Q4 2024 CoStar Group Inc Earnings Call
Thank you.
That can cause actual results to differ materially from such statements important factors that can cause actual results to differ.
Are not limited to those stated in Costar group's press release issued earlier today.
In our filings with the FCC, including annual reports on Form 10-K, and quarterly reports on Form 10-Q.
Included under the heading risk factors in those filings as well as in Costar group's other filings with the SEC, including current reports on form 8-K that are all available on the Sec's web sites. All forward statements are based on information available to Costar at the time of this call Costar assumes no obligation to update them.
Statements, whether as a result of new information future events or otherwise, except as required by applicable law.
Conciliation to the most directly comparable GAAP measures of any non-GAAP financial measure discussed on this call are shown in detail in our press release issued today along with definitions for those terms in that press release can be found on our website Costar group Dot com under press room.
Speaker Change: As a reminder, today's conference call is being webcast. Please refer to today's press release on how to access the replay of this call remember just one call per person and with that I'd like to turn the call over to our founder and CEO Andy Florance.
Andy Florance: Again, thank you for joining Costar group's fourth quarter and year end earnings call. We achieved another very strong quarter financial results with 2020 for full year revenue and adjusted EBITDA exceeding consensus and the high end of our guidance range.
Andy Florance: Revenue for the full year of 2024 was $2 seven 4 billion, an increase of 11% over the full year of 2023 as.
Andy Florance: As we delivered our 55th consecutive quarter of double digit revenue growth.
Andy Florance: For the fourth quarter of 2020 for revenue was $709 million, an 11% increase year over year.
Andy Florance: We continue to generate profit, while we're investing aggressively back into the business to create powerful future growth drivers such as homes Dot com.
Andy Florance: For the full year, our commercial information and marketplace businesses achieved a very strong 43% profit margin.
Andy Florance: For Costar group net income EBIT and adjusted EBITDA significantly improved each quarter in 2024.
Andy Florance: We grew net income from $7 million in the first quarter of $24 million to $60 million in the fourth quarter.
Andy Florance: We increased EBITDA from negative $13 million in the first quarter to $73 million in the fourth quarter.
Andy Florance: It grew adjusted EBITDA from $12 million in the first quarter to $112 million in the fourth quarter.
Andy Florance: Our adjusted EBITDA of $112 million in the fourth quarter was well ahead head of our guidance range of 76 million to $86 million.
Andy Florance: Our average monthly unique visitors to our global websites increased 17% year over year to $134 million in the fourth quarter of 2024, According to Google analytics.
Andy Florance: Company net new bookings were $53 million in the fourth quarter of 2024 up 21% sequentially from the third quarter of 2024.
Andy Florance: Net bookings are increasing because our sales forces are now optimized and back to selling their respective core product offerings.
Speaker Change: When we launched homes Dot com sales just 12 months ago, we only had 41 homes dotcom sales professionals to prospect over a million real estate agents to backstop. This very small team we temporarily test all of our sales forces to sell homes Dot com.
Speaker Change: We no longer need to do that because over the past year, we've grown the homes dotcom salesforce nearly six fold to 277 salespeople.
Speaker Change: We anticipating having we anticipate having 500 homes salespeople by year end 2025.
Speaker Change: The dedicated homes salespeople understand the significant value proposition homes Dot com offers well so they sell more service more effectively earn much higher NPS scores and renew the business at much higher rates.
Speaker Change: From all perspectives, having combs expert sell homes dot com Costar expert sell costar and apartments expert sell apartments dot com yields higher net bookings.
Speaker Change: Our costar product achieved 1.02 million billion.
Speaker Change: $1.02 billion in revenue in 2024, with a growth rate of 10% year over year.
Speaker Change: Costar continues to be the preeminent source of information and analytics for the industry.
Speaker Change: During the worst commercial real estate market in our lifetime.
Speaker Change: We have grown revenue adjusted prices for inflation and launched innovative valuable new products and features like lender and hospitality benchmarking.
Speaker Change: With the full Costar sales teams focused on selling Costar December 2024 was the highest month of net bookings for Costar in almost two years Q4 of 2024 net new bookings were the highest since Q3 of 2023.
Speaker Change: We are pleased to report accelerating costar sales in the year as we cross $1 billion in Costar revenue.
Speaker Change: The Costar subscriber base has grown to over 240000, our renewal rates are very strong at 92% with.
Speaker Change: We monitor our net promoter scores closely to continually improve our service offering and maintain high renewal rates over.
Speaker Change: Over the past three years, our U S. Costar NPS has improved 10% to 65.
Speaker Change: Our Canadian Costar NPS has improved 25% to 60.
Speaker Change: Most notably our U K Costar NPS has improved 35% to 65.
Speaker Change: Really remarkable improvement there.
Speaker Change: The U K Costar teams significant success in achieving high NPS scores.
Might have led to our primary U K competitors EJ <unk> recent announcement that they were withdrawing all their products and services from the U K in 2025.
Speaker Change: Each year States Gazette was founded 166 years ago, and $18 58 during Queen Victoria's reign, and before Abraham Lincoln became president of <unk>.
Speaker Change: Costar has compete against EG and its various companies since we acquired focus in the U K in 2004.
Speaker Change: When we first began competing with them. They were primarily a weekly commercial property newsmagazine stuffed with hundreds of high paying property ads.
Speaker Change: But they've launched an online commercial property service.
Speaker Change: <unk> has also launched an online marketing service called EG property linked that compete with Loopnet.
Speaker Change: As Costar gained leading share in the U K EG merge their information offering into a brokerage affiliated consortium called radius EG was owned by the information giant Rel X.
Speaker Change: In their announcement, they said irreparable impact of headwinds that are struck the whole of commercial real estate industry hard.
Speaker Change: I'd like to believe that to some degree the quality of research field Research service and technology that our team provides played some competitive role.
Speaker Change: <unk> may have sold or may in the future sell elements the discontinued businesses to other companies.
Speaker Change: It is with respect that we acknowledge the hard work contribution achievements of one of the Uk's, leading commercial property and information sources over 166 years.
Speaker Change: It's our competitors that motivate us to be the best we can be.
Speaker Change: Obviously, the ceria economy has created strong headwinds for costar over the last four years as well, but I believe those headwinds may shift to tailwind.
Speaker Change: I believe the theory economy has passed its nadir and is moving into what may be a very strong recovery demand and absorption for office space turned meaningfully positive at the end of 'twenty 'twenty four for the first time since 2021 availability rates are falling total available space is declining.
Speaker Change: Sublet vacancy rates are falling sublet rents are climbing the new construction pipeline has shut off in net supply after depreciation obsolescence is contracting.
Speaker Change: The economy is strong and resilient, we read stories about major corporations mandating five days a week in the office and then the observation that there's not enough space for the company and their offices to allow everyone to return to work.
Speaker Change: And the first quarters of the pandemic office owner steeply discounted Prime office space and leased it to tenants, who normally have a second generation budget.
Speaker Change: I believe that we could see very strong rent growth in the years ahead with capital appreciation. We are already seeing sales transactions return to pre pandemic levels and cap rates are rolling over their peaks.
Speaker Change: Matched costar through four economic cycles are for real estate cycles, and every time. The world is certainly office sector will never again regain its value and yet every time the correction overshoots and the office economy roars back Costar and our clients met may enjoy a tailwind in the next few years.
Speaker Change: The Costar for lenders product continued to gain momentum this past quarter.
Speaker Change: Q4 was our best quarter for the year with $1 7 million of net new annual revenue in December across 17 institutions, bringing total annual revenue to $75 million, including risk analytics.
Speaker Change: I have signed up 370 institutions of all sizes and types, who collectively manage over one trillion of CRE debt reinforcing our role as a key solution in the industry climb.
Speaker Change: Clients have been actively uploading portfolios over the last two years further validating our long term adoption stickiness and the depth of our platform's integration into our clients lending cycles.
Speaker Change: Additionally, we are seeing a growing number of clients transitioning from their initial cecil or current expected credit loss and.
Speaker Change: And stress tests solutions to ours, a clear sign that our platform is outperforming alternatives and capturing market share in a regulatory driven and segment.
Speaker Change: Despite a challenging high interest rate environment and cautious lending landscape over the past couple of years, we have continued to demonstrate consistent revenue growth in our lender solution.
Speaker Change: Corporate real estate departments are increasingly subscribing to costar as well to manage their costs.
Speaker Change: Find the best spaces to support their operations and efficiently renew their leases.
Speaker Change: These corporations already rely on brokers, who are very often using costar, but increasingly corporate users want direct access to costar as well to support a faster velocity analysis and decision making.
Speaker Change: New corporate subscribers to Costar. This year include great brands like Amazon Visa Ecolab, Macy's churches Unitedhealth care.
Speaker Change: Cracker barrel, Cisco Edward Jones, Salesforce, Sherwin, Williams, LG and many others.
Speaker Change: Costar group leases announced more than a million square feet of real estate across dozens and dozens of locations and our facility staff as well use costar daily and find it indispensable.
Speaker Change: Despite it being some of the most important information owners and tenants need.
Speaker Change: Historically accessing accurate and useful rent information has been very problematic in difficult and CRE.
Speaker Change: Rents are quoted a myriad of ways with numerous modifiers and inclusions exclusions that can completely change the meaning of the numbers often the details of individual lease deals are closely guarded.
We have begun the integration of Costar real estate manager and our new newly acquired operation visual lease.
Speaker Change: Managing more than a million leases for thousands of major corporations. These two companies are leaders in lease accounting lease management transaction management.
Speaker Change: Our intention is to build the next generation and corporate real estate digital solutions by integrating these two products with Costar and.
And empowering our clients with the Anonymised aggregate information we in this community of corporates can bring together.
Speaker Change: Just as Costar, STR aggregates and Anonymize, the confidential pricing and occupancy information for the world's major hotels and creates in valuably invaluable accurate and precise hospitality revenue information at that industry relies on we intend to do the same thing for corporate real estate.
Speaker Change: This would empower decision makers to quickly evaluate potential transactions and understand if they're reasonable in the marketplace.
Speaker Change: Corporate occupiers with hundreds or even thousands of leases renewing in a quarter year would have very good visibility into how new rent levels would increase or reduce their cost on renewal.
Speaker Change: Within Costar users would be able to access very precise rent levels by geography segment and quality empowering them to make better informed leasing valuation lending transaction development and investment decisions.
Speaker Change: Building. This next generation corporate real estate solution and the associated rent indices is one of our top priorities for Costar in 2025.
Speaker Change: We believe that the total addressable revenue opportunity for Costar is enormous and that this initiative will help us recognize more of that huge Tam sooner.
We continue to make good progress on building Costar in Europe, and particularly in France for the top markets, there and we expect to release Costar, France by year end 2025.
Speaker Change: We intend to grow the Costar sales team by 20% this year.
Speaker Change: Turning to Loopnet.
Speaker Change: It's the most heavily trafficked marketplace for commercial real estate in the United States and one of the most effective ways to market commercial real estate.
Speaker Change: We believe that it has more than $1 billion Tam in the U S alone.
In 2025, one of our primary objectives is to move the asset based pricing move to asset based pricing, where the price to market high value properties is greater than the price to market lower value properties.
Speaker Change: We've began renewing contracts on this basis for the first cohort of contracts that received price increases 98% have renewed at the significant priceless.
Speaker Change: We believe that we can expand the volume of properties marketed on loopnet by lowering the price point for some properties for which the current one size fits all pricing is not affordable.
Speaker Change: We are shifting our sales forces emphasis from selling few higher price depth advertisements to selling higher volumes of asset based priced ash advertisements.
Speaker Change: While we continue while we will continue to sell the higher tier ads, we believe that we will generate significantly more revenue growth by selling a higher mix of the silver basic tier ads they renew at a very high level.
Speaker Change: Along with crossing the $1 billion revenue Mark in 2024 apartments Dot com turned in a very strong fourth quarter.
Speaker Change: Revenue was 276 million for the fourth quarter of 2024.
Speaker Change: Our multifamily revenue is subscription based without standing customer satisfaction with NPS score of 94, our average NPS score of 94, and very high renewal rates in the nineties with a monthly renewal rate of 99%.
Speaker Change: In 2024, we reached 90% of renters, and all of our prospects and clients through almost every marketing channel in.
Speaker Change: In 2025, we expect to deliver 13 billion impressions across TV streaming video podcast, social media and Influencers direct digital paid search and display.
Speaker Change: We will be launching five new advertising spots for apartments Dot com with Jeff Goldblum, Our marketing campaign continues to deliver that with top programming venues in March you'll see us all of our March madness.
Speaker Change: Our unmatched <unk> targeting program creates 1 billion annual impressions and 1.4 million leads.
Speaker Change: Apartments dotcom continues to be the industry leader across many key metrics we.
We have set the standard in multifamily for high quality leads and a strong in person sales force.
Speaker Change: Apartment owners see apartments Dot com is number one the metric that matters most to them delivering leases.
Speaker Change: In 'twenty 'twenty four according to in Toronto, We produced one five times more leases than all of our competitors combined.
Speaker Change: Importantly apartments Dot com delivered three times the number of leads that convert the leases compared to our competitors.
Speaker Change: So with the most leads and the best conversion rate, we delivered four eight times more leases than other rental networks.
Speaker Change: We dominate apartment search engine results and are number one in organic search for the term apartments. We are also number one in paid search was one eight times more than all the competitors combined.
Speaker Change: We had 35 million average monthly unique visitors in the fourth quarter for our apartments Dotcom network.
Speaker Change: Similar web reported that apartments dot com has the most visitors in 2024 more than Zillow and rent dot com combined.
Speaker Change: Apartments Dot Com network delivered by far the most visits in the industry with $920 million in 2024.
Speaker Change: With consumers, we have dominated brand awareness with two out of three apartment seekers, saying they will use apartments dot com.
Speaker Change: That is nearly double zillow and five times more than rent dot com, we have higher brand awareness and zillow and rent dot com combined among apartment seekers.
Speaker Change: We continue to add new customers with properties of all unit counts to our marketplace at a rapid pace with more than 75000 paying apartment communities on our network up 7% year over year. This includes more than 10000 in the five to 49 unit range.
Speaker Change: Business to our house condo and townhouse pages increased 25% year over year and 32% in Q4 2024 over the prior year.
Speaker Change: We increased the number of single family rental listings by 26% over 3 million year over year.
Speaker Change: And.
Speaker Change: Over $3 million not year over year in 2024 paid single family rental listings increased 59% year over year to 323600 with a number of independent rental owners using apartment stock climbed client apartment dot com climbing to 13% to 244.
Speaker Change: 1000.
Speaker Change: For the year, we processed nearly $5 billion in rental payments or just over 5 billion of rental payments.
Speaker Change: And a little over a year, we're already number one in traffic in Canada, our newest departments dot com market, which demonstrates the success, we can have extending our brands from one market one country to another.
Speaker Change: There's still a lot of room to grow this business, we see $2 6 billion of opportunity in the 20 unit plus buildings and above.
Speaker Change: And there is much more opportunity to below 20 units.
We believe there is more than a $9 billion Tam in multifamily.
Speaker Change: We intend to grow the apartment Dotcom sales force head count, 23% in 2025 to keep up with the potential of the site.
Speaker Change: Last week.
Speaker Change: Redfin announced an agreement to transfer basically the guts of the apartments redfin portal business to Zillow.
Speaker Change: Redfin acquired rent path, the parent company of rent Dot Com and apartment guide for $608 million in February of 2021.
Speaker Change: Redfin was able to purchase rent path after the FTC blocked or $588 million purchase of it after rent path had gone bankrupt.
Speaker Change: On the day Redfin purchase trend path that stock was trading at 98, a share and since that date their stock is.
Speaker Change: Dropped precipitously down 91% to $8.87 a share at yesterday's close.
Speaker Change: I think it's safe to say that rent dot com has not performed well under rent redfin, so probably good that it's moving on.
Speaker Change: While the announcement called the deal a partnership I believe it's effectively or sell the asset that attempts to avoid FTC regulatory review.
Speaker Change: Find it hard to believe the FTC will ultimately surrender their authority to investigate the potential loss of competition.
Speaker Change: This deal appears to achieve.
Speaker Change: We believe that if presented to the FTC has a transaction the FTC would obviously blocks that should deal.
Speaker Change: Okay. Their F T C.
Speaker Change: As part of the deal Zillow pays redfin $100 million upfront red.
Speaker Change: <unk> fit terminates 450 of the Vas or.
Speaker Change: Redfin will be terminating 450 or the vast majority of the rent dotcom staff.
Speaker Change: In redfin will attempt to transfer its apartment property management clients to Zillow.
Speaker Change: Effectively going forward rent dot com will no longer operate as a normal independent competing website.
Speaker Change: Rather we will only operate as a shell shell syndications site, sending leads to Zillow, we do not know the terms and costs of the lead syndication deal, but I would not be surprised if still ultimately has to pay redfin hundreds of millions if not $1 billion for what we see is relatively low converting leads.
Speaker Change: This would not sound like an attractive transaction certainly apartment property managers will house have less choice now.
Speaker Change: We see a large opportunity to win away many of the properties formally marker and rent dot com without paying redfin, a massive sum of money.
Speaker Change: It feels like jump ball on the former redfin clients and our Paige Forrest and team are quite tall.
Speaker Change: We launched the new homes Dot Com, just one year ago during Super Bowl 58.
Speaker Change: At roughly the same time, we acquired the residential portal on the market in the U K and relaunched it as well.
Speaker Change: And just one year, we've made tremendous progress towards our goal of providing the leading residential real estate portals and monetizing a new bolt the billion dollar Tam opportunity for Costar group.
Speaker Change: In less than one year homes Dot Com network became the second largest real estate portal in the United States based on traffic with an audience of 110 million average monthly unique visitors in the fourth quarter. According to Google analytics.
Speaker Change: 110 million unique visitors is nearly double realtor dot com 62 million average monthly unique visitors that news Corp reported for the same quarter recently.
Speaker Change: I think that's remarkable realtor dot com launched 30 years ago and its predecessor formed back in 1995.
Speaker Change: And we pass them, an apples to apples traffic in our first year of the relaunch.
Speaker Change: We began the year with our low single digit unaided awareness and during the year.
Speaker Change: Built and grew that awareness number two is highest 33%.
Speaker Change: As we complete our second successful Super Bowl campaign and launch our 2025 campaign I believe that we can reach 50% unaided awareness this year potentially surpassing in two years, what our competitors spent 30 years building.
Speaker Change: We began last year with 41, Homestar com salespeople and today, we have 275 with.
Speaker Change: With job offers outstanding we're forecasting an additional 50 hires in March alone.
Speaker Change: Our goal is to have 500 homes dotcom salespeople in place by the end of the year and productive.
Speaker Change: <unk> that goal our whole homes dotcom Salesforce will go from basically not existing last year to being one of our largest sales teams in just two years.
Speaker Change: Despite that the fact is the entire team is literally rookies, but theyre selling effectively.
Speaker Change: During Q4, the team and production sold on average 1742 net new monthly revenue.
Speaker Change: Is it on denominator grew dramatically coming into January with more new head count.
Speaker Change: The January number remains strong at 1636 net new per months.
Speaker Change: In January the dedicated homes sales team sold 3.73 million in annualized net revenue based upon that group sales and their cancels.
Speaker Change: I expect that as the team both grows and becomes more experience that the sales numbers will increase significantly.
Speaker Change: The dedicate homes sales team is significantly more effective at servicing our new clients achieving good net new promoter scores and renewing business then was the stopgap broader sales effort, we put in at the beginning of the year on an AD hoc basis, we launched the new homes Dotcom memberships last year.
Speaker Change: I believe we offered a better value proposition than did the legacy residential portals.
Speaker Change: But our required educating real estate agents are accustomed to buying agency leads for 30 years.
Speaker Change: <unk>.
Speaker Change: And we need to educate them to the fact that we were selling solutions to win more seller listing simply put.
Speaker Change: <unk> Dot com provides a unique internet marketing solution that helps agents sell the home they were hired to sell faster and for more money, making them better listing agents.
Speaker Change: Because they can show perspective, homebuyers that they have a superior selling solution they should be hired more often.
Speaker Change: In contrast, the legacy solutions of the past 30 years sell agents leads that really belong to competing agents.
Speaker Change: Our model is used by 95% of the real estate portals around the world and is associated with Praful real estate portals and that stands in contrast to the legacy U S portals, which are really in the minority with the lead diversion model and has struggled with profitability.
Speaker Change: When we first launched many agents thought that we were just like the legacy portals saw on the selling them leads that belonged to competing agents. So initially we had negative NPS scores that need improvement.
Speaker Change: As we built a dedicated homes dotcom sales team just focused on selling and servicing residential agents. They did a much better job communicating our superior value proposition.
Speaker Change: Our NPS scores have climbed dramatically throughout the year.
Speaker Change: When the broader Salesforce first began selling last year NPS was negative 40.
Speaker Change: But by January our dedicated home sales team is achieving an average NPS score of 28, which is in the good category and two points away from the great category.
Andy Florance: Costar group, we're accustomed to consistently achieving great excellent NPS scores, but brand new products do not launch a excellent when apartments first launched the NPS scores were 10 and now a decade later as I've mentioned they averaged 94.
Andy Florance: Homes Dot Coms M. P. S climbed 68 points in just one year.
Andy Florance: I want to congratulate the team on that achievement is an incredible accomplishment.
Andy Florance: We already have many of our homes dotcom sales reps, earning excellent NPS scores at 80 and above.
Andy Florance: Our goal is to get everyone up in that range we.
Andy Florance: We expect that higher NPS scores will drive higher renewal rates and drive additional sales through referrals.
Andy Florance: When we re launched an all new homes Dotcom site, one year ago I felt we offered one of the best search experiences for buying or selling a home was extremely extremely proud to work with exceptional development product teams on such a successful launch I am even more proud by how much those teams have.
Andy Florance: Accomplished in the first 12 months after that great initial launch at.
Andy Florance: At our sales conference a week or so ago I walked through over 110, new important features our teams added to the product across 2024.
Andy Florance: Features are too numerous to detail but include innovative valuation tools lead verification searched by commuting distance visual visualization layers to assess crime schools renters owners residential and adding residential news and much much more when.
When I look at the product roadmap in the year ahead I believe it's the most innovative work that I've ever seen in my career by a wide margin.
Andy Florance: That everyone on the homes Dot com product and development team is excited to be working on one of the most effective innovative and exceptional development teams anywhere in any industry.
Andy Florance: There are three major initiatives for homes Dot com in 2025 that we believe will add new revenue streams to homes Dot com.
Andy Florance: Our U K residential real estate portal on the market also achieved significant growth in our first year running it in just one year, we have grown the number of advertisers, 23% and the number of properties listed by over 40%. Our marketing investment has led to an increase in total visits by 75%.
Andy Florance: Which in turn turned genera.
Andy Florance: Generated 42% more leads for agents.
Andy Florance: As a result on the market has seen eight consecutive months of net new revenue growth.
Andy Florance: Last week launched the new homes Dotcom second year with two we launched the new year year or two with two new Super Bowl ads.
Andy Florance: Was proud that AD week raised our ads is number two in Super Bowl AD ranking this year.
Andy Florance: We believe that homes Dot com is now the best site for hub shoppers sellers' agents and brokers.
Andy Florance: <unk> Dot com has a clean spam free design more content and other sites have robust and growing product functionality and most importantly, a better business model in which all the parties can be aligned.
Andy Florance: We want to let the world know that homes Dot com is the best but our attorneys say, we cannot legally say that so a building AD campaign trying to say that we are the best but not doing it in line with our reality.
Andy Florance: This year, our 232nd Super Bowl ads featured Morgan Freeman, Dan Levy and highly Gardner.
Andy Florance: When Morgan Freeman tries to say homes Dot com is the best it sounds like the voice of God.
Andy Florance: Overall, our marketing campaign for homes Dot Com continues to deliver strong results in 2024, we delivered nearly 19 million impressions with nearly 3 billion impressions in Q4.
Andy Florance: 2024, we ran more than 47000 commercial commercials, including spots and high profile media like the Olympics. The World series College football the NFL, the Grammys, the emmys and across primetime television and streaming video like Netflix Disney Paramount Youtube and ESPN.
Andy Florance: We are also advertising on streaming audio partners like a heart radio Spotify, Pandora, Amazon music, including podcasts like Freakonomics Mad money and Conan O'brien.
Andy Florance: We're all over social media with millions of impressions on meta Pinterest read it and Tic Toc and whatnot nine.
Andy Florance: 90% of Americans have likely seen homes dot com ads.
Andy Florance: We believe that we have built the best site for buying and selling a home. Our members are gaining dramatically more exposure for their sellers on homes dot com their listings sell faster and for more money on average and because our members offer superior marketing solution, they're winning 58% more listings.
Andy Florance: We had a great first year for homes Dot com and we're building phenomenal momentum to create the leading site for buying and selling homes.
Andy Florance: I believe that we can win major share grow a third billion dollar business and generate substantial long term EBITDA value for our shareholders.
Andy Florance: A quick update on matter Port co started matter port have each certified substantial compliance with the FTC second request and continue to work cooperatively with the FTC in its review of costars pending matter Port acquisition we.
Andy Florance: We believe we are on track for the deal to close in the first quarter.
Andy Florance: One of our main investments in 2025 years, probably picked up will be growing our sales force we plan to grow the sales force from 1390 at December 2024 to.
Andy Florance: To reach 1890 by December 2025.
Speaker Change: Adding approximately 500 salespeople will grow our sales force by 35% and we believe bring significant revenue growth potential our incremental additional revenue growth potential to a great business. This point I'm going to turn the call over to Chris.
Chris: Our CFO.
Chris: Thank you Andy.
Chris: Full year 2024 revenue grew 11% versus the prior year.
Chris: Coming in ahead of consensus and above the high end of our revenue guidance range.
Chris: Full year adjusted EBITDA in 2024 came in above expectations at $241 million and a 9% margin also exceeding consensus and the high end of our guidance range.
Chris: Our commercial information and marketplace brands delivered 43% profit margins for 2024.
Chris: Proving the underlying strength of the commercial product portfolio as we continue to invest in our residential and international strategy.
Chris: Costar revenue grew 10%, both the fourth quarter and full year of 2024 in line with our guidance.
Chris: As mentioned on previous calls Costar revenue was positively impacted by the integration of the STR benchmarking into a costar platform.
Chris: This integration resulted in approximately four percentage points of Costar revenue growth in 2024.
Chris: For Q1, 2025, we expect revenue growth of 6% as FTR has now been integrated into Costar, and we expect 6% to 7% growth for the full year as we continue to manage through the challenging CRE markets.
Apartments Dot com revenue grew by $153 million or 17% year over year and 2024 in line with our expectations and in line with apartments Dot Com, a five year revenue CAGR.
Chris: We expect the apartments dotcom revenue growth of 11% to 12% for the full year of 2025, and we are forecasting 11% revenue growth for the first quarter.
Chris: Our moderating growth rate in 2025 reflects the increased scale of apartments dot com and the impact of apartments dotcom sales reps supporting both our commercial brand as well as the launch of homes Dot com in 2024.
Chris: We believe the expansion of our apartments Dot Com sales force throughout 2025 should bolster growth as we continue to penetrate the significant untapped tabs.
Chris: Loopnet revenue grew 5% in the fourth quarter and 6% for the full year of 2024 in line with our guidance.
Chris: We expect that in the first quarter of 2025 and for the full year of 2025, Loopnet revenue growth will be in the mid single digits consistent with 2020 for growth.
Chris: From information services was $37 million in the fourth quarter and $136 million for the full year of 2024.
Chris: We expect information services revenue growth for 2025 to be in the range of 18% to 20% with visual lease contributing approximately $40 million of revenue.
Chris: Revenue growth for the first quarter of 2025 is expected to be in the high teens to low 20% range.
Chris: Other marketplaces revenue was $36 million for the fourth quarter and $130 million for the full year of 2024.
We expect revenue growth for 2025 in the mid to high single digits in our first quarter revenue slightly below $30 million we.
Chris: We expect 10 X transaction volumes to ramp through 2025 in line with an expected improvement in overall CRE transaction volumes.
Chris: Residential revenue was $28 million in the fourth quarter and $101 million for the full year of 2024.
Chris: Our 2025 residential revenue growth outlook is in the high teens to low 20% range and we expect first quarter revenue growth of approximately 40%.
Chris: For Costar group net income was $60 million for the fourth quarter and $139 million for the full year of 2024.
Chris: We earned $213 million of net investment income on a $4 $7 billion in cash in 2024 or a five 5% net yield.
Chris: Our sales force totaled 1390 people at the end of 2020 form with the majority of the increase concentrated in our homes dot com residential business.
Chris: We expect to have over 500 sales reps for homes Dot com by the end of 2025.
Chris: Due to the large untapped total addressable market in the commercial real estate and apartment markets. We're also expanding the sales force of Costar apartments, and loopnet to capture that opportunity.
Chris: Our contract renewal rate was 89% in the fourth quarter of 2024.
Chris: <unk> strong at 94% for customers, who have been subscribers for five years or longer.
Chris: Subscription revenue on annual contracts was 80% for the fourth quarter of 2024.
Chris: Net new bookings for the fourth quarter was $53 million, representing a sequential increase of 21% from the third quarter of 2024.
Chris: We expect net new bookings in 2025 to be higher than 2024 as a result of our sales force has refocused on their respective businesses a significant increase in dedicated homes dotcom sales reps compared to the first quarter of 2024.
Chris: Increased sales forces and our other commercial businesses and improving market conditions in commercial real estate.
Chris: In 2025, we are also announcing a share buyback program of $500 million, we expect to execute a $150 million of share repurchase annually, which will be which will more than offset annual noncash based compensation.
Chris: Looking ahead to 2025, we expect full year revenue of $2 95 to 3.015 billion.
Chris: Implying an annual growth rate of 9% to 10%.
Chris: First quarter 2025 revenue is expected to range from $711 million to $716 million, representing revenue growth of 9% year over year at the midpoint.
Chris: 2025, adjusted EBITDA is expected in the range of 375 million to $405 million, reflecting an adjusted EBITDA margin of approximately 13%.
Chris: First quarter 2025, adjusted EBITDA is expected to be $25 million to $35 million.
Chris: Our level our level of capital expenditures is expected to range from $400 million to $450 million in 2025 with roughly $360 million of that total spend for our Richmond campus, which we expect to be substantially completed in the first half of 2026.
Chris: Operating capital apart from the Richmond campus is expected to be in the $90 million range and increase over prior years, primarily due to our planned capex for Arlington, Virginia headquarters.
Chris: Our forecast for net interest income is approximately $170 million for 2025, taking into account our increased capital spend and possible interest rate reductions in the year ahead.
Chris: This figure does not account for any M&A activity.
Chris: Finally, we are withdrawing our five year revenue and EBITDA targets that we set back in February 2022, when we provided this guidance we could not have foreseen the unprecedented long lasting downturn in the commercial and residential businesses over the over the several years.
Chris: However, looking ahead, we continue to see significant growth opportunities in our core products for Costar suite, the significant untapped hands. The inclusion of STR. The continued rollout and penetration of the lender product expansion into Europe in 2025, and 2026 and additional in development products.
Chris: We must optimistic that costar will see double digit growth again once we are through this malaise.
Chris: Malaise.
Chris: And apartments Dot com, we expect to continue to see continue to see low to mid double digit growth over the coming years, given the $2 6 billion dollar Tam and 20 unit plus buildings and much more than that in the Tam for 1% to 19 unit buildings.
Chris: These opportunities remain underpenetrated and we are optimistic we will capture the lion's share of that opportunity as we continue to invest in the platform and deliver best in class metrics and service to help our customers achieve their objectives.
Chris: With a relatively new head of Loopnet and brand new head of Loopnet sales, we expect loopnet to again delivered double digit growth in the future on the back of an expanded footprint and revised pricing strategy.
Chris: Even in light of its growth from approximately $50 million when we acquired the company to nearly $300 million today. We expect this division to return to double digit growth as we take advantage of these opportunities.
Chris: With regard to our other businesses like real estate manager and visual lease land Satcom and biz by cell. We believe these properties have long term double digit growth opportunities.
Chris: Finally, given the meaningful industry changes in the residential real estate market, we remain enthusiastic about homes dot com as we continue to scale. This platform to monetize what could be one of costars largest businesses.
Chris: As we increase our dedicated sales force through 2025, we expect revenue to increase in line with that growth, which will pay dividends from 2026 and beyond delivering strong double digit growth in.
Chris: Summary, I'm proud of our 2024 results delivered during a year of complicated by high interest rates inflation and economic volatility.
Chris: We remain focused on our strategic investments in the commercial and residential markets, while producing record profit levels in our established commercial businesses with that I will now turn the call back over to the operator for questions.
Speaker Change: Thank you as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, please limit yourself to one question.
Speaker Change: Our first question comes from John Campbell with Stephens You May proceed.
Hey, guys. Thanks for thanks for the time and congrats on a solid quarter. Thank you Andy last call you talked about being kind of midstream in the data collection efforts in some of our larger overseas markets and then.
Speaker Change: You guys had put out a series of press releases announcing new client partnerships. It seems like Youre. The traction building I just wanted to get your take on just broadly how long do you think it takes for international.
Speaker Change: Somewhat ryzen needle mover for our suite or for Costar and then secondly, just on international.
Speaker Change: International expansion to date, I mean, it's kind of gone unnoticed from a P&L standpoint, just as far as the investment level I'm. Just wondering if you envision a time, where you might want to accelerate that pace.
Speaker Change: Meaningfully boost the level of investment.
Speaker Change: Sure so.
Speaker Change: We have been making.
Speaker Change: Steady progress there we are in the process of.
Speaker Change: Implementing a little bit of financial discipline on P&L across our European operations, and making sure that we're not running multiple versions of the same product running both the acquired and the.
Speaker Change: And the general broader Loopnet Costar platform. So we have a little bit of a case, where we're running some duplicative costs are one of the reasons you won't see as big a hit in the P&L in the years to come is that we're rationalizing.
Speaker Change: Some of the European operations not to run.
Speaker Change: Dual initiatives and move towards just a consistent costar loopnet platform in Europe.
Speaker Change: As I mentioned, we'll have France up and running this year.
Speaker Change: Spain will be pretty quickly following that.
Speaker Change: And we are looking at.
Speaker Change: Moving all of our marketplaces in Europe to Loopnet this year in 2025.
Speaker Change: Loopnet is a lot easier to rollout then is costar costar as a building by building sort of research process, whereas loopnet is.
Speaker Change: Easier to pull together groups of listings that don't have to be comprehensive coverage just it would be the we don't believe theres any other sort of pan European international marketplace for marketing commercial real estate.
Speaker Change: That really meets the demand for cross border leasing and sales activity. So.
Speaker Change: We're making good progress on it I do not see a massive P&L hit coming anywhere a significant P&L hit coming associated with that 2025 in fact, they'll probably go the other way, but we continue to watch for opportunities to grow internationally, and we are making some decent progress on that.
Speaker Change: Front.
Speaker Change: And if you want a second question, we're having a sale today on questions.
Speaker Change: [laughter].
Speaker Change: I'll go to the queue. Thank you.
Speaker Change: Yeah.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Pete Christiansen with Citi. You May proceed.
Pete Christiansen: Thank you good evening.
Pete Christiansen: I wanted to look and I wanted to double click on the guide for apartments. This year.
Speaker Change: And I guess, considering you had seven ish percent, 8% growth in properties year over year, and 24 against almost 17% revenue growth as you think about that 11 to 12 for 25 can you just walk us through that mix of.
Pete Christiansen: The assumption on property growth versus.
Pete Christiansen: Versus pricing is a function of going down market. So I guess more properties, but it takes longer for you to scale into that.
Pete Christiansen: Tam opportunity is that how we should think about it. Thanks.
Pete Christiansen: Yes, I'd say a couple of things you are right on your metrics around growth in units and pricing. So what we have seen.
Pete Christiansen: Just to clarify I mean $153 million of revenue right, it's significantly bigger that growth versus our biggest competitor.
Pete Christiansen: But we still see a massive tam opportunity to move on unit. So increased unit size, but also increased pricing as well there clearly will be more of a unit increase over the next year versus price increase.
Pete Christiansen: And inevitably as you go further down into the smaller buildings. It does change a little bit the dynamics, but we believe the Tam.
Pete Christiansen: In the larger market is still double the size of our current revenues. So there's plenty of opportunity in our in our key market Theres huge Tam opportunity in the 50 to 100 and the <unk>.
Pete Christiansen: 20% to 50 market and the biggest Tam opportunity and you've got to get it right is actually the 1% to 19 property market. So I think you're thinking about the right way and that theres been a pretty even mix between units and pricing over the last couple of years I think you will see more of a push on unit at least in 2025, but there is so much opportunity.
Pete Christiansen: I'm not sure that.
Pete Christiansen: Once you get through it that it'll matter that much.
You can see from our NPS at 94% 94 that we.
Pete Christiansen: Yes.
Pete Christiansen: <unk> spent a lot of time with our existing customers and that's great that lease those great renewal rates client loyalty.
Pete Christiansen: But that's one of the reasons why you saw a relatively low property growth.
Pete Christiansen: And then more.
Pete Christiansen: More revenue growth associated with people buying the same clients buying more exposure for the same properties.
Pete Christiansen: A slightly higher vacancy rate market for multifamily or lower occupancy market.
Pete Christiansen: We're aware that we invest a lot of time with existing clients in 2024 and part of our initiative in growing the sales force.
Pete Christiansen: As to basically have the additional head count we need to go out and reach more new rooftops. So those new rooftops are out there.
Pete Christiansen: We own <unk>.
Pete Christiansen: Many tens of thousands of folks we didn't get to talk to at all in 2024, and we hope to talk to more of a 2025.
Pete Christiansen: On the <unk>.
Pete Christiansen: On the smaller properties one of the things we did see this year is we typically sell to the small properties with our mid market sales team, which is centralized in Richmond, Virginia.
Pete Christiansen: We saw a significant increase in productivity from that group. This year, so theyre getting pretty good at selling to those 20 unit 30 unit apartment communities, So I'd say that.
Pete Christiansen: Things are going well at both the larger communities and the smaller and mid sized communities.
Pete Christiansen: But again I think the.
Pete Christiansen: Really interesting thing is the growth in the individual properties because of that that market is massive the individual townhouse condo home.
That kind of thing.
Pete Christiansen: Thank you. That's helpful. My second question would have been on rep productivity at that level.
Pete Christiansen: Over time, you would expect that to improve that sounds good. Thank you. It was remarkable looking at the chart its significant improvement.
Pete Christiansen: Thats pretty encouraging.
Pete Christiansen: Thank you.
Speaker Change: Our next question comes from Ryan Tomasello with <unk> you May proceed.
Speaker Change: Hi, everyone. Thanks for taking the questions.
I appreciate the updated commentary around the structural growth targets, Chris I guess.
Speaker Change: As it relates to the Bottomline.
Speaker Change: Hoping you can maybe talk about your approach to managing margins over the coming years, where do you think core commercial margins might go relative to I guess, the 43% you've called out for last year.
Speaker Change: And for residential just generally how you're thinking about.
Speaker Change: The timeline to narrowing those losses more to a breakeven level yes.
Speaker Change: Yeah sure. So what is very apparent to me seven months into the job is really how fixed cost our commercial businesses are so you'll see the power of the increase in the margins every year every quarter right. So we talk about one or 2% increase in margins.
Speaker Change: Year in and year out.
Speaker Change: And we're continuing to see that so I think you can expect to continue to see that going forward Theres no big capital requirements, you know, we're continuing to invest organically.
Speaker Change: And so I think that still holds very true and it is very true and this announcement I think importantly for the homes Dot com.
Speaker Change: Segment.
Speaker Change: As Andy mentioned that we launched last year, but I really see this year is a real full launch right. So we have our sales team ramped up will ramp up through the rest of the year. We have a product that is clearly defines and our value proposition. We have a sales team that is fully selling it.
Speaker Change: We will still experience cancels to remember our first quarter of 2024 was a big year and a lot of those contracts were 12 month contracts. So we will see that wave finally abate after we get through the first quarter. So I think you'll have a much clearer picture on homes Dot Com is second and third quarter moves throughout the year and.
Speaker Change: And you'll see that momentum build and that's what we expect from the productivity the reduction and cancellations.
Speaker Change: These scores increasing salesforce, increasing so I do think you'll just see it evolve from the first and the fourth quarter of this year and that's where we're looking forward to.
Speaker Change: Great. Thanks for taking the questions.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Alexia <unk> with Jpmorgan you May proceed.
Speaker Change: Hello, everyone, Chris just to follow up on the previous question.
Speaker Change: Your expectation of <unk>.
Speaker Change: Commercial margins continuing to improve by one two percentage points per year, what does that mean for homes dot com spend in 2025.
Speaker Change: Do you expect the U S.
Speaker Change: S portion to be roughly similar to last year and what does it mean for international expansion for residential business.
Speaker Change: Well a couple of things one we have.
Speaker Change: We've historically talked about our 2025 spend being roughly the same as 2020 form of broadly in line with that I would say, we have a very close eye in pencil on expenses and we are always looking for opportunities to make sure. We're spending the right capital in the right way, but we are expecting 25 to look very similar to 24, and then on the international side.
Speaker Change: In the U K as Andy mentioned, we've had some great growth there and a number of key metrics that we look at and we're expecting to start to harvest that in 'twenty five and so I think inevitably that there'll be slightly.
Speaker Change: Slightly lower than 24, given our investment in our acquisition.
Speaker Change: But still looking to push ahead, given a significant opportunity in the U K. If you look at the peers of our company, they're very attractive margins very attractive cash flow and we believe that we will inevitably.
Speaker Change: When a lot of that business and then taking a leading position in that market.
Speaker Change: I would also say that there's a rotation where we're spending money.
Speaker Change: You can see that head count growth in sales and so we are.
Speaker Change: <unk> cost reductions in a number of areas and then we are reinvesting that into revenue generation. So the ratios of head count on staff that's dedicated.
Speaker Change: The sales versus producing the product initially is shifting and then the final question I'd have few legacies are you in the office and Youre not texting other people while we're on this call are you.
Speaker Change: No.
Speaker Change: And Im not then.
Speaker Change: Thank you for this call.
Speaker Change: Texting anyone.
Speaker Change: One Jamie diamond to find out.
Speaker Change: I do have a keeping morgan background, if that makes sense.
Speaker Change: Sure.
Speaker Change: How about the additional comments.
Speaker Change: With regard to the actual spend could you maybe give us any more color how you're progressing in terms of content investments into schools and parks and some other areas and how does that compare to last year.
Speaker Change: More investments that you are you planning.
Speaker Change: And those investments around the ethanol as CEO as well as the TD advertising yes.
Speaker Change: Yeah. So.
Speaker Change: Our significant investments right now going into 2025 around salespeople.
Speaker Change: And.
Speaker Change: We have made tremendous progress on unaided awareness gone from low single digit up to hit a high of 33, I expect that will probably like the where we are going into.
Speaker Change: February March and unaided awareness with.
Speaker Change: The next round of.
Speaker Change: Ads that you just saw the Super Bowl.
Speaker Change: We are in no way, increasing our investments on content or any of the other initiatives because we've made tremendous progress on building that content in prior periods and.
Speaker Change: And what really matters now is in.
Speaker Change: Controlling our costs and investing into revenue generation.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Stephen Sheldon with William Blair You May proceed.
Stephen Sheldon: Hey, thanks.
Loopnet, how long do you think it could take for revenue growth there to accelerate as we shift more to the asset based pricing model and shifting our focus more to the silver package. It it looks like Youre, assuming similar growth in 2025 to 2024, but do you think those changes could have an impact on bookings and looked at as we think about the rest of this year and potentially set up for <unk>.
Stephen Sheldon: Acceleration into 2026 are you guys thinking about it I'll give you an anecdotal answer and then Chris will give you the official answer.
Stephen Sheldon: But we're already in.
Stephen Sheldon: In January <unk>, 71% of our.
Stephen Sheldon: Net new sales were the silver that sort of Super high renewing.
Stephen Sheldon: Add level, which probably is a flip from January of the prior year.
Stephen Sheldon: Where it was probably 71% of the sales being the depth advertising up in.
Stephen Sheldon: Diamond's platinum's.
Stephen Sheldon: And we are seeing our best January and February tracking results in Loopnet in years.
Stephen Sheldon: Based on that shift in strategy.
Stephen Sheldon: But it is.
Stephen Sheldon: Sure.
Stephen Sheldon: Moving a pretty big ship, so it will take a while.
Stephen Sheldon: To actually have that reflect in year over year growth rates, but we're seeing.
Stephen Sheldon: Really good initial results.
Stephen Sheldon: Chris give you the official answer yes, Andy was spot on our expectation is for the business to build momentum every quarter. So while we're expecting fairly similar year over year growth versus 24 every quarter, we should see a little acceleration and therefore, our exit rate in the fourth quarter should set us up for a good 2026. So that's that is our expectation.
Speaker Change: And as Andrew just mentioned the early signs of what we're doing.
Stephen Sheldon: <unk>.
Stephen Sheldon: Got it that's helpful and just a quick follow up that's helpful commentary on Loopnet curious if you can share anything on overall net new bookings activity.
Stephen Sheldon: In the first six to seven weeks of 2025 and weather.
Stephen Sheldon: Thanks, It continue to pick up like you saw acceleration pre Q into <unk> curious what youre seeing there.
Stephen Sheldon: We're not giving guidance, but I feel we feel very good about our first quarter Guy.
Stephen Sheldon: <unk> that we just gave.
Stephen Sheldon: Alright, thank you.
Stephen Sheldon: Thank you.
Speaker Change: Our next question comes from Jeff Mueller with Baird You May proceed.
Yes. Thank you.
Speaker Change: How are you monitoring I guess apartments dot com new logo.
Speaker Change: Win rates versus competitors or just what can you say if that gives you. The most confidence that its just a sales capacity issue and not a deteriorating win rate issue for apartments Dot com with I guess some evolving.
Speaker Change: Competitive set I, just would've expected better apartments growth easier comps and taking out the foothills responsibility that building sales head count. It seems like you have a number of things that should drive it. So so let me just give you some numbers because I always find this an interesting discussion because people never really talk about the numbers.
Speaker Change: And so in 2024, we produced $153 million of additional revenue. Our next biggest competitor I think it was $96 million, we have over 75000 properties on our platform. They have 50000 properties, our revenue or a revenue basis.
Speaker Change: $1 $1 billion the revenue base is sub $500 million.
Speaker Change: Any growth rates that they've put on the table you have to you have to have you have two more than half because we're more than twice the size and so inevitably there was a distraction of the sales force and because that happened in the first and second quarter, I mean from a roll rate and a renewal perspective.
It will impact us a little more in 2025.
Andy Florance: I think we have incredible opportunity ahead of US I think both of these businesses have incredible opportunity to have us. We think we can double our revenue in our in our core Tam and as Andy said, our mid market team does great and we're actually going to push as we expand that sales force into those markets and really penetrate that Tim but the lower level of the lower unit.
Andy Florance: <unk> is also fairly large so again much more much bigger business really attractive growth prospects much higher margins.
Speaker Change: And Andy you made a point he was talking about his other competitors our competitors make us better and we welcome the competition, but I think people have to put this back into context of what the size of our businesses with the growth of our businesses, what the margin profile of our businesses and what that represents.
Speaker Change: So we're enthusiastic we're excited and we're looking forward to tackling not only the huge Tam we've already penetrated but the other terms as well in the segment.
Speaker Change: Okay. Thank you.
Speaker Change: Thank you I would now like to turn the call back over to Andy Florance for any closing remarks.
Speaker Change: Well I think you hit Chris's button on that last question.
Speaker Change: But I have to agree.
Speaker Change: We're apartments dot com, 94%.
Speaker Change: NPS score, 99% monthly renewal.
Speaker Change: Growing both head count growing.
Speaker Change: Adoption in the mid and in the upper end.
Speaker Change: No.
Speaker Change: We had a very strong 2024 I want to thank all the staff who made it a strong 2020 for the salespeople to researchers the software developers the product managers, we look forward to delivering outstanding results in 2025 and are reporting good progress on all of our major product areas.
Speaker Change: And thank you for joining us and look forward to seeing all of you in the near term.
Speaker Change: Thank you. This concludes the conference. Thank you for your participation you may now disconnect.
Speaker Change: Okay.
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