CoStar Posts 12% Revenue Growth in Q2 but Sales Growth Slows at Homes.com

The U.S. real estate data giant CoStar has posted its hotly anticipated figures for the second quarter of 2024. Notable figures from the company's performance for the three months ended June 30th include:

• Revenue was $678 million, a 12% increase year-on-year.
• Net income for the period stood at $19 million, down from $101 million in Q2 of 2023.
• Residential revenue for Q2 stood at $26.2 million, up 106% year-on-year and up 41% compared to Q1.

Double-digit quarterly revenue growth seems to be the minimum acceptable standard for CoStar with the S&P 500 company having now registered more than 50 consecutive quarters of double-digit year-on-year growth.

CoStar's latest figures were fuelled in large part by its rentals marketplace Apartments.com which saw revenue climb 18% year-on-year to $264 million. CoStar's other major revenue driver is its eponymous real estate information service which saw revenue grow 10% to $253 million.

Despite currently representing less than 4% of the company's overall business, shareholders and analysts were focused on CoStar's Residential segment. The company has been making headlines as it pushes into the world of residential real estate portals with a $1 billion marketing investment for Homes.com in the U.S.

Despite comfortably beating its guidance and market consensus on an Adjusted EBITDA basis ($41 million in Q2) companywide net income was down significantly largely thanks to the continuing investment needed to climb the portal ladder. However, CoStar's founder and CEO, Andy Florance pointed to some notable gains for the Homes.com brand in comments accompanying the release

“Homes.com net new bookings through June reached over $55 million, a significant milestone as it took Apartments.com two years to achieve those results. Our Homes.com Network had 148 million monthly average unique visitors in the second quarter, according to Google Analytics, maintaining our position as one of the top two most heavily trafficked residential property marketplaces in the U.S. Our unaided brand awareness continues to climb and reached 27% in June 2024 as a result of our aggressive brand marketing campaign."

The traffic figure, which has been at the centre of a PR war with rival Realtor.com, represents a 73% increase compared to 2023 with the Homes.com portal generating 99 million of the 148 million monthly average unique visitors to CoStar's US residential network—a 173% increase which "far exceeds" company expectations for this stage of the portal's development according to Florance.

Despite impressive traffic figures, the $55 million in sales represents something of a slowdown in the growth pace for CoStar's Residential flagship.

In an investor call, Florance attributed the figure to how the company uses its sales teams internally and a gap between what agent customers are used to receiving from a portal and the new 'your listing, your lead' model that Homes.com is selling to them. The CEO admitted that...

"...after two decades of agents being used to buying leads off of lead diversion sites in order to get buyer agency, there is definitely an education process [needed]."

In its investor presentation, CoStar highlighted the growth at its British challenger portal OnTheMarket which it claims now has close to 17,000 agent branches advertising (for context, Rightmove's figure for FY24 was 17,875). It also said that average monthly visits for OnTheMarket in June were 35 million, up 78% compared to June 2023.

Little mention was made of Matterport the virtual tour software market leader that CoStar agreed to acquire for $1.6 billion back in April. The deal is still in the works with Matterport shareholders due to vote on the merger later this week. In May a Delaware judge ruled that the California-based software provider is liable to pay its former CEO $76 million in damages.