CoStar Group (CSGP -1.20%), an operator of online real estate marketplaces and a leader in property market data and analytics, reported its third-quarter 2024 earnings on Oct. 22. The earnings release highlighted robust revenue growth and better-than-expected profitability measures. Revenue was up 11% year over year to $693 million, landing within management's guidance range of $692 million to $697. The company also reported adjusted EBITDA of $76 million, significantly above the guidance range of $47 million to $52 million. Non-GAAP earnings per share came in at $0.22, compared to management guidance of $0.15 to $0.16. The quarter was marked by successful revenue expansion and profitability growth, despite challenges in maintaining operational efficiency due to increased spending on marketing and expansions.
| Metric | Q3 2024 | Q3 2024 Management Guidance | Q3 2023 | % Change (YOY) |
|---|---|---|---|---|
| Revenue | $693 million | $692 million to $697 million | $625 million | 11% |
| Adjusted EBITDA | $76 million | $47 million to $52 million | $112 million | (32%) |
| Non-GAAP EPS | $0.22 | $0.15 to $0.16 | $0.30 | (27%) |
| Net income | $53 million | N/A | $91 million | (42%) |
Source: Management guidance from Q2 earnings report released July 23.
CoStar Group's Business Overview
CoStar Group provides real estate information, analytics, and online marketplaces in the U.S. and the U.K. It owns a plethora of online brands, including Apartments.com, LoopNet, and Homes.com. This extensive portfolio serves various segments of the real estate industry and benefits from CoStar's proprietary database, which is foundational to its product offerings. The company focuses on maintaining a leading market position through continuous investment in technology, strategic acquisitions, and brand recognition.
Recently, CoStar has concentrated on expanding its residential service platforms like Homes.com and enhancing traffic and market share through strategic marketing investments. Its thrust towards innovation and technology integration is evident as it continues to build advanced research tools and analytics solutions, fortifying its position against competitors.
Quarter Performance: Notable Events
The third quarter was marked by significant achievements and challenges for CoStar. It recorded revenue of $693 million, reflecting sustained top-line growth amidst competitive pressures. While its adjusted EBITDA of $76 million was higher than expected, it was down year over year from $112 million, impacted by rising costs.
From a service perspective, CoStar generated notable growth in user engagement with its residential platforms. Homes.com's traffic increased. However, marketing spending surged by 24% to $331.2 million, reflecting CoStar's aggressive efforts to strengthen its residential market penetration.
The company's acquisition of OnTheMarket led to a remarkable 212% increase in U.K. traffic. Still, integration costs rose, impacting operational margins. Increased spending in brand building, particularly for Homes.com, posed operational challenges, with selling and marketing expenses elevated significantly from the previous year.
CoStar's balance sheet remains robust, with cash and cash equivalents of $4.938 billion, providing it with a cushion for ongoing strategic initiatives. However, due to its capital expenditures and integration costs, that cash reserve is down slightly from $5.216 billion at the start of the year.
Looking Ahead
CoStar's financial outlook for the fourth quarter suggests continued revenue growth. Management projects revenue between $693 million and $703 million. Adjusted EBITDA is expected to land in the $76 million to $86 million range, showing optimism for improved operational performance.
For the full year, CoStar adjusted its revenue guidance downward to a range of $2.72 billion to $2.73 billion, from a previous range of $2.735 billion to $2.745 billion. This adjustment suggests management is cautiously optimistic about achieving its growth targets, considering its elevated marketing and expansion costs. Investors should monitor the company's progress in improving its operational efficiency as it integrates new acquisitions and expands residential services.
