Good day, and thank you for standing by. Welcome to the Q3 2025 CoStar Group Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Rich Simonelli, Head of Investor Relations.

Thank you very much, operator, and hello, and thank you all for joining us to discuss the third quarter 2025 results of CoStar Group. Before I turn the call over to Andy Florance, CoStar's CEO and Founder; and Chris Lown, our Chief Financial Officer, I'd 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 fourth quarter and the rest of 2025 based on current beliefs and assumptions. Forward-looking statements involve many risk, uncertainties, assumptions, estimates and other factors that can cause actual results to differ materially from such statements. Important factors that could 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 with the SEC, including our annual report on Form 10-K and quarterly reports on Form 10-Q included under the heading Risk Factors in these filings as well as other filings with the SEC available on the SEC's website. All forward-looking statements are based on the information available to CoStar on the date of this call. CoStar assumes no obligation to update these statements, whether as a result of new information, future events or otherwise, except as required by applicable law. Reconciliation 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 today, along with the definitions for these terms. Press release is available on our website located at costargroup.com under Press Room. So please refer to today's press release on how to access the replay of this call. And remember one question during the Q&A session, so make it a good one. And with that, I'd like to turn the call over to our Founder and CEO, Andy Florance. Andy?

Thank you for joining CoStar Group's Third Quarter 2025 Earnings Call. We achieved another excellent quarter for CoStar Group with third quarter 2025 revenue reaching $834 million, a 20% year-over-year increase. This is our 58th consecutive quarter of double-digit revenue growth and we're 1 quarter closer to potentially 100 sequential quarters of revenue, double-digit revenue growth. Stay tuned. Adjusted EBITDA in the third quarter rose to $115 million, up 51% over Q3 '24. Profit margin in our Commercial Information and Marketplace businesses increased to 47% for Q3 2025. Net new bookings totaled $84 million, up 92% year-over-year. CoStar Group's residential real estate portals include Apartments.com, Homes.com, OnTheMarket and Domain. These are all sites that help people find or market a residence. Assuming we own Domain for the full third quarter, the revenue for the residential portals would now be $411 million in the quarter or $1.644 billion annualized. Our residential portals revenues grew 22.7% quarter-over-quarter and 31.3% year-over-year. We expect synergies across these residential portals will continue to drive improvement in our margin profile and believe that long-term margins can operate at more than 40% adjusted EBITDA margins. Apartments.com delivered another strong quarter, surpassing $1.2 billion in annual run rate revenue and generating $303 million in Q3 revenue, an 11% increase year-over-year. Apartments.com remains the preferred source for property managers and owners as reflected by a 99% monthly renewal rate, 99% monthly renewal rate and a 93 NPS score. Our high-quality proprietary content remains central to attracting consumers. Net new bookings rose 37% year-over-year in Q3. We added 4,200 new apartment communities in Q3. Our sales force has now grown to over 500 representatives, achieving our 2025 sales hiring target ahead of schedule. In Q3, the team conducted 200,000 client and prospect interactions, with nearly half of them occurring in-person,…

Thank you, Andy. Good evening. I'm happy to report that CoStar has now posted its 58th consecutive quarter of double-digit revenue growth coming in at 20%. We achieved an impressive commercial information and marketplaces brand margin of 47% in the third quarter versus 43% in 3Q '24. Net new bookings for the third quarter were $84 million representing a 92% increase year-over-year. Every major product contributed to this record as our growing dedicated sales force of over 2,000 people is delivering for CoStar. Revenue for the third quarter was $834 million, which included a $25 million contribution from the Domain acquisition. Revenue, excluding Domain of $808 million exceeded the high end of our guidance. Third quarter adjusted EBITDA came in at $115 million, also exceeding the high end of our guidance at a 14% margin. The outperformance in adjusted EBITDA was a result of continued expense discipline and better-than-expected revenue. Our CoStar products saw revenue grew 8% in the third quarter, ahead of our guidance. We are excited about this product's renewed growth, especially given continued volatility in the commercial real estate sector. Net new bookings have steadily increased throughout 2025 and are now at the highest level seen since 2022. With this increasing momentum, we expect to see the CoStar product grow between 8% and 9% in the fourth quarter with full year growth firmly in the 7% range from our original guidance of 6% to 7%. Residential revenue was $55 million in the third quarter with $23 million coming from the Domain acquisition. The $32 million in organic revenue was consistent with last quarter's guidance. With the addition of revenue from Domain, we now expect fourth quarter revenue of $100 million to $105 million with Domain contributing around $67 million. For full year 2025, we expect residential revenue…

[Operator Instructions] Our first question comes from Pete Christiansen with Citi.

Nice results, guys. Good trends here. Andy, It's interesting. I was looking across the last 8 years and sequential change in bookings excluding COVID, so 2020 was roughly 15%. This quarter sequential change in bookings was 10% down. So clearly, the new sales force capacity is contributing and other things also contributing to some of that growth being above seasonality. But just curious if you could point out any seasonal behaviors that you noticed and maybe a special attention on the residential side. Are agents canceling now, planned to come back later? Are you seeing the same type of seasonality that you normally see in the apartments business? Just any deeper thoughts there would be helpful.

Sure. And I guess you got the first question because we source Citi during our script. So -- but the Apartments.com does have seasonality. And as you know, the prior quarter, you have usually unusually large sales because of the NAA event where people, major property managers do their annual purchasing for the year to come. And we would expect some limited seasonality from residential agents as they get to year-end holidays and the like. Their peak season is the spring selling season. But what we're seeing right now, if I look at a line of our sales production at Homes.com, it is a very linear line and the only seasonality in that sales line is Saturday and Sunday. So it's a very smooth progression up right now, and we're not yet seeing seasonality. And maybe in the Christmas holidays that you might get something but not yet.

Our next question comes from Stephen Sheldon with William Blair.

Just wanted to follow up on that question. I guess, can you just give more detail on the sequential booking trends in the third quarter as we look at the core businesses. So looking at Suite, Apartments.com and LoopNet. And then just how are things shaping up in the seasonally important fourth quarter around bookings, especially with a bigger sales force and the ramping productivity. So yes, just what are you -- how are you thinking about the bookings trajectory into 4Q?

Chris?

Yes. So I think as you see...

Didn't like [indiscernible]

I think what you see is, you see our full year guidance, you see our sequential trends. We're very pleased with the bookings. And I think we're just getting started from the sales force expansion, all those sales force came in at the end of the first quarter, second quarter, et cetera. So productivity takes time to ramp. But seasonality and what we're modeling is pretty much in line with what we're expecting. And therefore, you saw the increase in our full year guidance and our expectations. And so I think we're on track from what we're expecting.

Yes. And I do want to point out that from -- remind everyone that from the bookings at Homes.com from Q2 to Q3 was up 53%. So as we're going into the third quarter, we're seeing a significant uptick in bookings at Homes.com. And again, because of the number of people, a very smooth upward growth trajectory.

Yes. And just to expand a little further, at CoStar's trends is very positive. We're seeing reacceleration there, which we're very excited about. We talked about LoopNet, Andy talked about LoopNet and what's going on there. And on Apartments, as I said, the trends are as expected as modeled. So I think we feel really good on the underlying trends and resulting in our change in guidance.

Our next question comes from Ryan Tomasello with KBW.

At Apartments.com, in terms of bookings, can you say how those performed sequentially versus, I think, $45 million in the second quarter? And looking at the guidance for the fourth quarter, Chris, I think you're calling for 11% to 12% on multifamily, which would be pretty unchanged growth from the third -- I'm sorry, from the -- yes, from the third quarter. Just curious what's driving that despite the ramp in the sales force and just generally how you're thinking about demand trends at Apartments.com heading into the end of the year?

What's important is what you saw across a number of funds. One, we continue to see rooftop expansion in Apartments.com. We're expanding the sales force. We've talked historically about the seasonality or -- have the contributions on a quarterly basis as we look at back historically, with the second quarter being the largest quarter, the third and fourth quarter as being relatively similar, although there can be an uptick in the fourth quarter. So I think we feel generally good about the trends, which has resulted in our numbers and our forecast. But obviously, solid growth, increased rooftop expansion. And then that's actually across all segments, 1 to 49, obviously had a pretty significant increase year-over-year and then both 50 to 99 and 100-plus also showing growth at or higher than what we've seen over the last 4 or 5 quarters.

And Ryan, did I mention that the FTC was suing our competitor?

Yes, I think I caught that Andy.

Okay. Just want to make sure.

Our next question comes from Curtis Nagle with Bank of America.

I guess, Andy, I just wanted to go back to the point. So you're investing 50% of your software costs now into AI. I guess where are you redirecting those expenses from? And I guess, any thoughts you could give on how to think about total expenses for '26 for Homes.com?

I thought you'd never ask. The -- those -- the 50% of our software development going into AI features in Homes.com is an allocation of the existing resources. It does not reflect an increase in total spend. So as we go into any particular quarter or season, we're always looking at what are the headline investment initiatives going to be. We are most excited about the potential of these AI features and functions, which are just remarkable and awesome. And then we look at 2026, we anticipate, I would say, same or lower spend on Homes.com investment in '26. Do you agree with that, Chris? Are you going to go...

You're the CEO. I agree with whatever you say, Andy.

Okay. Great. Yes. But we don't see any -- other than the increased sales force size that we've already baked in that roll over to '25, the costs are not materially going up in any way I see.

Our next question comes from Brett Huff with Stephens.

Can you detail a little bit, unpack a little bit the bookings number that you gave us for Homes.com which we appreciate. Just in terms of rep productivity, are the newer folks getting more up to speed? Do we still have more of those folks get up to speed, pricing? Sort of any of the numbers that go into that bookings number would be super helpful as we try and tweak our model.

Sure. So we are in a period of remarkable headcount growth at Homes.com. We've never seen anything like it, where you have classes of 100-and-some coming in at any given point. That is difficult to manage, you would fully expect you'd see a drop off in per person productivity as you bring that many people in. But we are seeing that consistent -- we're seeing consistent growth in those bookings. And what was the second part of the question?

Productivity.

Yes. So the productivity is still -- we're seeing a very positive ROI at each incremental salesperson added, but you are seeing the effects of so many people coming in. And we are slowing the growth or I believe sort of have capped the growth of salespeople to allow for training and onboarding to catch up.

Right. And you have made adjustments to pricing to improve penetration....

Slight increase in pricing in this quarter over prior quarter, but we're focusing on penetration, as you can see.

Our next question comes from Faiza Alwy with Deutsche Bank.

Yes. Andy, you mentioned in your opening remarks that you think that you can get to 40% profitability or margins on the residential business. I'm curious how you think about the time frame on that? And sort of what needs to happen for you to get there?

Yes. So the residential business, obviously, you have Domain in there, you have OnTheMarket, you have Homes in there, you have Apartments.com, and past is prologue. You see us adding components to it through time. But when you look at our business model, it's uniform across all 4 of those platforms. It is around marketing the real estate. If I look around the world at all of the precedent models that use marketing real estate as their core business, it will be a Rightmove, or Idealista or SeLoger or REA Group and the like. They all operate up at margins that are typically around 50%, in some cases, high as 75%. So it's really continued blocking and tackling over the next number of years. I don't have a specific date for that. But when I look at our -- when I look at the margin numbers for the combined residential businesses, I like the progression of EBITDA margin that I see in that group of companies. You can combine all these things together this way or that way. But when you look at them, I think they're making good progress towards our intermediate to long-term margin goals.

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

Well, I think I think our participants on the call today have probably modeled good behavior in keeping it brief. I'll try to be brief in my next set of comments. But thank you guys for joining us. We're very excited about what's happening here at CoStar Group. And we look forward to updating you in 2026 for our next earnings call. Thank you.

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