CoStar Group, Inc.

Hello, everybody, and welcome to the CoStar earnings call for Q1 2026. Thank you all for joining us. Before I turn the call over to Andy Florence, CoStar Group's CEO and founder, and Chris Lown, our CFO, I'd like to review a few of our safe harbor statements. First of all, certain portions of the discussion today may contain forward-looking statements. The company's outlook and expectations are based on current beliefs and assumptions and 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 today and in our filings with the SEC. All forward-looking statements are based on the information available to CoStar Group on the date of this call. CoStar Group assumes no obligation to update these statements whether as a result of new information, future events, or otherwise. Reconciliation is the most directly comparable gap measure 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 those terms. The press release is available on our website, located on costargroup.com under press room. Please refer to today's press release on how to access the replay of this call. 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.

Thank you, Rich. Thank you for joining us today. I want to start with three things. First, this was an exceptional quarter. We delivered our 60th consecutive quarter of double-digit revenue growth. Our adjusted EBITDA doubled, and we're on track for the highest full-year adjusted EBITDA in CoStar Group's history. Second, the Homes.com investment is delivering exactly what we said it would. Member agents are generating extraordinary returns on their subscriptions. Consumer engagement on Homes.ai is multiples of conventional residential search. And Homes.com is the fastest growing residential portal in the United States. I'll walk you through the evidence later in the call. Third, the activist distraction is behind us. With the noise gone, we have more focused energy than ever to spend on what matters, growing EBDA. Let me take you through the numbers. First quarter 2026 revenue grew 23% year over year. Q1 26 adjusted EBIT of 132 million doubled year over year and came in 26% above the midpoint of our guidance. After a record 2025 for annualized net new bookings, we started 2026 stronger still. Q1 net bookings of 67 million were up 20% year over year. We expect productivity to build over the year, particularly from the sales reps we hired throughout 2025. Our commercial business generated $472 million of revenue in Q1, up 15% year over year, with a adjusted EBITDA of $161 million. CoStar revenue was $331 million. Let's get that extra million in there. in Q1 with annualized net new bookings from our core CoStar product up 16% year-over-year. CoStar users grew 22% year-over-year to 317,000. Sales to brokers and tenants were especially strong with broker sales up 29% and tenant sales up 27% year-over-year. CoStar NPS was 69%. and our quarterly renewal rate was 92%. CoStar Rent Benchmark launches this summer. Drawing on our proprietary lease database and public records, it will be the industry's only net effective rent benchmark product, giving landlords, occupiers, investors, and brokers visibility into starting rents, effective rents, TI allowances, free rents, and escalations across U.S. markets. CoStar New Homes is in development with Phase 1 plan for Q2. The module tracks new residential construction from planning through delivery and serves home builders, mortgage bankers, retailers, and retail center owners. It integrates builder feeds, drone imagery, and other data sources to deliver insight into housing supply, demand, and market trends. CoStar Debt Solutions, formerly CoStar Lender, had a strong quarter with net new bookings up 26% year over year as the business crossed $100 million in revenue. Debt Solutions now serves over 500 financial institutions across the full lender spectrum, including banks, private lenders, debt funds, and regulators. Debt Solutions is on track to launch CRE debt benchmarking in the second half of 26, with CRE loan origination workflow following in Q1 of 27. The final product will be a full workflow solution to originate and underwrite a loan. Our first release will focus on seamless delivery of property details, peer properties, and market information. We launched a client advisory committee with over a dozen institutions to shape the loan origination roadmap, deepen understanding of how AI is reshaping their workflows, and strengthen product market fit. Across the platform, Debt Solutions is actively building these AI enhanced workflows. CoStar UK's growth accelerated in Q1 with revenue up 25% and net new bookings up 44% year over year. This growth was supported by the release of new land registry lease modules that gave clients authoritative effective rent data sourced from government records and the re-collapse of one of our primary competitors there. CoStar Canada revenue grew 22% year over year. We released multifamily analytics coverage for Montreal in Q1. CoStar France launches in Q2. We will cross-sell into the 32,000 French CRE professionals who already subscribe to news and information from our business IMO acquisition. accelerating adoption as we build the only pan-European CRE data and analytics platform. In CoStar Australia, we are rapidly building proprietary property data with our local research team now approaching 100 people. We expect to launch CoStar and LoopNet in Australia in Q3 and Q4. Real estate manager added AI lease abstraction capabilities to the visual lease platform this quarter, and we'll extend these capabilities to co-star real estate manager later this year. Customers are eager to bring this best-in-class capability into the lease management and accounting workflows to save them a lot of time and hassle. We're also deploying multiple AI agents internally to accelerate customer onboarding, support enablement, and the automation of reputable professional services work. In Q1, SDR launched profitability benchmarking, supporting more than 150 detailed data points across a hotel's P&L. Customer interest was immediate with 750 hotel subscribers submitting data to unlock the functionality. Building participation at scale is critical to future monetization, and this early engagement reinforces the long-term value of the investment. LoopNet generated 85 million of revenue in Q1, up 16% year-over-year. Paid listings rose 10% year-over-year in the US, 35% in Canada, and 63% in the UK. Last month, after more than a year of successful testing, we rolled out asset-based pricing across all US markets. LoopNet advertising is now priced to match the size of the asset and the value LoopNet delivers to listers. Early results have been really outstanding. At the high end, the volume of silver listings sold at $300 or above per month grew 650% from February to March. At the low end, listings sold below $40 grew over 1100%, opening up an entirely new category of inventory and bringing in smaller advertisers who could not justify the higher price points for one size fits all that we had before. We expect this to drive more listings, more traffic, and more revenue. LoopNet's European revenue grew 17% year over year. Following last year's launch in France and Spain, we're seeing the network effects of being the first and only global commercial real estate marketplace. Average monthly unique visitors on LoopNet Europe more than doubled to over 900,000, up 102% year over year. Crucially, These users are not just searching their home countries, they're searching globally. We will extend this network effect as LoopNet launches in Australia, Germany, and other markets. Our Australia CRE marketing platform, commercialrealestate.com.au, grew 10% year-over-year on a pro forma basis, driven by higher depth revenue, improving depth penetration, and higher average revenue per listing. That commercial unique visitor audience was up 129% year-over-year in Q1. Subscription revenue for Matterport was up 19% year-over-year. Enterprise momentum built through the quarter. New enterprise accounts in March were up 31% year-over-year. And direct sales were up 16%, supported by a healthy and expanding pipeline that continues to build into Q2. Matterport has become a critical point of differentiation across CoStar Group. It drives engagement, lifts conversion, and generates valuable proprietary data. Integration is proceeding exceptionally well across Apartments.com, Homes.com, LoopNet, CoStar domain. Matterport is already a key component of Homes AI and will unlock huge future AI innovation all across CoStar Group. Matterport exteriors with X-ray, now in alpha, lets users virtually remove a roof or floor of a virtual building to see the building's interior in the context of the yard, the neighborhood. That's a real estate marketer's dream. We've also released a number of new innovations with strong use cases in architectural engineering construction, facilities management, and manufacturing. BizBuy sell revenue was 8.8 million in Q1, with broker subscriptions reporting 2,300 with broker subscribers, I'm sorry, reporting 2,345 completed sales transactions of businesses representing 2 billion enterprise value, 59% of which involved commercial real estate. We're rapidly turning Biz by Sell into a true end-to-end transaction platform with integrated financing, 3D tours, and document sharing, now driving over 24,000 briar profiles and 15% broker adoption. Residential revenue was 421 million in Q1, up 32% year-over-year. Adjusted EBITDA improved by 56 million, and we expect the residential segment to reach profitability in Q2, 2026. Apartments.com generated $312 million of revenue in Q1, up 10% year-over-year, the 15th consecutive quarter of double-digit revenue growth. Apartments.com delivered 220 million highly engaged renter visits, 370,000 tours, and 300,000 applications submitted directly on our platform to apartment owners, alongside 40 million Matterport tours. Our monthly renewal rate held at 99%. Apartments.com brand media impressions nearly tripled in Q1, up 189% year over year to 1.7 billion. The longer we invest in our brand on behalf of our clients, the more efficiently we deploy that investment. Clear example, our first ever co-branded Super Bowl commercial with homes.com aired on February 8th, reaching 126 million viewers, the highest peak viewership in U.S. media history. Combined with our industry-leading SEO and SEM, these efforts continue to produce the most qualified audience of apartment seekers on the Internet. According to Google, overall rental search demand remains soft. Even so, ComScore data shows Apartments.com network unique visitors up 3% year-over-year in March. Zillow unique visitors were down 5% year-over-year. And Zillow's expanded rental network, Zillow plus Realtor plus Redfin, was down 3%. Zillow has now seen unique visitors decline year over year for 15 consecutive quarters. Let's make that 15 consecutive months, not 15 consecutive quarters. I was just sort of picking up the 15 consecutive quarters of double-digit growth we had. Our Salesforce conducted 185,000 quality meetings in Q1 for Apartments.com and achieved an outstanding NPS of 89. In Q1, Apartments.com introduced Smart Search, our natural language search feature, and the first AI-powered voice search in multifamily. Smart Search lets renters search the way they speak, packing every detail and even multiple locations into a single query. Results are faster, more detailed, and dramatically more efficient. The early metrics are really strong. Renters who use Smart Search spend 94% more time on site and view 63% more listings. Ahead of the June apartmentalized trade show that NAA hosts, the big show of the year, we will launch Apartments to AI, our pioneering conversational search experience built on the same technology powering home's AI. Apartments.ai will more deeply engage renters and continuing delivering best-in-class advertiser ROI through the industry's highest quality leads. We will also highlight Homes.com's expanded rental capabilities and the value add to Apartments.com at that same apartmentalize. Apartments.com leads the industry on price transparency. Any property can now display a complete all-in monthly price with all the extras reoccurring one-time required fees with a prominent badge alerting renters. Six states already require this sort of transparency, and the FTC just concluded its public comment period on similar rules. Matterport continues to be a true differentiator for consumers on Apartments.com. We now have approximately 250,000 3D tours in the platform, including over 1,500 Matterport 3D exteriors that give prospective renters an immersive 360-degree view of the entire community. In Q1, renters spent 46% more time on listings featuring a Matterport, and those listings generated 56 times more tour requests per listing than listings without one. It's an amazing stat. Homes.com revenue grew 58% year-over-year to 26 million in Q1. We are on pace to hit our stated 2026 net investment target of 550 million in homes. And what that investment is buying is becoming clear in the data. Membership growth and monetization are both accelerating. We had over 4,300 members in Q1, up 205% from Q1 of 25. We now have 35,175 agent subscribers with 76% of them on annual contracts. Net new bookings were 11 million in Q1. March annual revenue run rate reached 106 million, up 92% year over year. Our trailing 12 month average ARPU is $287. We are now seeing clear, quantifiable evidence that Homes.com business model is working and that our subscribers gain an extraordinary return on their investment. We analyzed the first 11,400 Homes.com members and compared their commission earnings in the 12 months before joining Homes.com to the earnings in the 12 months after they became a Homes.com subscriber. The findings are striking. On average, a Homes.com subscriber earned 36,400 more in commissions in their first year as a member. Against an average annual subscription cost of just $3,400, that's an 11 times return on their investment. In the same time period, our members saw commissions grow 16%, while the average non-member saw their commissions decline. The ROI is even stronger for the agents who need it most. Agents who have had earned 50,000 or less in the prior year earned 58,000 more after joining. Pre-membership earnings were 26,000 on average, and that jumped to 82,000 on average. There are hundreds of thousands of agents in this earnings cohort. Agents in the 50 to 100,000 bracket earned $41,000 more in commissions after joining. Agents in the $100,000 to $150,000 bracket earned $38,000 more once they became Homes members. These numbers almost certainly understate the value. The benefit extends beyond our 12-month analysis window, and we exclude the significant rental marketing value members generate through Homes.com and our syndication to Apartments.com. Based on these results, we will raise subscription fees for new customers on May 1st and evaluate measured potential renewal increases. For CoStar Group as a whole, this is the fastest organic revenue build we've ever achieved for a new product, and we hit these revenue levels faster than our U.S. competitors did at their start. Our MPS is 41, an excellent score after just two years and still improving. Homes.com subscribers paid to promote 260,000 active listings in Q1, representing 8.7% of the nearly 3 million homes for sale in the US. In 2025, the homes.com network drew nearly 2.1 billion views and 108 million average monthly unique visitors. We achieved a healthy balance across SEM, SEO, and direct traffic, allowing us to optimize SEM for quality leads, not just quantity. The result is better traffic and more engaged visitors. Organic traffic to homes.com was up more than a hundred percent year over year and every month of the quarter and March specifically up 119% year over year. Homes.com was featured across major cultural moments in 2026, including the Oscars, the Olympics, the Superbowl, March madness, and many other driving over 3 billion impressions in Q1. Our new March ad showcased Homes AI in action, and I have received more positive feedback on this campaign than any of our prior Homes.com campaigns. In March, average annual session duration hit an all-time high of 26% year-over-year, and bounce rate hit an all-time low down 29%. Homes AI is the engine behind this engagement surge. AI users run nearly four times as many searches favorite seven times as many properties, and submit seven times as many leads. In April, time on site reached 18 minutes for AI users versus four minutes, 32 seconds for non-AI users. Put plainly, when consumers experience Holmes AI, they spend roughly four times longer than they do on conventional residential search. This is precisely the dynamic that precedes meaningful consumer share shift. and is exactly the proof point we expected our AI investment to produce. In March 26, we significantly expand our relationship with eXp Realty, the largest residential firm by transaction size in 25. The new partnership lets eXp's A3000 agents prominently display pre-market coming soon listings on homes.com. You may recall we partnered earlier with eXp Commercial in December 24 when they became a major subscriber to CoStar's information and analytics. We've been integrating Apartments.com with Homes.com since early 2025. Last year, Homes.com rentals drove over 10% of Apartments.com's traffic, making Homes.com Apartments.com's largest syndication partners. This combination produced nearly 650,000 paid single-family home rental listings in 25. Paid single-family rental listings in Q1 2026 grew 33% year-over-year. According to Comscore, Homes.com is now the fastest-growing rental site in the U.S. For Google Analytics, Homes.com rentals visits grew by 13 million versus Q1 of 2025. making Homes.com our most powerful platform for reaching the single-family rental market. Over 214,000 independent owners now use our rental tools, and we expect that number to raise materially as we extend the full Apartments.com feature set into Homes.com. We're continuing to improve the experience for renters who search on Homes.com. By the end of 2026, every tool available on Apartments.com will be available on Homes.com, letting independent owners rent their house, condo, or townhouse across both platforms. At the end of August 2025, we began selling marketing on homes.com to new home builders. In the first eight months, we generated 3.3 million in annualized net new bookings, with the run rate accelerating each quarter. Q1 alone delivered 1.5 million. We assigned data feed agreements with 663 home builders looking to reach the homes.com audience. These feeds now cover roughly 75% of all production new home activity in the U.S. These feeds provide a better consumer experience to home searchers on homes.com and are a foundational building block to power a valuable new homes information product within CoStar. So let me pause to speak briefly to Elf in the room. The activist campaign over the last year did weigh heavily on homes.com sales and potential partnerships. Real estate leaders were reading a steady drumbeat of negative coverage. Nonetheless, we've made durable progress through it. With that distraction now behind us, we can now apply even more focused energy to accelerating homes.com revenue and the revenue in every other business in the portfolio. Land.com revenue grew 8% year-over-year and net new bookings hit a record, up 126% year-over-year, boosted by replacing a regionally targeted site-specific ad with a county-targeted network ad format. Inventory tripled and ads sold quadrupled. Domain Australia delivered a strong Q1 with sustained elevated audience volume, strong uptake of premium products, and disciplined cost control. Recent investments in product technology research and photography are now producing tangible outcomes, and Q1 revenue was $68 million. The Australian market is highly cyclical, and Q1 is always seasonally soft, which is reflected in overall sequential down revenue. Year over year, however, core domain residential revenue did grow 11%. We delivered EBITDA growth despite all the significant investments we're making. In addition to expected normal seasonality, we did also discontinue revenue from spam ads on the domain portals because it was not materially profitable and significantly distracted from the value of home sellers receive when marketing on those sites. CoStar Group's technology capabilities are already benefiting Australian customers. Domain site improvements are dramatically increasing traffic, Monthly unique audience averaged 8 million across the quarter, with March hitting 8.4 million, the second highest month on record. Total users reached a high of 21.9 million, up 47% year over year, and listings grew 28%. Domain launched Matterport in Australia this month, bundling immersive technology into premium listing packages and giving agents and vendors meaningful savings on traditional photography. The launch generated significant positive media coverage. Q1 was another strong quarter for on the market. We closed it with our 23rd consecutive month of positive net new bookings. Total time on site was up 16% and page views up 24% year over year, driving a 23% year over year increase in leads. On the market now has 17,500 state agents and new home developer customers on site, the highest in its history. On the Market has eclipsed Zoopla as the UK's number two portal by inventory and now has more new home listings than Rightmove. The growth was accelerated by signing the Connells Group, the UK's largest estate agent, with over 80 brands and more than 1,200 branch locations. Our On the Market sales team is delivering real value for customers. NPS came in at a solid 46 for the period. In Q2, we'll continue building AI search functionality as we progress towards integrating on the market into the homes.com software environment in 2027. In closing, I want to acknowledge our outstanding management team. The breadth and depth of expertise across this company is what makes everything you've heard today possible. There's a lot of it. I am very grateful for what they bring to this company. I also want to thank our board of directors, our leadership expertise and council. We're outstanding through what was at times a noisy year. We are well positioned to deliver against every objective we've set and to unlock large digital real estate opportunities ahead of us. To our shareholders, thank you for your continued support. The day of this quarter across CRE, across apartments, especially across homes.com confirms one thing, the strategy is working. I've never been more confident in our plan to deliver double-digit revenue growth and significant earnings expansion through 2030 and beyond. At this point, I'll turn the call over to our CFO, Chris.

Thanks, Andy. In the first quarter of 2026, we delivered $132 million of adjusted EBITDA, doubling the adjusted EBITDA from the first quarter of 2025 and $17 million above the high end of our guidance range. The outperformance in adjusted EBITDA was primarily due to lower personnel costs from cost-saving efforts as we continue to find efficiencies from AI, personnel, and other expense initiatives. 1Q26 revenue was $897 million, which was 23% higher year over year and toward the high end of our guidance range. Organic revenue growth was 10% for the quarter. Commercial revenue in the first quarter was $472 million, an increase of 15% year-over-year and a 7% organic growth rate. Our commercial brands delivered revenue in line with the guidance we provided on our February earnings call. CoStar revenue grew 9% to $331 million, driven by strong double-digit international growth. The year-over-year increase was driven by both volume and price. LoopNet revenue is $85 million in the first quarter, a 16% increase year-over-year, or an 11% organic growth rate. The year-over-year growth was attributable to an increase in paid listings from our continued focus on selling silver ads. Other commercial revenue was $56 million in the first quarter of 2026, up 81% compared to the first quarter of 2025. The year-over-year increase is primarily attributable to the inorganic contribution from Matterport, which has performed well since the acquisition, with subscription revenue growth of 19%. Residential revenue in 1Q2026 was $425 million, a 32% increase over last year's first quarter and at the high end of our guidance range. Organic growth for residential in the first quarter was 13%, with double-digit growth contributions from apartments, homes, and on the market. Increased volumes for the cattle for organic growth in the first quarter. Commercial adjusted EBITDA was $161 million in the first quarter of 2026, a 34% margin and above the high end of our guidance range. Similarly, residential adjusted EBITDA was also better than our guidance range, coming in at negative $29 million. CoStar posted positive net income and adjusted EPS of 23 cents per share for the first quarter of 2026, both considerably higher than our guidance. Our sales headcount at the end of March was 2,090. Homes.com reps make up our largest sales team, consisting of 570 individuals. Apartments.com is the next largest sales force with 520 reps, with CoStar at 475 reps and 225 at the LoopNet team. For Homes.com reps, we are focused on driving productivity and efficiency in 2026. With our other brands, we will be adding reps throughout the remainder of the year, given the significant opportunity that still exists across all our brands, and we expect productivity to ramp as our new sales reps mature over the coming years. Our contract renewal rate has held consistently at 89% for the past seven quarters. Customers who have been subscribers for at least five years have an impressive 95% renewal rate. Subscription revenue on annual contracts was 73% of total revenue for the first quarter of 2026, compared to 71% during the fourth quarter of 2025. As a reminder, Domain does not operate using annual subscriptions. Net new bookings for the first quarter were $67 million, a 20% increase from the first quarter of 2025. In 2025, we completed our first share repurchase program, buying back $500 million worth of stock or 7.1 million shares. We subsequently announced a $1.5 billion buyback program in January of this year. Throughout the first quarter, we repurchased 11.4 million shares for $505 million, the majority of which was purchased through an accelerated share repurchase plan. We expect to repurchase an additional $195 million worth of shares during the remaining nine months of the year. bringing our total cash outlay for share buybacks in 2026 to $700 million. For the second quarter of 2026, we expect revenue to range from $922 million to $932 million. This range represents an 18% to 19% increase over the second quarter of 2025, or a 10% organic growth rate at the midpoint. Commercial revenue is expected to grow between 7% and 9%, to a range of $479 to $484 million. We expect residential revenue of $443 to $448 million, an increase of 32% to 34% year-over-year, or 12% to 14% organically. Adjusted EBITDA is expected to range between $160 and $180 million, representing a margin of 17% to 19%, or roughly 700 basis points higher than Q2 2025. Commercial adjusted EBITDA is expected to be between $160 and $170 million, a margin of 34% to 35%. Residential adjusted EBITDA is anticipated to be positive in Q2 2026, ranging between break-even and $10 million. Our adjusted EPS guidance for Q2 2026 calls for a range of 27 to 30 cents per share on 409 million weighted average shares outstanding. For full year 2026, we are reaffirming our previous revenue guidance range of 3.78 to 3.82 billion dollars, a 16 to 18 percent annual growth rate. Commercial revenue remains at a range of 1.955 to 1.975 billion dollars, and the residential revenue range remains at $1.825 to $1.845 billion. Based on the strength of the first quarter and the expectation of continued personnel expense efficiencies, we now expect adjusted EBITDA to range from $780 to $820 million. This is an increase of $30 million at its midpoint and a full percentage point increase in margin. Our adjusted EPS range is also increasing for the full year. The accelerated share purchase program in the first quarter retired more shares than we had forecast, and the previously mentioned expense reduction initiatives are primarily driving our guidance increase to adjusted EPS. Our new adjusted EPS guidance range is $1.32 to $1.39, an increase of $0.09 at the midpoint. I will now turn the call back over to the operator for questions.