CoStar Group, Inc.

Good day and thank you for standing by. Welcome to the Q2 2026 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, Richard Simonelli, Head of Investor Relations.

Thank you, Josh, and hello, and thank you all for joining us to discuss the second quarter 2026 results of the CoStar Group. Before I turn the call over to Andy Florence, CoStar CEO and founder, and Chris Lown, our CFO, I'd like to review our safe harbor statement. Certain portions of the discussion today may contain forward-looking statements. The company's outlook and expectations are 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 in our filings with the SEC. 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 because of new information, future events, or otherwise. Reconciliation to the most directly comparable gap measure of any non-gap financial measure discussed on this call are shown in detail in our press release, along with the definitions for those terms. Press release is available on our website, located at costargroup.com under Press Room. You've joined us via webcast. Please refer to the press release today to see how to access the replay of this call. Remember, I want to give everybody a chance to ask questions, so please limit your question to one question to start off, and you can re-queue in time permitting to ask a second question. And with that, I'd like to turn the call over to our founder and CEO, Andy Florence. Andy?

Again, thank you for joining us today. Our second quarter 2026 financial results marked a profitability inflection point for CoStar Group as adjusted EBITDA more than doubled year over year to $184 million. This is the second highest quarterly level in company history. We generated $925 million of revenue in the second quarter, an 18% increase year over year. That is our 61st consecutive quarter of double-digit revenue growth. Net income increased by 817%, and EBITDA rose 441%. We held our increase in operating costs to just 2% year over year, all while continuing to invest in numerous long-term growth initiatives. We expect to deliver the highest full-year adjusted EBITDA in CoStar Group's history in 26, and we're confirming our full-year guidance range of 780 million to 820 million. Along the way, we expect to deliver two consecutive quarters of our highest ever adjusted EBITDA. Net new bookings for the quarter were 69 million, up 3% from the first quarter. Our commercial real estate business generated $481 million of revenue in Q2, an increase of 8% year-over-year, and it generated adjusted EBITDA of $172 million, up 7% year-over-year. CoStar revenue was $337 million, up 9% year-over-year, and net new bookings accelerated up 24%. Renewal rates remained an impressive 93%, and MPS held historically strong at 68. Net new bookings to brokers increased 48% year-over-year, including a multi-year renewal of our largest brokerage client. Subscribers on the CoStar platform grew 19% year-over-year to 327,000. That subscriber base creates a powerful demand for commercial property sale and lease listings, and it makes the platform extremely valuable to the brokers and owners who list with us. CoStar Debt Solutions delivers differentiated risk analytics to commercial real estate lenders by intelligently combining CoStar's information resources with each lender's own proprietary loan data. It delivered its best quarter ever with over 4 million in net new monthly bookings up 96% year over year. We are now applying the benchmarking expertise we developed with SDR to debt solutions. 300 lender clients are contributing information on over 100,000 active loans, over $1.2 trillion in outstanding debt, and this is on an anonymized and aggregated basis. The product will give lenders unprecedented visibility to improve decisions across origination, portfolio, risk, and compliance. As an example of this value, a lender might discover his or her office loan book is at 80% loan-to-value ratio, while peers are at a more conservative 60%. That insight would provide and prompt the consideration of a significant risk premium or perhaps a shift to a more conservative lending policy going forward. Clearly, it's a game changer in the lending world. Overall, commercial revenue accelerating growth was partly offset by 10X, where we have been restructuring the business for future growth and cost control, and it enabled us to reduce costs by $7 million year-to-date. During this restructuring, revenue declined by $4 million. Going forward, 10X will be separated from LoopNet with dedicated sales, marketing, and leadership to more effectively drive growth. We launched Four major product initiatives on the core CoStar platform in the second quarter. First, in June, we released CoStar Rent Benchmark, a first-of-its-kind data set built from 4 million AI-abstracted actual leases and lease documents. Rather than using less reliable asking rents or broker report information, this is real data. Today, we present actual rent benchmark data and over time we plan to add model rents derived from that information. We have plans to build similar high quality rent solutions in Australia and the United Kingdom. Secondly, we launched CoStar in France in Q2, building on our BrioLoco and business MO acquisitions and significant proprietary local research. The platform covers office logistics and hospitality across Paris, Lyon, Marseille and more than 290,000 properties, 385,000 commercial tenants, 90,000 availabilities, and 75,000 lease and sales comparables. It is one of the deepest series databases in the country. Over the next two years, we plan to migrate and upgrade roughly 1,100 business MO subscribers to CoStar. Early customer response has been very encouraging. Within days of launch, we signed our first major global brokerage and a major global investor told us this was their first time they'd ever been able to get an absorption number for Paris. That's a KPI their investment board requires that, until now, was not readily available in France. For our third CoStar product launch in Q2, we launched public record search in the UK, providing extensive transparency into 6.9 million freehold and leasehold ownership titles, and 6.8 million properties and parcel groups. Fourth, we extended our AI-powered lease abstraction engine into CoStar Real Estate Manager. It converts complex lease documents into structured, audible records and significantly reduces the time clients spend onboarding and managing leases. We remain focused on launching CoStar in Australia in the second half of this year. We now have 124 researchers and photographers deployed on the ground in Australia. covering 30,000 listings, 23,000 property profiles, and more than 10,000 sale and lease transactions. Matterport performed well in the second quarter. Subscription revenue grew 16% year over year, and we achieved Matterport's all-time best month of enterprise customer acquisition in June. Tomorrow, we will deploy a new pricing plan that reduces the price of the Matterport 3 camera and shifts more of the revenue into SaaS. We believe this will accelerate both adoption and subscription revenue growth. We continue to advance the product roadmap. We fully released E57 import, strengthening Matterport's position as a unified platform for storing, managing, and using multiple sources of 3D spatial data in one spot. The team also released a more powerful digital twin experience. It presents a home's exterior through a Gaussian splat, lets viewers rotate and fly around the house, and then move seamlessly inside to experience the home in high resolution panoramas. Or they can virtually remove the floor and various floors for a true dollhouse view of the home from the sky. This capability was on our acquisition rationale roadmap, and it's really exciting to see it successfully deliver. The Matterport 3 camera has proven a highly efficient, reliable capture device, and post acquisition, we have restarted hardware development. We have now produced the first prototypes, the next generation Matterport 4, which offers higher measurement location accuracy and higher resolution panoramas, which is particularly valuable to architecture and construction uses. We anticipate delivering the Matterport 4 in late 27. LubeNet generated 87 million of revenue in Q2, up 14% year-over-year. Paid listings increased 9% year-over-year in the US to 220,000 and grew 24% in Canada and 52% in the UK year-over-year. We expanded the LoopNet sales force to 225 reps, up from 191 a year ago. Asset-based pricing is driving adoption among lower-value listings while capturing more value from higher-value listings. This is contributing to sequential acceleration of net new bookings from Q1 to Q2. LoopNet's European revenue grew 10% year-over-year, with average monthly unique visitors up 88%. Our investment of Wikicasa in Italy creates the opportunity to add Italian coverage to LoopNet. We are now partnered with dozens of Italy's largest brokerage firms, and Wikicasa lists over 100,000 commercial real estate listings from more than 12,000 broker branches. Our Australian CRE marketing platform, commercialrealestate.com.au, continues to grow with Q2 visits up 76% year over year. We have decided to shift the release of LoopNet in Australia to late 2027, prioritizing instead releasing residential integration first to achieve significant potential margin enhancements sooner. SDR delivered a strong Q2 with nearly 70% of its net new revenue coming from brand new logo sales. A clear signal that growth is being driven by market expansion, not just pricing. We landed 261 new logos globally with U.S. headliners Nobu Hospitality and Baywood Hotels, alongside a standout Japan cohort in Kajima and UDS. Even with the Iran conflict weighing on the Middle East, we continued expanding with Al-Istama in Saudi Arabia and secured a significant Indian win with Sami Hotel Investments. BizBuySell revenue grew a moderate 5% year over year. We're expanding the business with benchmarking tools that help buyers and sellers understand business value and evaluate opportunities, while partnering with SBA lenders to embed financing into the marketplace. Nearly one in three buyers now complete a robust buyer profile on BizBuySell and an NDA to speed the deal process. There's over 32,000 profiles in total, including 8,700 added in Q2 alone. Residential revenue was $440 million in Q2, up 33% year-over-year. Second quarter adjusted EBITDA grew $41 million over the first quarter, bringing our residential segment to a positive adjusted EBITDA in Q2. Apartments.com delivered $318 million of revenue in the second quarter, up 9% year-over-year. June's gross sales were the third highest sales month in Apartments.com history. Apartments ended the quarter with nearly 93,000 paid properties up 12% year over year, sustaining 18 months of adding approximately 1,000 paid properties each month, with monthly renewal rates holding strong at 99%. Average revenue per property was largely flat, just down about 3.6% year over year. Thank you for joining us. and found that Apartments.com leads convert at 2.5 times the rate of the next closest competitor. Entrata data shows Apartments' lead-to-lease conversion rose 14% year-over-year through May, and a leading national property manager reports an 18% improvement. We believe that the ROI of our product will win out over the medium term. Our sales organization, the largest and most active in the industry, conducted 196,000 quality meetings in Q2 and maintained an industry-leading net promoter score of 88. Apartments.com delivered more than 228 million highly engaged renter visits in the quarter, with traffic up 7% year-over-year in June, according to Google Analytics. By contrast, ComScore reports that June visits to Zillow's network declined 35% year-over-year. Apartments.com remains the most recognizable brand in apartment search, with 66% unaiding consumer awareness among apartment seekers. That's 25 points ahead of our nearest competitor, according to Dynata. We have continued to grow despite competitive distortions in the multifamily rental marketplace. The FTC and multiple state attorney generals have sued Zillow for allegedly entering an unlawful agreement that reduced competition in multifamily Rental Advertising, and CoStar Group has separately sued Zillow for the unauthorized use of tens of thousands of CoStar-owned copyright apartment photographs that it used to build its rental marketplace. While these cases are pending, together they raise a broader question, whether Zillow's rental expansion was built through lawful competition or through shortcuts that regulators and rights holders are now challenging in court. that may result in significant setbacks for them. To date, the sales leads generated from the conference resulted more than 7 million in new annualized sales, up 1 million from last year. Leveraging our successful Homes AI technology, we introduced Apartments.com AI at the event, an immersive conversational search experience that helped renters find, understand, compare, and contact properties through natural dialogue or text, It supports the full apartment search journey and combines AI with Apartments.com's unmatched property data and media, so renters arrive better informed and more prepared when they reach out to leasing teams. Early engagement has been extremely encouraging. In just a few weeks, users completed approximately half a million AI sessions. Apartments.com AI users spend three times longer on the site than non-AI renters, averaging 20 minutes per session. They view twice as many listings and spend 40% more time on each listing. 3D tour usage is up 225% and traffic-to-lead conversion is up 256%. Based on these earlier results, we expect AI to meaningfully improve lead-to-lease conversion over time. Homes.com rentals. were showcased at the all-new Homes.com rental experience at Apartmentalize. Homes.com is the natural place to find a single-family home, townhouse, or condominium to rent and has become an important extension of the Apartments.com network. Through Q2, Homes.com rentals drove more than 11% of Apartments.com's traffic, making Homes.com its largest single syndication partner. and leads from Homes.com to Apartments.com increased 162% year-over-year. By the end of 26, we expect every tool that independent owners use on Apartments.com to also be available on Homes.com. We just released upgraded native Apartments.com apps for both iOS and Android. Apartments.com is industry's highest-rated rental app, and both these apps are off to a strong start with leads up 10% year-over-year in the first month. Our Q2 marketing generated more than 2.2 billion media impressions, co-branded Homes.com campaigns produced approximately 11 million views across YouTube and other outlets, and targeted digital campaigns, including World Cup-related YouTube placements. In April, Apartments.com launched a ChatGPT partnership in 100 markets and have since expanded it to 500. According to Criteo, Apartments.com has greater visibility in chat GPT than any other competitor. The U.S. multifamily market is stressed and continues to work through elevated supply, making owners more price sensitive. Q2 absorption remains strong at approximately 139,000 units, down 3% year over year, while 2026 deliveries are projected to decline 23%. Concessions remain widespread with roughly 40% of communities offering incentives. In this environment, property owners are increasingly focused on lead quality and leasing efficiency, exactly where Apartments.com differentiates. Homes.com revenue grew 66% year-over-year to $28.5 million in Q2, and the annualized run rate reached $116 million at the quarter end, up 78% year-over-year. We now have over 36,000 agent subscribers, up 107% from a year ago. 12-month trailing ARPU is approximately $265, and the average subscriber price rose to $305 in June. We expect average pricing to continue to rise as we use learnings from our growing subscriber base to optimize pricing. Subscribers paid to promote close to 305,000 active listings in Q2 That's 9.3% of the 3.2 million homes for sale in the U.S. And home member agents' listings increased 92% year-over-year. We believe agent subscribers are earning an 11x return on investment based on the first-year commission data we shared last quarter. That positive result shows up in lower cancellations. Our monthly cancel rate dropped again to just 2.4% in June, our lowest yet. down from 6.5% in June of 25. Homes.com organic traffic is up 115% year-to-date. Average session duration hit an all-time high in Q2, up 52% year-over-year in June. Bounce rates hit an all-time low of 34%. In the third quarter, we plan to roll out our Platinum Marketing Tier, Homes.com's first depth advertising offering. will receive enhanced placement and search results and across key neighborhood and community pages, enhanced social marketing, and the full range of homes.com still and drone photography and Matterport tours. We expect Platinum ads to be priced at multiples over standard listings. Most revenue on most real estate portals around the world comes not from the base subscriptions we've sold to date, but from enhanced depth advertising sales we're about to begin selling. 70% of Apartments.com customers buy depth advertising, and 91% of domains' total revenue is generated by it. We believe that in the future, the majority of Homes.com revenue will be generated by depth advertising, so it's an important milestone to begin selling it this upcoming quarter. Homes.ai continues to drive exceptional engagement. Homes.ai users spend more than 17 minutes on site. They conduct three times as many searches Favorite five times as many properties, share listing six times more often, are 48% more likely to return to homes.com within the week. Consistent with managing our homes.com investment, we are optimizing our sales force for efficiency and productivity, reducing inside sales reps from 660 at the end of Q425 to about 400 today, while retaining the top producers who generate an outsized share of the revenue. We always believed that a field organization would be the most productive, consistent with our experience at Apartments.com, Luton, and CoStar, but it takes years to build a good one. So we initially built an inside team for speed to market. It worked as we achieved over $100 million of organic revenue in the first two years. But as expected, our small field team is delivering higher productivity, so we're expanding that field team to 50 reps focused on five major metros, Washington, D.C., Tampa, Atlanta, Dallas, and Chicago, and plan to expand further as successful performance warrants. Even as we reduced the sales force, homes.com net new bookings were consistent with Q1, and production per rep increased 19%. Domain in Australia delivered a strong Q2, growing revenue 9% year-over-year on a pro forma basis. Strong age engagement with Domain's growing audience, the rollout of Matterport-enabled premium packages and increased industry presence drove record upgrade activity. Core residential revenue excluding developers, agents, solutions and print increased 15% year-over-year on higher listing volumes. We launched Matterport integrated with Domain Australia on July 1st. We've had very positive response in the first several weeks driving significant uptake of Platinum ads on Domain. We believe Domain is Australia's fastest growing property brand with average monthly visits reaching 41 million in Q2, up 35% year over year. We are narrowing the audience gap that historically defined this market by delivering a differentiated, better user experience. Our program to divest non-core software assets in Australia is progressing as expected, which will enable management to concentrate on the most important residential and commercial objectives and will improve overall profitability. We expect to finalize all divestitures by the end of 2026. Q2 was another strong quarter for on the market, our UK residential portal. Total property inventory increased 12%, surpassing Zoopla and now for the first time making on market the second largest property portal in the UK by inventory. We achieved our 26th consecutive month of positive net new bookings, with leads up 14% in the first half. Average engagement increased 43% year-over-year in Q2, pages viewed per active user rose 64%, and total time on the site grew 16%. Turn to land.com. Revenue grew 9% year-over-year. First half sales net new bookings increased 22% and signature ads grew 55% year-over-year. This month, we delivered our consolidated headquarters campus in Richmond, Virginia on schedule and under budget. A decade ago, we chose Richmond for its ability to attract and retain in a low-cost market the highly skilled talent needed to build and scale CoStar's business. The new campus consolidates nearly a dozen scattered spaces and buildings into one facility and allows us to scale from 2,500 employees today to 4,000 with limited capital costs and no additional construction. The campus pairs a premier 21-story office tower with a mass timber amenity building and our original nine-story office building. Its LED embed glazing displays a generative AI art by Rafiq Anadol built from our own real estate data and imagery. appropriately keeping us focused on our AI future. The campus is tracking toward LEED Platinum and Well Platinum certifications as slated to achieve net zero through 100% renewable energy. Financially, this is a highly strategic deployment of capital. Centralizing operations eliminates fragmented lease costs and directly enhances employee efficiency, accelerating product cycle sales and client retention. Because we own this premier trophy asset entirely on our balance sheet, we have created substantial equity value and position ourselves for a future sales leaseback that could unlock hundreds and hundreds of millions in liquid capital for acquisitions or share buybacks while retaining uninterrupted operational control. We hope to replicate the playbook from our former DC headquarters where we achieved 145% value gain then in one year. In May, we announced our agreement to acquire Zonda, a leading provider of new home construction data, analytics software, and online marketplaces. Zonda's comprehensive data set covers land development, construction activity, home sales, community performance, and builder operations, serving more than 3,000 builders, developers, lenders, manufacturers, and suppliers across North America. We expect the transaction to close in the second half of this year. At this point, I'll turn the call over to our CFO, Mr. Christopher Lown.