CoStar continues to grow, but not without some pain
Revenue was up 11%, and the company plans to accelerate the growth of the Homes.com sales team despite some slowdown in traffic from the previous quarter.
With growth comes growing pains, something CoStar CEO Andy Florance acknowledged when discussing the ramp-up of the Homes.com sales force — but he also remains bullish about turning the search portal into a billion-dollar product.
CoStar Group generally met expectations on revenue, which came in at $693 million in the third quarter. Revenue was up 11% from a year ago and $15 million higher than the previous quarter, marking the 54th consecutive quarter of double-digit revenue growth, Florance said during an earnings call. The company also remains profitable, though income fell significantly from a year ago.
Florance spent a considerable amount of time talking about the growth of Homes.com, which racked up 85 million average monthly unique visitors in the third quarter. Traffic was up year-over-year but down from 99 million monthly unique visitors in the second quarter.
CoStar has been rapidly adding to Home.com's salesforce, which sells its subscription product to agents. When the company began its marketing blitz — starting with a big investment in Super Bowl ads earlier this year — the sales team had 41 members; by the end of September, it was up to 113, with more in training. Florance said they hope to have 275 salespeople by the end of the year and close to 600 by the end of 2025.
What CoStar had to say
In order to quickly bulk up the Homes.com sales team, CoStar had to pull salespeople off other core products, impacting sales in those areas.
"This is one of the dilemmas that you always face when you're starting a major new product area that you hope to be a billion-dollar business one day," Florance said. "It's always painful when you're doing this, but it's worth it."
Florance said he's pleased with the progress being made in the sales area overall, adding that the company saw an upturn in September and expects further improvements in new bookings in the fourth quarter and throughout 2025.
He also said the Homes.com advertising push is paying off: "Our marketing investment continues to deliver strong results as we lay the groundwork for sustained long-term growth as interest rates move down, transaction volume increases and our brands gain even more traction."
The company plans to continue investing in Homes.com, but may direct more of its dollars to building the sales team rather than advertising, said Chris Lown, chief financial officer for CoStar Group.
Key numbers
Revenue: $693 million in the third quarter, up 11% from a year ago, and an increase of $15 million from Q2.
Cash and cash equivalents: $4.94 billion at the end of September, down from $5.22 billion at the end of 2023.
Gross profit: $552 million in Q3, up from $501 million a year ago.
Net income: $53 million in Q3, down from $91 million a year ago, but up from $19 million the previous quarter.
EBITDA (earnings before interest, taxes, depreciation and amortization): $51 million in the third quarter, down from $89 million a year ago, but an improvement over $12 million in Q2.
Non-GAAP net income per share: 22 cents in Q3, down from 30 cents a year ago.
Notable moves
CoStar announced on Oct. 22 that it had acquired Visual Lease for $272.5 million. Visual Lease is a software platform that helps companies manage leased and owned assets and accounting.
"Visual Lease and CoStar Real Estate Manager are driven by the same mission of integrating all lease management portfolio functions into one user-friendly platform. Bringing Visual Lease into the CoStar Group family will allow us to create the best possible experience for our customers," Florance said in a news release.