Good day and thank you for standing by. Welcome to the Q1 2025 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.

Thank you so much, operator and hello and thank you all for joining us to discuss the first quarter 2025 results of 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 second quarter and full year of 2025 based on current beliefs and assumptions. Forward-looking statements involve many risks, uncertainties, assumptions, estimates and other factors that can cause actual results to differ materially from such statements. Important factors that can cause actual results to differ include but are not limited to, those stated in CoStar Group's press release issued earlier today and in our filings from time to time with the SEC, including our 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 other filings with the SEC available at the SEC's website. All forward-looking 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 measure of any non-GAAP financial measure discussed on this call are shown in detail in our press release issued earlier today, along with the definitions for this term -- for these terms. The press release is available on our website under the costargroup.com under Press Room. As a reminder, today's conference call is being webcast and you're on it and so the link is also available on our website under Investors. Please refer to today's press release on how to access the replay of this call. And with that, I'd like to turn the call over to our Founder and CEO Andy Florance. Andy?

Good day and thank you for joining CoStar Group's first quarter 2025 earnings call. We posted another strong quarter with Q1 '25 revenue coming in at $732 million, a 12% increase year-over-year. This was our 56th consecutive quarter of double-digit revenue growth. Q1 revenue exceeded consensus and was at the top end of our guidance range. Adjusted EBITDA was $66 million, a 429% increase of Q1 over Q1 2024. Adjusted EBITDA also exceeded consensus and was at the top end of our guidance range. We achieved a very strong 43% profit margin in our Q1 '25 commercial real estate and information marketplace businesses that includes CoStar, Apartments, LoopNet, STR Real Estate Manager, Land and BizBuysell in aggregate, coming at a 43% profit margin. Company net new bookings were $56 million in the first quarter of '25, up 6% sequentially from the fourth quarter of '24. Our international businesses have achieved 3 consecutive quarters of all-time net new bookings, reaching over $5 million ARR in Q1 '25, representing 56% year-over-year growth. We had 130 million average unique visitors to our global websites in Q1 '25 according to Google Analytics. CoStar achieved $265 million in revenue in Q1 '25. Revenue was up 6% year-over-year, while annualized net new bookings reached their highest level since Q3 '23, generating 68% year-over-year growth. This was the fourth consecutive quarter of increasing net new bookings as we continue to generate strong sales with banks, institutional investors and owners. STR's integration to CoStar contributed to its best quarter ever for net new bookings, up 17% year-over-year. This increase was driven by significant rise in sales to owner operators who were 40% of STR's net new bookings in Q1. We grew the number of CoStar subscribers in Q1 17% year-over-year, largely driven by the migration of STR to…

Thank you, Andy. First quarter 2025 revenue grew 12% year-over-year to $732 million. Matterport contributed $15.9 million of revenue for the quarter which represented 1 month of activity. Excluding the Matterport contribution, revenue was at the high end of our guidance and above consensus estimates. First quarter adjusted EBITDA came in at $66 million and a 9% margin, also exceeding consensus and the high end of our guidance range. The outperformance in adjusted EBITDA was primarily due to timing of marketing spend, lower personnel costs from cost-saving initiatives and hiring timing. Matterport contributed an adjusted EBITDA loss of $2.7 million for the first quarter stub period. Our commercial information and marketplace brands delivered healthy 43% profit margins in the first quarter. This measure does not include our investments in Homes.com, on the Market and Matterport. CoStar revenue grew 6% in the first quarter, in line with our guidance. Even considering what continues to be a difficult commercial real estate backdrop, CoStar net new bookings continue to improve and are now at the highest levels since the third quarter of 2023. While we do not anticipate some -- I'm sorry, while we do anticipate some slight headwinds from government contract cancellations expected throughout 2025, we still expect CoStar revenue growth to remain at 6% in the second quarter and we are maintaining our 6% to 7% revenue growth guidance for the full year. Apartments.com revenue grew 11% year-over-year in the first quarter, in line with our expectations. We refocused our sales plans this year to emphasize new rooftops and we are seeing the benefits of this incentive structure with a considerable growth in our number of listed properties. The under 100-unit property cohort increased 19% year-over-year in the quarter. This addressable market is nearly 4x the size of the over 100-unit…

[Operator Instructions] Our first question comes from Alexei Gogolev with JPMorgan.

Andy, great to hear from you. Thank you for the introduction. And I was wondering if you had any additional comments on the delayed market listing exemption that was discussed by the NAR and then the reaction from Zillow. Have you had a chance to speak to brokerage firms? What is their view on the Zillow's and [indiscernible] reactions?

What I've heard is overwhelmingly negative. So I've heard, read hundreds of comments from agents. And again, I'd say 90-some percent negative. So there's a pretty transparent thought there that they're requiring people to put their listings up early in order to make sure that they have a chance to monetize them and people aren't taking their listings to market without going through Zillow first. And I think that is sort of a surprising over sort of act that probably I think, shows a little bit of weakness. But I think it's being confused a little bit with something related to COMPASS. I don't think it is. It is unusual to see something the NAR is allowing having a portal trying to set a new set of rules. So create a good opportunity for us for sure.

And Chris, a quick follow-up on your guidance. Would you be able to tell us what was the nonresidential EBITDA margin in Q1? And if your outlook for resi spend for 2025 is still intact?

Yes. So the commercial margin was 43% for the first quarter. And as Andy mentioned our...

Chris, that's impressive.

It's pretty good margin. And as Andy mentioned, we have been very focused on expenses around Homes.com. A lot of our actions taken in the first quarter to manage and reduce costs did come out of Homes.com. So we are very much on track from a budget perspective around the numbers we've discussed historically for Homes.com. No change there.

Our next question comes from Pete Christiansen with Citi.

Good progress on a number of fronts here. Andy and congratulations on closing Matterport. Can you walk us through the next 12, 18 months, if we could just double-click on how you envision Matterport being integrated into the CoStar platform and how you think about monetization of that product? And just curious on how do you think that Matterport evolves with CoStar over the next 12 to 18 months.

Sure. So Matterport is going to have 2 different lives. One is it's being very broadly used around the world by construction companies, brokers, agents, developers, boat dealers, airplane manufacturers, anyone trying to digitize a space. And then it will be more deeply embedded into all of our platforms from real estate manager to CoStar to LoopNet to apartments to homes to hopefully Domain one day. And we will be embedding it deeply natively and building unique and special features in those product areas that makes a Matterport available with more power in those spaces. I've had a chance to meet a lot of the Matterport folks. I would say that they and I have real -- a common vision for some exciting R&D projects that I think will add a lot of value. I believe R&D -- I believe Matterport is on the verge of producing some pretty interesting things in their technology. They'll have a lot of applications, both for our platforms and outside our platforms. I think that I'm really amazed at how ubiquitous the value prop is for Matterport. I'm just recently touring some construction over in Europe and they've been Matterport in the construction site every week. Matterport up until recently has only had about 5 salespeople to cover Europe, Asia, Africa, all the world ex the United States. Clearly -- and I figure that those 5 salespeople had 1.3 million good prospects per salesperson. So I think there's a wonderful opportunity to invest in both the R&D side, the sales side and grow significant revenue for Matterport, build it to a good margin and then also fund more aggressive R&D within the product.

Yes. I'd expand on that a little bit and also add from a practical perspective, it will inevitably lower cancellations and products, right? As people have more time on site, they use it more. We hear people renting apartments with Matterports without going physically there. People looking for commercial real estate will travel less and therefore, we will spend more time on site and will become more ubiquitous. So we think really we believe real financial tailwinds will accrue as well as we, as Andy said, really deeply embed this application across all of our platforms which will just strengthen their outcomes but also their financial outcomes as well.

[Operator Instructions] Our next question comes from George Tong with Goldman Sachs.

You mentioned realizing about $50 million in residential savings in the quarter. Can you talk about how you're thinking about investment spend for this year in light of the work that the capital allocation committee is doing on the Board? How are you thinking about the $900 million and change originally targeted for the year?

Yes. The $900 million investment is unchanged. The $500 million was really a capital allocation, a proactive capital allocation decision we made to take some costs out of Homes.com and shift them towards the sales force. As was mentioned, our sales force growth is exceeding our expectations which was fantastic but we're able to make capital allocation decisions to move costs from one place and invest that capital elsewhere. And so it's in line with plan and there are no changes.

Our next question comes from John Campbell with Stephens.

Andy, I want to maybe circle back on CCP. I think you probably expect a lot of questions there. It does seem like as you're looking to position Homes.com as, I guess, a site that kind of captures those private listings that don't abide by Zillow standard. I don't know if that's eventually as they make their way to MLS or maybe it's just a straight connection or a feed into you guys. That seems pretty clear to me. But outside of that, I'm just curious the other ways you're may be thinking about leaning in. I don't know if that's helping power maybe white label the private listing networks or something along those lines. I'm just -- I'm guessing there's probably some competitive dynamics that limit what you can say but maybe just shed some light where you can.

Yes. So I think that Clear Cooperation has always been -- people since the beginning of time in real estate have marketed listings off market. People have always looked to see if there's someone in the shop, in the neighborhood, a connection that wants to buy a property, especially at the middle, upper end of properties that happens in commercial real estate. It happens around the world. Typically, 20% of listings around the world are going to be marketed off-market or private. I don't want to get too deeply into what COMPASS is doing or what eXp is doing but just more as a general theme, I think that there is an important dynamic changing here with clear cooperation being more flexible and with the no [indiscernible] rules on the MLSs changing. You've got people beginning to question where they want their listings to go and when they want them to go there. And if you've done some research, I'm sure you've heard that the lead diversion models are not popular. They don't exist in other countries because when people have a choice as to where they market their listings, they choose not to have their leads taken and sold off. So I think there's generally some anxiety on the part of some of those folks that people will make more choices to avoid the lead diversion platforms longer and that positions us really well because we're actually in harmony with everyone because we are actually presenting their listings with their names on them and are not trying to rewrite the rules or -- we're not trying to regulate it. We're pretty much working with the clients as they want to work. But we're not going to get into any debates between different firms on the strengths of Clear Cooperation, private networks and all that stuff. I think they do it anyhow and they have done it since the beginning of time.

Our next question comes from Ryan Tomasello with KBW.

I wanted to double-click on multifamily. I guess, can you help us understand what's driving the growth decel in the second quarter to 10% and your confidence in the implied acceleration in the back half of the year? And does that bake in any benefit at all from the sales force investments? And considering the incentives you called out for prioritizing property growth, how should we consider the evolution there on pricing versus property count? And then just lastly, on bookings. I don't think we got any color on apartments bookings in the quarter. So anything you're willing to provide there would be helpful.

Yes. So snuck in a couple of questions there. So one, remember, the second quarter is the big quarter for Apartments.com. That's when the big conference happens, happens in June, sort of the back end of the second quarter. So that flows through in the third and fourth quarter. So that's the dynamic that happens year in and year out. I think you have that dynamic, in addition to have the dynamic of the additional head count from a sales perspective. As Andy said, the rent period sales force is a fantastic sales force. They're actually already up and running. They've had a great experience trying to sell against us. So now they get to sell for us. So we'll get acceleration there. Ensuring that the sales team is focused on the right things. Rooftops is important and pricing is important but we feel good about that acceleration. So all that translates into a third and fourth quarter increase in our acceleration of where we are versus the second quarter. So that all makes us feel relatively good. And we didn't provide a net new number for apartments but you should assume a sort of in the mid-20s million range for net new bookings.

Our next question comes from Stephen Sheldon with William Blair.

On the suite, I guess, is your thinking about the degree of pricing increases changed at all? I think you've typically talked about roughly 3% to 5% annual uplift. But just given your dominant positioning there and continuing to add new data sets, new forms of value, could you potentially look to be more aggressive on that front in the coming years, especially if the CRE backdrop continues to improve?

I would emphasize that we've been coming through a very challenging commercial real estate market. It is, I think, a real testament to CoStar that we continue to show good growth through a very brutal market condition for commercial real estate. I do believe that -- historically, we've always slowed our pricing increases during difficult markets to support our clients. And then we are generally more aggressive with our price adjustments when we are in good markets for our clients. And I think it's pretty clear that we are moving into a better market for our clients. You can see it in the availability rates dropping. You can see vacancy edging over. You see transaction volumes picking up. We tend to talk about the markets turning a little bit earlier than our clients understand they're turning. So -- but they definitely are turning, barring anything in a recession, a major recession happening, generally, the overall fundamentals for real estate are good and would allow us to be a touch more aggressive in the years to come. But I think you'd also just see volume increasing, too.

I'd also add that the value proposition that Andy has developed over CoStar since the development is massively different today than it was right at inception where it's primarily a broker product with lender, with the lease benchmark product that's coming with STR. I mean the value proposition about to create additional revenue streams or compound sort of the value is dramatically different. So the model has also changed with [indiscernible] to our advantage as we roll out those products and expand TAMs as well.

Our next question comes from Jeff Meuler with Baird.

It sounds like when you were talking about Homes.com attrition, a lot of that was like early cancels within a contract metrics. Can you give us any sense of clients that signed on kind of last fall that were on a 6-month contract and have just naturally come up for renewal that were kind of sold on a message that was better aligned to what the value prop actually is. Just like what those contracts are retaining at? Or is there some reason that wouldn't start to provide a good indication at this point?

Yes. I wouldn't have specific data on fall contracts on 6-month renewal. What I can tell you is that when you look at the in-period cancellation rate, that line is dramatically down. It is falling to some pretty low numbers. And I believe the 6 month in the last month of the last -- of the 6-month in contract cancellation is 0.25% which is de minimis. It had been up at a much higher number, maybe 5%, 6%, 7%, 8% at the beginning. And again, I believe a big part of that was just in the excitement of the early launch everyone thought we were selling lead diversion and no one knew what the whole rest of the world is buying which is digital marketing for real estate which is what apartments is, it's what LoopNet is, it's what REA Group, Rightmove, everyone else is. So we were offering something new. Now we had a very small sales force, a generalized sales force. But now I'm very happy with seeing it's up in that 40 NPS range which is outstanding. And to do it that quickly suggests to me that we will have solid renewal rates going forward.

I'd also highlight the preponderance of our contracts are 12 months. So again, the data is moving in the right direction. But I think your question is better to be asked in sort of the next 3 to 6 months as they start to roll forward.

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

Well, I think I've taken all the time I was allotted for this year. So we're off to a great start in '25. Again, I want to thank the Board members who are completing their service to the company and welcome the new Board members on board. I'm very excited about the progress we're making with Homes.com and with the great performance we're seeing across basically all of our product areas. Thank you all for joining us and your patience on the call. And we look forward to updating you next quarter.

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