Good day, and thank you for standing by. Welcome to the Q4 2024 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 speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to your speaker today, Rich Simonelli, Head of Investor Relations.

Hello, and thank you very much for joining us today to discuss the fourth quarter 2024 and full year 2024 results for the CoStar Group. Before I turn the call over to Andy Florance, CoStar's CEO and Founder; and Chris Lown, our CFO, I would like to review our safe harbor statement. Certain portions of the discussion today may contain forward-looking statements, including the company's outlook and expectations for the first quarter as well as full year 2025 based on management's current beliefs and expectations. Forward-looking statements involve many risks and uncertainties, assumptions and estimates and other factors that could 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 and in our filings with the SEC, 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 website. All forward statements are based on the information available to CoStar at the time of this call. CoStar assumes no obligation to update these statements, whether as a result of new information, future events or otherwise, except as required by applicable law. Reconciliations 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 the definitions for those terms and that press release can be found on our website, costargroup.com under Press Room. 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 for person. And with that, I'd like to turn the call over to our Founder and CEO, Andy Florance.

Again, thank you for joining CoStar Group's fourth quarter and year-end earnings call. We achieved another very strong quarter of financial results with 2024 full year revenue and adjusted EBITDA exceeding consensus and the high end of our guidance range. Revenue for the full year of 2024 was $2.74 billion, an increase of 11% over the full year of 2023, as we delivered our 55th consecutive quarter of double-digit revenue growth. For the fourth quarter of 2024, revenue was $709 million, an 11% increase year-over-year. We continue to generate profit while we are investing aggressively back into the business to create powerful future growth drivers, such as Homes.com. For the full year, our commercial information and marketplace businesses achieved a very strong 43% profit margin. For CoStar Group, net income EBITDA and adjusted EBITDA significantly improved each quarter in 2024. We grew net income from $7 million in the first quarter of '24 to $60 million in the fourth quarter. We increased EBITDA from negative $13 million in the first quarter to $73 million in the fourth quarter. We grew adjusted EBITDA from $12 million in the first quarter to $112 million in the fourth quarter. Our adjusted EBITDA of $112 million in the fourth quarter was well ahead of our guidance range of $76 million to $86 million. 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. Company net new bookings were $53 million in the fourth quarter of 2024, up 21% sequentially from the third quarter of 2024. Net bookings are increasing because our sales forces are now optimized and back to selling their respective core product offerings. When we launched Homes.com sales just 12 months ago, we only had 41 Homes.com…

Thank you, Andy. Full year 2024 revenue grew 11% versus the prior year. Coming in ahead of consensus and above the high end of our revenue guidance range. Full year adjusted EBITDA in 2024 came in above expectations at $241 million and a 9% margin also exceeding consensus on the high end of our guidance range. Our commercial information and marketplace brands delivered 43% profit margins for 2024, proving the underlying strength of the commercial product portfolio as we continue to invest in our residential and international strategy. CoStar revenue grew 10% in both the fourth quarter and full year of 2024, in line with our guidance. As mentioned on previous calls, CoStar revenue was positively impacted by the integration of the STR benchmarking into our CoStar platform. This integration resulted in approximately 4 percentage points of CoStar revenue growth in 2024. For Q1 2025, we expect revenue growth of 6% as STR 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.com revenue grew by $153 million or 17% year-over-year in 2024, in line with our expectations and in line with Apartments.com's five-year revenue CAGR. We expect Apartment.com revenue growth of 11% to 12% for the full year of 2025, and we are forecasting 11% revenue growth for the first quarter. Our moderating growth rate in 2025 reflects the increased scale of Apartments.com and the impact of Apartments.com sales reps supporting both our commercial brand as well as the launch of Homes.com in 2024. We believe the expansion of our Apartments.com sales force throughout 2025 should bolster growth as we continue to penetrate the significant untapped TAMs. LoopNet revenue grew 5% in the fourth quarter and 6% for the full year…

Thank you. [Operator Instructions] Our first question comes from John Campbell with Stephens. You may proceed.

Hi, guys. Thanks for the time. Congrats on a solid quarter.

Thank you.

Andy, last fall, you talked to being kind of midstream and the data collection efforts in some of the large overseas markets. And then, you guys have put out a series of press releases announcing new client partnerships. It seems like you’re -- the traction is building. I just wanted to get your take on just broadly, how long do you think it takes for international to somewhat rise is a needle mover for sweet or for CoStar? And then secondly, just international expansion to date, I mean it's kind of go unnoticed from the P&L standpoint, just as far as the investment level. I'm just wondering, if you can envision a time where you might want to accelerate that pace and more meaningfully boost the level of investment?

Sure. So we have been making steady progress there. We are in the process of implementing a little bit of financial discipline on P&L across our European operations and making sure that we're not running multiple versions, the same product running both the acquired and the general broader LoopNet CoStar platform. So we have a little bit of a case where we're running some duplicative costs. So 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 some of those European operations not to run dual initiatives and move towards just a consistent CoStar LoopNet platform in Europe. As I mentioned, we'll have France up and running this year. Spain would be pretty quickly following that. And we are looking at -- moving all of our marketplaces in Europe to LoopNet this year in 2025. LoopNet is a lot easier to roll out than is CoStar, CoStar is a building-by-building sort of research process, whereas LoopNet is easier to pull together groups of listings that don't have to be comprehensive coverage, just it will be the -- we don't believe there's any other sort of pan-European international marketplace for market and commercial real estate that really meets the demand for cross-border leasing and sales activity. So we're making good progress on it. I do not see a massive P&L hit coming anywhere significant P&L hit coming associated with that in 2025. In fact, it will probably go the other way, but we continue to watch for opportunities to grow internationally, and we are making some decent progress on that front. And if you want a second question, we're having a sale today on questions.

I’ll go to queue. Thank you.

Thank you. Our next question comes from Pete Christiansen with Citi. You may proceed.

Thank you. Good evening. I want to double-click on the guide for apartments this year. And I guess, considering you had 7%-ish, 8% growth in properties year-over-year in '24 against almost 17% revenue growth, as you think about that 11 to 12 for '25, can you just walk us through the mix of the assumption on property growth versus pricing? And is there a function of going down market, so I guess more properties, but it takes longer for you to scale into that big TAM opportunity? Is that how we should think about it? Thanks.

Yeah. I'd say a couple of things. You're right on your metrics around growth in units and pricing. So what we have seen, just to clarify, I mean, $153 million of revenue, right, it's significantly bigger, that growth versus our biggest competitor. But we still see a massive TAM opportunity to move on units, so increase unit size, but also increased pricing as well. There clearly will be more of a unit increase over the next year versus price increase. And inevitably, as you go further down into the smaller buildings, it does change a little bit the dynamics. But we believe the TAM in the larger market is still double the size of our current revenue. So there's plenty of opportunity in our key market. There's huge TAM opportunity in the 50 to 100 and the 20 to 50 market. And the biggest TAM opportunity, you got to get it right, is actually the 1 to 19 property market. So I think you're thinking about it the right way, in that there's 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's so much opportunity that I'm not sure that once you get through it that it will matter that much.

Pete, you can see from our NPS at 94 that we spent a lot of time with our existing customers, and that's great. That leaves those great renewal rates, client loyalty. But that's one of the reasons why you saw a relatively low property growth and then more revenue growth associated with people buying same clients buying more exposure for the same properties in a slightly higher vacancy rate market for multifamily or lower occupancy market. 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 is to basically have the additional headcount we need to go out and reach more new rooftops. So those new rooftops are out there. We own -- there's many tens of thousands of folks. We didn't get to talk to at all in 2024, and we hope to talk to more in 2025. On the smaller properties, one of the things we did see this year is we typically sell to those small properties with our mid-market sales team, which is centralized in Richmond, Virginia. We saw a significant increase in productivity from that group this year. So they're getting pretty good at selling to those 20-unit, 30-unit apartment communities. So I'd say that things are going well at both the larger communities and the smaller and midsized communities. But again, I think the really interesting thing is the growth in the individual properties because that market is massive. The individual townhouse, condo, home, that kind of thing.

Thank you. That's helpful. My second question would have been on rep productivity at that level. I guess, over time, you would expect that to improve. That sounds good. Thank you.

It was remarkable. Looking at the chart, it's significant improvement, pretty encouraging.

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

Hi, everyone. Thanks for taking the questions. I appreciate the updated commentary around the structural growth targets, Chris. I guess as it relates to the bottom line, I was hoping you can maybe talk about your approach to managing margins over the coming years, where you think core commercial margins might go relative to, I guess, the 43% you called out for last year. And for Residential, just generally how you're thinking about the timeline to narrowing those losses more to a breakeven level? Thanks.

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 see the power of the increase in the margins every year, every quarter. And so we talked about 1% or 2% increase in margins year-in and year-out, and we're continuing to see that. So I think you can expect to continue to see that going forward, there's no big capital requirements. We continue to invest organically. And so I think that still holds very true, and it's very true in this announcement. I think importantly for the Homes.com segment, as Andy mentioned, we launched last year, but I really see this year as 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 defined in a value proposition. We have a sales team that is fully selling it. We will still experience cancels. Remember, our first quarter of 2024 was a big year and a lot of those contracts were 12-month contracts. So we'll see that wave finally abate after we get through the first quarter. So I think you'll have a much clearer picture on Homes.com as second and third quarter moves throughout the year, and you'll see that momentum build. And that's what we expect from the productivity, the reduction in cancellations, NPS scores increasing, sales force increasing. So I do think you'll just see it evolve from the first to the fourth quarter of this year, and that's what we're looking forward to.

Great. Thanks for taking the questions.

Thank you. Our next question comes from Alexei Gogolev with JPMorgan. You may proceed.

Hello, everyone. Chris, just to follow up on the previous question with your expectation of commercial margins continuing to improve by 1, 2 percentage points per year, what does that mean for Homes.com spend in 2025? Do you expect the U.S. portion to be roughly similar to last year? And what does it mean for international expansion for Residential business?

Well, a couple of things. One, we've historically talked about our 2025 spend being roughly the same as 2024, and we're broadly in line with that. I would say we have a very close eye and 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, in the U.K., as Andy mentioned, we've had some great growth there in a number of key metrics that we look at. And we're expecting to start to harvest that in '25. And so I think inevitably, that it'll be slightly lower than 24%, given our investment in our acquisition; but still looking to push ahead, given a significant opportunity in the U.K. If you look at the peers, of our company, they have very attractive margins, very attractive cash flow, and we believe that we will inevitably win a lot of that business and take a leading position in that market.

Alexei, I would also say that there's a rotation where we're spending money. So you can see that headcount growth in sales. And so we are seeing cost reductions in a number of areas, and then we're reinvesting that into revenue generation. So the ratio of headcount on staff that's dedicated to sales versus producing the product initially is shifting. And then the final question I have for you is, are you in the office and you're not texting other people while we're on this call, are you?

No. Andy, I'm not. Thank you for this conference. I'm not texting anyone.

I just wouldn't want Jamie Diamond to find out.

I do have a JPMorgan background, if that makes you feel better. How about the additional comments with regards to the actual spend? Could you maybe give us some more color how are you progressing in terms of content, investments into schools and parks and some other areas? And how does that compare to last year? What sort of more investments are you planning and also investments around SMO, SEO as well as TV advertising?

Yeah. So our significant investments right now, going into 2025, are around salespeople. And we have made tremendous progress on unaided awareness going from low-single digit up to hit a high at 33%. I expect that will probably like the -- where we are going into February, March in unaided awareness with the next round of ads that you just saw with the Super Bowl. We are, in no way, increasing our investments on content or any of those other initiatives because we made tremendous progress on building that content in prior periods. And really matters now is controlling our costs and investing into revenue generation.

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

Hey, thanks. On LoopNet, how long do you think it could take for revenue growth there to accelerate as you shift more to the asset-based pricing model and shift sales focus more to the silver packages? It looks like you're assuming similar growth in 2025 to 2024, but do you think those changes could have an impact on bookings and move that as we think about rest of this year and potentially set up for acceleration into 2026? How are you guys thinking about it?

I'll give you an anecdotal answer, and then Chris will give you the official answer. But we're already in -- in January, 71% of our net new sales were the silver ad that's sort of super high renewing ad level, which probably is a flip from January the prior year where it was probably 71% of the sales being the depth advertising up in the diamonds, platinums. And we are seeing our best January and February tracking results in LoopNet in years based on that shift in strategy. But it is -- you're moving a pretty big ship. So it will take a while to actually have that reflect in year-over-year growth rates, but we're seeing really good initial results, and I'll let 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 a 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 is our expectation. And as Andy just mentioned, the early signs of what we're doing will look positive.

Got it. That's helpful. And just a quick follow-on. That's helpful commentary on LoopNet. Curious if you can share anything on overall net new bookings activity in the first six to seven weeks of 2025 and whether things have continued to pick up, like you saw acceleration in 3Q into 4Q. Curious, what you're seeing there?

We're not giving guidance, but I feel -- we feel very good about our first quarter guidance that we just gave.

All right. Thank you.

Our next question comes from Jeff Meuler with Baird. You may proceed.

Yeah. Thank you. How are you monitoring, I guess, Apartments.com new logo win rates versus competitors? Or just what can you say like that gives you the most confidence that it's just a sales capacity issue and not a deteriorating win rate issue for Apartments.com with, I guess, an evolving competitive set? I just would have expected better apartments growth, easier comps and taking out the split sales responsibilities of building sales headcount, it seems like you have a number of things that should drive it.

So let me just give you some numbers because I always find this an interesting discussion because people never really talk about the numbers. And so in 2024, we produced $153 million of additional revenue. Our next biggest competitor, I think, was $96 million. We have over 75,000 properties on our platform. They have 50,000 properties. Our revenue basis reached $1.1 billion. The revenue base is sub-$500 million. any growth rate that they put on the table, you have to have. You have to more than have 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. But I think we have incredible opportunity ahead of us. I think both of these businesses have incredible opportunity ahead of us. We think we can double our revenue 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 TAM. But the lower level -- the lower unit TAM is also fairly large. So again, much more -- much bigger business, really attractive growth prospects, much higher margins. And Andy made a point, he was talking about as 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 business is, what the growth of our business is, what the margin profile of our business is and what that represents. 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 TAMs as well in the segment.

Okay. Thank you.

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

Well, I think you hit Chris' button on that last question, but I have to agree. We're Apartments.com 94% NPS score, 99% monthly renewal, growing both headcount, growing production in the mid and in the upper end. So we had a very strong 2024. I want to thank all the staff who made it a strong 2024, the salespeople, the researchers, the software developers, the product managers. We look forward to delivering outstanding results in 2025 and reporting good progress on all of our major product areas. And thank you for joining us and look forward to seeing all of you in the near term.

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