10% and your confidence in the implied acceleration in the back half a year? Does that make any benefit at all from the Salesforce investments and considering the incentives you called out for prioritizing property growth? How should we consider the evolution there on pricing versus property count? Lastly, on bookings, I don't think we got any color on apartments bookings in the quarter, so anything you're willing to provide there would be helpful.

Thanks. Yeah, so snuck in a couple questions there. So one, remember the second quarter is the big quarter for apartments.com. That's when the big conference happens. It happens in June, so the back end of the second quarter, so that flows through in the third and fourth quarter. So that's the dynamic that happens year in and year out. I think you have that dynamic. You in addition have the dynamic of the additional headcount from a sales perspective. As Andy said, rent period Salesforce is a fantastic Salesforce. They're actually already up and running. They've had a great experience trying to sell against us, so now they get to sell for us, so we'll get acceleration there. Ensuring that the sales team is focused on the right things. Rooftops is important and pricing is important, but we feel good about that acceleration. So all that translates into a third and fourth quarter increase in our acceleration of where we are versus the second quarter. So that all makes us feel relatively good, and we didn't provide a net new number for apartments, but you should assume in the mid-20s, the million dollar range for net new bookings.

Thank you. Our next question comes from Stephen Sheldon with William Blair. He may proceed.

Hey, thanks. On the suite, I guess as you're thinking about the degree of pricing increase has changed at all, I think you've typically talked about roughly 3 to 5% annual uplifts, but just given your dominant positioning there and continuing to add new data sets, new forms of value, could you potentially look to be more aggressive on that front in the coming years, especially if the CRE backdrop continues to improve?

I would emphasize that we've been coming through a very challenging commercial real estate market. It is, I think, a real testament to CoStar that we continue to show good growth through a very brutal market condition for commercial real estate. I do believe that, well, historically, we've always slowed our pricing increases during difficult markets to support our clients, and then we are generally more aggressive with our price adjustments when we are in good markets for our clients, and I think it's pretty clear that we are moving into a better market for our clients. You can see the availability rates dropping. You can see vacancy edge and over. You can see transaction volumes picking up. We tend to talk about the markets turning a little bit earlier than our clients understand they're turning, but they definitely are turning. Barring anything, a major recession happening, generally, the overall fundamentals for real estate are good and would allow us to be a touch more aggressive in the years to come, but I think you'd also just see volume increasing too.

I'd also add that the value proposition that Andy's developed over CoStar since its development is massively different today than it was right at inception, where it's primarily a broker product with lender, with the lease benchmark product that's coming, with STR. I mean, the value proposition, the ability to create additional revenue streams or compound the value is dramatically different. So the model has also changed with Inners to our advantage as we roll out those products and expand TAMs as well.

Thank you. Our next question comes from Jeff Mueller with Baird. You may proceed.

Yeah, thank you. It sounds like when you were talking about homes.com attrition, a lot of that was like early cancels within a contract metric. Can you give us any sense of clients that signed on kind of last fall that were on a six-month contract and have just naturally come up for renewal that were kind of sold on a message that was better aligned to what the value prop actually is? Just like what those contracts are retaining at or is there some reason wouldn't start to provide a good indication at this point? Thank you.

Yes, I wouldn't have specific data on fall contracts on six months or no. What I can tell you is that when you look at the end period cancellation rate, that line is dramatically down. It is falling to some pretty low numbers and I believe the six months in the last month, of the six months in contract cancellation is .25% which is de minimis. It had been up at a much higher number, maybe 5, 6, 7, 8% at the beginning. And again, I believe a big part of that was just in the excitement of the early launch, everyone thought we were selling lead diversion and no one knew what the whole rest of the world is buying which is digital marketing for real estate which is what Apartments is, it's what Loopnet is, it's what our A group, Brightmove, everyone else is. So we were offering something new. Now we had a very small sales force, a generalized sales force but now I'm very happy with seeing it's up in that 40 NPS range which is outstanding and to do it that quickly suggests to me that we will have solid renewal rates going forward.

I'd also highlight the preponderance of our contracts are 12 months so again the data is moving in the right direction but I think your question is be better to be asked in sort of the next three to six months as that start to roll forward.

Thank you. I would now like to turn the call back over to Mr. Andy Florence for any closing remarks.

Well I think I've taken all the time I was allotted for this year. So we're off to a great start in 25. Again I want to thank the board members who are completing their service to the company and welcome the new board members on board. I'm very excited about the progress we're making with homes.com and with the great performance we're seeing across basically all of our product areas. Thank you all for joining us and your patience on the call and I look forward to updating you next quarter.

Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.