CoStar Group, Inc.

good day and thank you for standing by welcome to the q3 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 not like to hand the conference over to your speaker today Rich Ciminelli, Head of Investor Relations.

Thank you very much, Operator, and hello and thank you all for joining us to discuss the third quarter 2025 results of CoStar Group. Before I turn the call over to Andy Florence, CoStar's CEO and founder, and Chris Lown, our Chief Financial Officer, I'd 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 fourth quarter 2020. and the rest 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 with the SEC, including our annual report on Form 10-K and quarterly reports on Form 10-Q. included under the heading risk factors in these filings as well as other filings with the SEC available on the SEC's website. All forward-looking statements are based on the information available to COSTAR on the date 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 most directly comparable gap measure or of any non-gap financial measure discussed on this call are shown in detail in our press release issued today along with the definitions for these terms. Press release available on our website located at costartgroup.com under Press Room. So please refer to today's press release on how to access the replay of this call. And remember, one question during the Q&A session, so make it a good one. And with that, I'd like to turn the call over to our founder and CEO, Andy Florence.

Andy, thank you for joining CoStar Group's third quarter 2025 earnings call. We achieved another excellent quarter for CoStar Group with third quarter 2025 revenue reaching $834 million, a 20% year-over-year increase. This is our 58th consecutive quarter of double-digit revenue growth, and we're one quarter closer to potentially 100 sequential quarters of revenue, double-digit revenue growth. Stay tuned. Adjusted EBIT in the third quarter rose to $115 million, up 51% over Q3-24. Profit margin in our commercial information and marketplace businesses increased to 47% for Q3-2025. Net new bookings totaled $84 million, up 92% year-over-year. CoStar Group's residential real estate portals include Apartments.com, Homes.com, On The Market, and Domain. These are all sites that help people find or market a residence. Assuming we own domain for the full third quarter, the revenue for the residential portals would now be $411 million in the quarter or $1.644 billion annualized. Our residential portals revenues grew 22.7% quarter over quarter and 31.3% year over year. We expect synergies across these residential portals will continue to drive improvement in our margin profile and believe that long-term margins can operate at more than 40% adjusted EBITDA margins. Apartments.com delivered another strong quarter, surpassing $1.2 billion in annual run rate revenue and generating $303 million in Q3 revenue, an 11% increase year over year. Apartments.com remains the preferred source for property managers and owners as reflected by a 99% monthly renewal rate and a 93 NPS score. Our high quality proprietary content remains central to attracting consumers. Net new bookings rose 37% year-over-year in Q3. We added 4,200 new apartment communities in Q3. Our sales force has now grown to over 500 representatives, achieving our 2025 sales hiring target ahead of schedule. In Q3, the team conducted 200,000 client and prospect interactions, with nearly half of them occurring in person. a 66% year-over-year increase in Q3. Our total multifamily property count now exceeds 87,000, an increase of 12,000 in 2025. Apartments.com network site visits totaled 223 million for the quarter. Leads for specific models and units increased 64%, and our highest converting apply now leads rose 70% year over year in Q3. In the single family rental segment, we had 1.4 million availabilities and 260,000 paid rentals, up 51% year over year. Homes.com rental traffic grew 55%, underscoring the synergy between Apartments.com and Homes.com. Advertisers benefit from increased exposure across both platforms at no additional cost. Turning to Homes.com, Homes.com is showing steadily accelerating revenue growth from an increasing number of revenue streams. Annualized net new bookings of Homes.com subscriptions rose to 16 million in the third quarter, up 53% year-over-year from 10 million in the second quarter of 25. That's actually quarter over quarter, up 53% quarter over quarter from $10 million in the second quarter of 2025, not year over year. Much more impressive when it's Q over Q. The net new annualized bookings in the third quarter represent 1,225% year over year increase. Revenue in Q3 increased 20% year over year. The number of net new subscribers added in the third quarter was 7,035. up 12% over the 6,280 NetNew subscribers added in the second quarter. In Q3, NetNew subscriber growth was 1,000% year-over-year. We now have over 26,000 subscribing agents. Just one of the many ways in which our business model is superior to competing portals is our ability to provide service to a much larger number of agents than they can. Competing portals in the United States business models of lead diversion limits them to selling to about roughly 5% of agents because they need to take leads from the other 95% of agents who are not clients so that they have something to sell to the 5% that are clients. In contrast, we can sell to well more than 50% of agents because we're not taking away leads from any agent. With LoopNet CoStar and Apartments, we have shown that in many markets, we're selling to well more than half of the players in that market. This has the advantage of creating a bigger TAM, but also creating more goodwill among agents. In competing portal models, 95% of the agents are losing business because of the portal, and 5% are gaining business. In our model, almost every agent can gain business because of our portal, and that creates goodwill. Alignment with your clients builds stronger and more durable brands. Sales of our Homes.com Boost product rose 136% quarter over quarter to $617,000 in the third quarter. Homeowners are the primary buyers of Boost, paying on average $386 on a one-time basis to give their home for sale more exposure. At this price point, the U.S. TAM for boosts sold to homeowners alone is already approximately $2 billion. When agents do buy a boost for one of their listings, we see 25% of those agents convert to full Homes.com membership subscriptions. We began selling enhanced exposure on Homes.com to new home builders on August 25th. In the month of September alone, we sold net new annualized bookings for new homes of 498,000. In total, we've already sold 743,000 annualized buildings since August 25th. As homes.com approaches our seventh quarter since launch, it is now the fastest growing revenue product we've ever launched. Though apartments.com and CoStar now have more than a billion dollars in revenue, they grew revenue at a much slower pace than Homes has in their first seven quarters. Homes.com has now grown 50% more incremental revenue in its first seven quarters than did Apartments.com in the same time period. We're continuing to increase the size of our Homes.com sales team. We now have 500 sales reps in production with another 150 in pre-production. We've now added field sales, new home sales specialists, and major accounts reps. We believe the highest and best function of a portal is to market real estate and that that is the future of the industry. I do not believe that future revenue models for successful real estate portals will be based on either iBuying or lead diversion to buyer agents. Currently, as I mentioned, we have 26,000 subscribing agents and Boost clients, promoting 130,000 active listings on homes.com, representing 6% of the active 2.2 million properties for sale in the U.S. A recent analyst report from Citi say that they believe that a core product for Zillow going forward will be its showcase listing product, and estimated in September 25 that Zillow had only 24,500 listings, or approximately 1.1% of the active market. So we have five times the number of listings marketed or boosted on our site. So you further estimate that Zillow had $13 million of revenue in the third quarter for showcase listings. So homes.com is well ahead of Zillow in both revenue and listing count in what we believe is the primary sustainable revenue driver for successful residential real estate portals around the world. Our strategy is to grow the share of real estate agents and homeowners relying on us to bring more exposure to their homes for sale. And these numbers show that we're on the way to achieving that goal. Our marketing campaign continues to build out audience and brand awareness. In August, unaided awareness was 42%, and unaided intent was 28%. That unaided awareness is up from about 4% when we started. And we are showing continued long-term long-term upward trend in both categories. In the third quarter, the Homes.com network achieved 115 million unique monthly visitors. This led to 560 million total visits to the Homes.com network in Q3, up 7% compared to Q2. According to Comscore, unique visitor traffic to Homes.com rose 8.3% compared to a 6.5% decline at Zillow and a 0.7% decline at Realtor.com. I'll just call that last part flat. ComScore continues to rank the unique monthly visitors to the Homes.com network above either Realtor or Redfin. Our organic traffic in Q3 climbed 87% year over year. We continue to improve the quality and engagement of traffic to Homes.com, achieving a low 24% bounce rate in Q3, which is a 64% year-over-year reduction in bounce rate. Our average session duration increased to 4 minutes and 29 seconds in Q3, which is a 93% year-over-year increase. I believe that our efforts to put more than 70,000 Matterports on the sites is driving this deeper home shopper engagement on our site. We are optimizing for quality of traffic from our SEM, generating 112 million listing detailed page views from SEM in Q3 for a 374% year-over-year improvement. We achieved this improvement with essentially the same but a more efficient SEM spend. I believe we are about to see our products hyper-accelerated by some of the most exciting facilitating AI technologies I could have ever imagined. While we're already using AI throughout our organization, I'm excited about the launch of AI Smart Search on homes.com and the future innovations it foreshadows. Consumers can ask homes.com precisely what they're looking for in their own words. This allows for reasonably complex queries such as long conversational Phrases with multiple geographies such as, show me waterfront properties with a pool with a balcony and a great view in Miami Beach and Fort Lauderdale starting at one million. This does away with having to deal with traditional filters and forms that are limiting. If you're a coder, this is like giving people with no coding skills access to the power of full deep Boolean nestled queries against 10 times the number of fields with just simple plain English questions. As a result, Smart Search is highly customizable, intuitive, fun, and easy and more powerful. This is our own artificial intelligence capability we're engineering in, and we're doing it in partnership with Microsoft. In the third quarter, AI Smart Search has produced improved user engagement. So this new AI Smart Search is producing significant improvement in user engagement. Users of AI Smart Search used 69% more search filters, viewed 37% more listing pages per session, were five times more likely to return to the site within the following week. That's amazing. And submitted 51% more leads after viewing a listing page. It's a more effective way to find what you're looking for. We are now investing. 50% of our homes.com software development efforts in the fourth quarter and beyond towards building a range of AI-empowered features into homes.com. This is our single biggest commitment by far to any software development effort. This is an incredibly exciting time for homes.com. All of our products have boundless new opportunities opened up by the enormous potential of generative AI. In the four decades that I've led CoStar Product Vision, a core principle of our success is leaning into new facilitating technologies to unlock their value for real estate. We were among the first to digitize real estate information, put real estate on a digital map, present digital real estate photos. We were the first to incorporate digital twins in a scale. And we were actually the first to leverage the internet for real estate. In fact, we actually bought CBRE, Cushman, Wakefield, and JLL, their first internet accounts, before there was even a Netscape or a Google around. AI offers transformative opportunities to unlock tremendous value in real estate. I believe few products are better positioned to cohesively capitalize on this opportunity than is homes.com, apartments.com, LoopNet, and CoStar. We have massive and proprietary real estate data resources. We have unmatched expertise in organizing and quality control on that information. We have leading expertise in how to make that information useful and relevant to real estate industry participants. We believe that it will bring tremendous dislocation generally and open up huge new value opportunities, which we plan to exploit. While homes.com is our initial priority for AI enhancement, we will apply the lessons learned to apartments.com and all of our other products as quickly as possible. AI will impact top of funnel traffic acquisition. Real estate portals built on SEO foundations need to build strategies to acquire traffic from AEO, answer engine optimization, and GEO, generative engine optimization. SEO remains the foundation of AEO and GEO, though. A portal's brand content context remain the key building blocks for success. Today, GEO is sub-1% of top-of-funnel acquisition. For example, one large U.S. real estate portal in the U.S. only draws 0.45% of its top of funnel traffic from ChatGPT. And another large portal in Australia only captures 0.15% of its top of funnel from ChatGPT. So brand, direct traffic, SEM display, social, email, SEO, and AEO remain 99.5% of top of funnel source. These traffic sources will remain important in generative AI future for sure, and likely the majority, but GEO will become much bigger top of funnel traffic feed, and we will position our portals to capture that traffic. Many believe the traffic from GEO may be monetized the way Google monetized SEO with SEM. There's some huge AI, GPU, and energy bills to pay out there. I just spent a few days at the online marketplace conference in Madrid with dozens of real estate portal CEOs and digital real estate experts. All felt the competitive urgency to integrate the range of capabilities of generative AI into their portals. But I did not find one person who thought that generative AI solutions would effectively meet the specialized needs of the real estate world. To be successful, There's a need to build specialized AI models around buyer personalization and profiles, data capture, listing evaluation, computer vision, digital twin searching, area evaluation, lead management, advertising optimization, valuation, and many other algorithms. That is exactly the exciting work we are leaning into and embracing. There was a time when AOL, Yahoo, or eBay were ascendant and uniquely dominant. and Microsoft and Google are still dominant, though perhaps past their zenith of dominance. All of these impressive general-purpose transformative technology innovations enthusiastically built real estate portals and tried to dominate digital real estate. All failed. All failed. They've now exited the space. Only eBay has anything left, and it's not much. It's just a very Fizbo thing. Specialized solutions, often leveraging these companies' capabilities, repeatedly ultimately dominated the real estate vertical. I believe the past is prologue here. There are a number of incredible generative AI companies that are building invaluable tools. Those tools will be leveraged by specialized digital real estate companies to create specialized value. A specialized digital real estate company that does it best among them will unlock huge value for its investors. CoStar Group is the largest digital real estate company in the world by market cap is well positioned to win in an AI future. It's just a brief comment on AI. The homes.com subscriber net promoter score rose to 36 in the third quarter, rising 84% over Q2 25. October to date, that NPS score continues to rise and is now at an outstanding 843. We're not done there. We'd like to get it up to apartments 93, but the progress is amazing. It took less than two years for homes.com to reach an MPS level that took CoStar about a decade or so to reach. As our MPS increases, so does our subscriber retention rate. In Q3 25, our retention rate of subscribers we sold six months prior from Q1 to 2025 rose to 86%. The Q3 retention rate rose 7.5% from 81% retention in Q2-25, and rose 39% year-over-year from 62% retention in Q3-24. We are offering Homes.com subscribers the benefits of Matterports for their listings, and agents tell us in focus groups that they really value that benefit. Member listings with Matterports captured nearly 40 times the listing detail views of non-member listings without Matterports. That should be the objective. If any real estate agent selling a home, get 40 times as many people to inspect that home. In the quarter, subscribers who had a Matterport on a listing had a 37% higher renewal rate than those that did not. It's working. We are enhancing our Matterport benefit to subscribers by offering a photo-realistic 3D view of the exterior of the house to complement the digital twin of the interior. This exciting new technology is called a Gaussian splat, and we capture it with a short drone flight around the house where legal. I would encourage you to view one live by looking up a home for sale at 5471 Country Club Parkway in San Jose, California on homes.com and view that Matterport 3D exterior. Eventually the house will sell and it won't be there anymore. In recent focus groups, we're seeing success in raising real estate agent awareness that homes.com is the only you're listing your lead portal. 51% of agents surveyed recognize your listing, your lead, and overwhelmingly connect it to the co-homes.com brand. Agents dislike lead diversion express a strong preference for a portal operating with your listing, your lead principle. As we continue to build that awareness, we believe that homes.com will become the portal agents trust and most recommend to their clients. Now I need to turn to an uncomfortable but important matter. Zillow is under siege, facing an unprecedented wave of lawsuits. I'm not sure that the market grasps the sheer magnitude of the risk bearing down on Zillow from all sides. These lawsuits are not isolated instances. They collectively target the heart of Zillow's operations, exposing alleged antitrust violations, widespread copyright theft, and blatant consumer deception. With private plaintiffs and government regulators now alert to Zillow's misconduct, I have predict even more aggressive legal and regulatory action in the months ahead. There are five federal lawsuits filed against Zillow since June of 2025. First, Zillow threatened to permanently ban any listing that was publicly marketed but not put on the MLS within 24 hours. So if you put a for sale sign in your front yard and didn't put it on Zillow, within 24 hours you're banned. Do a Facebook post. Don't put it on Zillow in 24 hours. You're banned. Pretty aggressive. It appeared that Zillow was targeting Compass. Zillow followed through and banned Compass listings that were not put on Zillow in 24 hours. On June 23, 2025, Compass sued Zillow, exposing Zillow's so-called Zillow ban for what it truly is, a ruthless scheme to strangle competition and trap home sellers inside of Zillow's walled garden. If Compass prevails and home sellers choose to where and when to list their homes, Zillow could lose massive swaths of its inventory, calling into question its lead diversion model. I believe that Zillow's actions pushed Compass into defensively merging with Anywhere. When the Compass Anywhere merger is completed, the combined company will be by far the largest real estate brokerage in the U.S., with, as I understand, as many as 300,000-plus agents. I'm pretty sure that Zillow just picked a fight it cannot win. Compass will have the most important listing content in real estate and Zillow will need them a lot more than Compass needs Zillow. We filed our lawsuit against Zillow on July 30th, 2025 to put an end to Zillow's brazen theft and monetization of CoStar's intellectual property. Zillow undoubtedly has used content stolen from apartments.com to unfairly build their rental business. The scale of this infringement is staggering. For context, in 2019, Excelgent was caught with 38,489 CoStar copyrighted photographs and the federal court awarded half a billion dollars in damages to us. Zillow's conduct is even more egregious and we're determined to hold them fully accountable. Then in September, The Zillow was sued in a class action suit by a group of plaintiffs who alleged that they were being deceived into overpaying hidden fees through Zillow's notorious contact agent button. Don't push it. This case tears straight to the heart of Zillow's business model, laying bare a system built on deception. The complaint exposes Zillow's tactics, saying Zillow actually directs the buyer away from the listing agent and directs the buyer to an unrelated buyer agent who lacks any specialized knowledge about the subject property. And the follow-up isn't just limited to duped buyers. Zillow's lead diversion racket is bleeding home sellers by diverting their potential home buyers to agents that may compete with their listing. Most recently, we're not done, hang with me. Most recently, September 30th, 2025, the United States Federal Trade Commission filed suit against Zillow Group and Redfin over an illegal agreement to suppress competition. They stated that the illegal deal stunts multifamily rental advertising competition, harming American renters and property managers. The FTC went on to say that the Zillow partnership with Redfin was nothing more than an end-runaround competition that insulates Zillow from head-to-head competition on the merits with Redfin for customers advertising multifamily buildings. The FTC is seeking injunctive relief, meaning a potential unwinding of the deal. The lawsuit was followed up the next day by another lawsuit on behalf of bipartisan coalition of attorney generals from Virginia, Arizona, Connecticut, New York, and Washington State. You might assume the CoStar Group sees deals like this when they come up, like the Redfin deal. My immediate and clear reaction would have been that obviously the FTC would not allow such an illegal deal in any effort to end run the FTC regulatory process would necessarily bring unnecessarily excruciating pain and damage to anyone foolish enough to try it. So we never would have pursued it. If Zillow is ordered by federal courts, the FTC, or attorney generals of states to disgorge their allegedly illegally gained department revenue and content, I believe it will seriously damage Zillow's reputation in the department industry. These lawsuits will take years to resolve. The full extent of Zillow's contact as alleged in these complaints and the various remedies from these lawsuits is yet to be seen. Moving to the United Kingdom was a strong quarter for our on-the-market, our UK residential marketplace. With leads up 21% a year over Q3-25, we delivered significant ROI to our 16,000 subscribing customers there. Bringing some Homes.com-inspired features to on the market has resulted in positive changes to the site that are generating more consumer engagement. We are building an audience of serious property seekers with total page views up 24% year-over-year in Q3. Average time on site per active user is up 79% year-over-year, and lead-to-visit conversions are up 31% year-over-year. Bookings increased for the 17th month in a row and has delivered nearly 11 million of annualized net new bookings since its acquisition. We closed the acquisition of Domain in August. I'm excited to work with the Domain team and their customers to bring Homes.com, CoStar, and LoopNet platforms to Australia. Domain's residential marketplace and commercial marketplace, well, Domain's residential marketplace is very successful and generates more than 50% direct contribution margin. Its commercial marketplace generates a 40% direct margin. Both marketplaces have long-term growth potential under the CoStar umbrella. The Domain brand is very well known in Australia, and there's significant potential to expand market share there. where homeowners invest significantly in digital real estate advertising. Domain has an excellent management team led by Jason Pellegrino, who knows the Australian market well. He used to be the MD for Google there, and his vision for the business aligns with ours. We have made fast progress since taking ownership of the Domain business on August 28th, delivering 7.4 million unique users in September on Domain's residential platforms, which was the largest number of unique users on Domain's own platforms in its history. The quality of this increased audience was retained, delivering the highest consumer reviews per listing in Domain's history. We're on track to significantly beat those records in October. We have already delivered a 24% year-over-year increase in audiences on our commercial real estate platforms in Australia. These strong audience results were driven by a mix of greater marketing investment supported by an improved mix of marketing investment across every step of the consumer journey and rapid product improvement supported by a refocused product team and access to co-star platforms, relationships, and talent. Examples of product improvements already executed and planned include when the first 60 days of ownership include improvements in platform speeds and latency, removal of all advertising interrupting the consumer experience, and improvements in image quality. A key highlight was the growth achieved in our audience metrics, where we saw domain apps average 138% increase year-over-year in downloads across iOS and Android, allowing us to successfully overtake our main competitor in App Store rankings. Domain was previously constrained under its former media company owner. It received limited management focus, limited expertise, and scarce resources, limited expertise in real estate marketplaces. It was operated with short-term EBITDA strategy, keeping it from competing effectively with the market leader at REA. We believe that with CoStar Group's technology and resources, Domain will compete more effectively and will achieve stronger long-term profitability. A dozen members of my management team and I recently spent two weeks in Sydney for a deep dive into the domain business and believe there are clear opportunities to make changes that will create value for our shareholders. Most of the significant software resources and products we offer, we believe are compatible with the Australian market and we can integrate domain into them to create competitive advantage and cost efficiencies. We hope to improve domains focus and profitability by rationalizing some of its product portfolio. Under prior ownership, Domain allocates significant resources to about 10 non-core initiatives at the expense of the highly profitable residential and commercial portals. I believe that most of the software development resources were allocated to products generating less than 20% of its revenue. We will refocus Domain's resources towards its successful scalable core and competing against its main competitor. We expect to offer LoopNet Homes and CoStar in Australia within 18 months. There's currently, we believe, no equivalent to CoStar in Australia. While Domain and REA Group offers products similar to LoopNet, I do not believe that they're on par with what LoopNet offers. This presents a significant opportunity for us to quickly establish a leading presence. The more I live with Matterport, the more impressed I am with its technology, how well it works, and how useful it is to real estate. Matterport creates a strategic advantage in both our residential and commercial product portfolios. Matterport Digital Twins unlock value by bringing a new and important dimension of digitizing real estate in every product we offer. As part of CoStar Group, we see Matterport set on two pillars. On one pillar, Matterport is a standalone solution for industries such as insurance construction, public safety, facilities management, and similar, which we believe is by itself a multi-billion dollar revenue opportunity. In the second pillar, Matterport is brought to market as an integrated solution within our marketplaces and information solutions through our existing sales forces of 2,000 some people. We believe that in the second pillar, Matterport can help CoStar compete and achieve more than a billion dollars in incremental value. Integration of Matterport in the second pillar is well underway and you can see deeper than ever integration of Matterport within our products. I believe that prior to merging with CoStar, Matterport was a world-class transformative technology held back by lack of focus on go-to-market strategy with an underscaled sales and marketing effort. Matterport had fewer than 30 sales representatives globally, leaving many huge revenue opportunities untapped. We plan to expand the sales force by 200 by the end of 26 and drive accelerated revenue growth. Matterport's Q3 revenue is 12% higher than our expectations, 44 million versus 40 million, and our Q3 25 net bookings were up 194% over Q3 last year. We emphasized new customer acquisition, which resulted in 94% increase year over year in incremental new customer logos. Our Matterport Max rollout for apartments.com began at the NAA conference in June of this year. We've already sold over 530 Matterport Max subscriptions which are adding upwards of $5,000 per year in annual subscription revenue per unit. We just completed a successful developer summit and hackathon with the Matterport team. Coming out of that, I'm very confident that we have an outstanding and innovative product roadmap that will delight our customers and, for you all, more importantly, our shareholders. Turning to CoStar, CoStar generated $277 million in Q3 of 25 revenue, reflecting 8% year-over-year growth. Revenue growth has steadily improved in 25 as net new bookings remain strong. Per rep, productivity in Q3 was at its highest since Q3 23. Cancellation rates have declined over the past two quarters and our renewal rate reached 93.3, the highest since 23. Our subscriber count rose to 284,000 in the third quarter, up 20% year over year. Our lender business achieved a record quarter, closing 4.3 million annual net new bookings. With nearly almost just their 100 million in revenue and over 450 clients, including banks, credit unions, private lenders, regulars, insurers, CoStar for Lenders has demonstrated strong success and has significant potential. CoStar Lender has already uploaded over a trillion dollars of loans into CoStar. Clients' loan portfolios are securely uploaded to our SOC 2 compliant platform, unavailable to any AI scraper, and integrated with CoStar's proprietary data analytics and credit modeling, informed by our research and marketplace solutions. This comprehensive ecosystem delivers unmatched value for regulatory examinations, asset allocation, and responsible growth. In 26, we plan to launch our benchmarking product and have begun developing a loan origination system, expanding our total addressable market. One of our core goals for all of our emerging businesses is to cross that oh-so-important $100 million revenue milestone. So congratulations to John Vecchione, Zhao Xing, and the entire lender team. Well done, and dinner is on me. LoopNet remains the world's largest and most active real estate marketplace, capturing 8.5 times more searches than our nearest competitor. In the third quarter of 2025, LoopNet achieved 10% revenue growth. Based on net new bookings from the last three quarters of 2025, we expect the platform to deliver low double-digit growth next year. I firmly believe that LoopNet should and can return to 20% plus annual growth rates soon. Our strategic focus has been on offering LoopNet advertising packages that enable clients to promote their entire property portfolios rather than just select assets. These silver ads, their portfolio comprehensive design, are designed to drive higher renewal rates, deliver stronger ROI for clients, expand listing coverage, and enhance both the consumer and customer experience. We are also continuing to roll out asset-based pricing for renewals, aligning our service pricing with the value delivered to clients. International expansion remains a key pillar of LoopNet's growth. Many of the largest multinational companies in the world are heavy users of LoopNet, and we could provide them even more value if we carried listings in more countries. In August of 25, we integrated all French listings from Bureau Loco into LoopNet, bringing the total number of European listings to 100,000 across France, Spain, and the UK. We can see major tenants like Amazon and many others searching LoopNet for commercial real estate, not only in the US, but also in Canada, France, the UK, and Spain. So wherever we're going, they're searching. We will soon add Australia, as I mentioned, through our domain acquisition, further growing our global reach. We believe that LoopNet can deliver more value to local advertisers if we're delivering a unique and valuable global audience with high buying power. Our data consistently shows that properties listed on LoopNet sell and lease faster. For properties listed in January 24, 30% of those on LoopNet transacted, while only 22% of those not listed on LoopNet transacted. For firms listing 90% to 100% of their listings on LoopNet, their 24-month close rate was 36%, while those not listed on LoopNet only had a 20% close rate. If a few hundred dollars invested in a LoopNet could increase your chance of transacting a commercial property by 80%, I believe that's a no-brainer. Turning to CoStar Real Estate Manager, and CoStar Real Estate Manager and Visual Lease now support real estate lease management accounting project management needs for 2,000 corporate clients, including more than half of the Fortune 500. Third quarter, 25 revenue climbed 63% year-over-year to $30.6 million. The business is very profitable with growing margins. We are making good progress integrating CoStar Real Estate Manager, Visual Lease, and CoStar into one extremely valuable corporate real estate solution. We expect to launch lease benchmarking capabilities mid-26, creating a new level of transparency, helping investors, brokers, corporates, and lenders understand gain a more accurate and timely understanding of serial rents and potential income. We expect to release an integrated product with real estate manager and costar suite in late 26. Clients will be able to access comprehensive market data and gain visibility into previously unseen opportunities to optimize their real estate portfolios. This will allow them before detailed analysis to make the most informed decisions that we believe will significantly drive significant ROI and cost savings for these clients. We shared our new product roadmap in our recent customer advisory meeting with major clients, which include real estate finance and accounting leaders, and we received very extremely positive feedback on the new product direction. CoStar Group's European business continues to deliver record net new bookings, reaching 5.7 million in Q3 2025 and 16.9 million year-to-date, representing a 51% year-over-year growth. UK business achieved another record quarter with year-to-date net new bookings up 125% and revenue up 17% year-over-year. In France, our research team has curated over 260,000 buildings, 50,000 availabilities, 140,000 tenants, and 60,000 sale and lease comps. Business IMO, now fully integrated into CoStar News, reaches over 100,000 French CRE professionals monthly. and we're confident that CoStar will soon become the leading source for SIRI data in France, connecting global and French investors. In closing, I believe that our results this quarter demonstrate that my colleagues here at CoStar Group are making great progress, continuing to successfully grow our existing businesses while effectively investing into new real estate segments and new global markets. With $350 trillion of real estate in the world, we believe we're creating value digitizing it with leading marketplaces and information solutions that can result in a trillion-dollar addressable market with a deep moat. And we're busy building it one brick at a time. At this point, I'll turn the call over to our CFO, Chris.

Thank you, Andy. Good evening. Good evening. I'm happy to report that CoStar has now posted its 58th consecutive quarter of double-digit revenue growth, coming in at 20%. We achieved an impressive commercial information and marketplaces brand margin of 47% in the third quarter versus 43% in 3Q24. Net new bookings for the third quarter were $84 million, representing a 92% increase year-over-year. Every major product contributed to this record as our growing dedicated sales force of over 2,000 people is delivering for CoStar. Revenue for the third quarter was $834 million, which included a $25 million contribution from the domain acquisition. Revenue excluding domain of $808 million exceeded the high end of our guidance. Third quarter adjusted EBITDA came in at $115 million also exceeding the high end of our guidance at a 14% margin. The outperformance in adjusted EBITDA was a result of continued expense discipline and better than expected revenue. Our CoStar products saw revenue grow 8% in the third quarter ahead of our guidance. We are excited about this product's renewed growth, especially given continued volatility in the commercial real estate sector. Now new bookings have steadily increased throughout 2025, and are now at the highest level seen since 2022. With this increasing momentum, we expect to see the CoStar product grow between 8% and 9% in the fourth quarter, with full-year growth firmly in the 7% range from our original guidance of 6% to 7%. Residential revenue was $55 million in the third quarter, with $23 million coming from the domain acquisitions. The $32 million in organic revenue was consistent with last quarter's guidance. With the addition of revenue from domain, we now expect fourth quarter revenue of $100 to $105 million, with domain contributing around $67 million. For full year 2025, we expect residential revenue to more than double to $210 to $215 million from $101 million in 2024. Apartments.com's third quarter revenue growth came in at 11% year over year. Our Apartments.com sales reps are consistently the most productive of our large brands, and we have increased the size of this team by 20% year to date. We now have more than 500 Apartments.com sales reps for the first time in its history. These reps will take time to ramp up their productivity, but this investment puts us in a great position for longer-term growth. For 4Q25, we expect 11 to 12% revenue growth, resulting in full year 2025 revenue growth of 11 to 12%. LoopNet revenue grew 12% in the third quarter, with a two percentage point lift from the domain acquisition. LoopNet's organic performance was in line with last quarter's guidance. Our sales team is consistently outperforming prior productivity levels, and in conjunction with the domain contribution, we now expect 4Q revenue growth of between 15% to 17% and full-year revenue growth of 10% to 11%. On an organic basis, 4Q revenue growth is expected to be 11%, its highest growth rate since 2023. This acceleration throughout 2025 sets us up nicely for 2026. Revenue from information services was $41 million in the third quarter, We expect fourth quarter revenue to be consistent with the third quarter and full year revenue growth of between 18 to 20%. We are excited about launching our new rent analytics product in the first half of 2026 and our new lease platform in the fourth quarter of 2026. Other revenue was $78 million in the third quarter with Matterport contributing $44 million. For the fourth quarter, we expect other revenue to range between 70 and $72 million. The fourth quarter is expected to be slightly impacted by revenue recognition timing for 10X and lower camera sales at Matterport as we sunset the Pro2 camera. As previously stated, adjusted EBITDA for the third quarter was $115 million, meaningfully above the high end of our 75 to $85 million guidance. The favorable performance came from higher than projected revenue, higher than anticipated professional service costs, and greater than expected headcount savings, as we remain laser-focused on expenses. Our contract renewal rate was 89% for the third quarter, with a renewal rate for customers who have been subscribers for five years or longer holding steady at 94%. Subscription revenue on annual contracts was 75% for the third quarter, The acquisitions of Matterport and Domain are the driving factors for the change in our subscription revenue metric. Our September 30th balance sheet included $2 billion in cash, which earned net interest income of $26 million in the third quarter, a 4% rate of return. We repurchased 576,000 shares in the third quarter for $51 million, bringing our year-to-date total to 1.4 million shares repurchased for $115 million. we expect to purchase approximately $50 million of additional shares in the fourth quarter, bringing our 2025 total to approximately $165 million of the $500 million share repurchase authorization. We closed on the domain group acquisition on August 27th. The total consideration was $1.9 billion. Domain contributed $25 million of revenue for the stub period from August 28th to September 30th. For context, Around 90% of Domain's revenues is residential, while the remaining 10% is split between commercial marketplaces and information services. With nine months of 2025 in the books and with the closing of Domain, we now expect full year revenue of between $3.23 to $3.24 billion, broadly in line with our guidance excluding Domain. Fourth quarter revenue is now expected to be between $885 and $895 million. Full year adjusted EBITDA is now expected to range between $415 and $425 million, with domain contributing approximately $15 million. This $25 million increase in our guidance, excluding the impact from domain, is indicative of our strong third quarter performance. Fourth quarter adjusted EBITDA is expected to range between $150 and $160 million. And with that, I will now turn the call back to our call operator to open the lines for questions.

Thank you. As a reminder, 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. Please limit yourself to one question. Our first question comes from Pete Christensen with Citi. You may proceed.

Good evening. Thanks for the question here. Nice results, guys. Good trends here. Andy, it's interesting. I was looking across the last eight years and sequential change in bookings, excluding COVID, so 2020, was roughly 15%. This quarter, sequential change of bookings was 10% down. So clearly the new Salesforce capacity is contributing and other things also contributing to some of that growth being above seasonality. But I'm just curious if You could point out any seasonal behaviors that you notice and maybe special attention on the residential side. Are agents canceling now, plan to come back later? Are you seeing the same type of seasonality that you normally see in the apartments business? Just any deeper thoughts there would be helpful.

Thank you. Sure. And I guess you got the first question because we sourced Citi during our script. So, Um, but the, um, uh, apartments.com does have, uh, seasonality. And as you know, the prior quarter, you have, uh, uh, usually unusually large sales, uh, because of the NAA event, uh, where people, major, uh, property managers do their annual purchasing, uh, for the year to come. And, um, We would expect some limited seasonality from residential agents as they get to year-end holidays and the like. Their peak season is the spring selling season. But what we're seeing right now, if I look at a line of our sales production at homes.com, it is a very linear line and the only seasonality in that sales line is Saturday and Sunday. So it's a very smooth progression up right now, and I'm not yet seeing seasonality. Maybe in Christmas holidays you might get something, but not yet. Thank you.

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

Hey, thanks. Just wanted to follow up on that question. I guess, can you just give more detail on the sequential booking trends in the third quarter as we look at the core businesses, so looking at suite, apartments.com, and LoopNet? And then just, you know, how are things shaping up in the seasonally important fourth quarter round bookings, especially with a bigger sales force and the ramping productivity? So, yeah, just what are you, you know, how are you thinking about the bookings trajectory into 4Q?

Chris?

Yeah, so I think as you see... They didn't like my SEO track. I think what you see is you see our full year guidance, you see our sequential trends. We're very pleased with the bookings, and I think we're just getting started from the Salesforce expansion. A lot of the Salesforce came in the end of the first quarter, second quarter, et cetera. So productivity time takes time to ramp, but seasonality and what we're modeling is pretty much in line with what we're expecting, and therefore you saw the increase in our and our four-year guidance and our expectations. And so I think we're on track from what we're expecting.

Thank you.

Yeah, and I do want to point out that from, remind everyone that from the bookings at homes.com from Q2 to Q3 was up 53%. So as we're going into the third quarter, We're seeing a significant uptick in bookings at homes.com. And again, because of the number of people, a very smooth upward growth trajectory.

Yeah, and just to expand a little further, CoStar's trend is very positive. We're seeing re-acceleration there, which we're very excited by. We talked about LoopNet, Andy talked about LoopNet and what's going on there. And on apartments, as I said, the trends are as expected and as modeled. So I think we feel really good on the underlying trends and resulting in our change in guidance.

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

Hi, everyone. Thanks for taking the questions. At Apartments.com, in terms of bookings, can you say how those perform sequentially versus, I think, $45 million in the second quarter? And looking at the guidance for the fourth quarter, Chris, I think you're calling for 11% to 12% on multifamily, which would be pretty unchanged growth from the third quarter. I'm sorry, yes, from the third quarter. Just curious what's driving that despite the ramp in the sales force and just generally how you're thinking about demand trends at Apartments.com heading into the end of the year.

You know, what's important is what you saw across a number of funds. One, we continue to see rooftop expansion at Apartments.com or expanding the sales force. We've talked historically about You know, the seasonality or the contributions on a quarterly basis as we look at back historically, you know, with the second quarter being the largest quarter, the third, fourth quarters being, you know, relatively similar, although there can be an uptick in the fourth quarter. So I think we feel generally good about the trends, which has resulted in our numbers and our forecast. But obviously, solid growth, increased rooftop expansion. And then that's actually across all segments, 1 to 49, obviously had a pretty significant increase year over year. And then both 50 to 99 and 100 plus also showing growth at or higher than what we've seen over the last four or five quarters.

And Ryan, did I mention that the FTC was suiting our competitor?

Yes, I think I caught that, Andy. Thank you. Okay, I just wanted to make sure.

Thank you. Our next question comes from Curtis Nagel with Bank of America. You may proceed.

Great. Thanks so much for taking the question. Andy, I just wanted to go back to the point. So you're investing 50% of your software costs now into AI. I guess where are you redirecting those expenses from and I guess any thoughts you could give on how to think about total expenses for 26 for homes.com?

I thought you'd never ask. The 50% of our software development going into AI features in homes.com is an allocation of the existing resources. It does not reflect an increase in total spend. So as we go into any particular quarter or season, we're always looking at what are the headline investment initiatives going to be. We are most excited about the potential of these AI features and functions, which are just remarkable and awesome. And then we look at 2026, we anticipate, I would say, same or lower spend on a homes.com investment in 26. Do you agree with that, Chris, or are you going to go? You're the CEO. I agree with whatever you say, Andy. Okay, great. Yeah, but we don't see any, other than the increased Salesforce size that we've already baked in, that rollover to 25, you know, the costs are not materially going up in any way, I see.

Okay, thank you, Andy.

Mm-hmm.

Thank you. Our next question comes from Brett Huff with Stevens. You may proceed.

Hey, good afternoon, and thanks for the time. Can you detail a little bit, unpack a little bit the bookings number that you gave us for homes.com, which we appreciate? Just in terms of rep productivity, you know, are the newer folks getting more up to speed? Do we still have more of those folks get up to speed? pricing for any of the, the, the numbers that go into that bookings number would be super helpful as we, we try and tweak our model. Thanks.

Sure. Um, so we are in a period of remarkable headcount growth and homes.com. We've never seen anything like it where you have classes of a hundred and some coming in at any given point that is difficult to manage. You would fully expect you'd see a drop off in per person productivity as you bring that many people in. Um, But we are seeing that consistent. We're seeing consistent growth in those bookings. And what was the second part of the question? Productivity. Yeah. So the productivity is still we're seeing a very positive ROI on each incremental salesperson added. But you are seeing the effects of so many people coming in and we are. Slowing the growth, I believe, sort of have capped the growth of salespeople to allow for training and onboarding to catch up. Right, and you haven't made adjustments to pricing to improve penetration. Slight increase in pricing in this quarter over prior quarter, but we're focusing on penetration, as you can see.

Thank you.

Our next question comes from Pais Alwi with Deutsche Bank. You may proceed.

Yes, hi, thank you. Andy, you mentioned in your opening remarks that you think that you can get to 40% profitability or margins on the residential business. I'm curious how you think about the timeframe on that and sort of what needs to happen for you to get there.

Um, yeah, so, uh, the residential business, obviously you have domain in there, you have on the market, you have homes in there, you have apartments.com and, you know, past this prologue, you see us adding components to it through time. But, uh, when you look at our business model, that's uniform across all four of those platforms, it is around marketing the real estate. If I look around the world at all of the precedent models, uh, that use marketing real estate as their core business, be it Rightmove or Edialista or C. Loger or REA Group and the like, they all operate up at margins that are typically around 50%, but in some cases high as 75%. So it's really continued blocking and tackling over the next number of years. I don't have a specific date for that, but when I look at are when I look at the margin numbers for the combined residential businesses, I like the progression of EBITDA margin that I see in that group of companies. You can combine all these things together this way or that way, but when you look at them, I think they're making good progress towards our intermediate to long-term margin goals.

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

Well, I think our participants in the call today have probably modeled good behavior, and keeping it brief, I'll try to be briefer in my next set of comments. But thank you guys for joining us. We're very excited about what's happening here at CoStar Group, and we look forward to updating you in 2026 for our next earnings call. Thank you.

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