The operator introduces the Q2 2024 CoStar Group Earnings Call and explains that it will be recorded. The Head of Investor Relations reviews the Safe Harbor statement and mentions that the call may contain forward-looking statements. She also provides information on where to find a press release with more details.

The speaker, Andy Florance, introduces the earnings call and announces that the company has achieved a 12% increase in revenue for the second quarter of 2024. The two main businesses, Apartments.com and CoStar, have both seen double-digit growth. Net new bookings were $67 million and adjusted EBITDA was $41 million, exceeding expectations. The company's commercial margins are strong and expected to continue expanding. The average monthly unique visitors to the company's websites have reached a record high, with Homes.com seeing a significant increase of 73% in average monthly unique visitors.

The author believes that complete site-centric census style tools like Google Analytics are more accurate than user-centric panel estimate counts from firms like comScore or SEMRush. They argue that the most accurate comparison is between their Homes.com network and the reported traffic of their leading competitors in the residential portal space. The author boasts about the Homes.com network's traffic numbers, which have surpassed those of their competitors, and also mentions their successful sales of Homes.com memberships.

The article highlights the success of the new Homes.com platform, with solid bookings numbers and a growing number of member agents. The platform has also received positive feedback from focus groups, with participants praising its clean and ad-free design, as well as the visibility of the listing agent. The author also mentions two agents who were particularly impressed with the value they were getting from their Homes.com membership.

The participants in the Homes.com membership program reported using the platform as a tool to win more exclusive listings. One participant, Laura, saw a significant increase in views on her listings since becoming a premier agent on Homes.com. She used this as a selling point to potential sellers, highlighting her advantage over other agents. Another participant, Becca, also saw success in using Homes.com to attract buyer leads and secure listings. She even invested in a Pro membership, which was the first platform she felt confident enough in to pay for.

The Homes.com membership has proven to be successful in helping agents secure new listings and increase traffic to their listings. An analysis showed that on average, members won 51% more new listings than non-members and in 95% of cases, members outperformed non-members. The potential ROI for member agents is high, with an average of 17 million annualized impressions and 46 times more exposure for member listings. Another analysis showed that members are 20% more likely to sell a home in the first 10 days and get an average of $11,000 more for a home. Despite only demoing to 3.5% of residential agents, the product has already shown to be successful.

The key driver for future revenue growth for Homes.com is building a dedicated sales team. Currently, there are 63 salespeople in production with an additional 53 in training and 30 hired. OnTheMarket, a U.K. real estate portal, has seen significant growth in listings, monthly visits, and unique visitors. It has also surpassed Zoopla in engaged inquiries. Apartments.com also had a strong quarter with 18% revenue growth and a record number of single-family rental listings. The mid-market efforts have also contributed to growth in paid subscribers.

The paragraph discusses the growth of Apartments.com due to new construction and the success of their sales team. They have a high Net Promoter Score and lead in all important metrics for multifamily owners and property managers. Their marketing campaign featuring Jeff Goldblum has generated over 2.1 billion media impressions and they have also launched a campaign to target landlords. As a result, their unaided brand awareness is at 74%, compared to Zillow's 42%.

The company's average monthly unique visitors grew by 3% year-over-year and outperformed the overall market, creating a favorable advertising environment. The apartment vacancy rates and unit level deliveries are expected to remain high, leading to continued growth for Apartments.com. CoStar had a 10% increase in revenue in the second quarter, with strong sales in their lender and STR products. The company believes their product is superior to the competition and has a significant market opportunity for growth. The company's consistent strong revenue and sales performance is attributed to their innovative products that provide increased value to customers.

CoStar has made several improvements and additions to their products over the past few years, including the integration of STR benchmarking, enhanced fund data, and international reach. Their newest feature, Owner, provides valuable insights into the portfolios of top real estate developers and owners. Despite economic cycles, customer engagement and usage of CoStar's platform has increased. Renewal rates and NPS scores are at their highest levels. CoStar's subscriber base has also grown significantly. LoopNet revenue exceeded expectations, and international revenue saw a 17% increase. LoopNet remains the top platform in the market with 6 times the traffic of its nearest competitor. Despite challenging market conditions, total detailed listing views have increased compared to the previous year.

LoopNet is expected to benefit from the real estate market's recovery in the coming years. The company has been focusing on improving sales and client service, resulting in a significant increase in their NPS scores. They are also expanding their dedicated sales team to tap into the large and global market opportunity. Revenue for Real Estate Manager and Land.com has seen growth, with the latter becoming the exclusive sponsor of a new show on Paramount Plus and CBS. BizBuySell also saw an increase in revenue and record enterprise value transacted in the second quarter. Their franchise directory and listing leads have also seen a significant increase, leading to a rise in their NPS score. Ten-X platform continues to outperform the market with a high trade rate, and they brought in more assets to the platform in the second quarter compared to the first quarter.

The paragraph discusses the recent performance of CoStar, a commercial real estate company, and its residential business. It mentions that commercial transaction volumes are starting to increase, but remain historically low, and that the company's CMBS delinquency rates are elevated. The company's CEO believes that the results demonstrate the strength of their commercial real estate business and that their Homes.com product is emerging as a better option than competitors. The new CFO, Chris Lown, reports that CoStar has achieved its 53rd consecutive quarter of double-digit revenue growth and a commercial business margin of 41%. The Residential business saw a 40% increase in revenue and has delivered $55 million in net new bookings in just four and a half months.

The company is focused on hiring dedicated sales reps for Homes.com and expects third quarter Residential revenue to be around $30 million. They are revising their full year guidance for Residential revenue to $105 million to $110 million. Apartments.com had 11% revenue growth and is on track to achieve 17% year-over-year growth. CoStar had 10% growth and is maintaining their full year guidance. LoopNet had 7% growth and is maintaining their mid-single-digit growth outlook. Information Services revenue was flat due to the transition of STR into CoStar and they are maintaining their full year guidance. Other Marketplaces revenue was $31 million and they expect it to be relatively flat for the third quarter and full year.

The company's adjusted EBITDA for the second quarter was $41 million, exceeding expectations due to slower hiring and timing of investment spend. The sales force increased by 7% and the contract renewal rate was 90%. The company has a strong balance sheet with $4.9 billion in cash. Full year revenue guidance is $2.735 billion to $2.745 billion, with adjusted EBITDA guidance of $195 million to $205 million. Third quarter revenue is expected to be $692 million to $697 million, with adjusted EBITDA of $47 million to $52 million. The call is now open for questions. The first question comes from Pete Christiansen of Citi.

The speaker, Andrew Florance, is responding to a question about the sales momentum for the company's residential side. He mentions that the sales force of 1,000 people can sell the Homes.com product, but they tend to go back to their core products after the initial rush. He also mentions that a dedicated Homes.com sales team would be more effective in the long term and has higher Net Promoter Scores. He compares the treatment of Homes.com clients by the sales force to how one treats a rental car compared to their own car.

The Homes.com team has a higher NPS and their focus is not on sales. There have been no refunds, but some initial cancellations due to credit card issues. There is a learning curve for agents used to buying leads from other sites, as Homes.com focuses on giving agents an advantage in selling their listings rather than mass scrape selling buyer agency leads.

The speaker is addressing a question about the new guidance for the residential business. They mention that the guidance includes a $4 million increase in revenue for the third quarter and a $3-5 million increase for the fourth quarter, which is slightly lower than the initial target of a $10 million increase.

George Tong from Goldman Sachs asks about the decision to lower guidance and the membership additions. Chris Lown responds that the launch of a new product required a lot of analysis and the initial results were strong, leading to a conservative build of the business. He also mentions the success of the launch compared to previous ones and the focus on getting Homes.com salespeople in their seats. Andy Florance adds that the main issue is rotating the core sales force back into their core products and relying on the growth of the dedicated sales force. Alexei Gogolev follows up with a question about the EBITDA margin target, which Chris confirms is still within the range of 15% to 16%.

George Tong welcomes Chris and thanks Cyndi for their contributions. He asks about the decrease in Residential revenue guidance despite positive online traffic and bookings. Andrew Florance explains that the decrease is primarily due to the borrowed sales force returning to their comfort zone and not fully promoting the Homes.com product. The solution is to build a dedicated sales team for Homes.com. Despite this setback, Florance is pleased with the product's performance and plans to focus on building the dedicated sales team.

The speaker expresses reluctance to pressure high-performing salespeople to move into new areas, such as homes. They then answer a question about competition in the apartment market and discuss their strong position and growth in the space. They mention their broad product development and strong metrics, and note that there is still plenty of room for growth in the smaller and individual unit market.

During the earnings call, CoStar executives discussed the potential for growth in their commercial real estate market, highlighting the importance of developing a strong presence in the corporate, owner, and lender segments. They expect their commercial EBITDA margin to remain around 41% for the year. CoStar plans to continue expanding their suite of products to cater to these segments and create more energy and engagement within their customer base.

CoStar Group is making progress in moving markets such as Germany, France, and Spain into their platform. They are also working on expanding their global hospitality functions. They have a lot of potential for growth in the commercial real estate market, as well as in the residential market as more residential firms are becoming interested in commercial properties. The company's main product, CoStar, has been continuously growing for 38 years and remains a strong opportunity for growth. Commercial bookings were down year-over-year, mainly due to salespeople shifting their focus to selling Homes.com.

Jeff Meuler from Baird asks about the budget for the Homes.com initiative and the exit rate for ARR. Andrew Florance responds by saying that they are seeing good results and are investing at the same level, but it's too early to call it a stutter. Chris Lown adds that the ARR guidance is still in the range of $475 million to $500 million. John Campbell from Stephens congratulates Chris on his new role as CFO.

The speaker discusses the unaided brand awareness metric for Homes.com and its importance as a North Star for the company. They also mention the rate of net residential investment spend and ask if reaching a 50% level in unaided awareness for Homes.com will trigger spend relief. The speaker notes that Homes.com has quickly increased its unaided awareness and believes it will continue to grow faster than Apartments.com. They anticipate a similar level of investment and growth as Apartments.com, with steady and consistent progress over multiple years without any major changes or increases that would slow EBITDA growth.

The speaker, Andrew Florance, discusses the focus on driving traffic for Homes.com through web mobile rather than app downloads. He explains that the new product has received positive feedback from consumers for its clean, fast, and informative design. He also mentions that competing sites are not seeing significant traffic from app downloads and that the web mobile platform is the most popular.

The company is focusing on developing their app to attract more traffic and reduce their dependence on buying SEM or organic traffic. They are also working on improving their web mobile platform and marketing on various social media platforms. The CEO clarifies that their main priority is to provide the best site for home buyers, but they also recognize the importance of providing advertising opportunities for agents to win more listings.

The company is confident that their "your listing, your lead" model is preferred by sellers because it allows the agent to answer potential lead's questions about the property. Agents also like this model because it generates buyer leads and referral commissions. The company believes their model is superior and is seeing competitors attempt to pivot their business to a similar model.

The speaker clarifies that they are not stepping away from buyers or buyer agency, but rather working to make it more sustainable and advantageous in the long-term. They thank the listeners for the opportunity to clarify and introduce new team members, including Chris Lown and Rich Simonelli. The call ends with a lighthearted comment about setting the preamble to music.

This summary was generated with AI and may contain some inaccuracies.