CoStar Group Inc (CSGP) 2025 Q3 法說會逐字稿

Good day. Thank you for standing by. Welcome to the Q3 2025 CoStar Group earnings conference call.

(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. 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 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 data 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.

The press release is available on our website located at costartgroup.com, under Press Room. Please refer to today's press release on how to access the replay of this call.

Remember: one question during the Q&A session so make it a good one.

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. We're one quarter closer to potentially 100 sequential quarters of double-digit revenue growth. Stay tuned.

Adjusted EBITDA in the third quarter rose to $115 million, up 51% over Q3 2024. 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 owned 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, a 66% year-over-year increase in Q3.

Our total Multifamily Property count now exceeds 87,000, an increase of 12,000 in 2025. Apartments.com's network site visits totaled 223 million for the quarter. Leads for specific models and units increased 64%. Our highest-converting Apply Now leads rose 70% year over year in Q3. In the Single-Family Rental segment, we had 1.4 million availabilities and 260,000 paid rentals, up 51% year over year.

Homes.com rental traffic grew 55%, underscoring the synergy between Apartments.com and Homes.com. Advertisers benefit from increased exposure across both platforms at no additional cost.

Turning to Homes.com, Homes.com is showing steadily accelerating revenue growth from an increasing number of revenue streams. Annualized net new bookings of Homes.com subscriptions rose to 16 million in the third quarter, up 53% year over year from 10 million in the second quarter of 2025. That's actually quarter over quarter; up 53% quarter over quarter from 10 million in the second quarter of 2025, not year over year. Much more impressive, when it's QoQ. The net new annualized bookings in the third quarter represented 1,225% year-over-year increase. Revenue in Q3 increased 20% year over year.

The number of net new subscribers added in the third quarter was 7,035, up 12% over the 6,280 net new subscribers added in the second quarter. In Q3, net new subscriber growth was 1,000% year over year. We now have over 26,000 subscribing agents.

Just one of the many ways in which our business models are superior to competing portals is our ability to provide service to a much larger number of agents than they can. Competing portals in the United States's business models of lead diversion limits them to selling to about roughly 5% of agents because they need to take leads from the other 95% of agents of agents who are not clients so that they have something to sell to the 5% that are clients. In contrast, we can sell to well more than 50% of agents because we're not taking away leads from any agent.

With LoopNet, CoStar, and Apartments, we have shown that in many markets we're selling to, we're well more than half of the players in that market. This has the advantage of rating a bigger TAM but also creating more goodwill among agents.

In competing portal models, 95% of the agents are losing business because of the portal and 5% are gaining business. In our model, almost every agent can gain business because of our portal. That creates goodwill. Alignment with your clients builds stronger and more durable brands.

Sales of our Homes.com Boost product rose 136% quarter over quarter to 617,000 in the third quarter. Homeowners are the primary buyers of Boost, paying, on average, $386 on a one-time basis to give their home-for-sale more exposure. At this price point, the US TAM for Boost sold to homeowners alone is already approximately $2 billion. When agents do buy a Boost for one of their listings, we see 25% of those agents convert to full Homes.com membership subscriptions.

We began selling enhanced exposure on Homes.com to new home builders on August 25. In the month of September alone, we sold net new annualized bookings for new homes of 498,000. In total, we've already sold 743,000 annualized buildings since August 25.

As Homes.com approaches our seventh quarter since launch, it is now the fastest-growing revenue product we've ever launched. Though Apartments.com and CoStar now have more than $1 billion dollars in revenue, they grew revenue at a much slower pace than Homes has in their first seven quarters. Homes.com has now grown 50% more incremental revenue in its first seven quarters than (inaudible) Apartments.com in the same time period.

We're continuing to increase the size of our Homes.com sales team. We now have 500 sales reps in production, with another 150 in pre-production. We've now added field sales, new home sales specialists, and major accounts reps.

We believe the highest and best function of a portal is to market real estate and that that is the future of the industry. I do not believe that future revenue models for successful real estate portals will be based on either [iBuying] or lead diversion to buyer agents.

Currently, as I mentioned, we have 26,000 subscribing agents and Boost clients, promoting 130,000 active listings on Homes.com, representing 6% of the active 2.2 million properties for sale in the US.

A recent analyst report from Citi say that they believe that a core product for Zillow, going forward, will be its showcase-listing product; and estimated in September '25 that Zillow had only 24,500 listings or approximately 1.1% of the active market. So we have 5 times the number of listings marketed or boosted on our site.

Citi further estimate that Zillow had $13 million of revenue in the third quarter for showcase listings. So Homes.com is well ahead of Zillow in both revenue and listing count in what we believe is the primary sustainable revenue driver for successful residential real estate portals around the world.

Our strategy is to grow the share of real estate agents and homeowners relying on us to bring more exposure to their homes-for-sale. These numbers show that we're on the way to achieving that goal.

Our marketing campaign continues to build out audience and brand awareness. In August, unaided awareness was 42% and unaided intent was 28%. That unaided awareness is up from about 4% when we started. We are showing continued long-term upward trend in both categories.

In the third quarter, the Homes.com network achieved 115 million unique monthly visitors. This led to 560 million total visits to the Homes.com network in Q3, up 7% compared to Q2. According to comScore, unique visitor traffic to Homes.com rose 8.3% compared to a 6.5% decline at Zillow and a 0.7% decline at Realtor.com. I'll just call that last part flat. comScore continues to rank the unique monthly visitors to the Homes.com network above either Realtor or Redfin.

Our organic traffic in Q3 climbed 87% year over year. We continue to improve the quality and engagement of traffic to Homes.com, achieving a low 24% bounce rate in Q3, which is a 64% year-over-year reduction in bounce rate. Our average session duration increased to 4 minutes and 29 seconds in Q3, which is a 93% year-over-year increase.

I believe that our efforts to put more than 70,000 Matterports on the sites is driving this deeper home shopper engagement on our site. We are optimizing for quality of traffic from our SEM, generating 112 million listing-detail page views from SEM in Q3 for a 374% year-over-year improvement. We achieved this improvement with essentially the same but a more efficient SEM spend.

I believe we're about to see our products hyper-accelerated by some of the most exciting facilitating-AI technologies I could have ever imagined. While we're already using AI throughout our organization, I'm excited about the launch of AI Smart Search on Homes.com and the future innovations it foreshadows. Consumers can ask Homes.com precisely what they're looking for in their own words. This allows for reasonably complex queries such as long conversational phrases with multiple geographies, such as, show me waterfront properties with a pool with a balcony and a great view in Miami Beach and Fort Lauderdale starting at $1 million.

This does away with having to deal with traditional filters and forms that are limiting. If you're a coder, this is like giving people with no coding skills access to the power of full deep boolean-nestled queries against 10 times the number of fields with just simple, plain English questions. As a result, Smart Search is highly customizable, intuitive, fun, easy, and more powerful.

This is our own artificial intelligence capability we're engineering in. We're doing it in partnership with Microsoft.

In the third quarter, AI Smart Search has produced improved user engagement. This new AI Smart Search is producing significant improvement in user engagement. Users of AI Smart Search used 69% more search filters; viewed 37% more listing pages per session; were 5 times more likely to return to the site within the following week -- that's amazing; and submitted 51% more leads after viewing a listing page. It's a more effective way to find what you're looking for.

We are now investing 50% of our Homes.com software development efforts in the fourth quarter and beyond towards building a range of AI-empowered features into Homes.com. This is our single biggest commitment, by far, to any software development effort. This is an incredibly exciting time for Homes.com.

All of our products have boundless new opportunities opened up by the enormous potential of Generative AI. In the four decades that I've led CoStar Product Vision, a core principle of our success is leaning into new facilitating technologies to unlock their value for real estate.

We were among the first to digitize real estate information, put real estate on a digital map, present digital real estate photos. We were the first to incorporate digital twins in a scale. We were actually the first to leverage the Internet for real estate. In fact, we actually bought CBRE, Cushman & Wakefield, and JLL their first Internet accounts before there was even a Netscape or a Google around.

AI offers transformative opportunities to unlock tremendous value in real estate. I believe few products are better positioned to cohesively capitalize on this opportunity than it is Homes.com, Apartments.com, LoopNet, and CoStar.

We have massive and proprietary real estate data resources. We have unmatched expertise in organizing and quality control on that information. We have leading expertise in how to make that information useful and relevant to real estate industry participants. We believe that it will bring tremendous dislocation, generally; and open up huge new value opportunities, which we plan to exploit.

While Homes.com is our initial priority for AI enhancement, we will apply the lessons learned to Apartments.com and all of our other products, as quickly as possible.

AI will impact top-of-funnel traffic acquisition. Real estate portals built on SEO foundations need to build strategies to acquire traffic from AEO, Answer Engine Optimization; and GEO, Generative Engine Optimization. SEO remains the foundation of AEO and GEO, though.

A portal's brand content and context remain the key building blocks for success. Today, GEO is sub-1% of top-of-funnel acquisition. For example, one large US real estate portal in the US only draws 0.45% of its top-of-funnel traffic from ChatGPT; and another large portal in Australia only captures 0.15% of its top-of-funnel from ChatGPT.

So brand , direct traffic, SEM display, social, e-mail, SEO, and AEO remain 99.5% of top-of-funnel source. These traffic sources will remain important in a Generative AI future, for sure; and likely, the majority. But GEO will become much bigger top-of-funnel traffic feed. We will position our portals to capture that traffic. Many believe that traffic from GEO may be monetized the way Google monetized SEO with SEM. There's some huge AI GPU and energy bills to pay out there.

I just spent a few days at the Online Marketplace Conference in Madrid with dozens of real estate portal CEOs and digital real estate experts. All felt the competitive urgency to integrate the range of capabilities of Generative AI into their portals. But I did not find one person who thought that Generative AI solutions would effectively meet the specialized needs of the real estate world.

To be successful, there's a need to build specialized AI models around buyer personalization and profiles, data capture, listing evaluation, computer vision, digital twin searching, area evaluation, lead management, advertising optimization, valuation, and many other algorithms. That is exactly the exciting work we are leaning into and embracing.

There was a time when AOL, Yahoo, or eBay were ascendant and uniquely dominant. Microsoft and Google are still dominant, though perhaps past their zenith of dominance.

All of these impressive general-purpose transformative technology innovations enthusiastically built real estate portals and tried to dominate digital real estate. All failed. All failed. They've now exited the space. Only eBay has anything left and it's not much. This is where I [fizz] about the thing. Specialized solutions often leveraging these companies' capabilities repeatedly, ultimately, dominated the real estate vertical.

I believe the past is prologue here. There are a number of incredible Generative AI companies that are building invaluable tools. Those tools will be leveraged by specialized digital real estate companies to create specialized value. A specialized digital real estate company that does it best among them will unlock huge value for its investors.

CoStar Group, as the largest digital real estate company in the world by market cap, is well positioned to win in an AI future. It's just a brief comment on AI.

The Homes.com subscriber net promoter score rose to 36 in the third quarter, rising 84% over Q2 '25. October to date, that NPS score continues to rise and is now at an outstanding [843]. We're not done there. We'd like to get it up to Apartments's 93 but the progress is amazing. It took less than two years for Homes.com to reach an NPS level that took CoStar about a decade or so to reach.

As our NPS increases, so does our subscriber retention rate. In Q3 '25, our retention rate of subscribers we sold six months prior from Q1 to 2025 rose to 86%. The Q3 retention rate rose 7.5% from 81% retention in Q2 2025 and rose 39% year over year from 62% retention in Q3 2024.

We are offering Homes.com subscribers the benefits of Matterports for their listings. Agents tell us in focus groups that they really value that benefit. Member listings with Matterports captured nearly 40 times listing-detail views of member listings without Matterports. That should be the objective, if any real estate agent selling a home get 40 times as many people to inspect that home. In the quarter, subscribers who had a Matterport on a listing had a 37% higher renewal rate than those that did not. It's working.

We are enhancing our Matterport benefit to subscribers by offering a photo-realistic 3D view of the exterior of the house to complement the digital twin of the interior. This exciting new technology is called a Gaussian Splat. We capture it with a short drone flight around the house, where legal. I would encourage you to view one live by looking up a home-for-sale at 5471 Country Club Parkway in San Jose, California on Homes.com and view that Matterport 3D exterior. Eventually, the house will sell and it won't be there anymore.

In recent focus groups, we're seeing success in raising real estate agent awareness that Homes.com is the only Your Listing, Your Lead portal. 51% of agents surveyed recognize Your Listing, Your Lead and overwhelmingly connected it to the Homes.com brand. Agents disliked lead diversion; expressed a strong preference for a portal operating with Your Listing, Your Lead principle. As we continue to build that awareness, we believe that Homes.com will become the portal agents trust and most recommend to their clients.

Now, I need to turn to an uncomfortable but important matter. Zillow is under siege, facing an unprecedented wave of lawsuits. I'm not sure that the market grasps the sheer magnitude of the risk bearing down on Zillow from all sides. These lawsuits are not isolated instances, They collectively target the heart of Zillow's operations, exposing alleged anti-trust violations, widespread copyright theft, and blatant consumer deception. With private plaintiffs and government regulators now alert to Zillow's misconduct, I predict even more aggressive legal and regulatory action in the months ahead.

There are five federal lawsuits filed against Zillow since June of 2025.

First, Zillow threatened to permanently ban any listing that was publicly marketed but not put on the MLS within 24 hours. So if you put a for-sale sign in your front yard and didn't put it on Zillow within 24 hours, you're banned. If you do a Facebook post and don't put it on Zillow in 24 hours, you're banned. Pretty aggressive.

It appeared that Zillow was targeting Compass. Zillow followed through and banned Compass listings that were not put on Zillow within 24 hours. On June 23, 2025, Compass sued Zillow, exposing Zillow's so-called Zillow ban for what it truly is, a ruthless scheme to strangle competition and trap home sellers inside of Zillow's walled garden. If Compass prevails and home sellers choose where and when to list their homes, Zillow could lose massive swaths of its inventory, calling into question its lead diversion model.

I believe that Zillow's actions pushed Compass into defensively merging with Anywhere. When the Compass-Anywhere merger is completed, the combined company will be, by far, the largest real estate brokerage in the US, with, as I understand, as many as 300,000-plus agents.

I'm pretty sure that Zillow just picked a fight it cannot win. Compass will have the most important listing content in real estate. Zillow will need them a lot more than Compass needs Zillow.

We filed our lawsuit against Zillow on July 30, 2025, to put an end to Zillow's brazen theft and monetization of CoStar's intellectual property. Zillow undoubtedly has used content stolen from Apartments.com to unfairly build their Rental business.

The scale of this infringement is staggering. For context, in 2019, Xceligent was caught with 38,489 CoStar-copyrighted photographs. The Federal court awarded $500 million in damages to us.

Zillow's conduct is even more egregious. We're determined to hold them fully accountable.

Then, in September, Zillow was sued in a class action suit by a group of plaintiffs who alleged that they were being deceived into overpaying hidden fees through Zillow's notorious Contact Agent button. Don't push it. This case tears straight to the heart of Zillow's business model, laying bare a system built on deception.

The complaint exposes Zillow's tactics, saying Zillow actually directs the buyer away from the listing agent and directs the buyer to an unrelated buyer agent who lacks any specialized knowledge about the subject, property.

The fallout isn't just limited to duped buyers. Zillow's lead diversion racket is bleeding home sellers by diverting their potential home buyers to agents that may compete with their listing.

We're not done. Hang with me. Most recently, September 30, 2025, the United States's Federal Trade Commission filed suit against Zillow Group and Redfin over an illegal agreement to suppress competition. They stated that the illegal deal stunts multifamily rental advertising competition, harming American renters and property managers.

The FTC went on to say that the Zillow partnership with Redfin was nothing more than an end-run around competition that insulates Zillow from head-to-head competition on the merits with Redfin for customers advertising multifamily buildings. The FTC is seeking injunctive relief; meaning, a potential unwinding of the deal.

The lawsuit was followed up the next day by another lawsuit on behalf of a bipartisan coalition of Attorney Generals from Virginia, Arizona, Connecticut, New York, and Washington State.

You might assume the CoStar Group sees deals like this when they come up, like the Redfin deal. My immediate and clear reaction would have been that, obviously, the FTC would not allow such an illegal deal and any effort to end-run the FTC regulatory process would necessarily bring unnecessarily excruciating pain and damage to anyone foolish enough to try it. So we never would have pursued it.

If Zillow is ordered by Federal courts, the FTC, or Attorney Generals of states to disgorge their allegedly illegally gained department revenue and content, I believe it will seriously damage Zillow's reputation in the apartment industry. These lawsuits will take years to resolve. The full extent of Zillow's contact, as alleged in these complaints, and the various remedies from these lawsuits is yet to be seen.

Moving to the United Kingdom, it was a strong quarter for OnTheMarket, our UK residential marketplace, with leads up 21% year over year in Q3 '25. We delivered significant ROI to our 16,000 subscribing customers there.

Bringing some Homes.com-inspired features to OnTheMarket has resulted in positive changes to the site that are generating more consumer engagement. We are building an audience of serious property seekers, with total page views up 24% year over year in Q3. Average time on site per active user is up 79% year over year. Lead-to-visit conversions are up 31% year over year. Net new bookings increased for the 17th month in a row and has delivered nearly 11 million of annualized net new bookings since its acquisition.

We closed the acquisition of Domain in August. I'm excited to work with the Domain team and their customers to bring Homes.com, CoStar, and LoopNet platforms to Australia. Domain's Residential Marketplace and Commercial Marketplace -- well, Domain's Residential Marketplace is very successful and generates more than 50% direct contribution margin. Its Commercial Marketplace generates a 40% direct margin. Both marketplaces have long-term growth potential under the CoStar umbrella.

The Domain brand is very well known in Australia. There's significant potential to expand market share there, where homeowners invest significantly in digital real estate advertising.

Domain has an excellent management team led by Jason Pellegrino, who knows the Australian market well. He used to be the MD for Google there. His vision for the business aligns with ours.

We have made fast progress since taking ownership of the Domain business on August 28, delivering 7.4 million unique users in September on Domain's residential platforms, which was the largest number of unique users on Domain's own platforms in its history. The quality of this increased audience was retained, delivering the highest consumer reviews per listing in Domain's history. We're on track to significantly beat those records in October.

We have already delivered a 24% year-over-year increase in audiences on our commercial real estate platforms in Australia. These strong audience results were driven by a mix of greater marketing investments supported by an improved mix of marketing investment across every step of the consumer journey and rapid product improvement supported by a refocused product team and access to CoStar platforms, relationships, and talent.

Examples of product improvements already executed and planned within the first 60 days of ownership include improvements in platform speeds and latency, removal of all advertising interrupting the consumer experience, and improvements in image quality.

A key highlight was the growth achieved in our audience metrics, where we saw Domain apps average 138% increase year over year in downloads across iOS and Android, allowing us to successfully overtake our main competitor in App Store rankings.

Domain was previously constrained under its former media company owner. It received limited management focus, limited expertise, and scarce resources -- limited expertise in real estate marketplaces. It was operated with short-term EBITDA strategy, keeping it from competing effectively with the market leader at REA. We believe that with CoStar Group's technology and resources, Domain will compete more effectively and will achieve stronger long-term profitability.

A dozen members of my management team and I recently spent two weeks in Sydney for a deep dive into the Domain business and believe there are clear opportunities to make changes that will create value for our shareholders. Most of the significant software resources and products we offer we believe are compatible with the Australian market. We can integrate Domain into them to create competitive advantage and cost efficiencies. We hope to improve Domains' focus and profitability by rationalizing some of its product portfolio.

Under prior ownership, Domain allocates significant resources to about 10 non-core initiatives at the expense of the highly profitable residential and commercial portals. I believe that most of the software development resources were allocated to products generating less than 20% of its revenue. We will refocus Domain's resources towards its successful, scalable core and competing against its main competitor.

We expect to offer LoopNet, Homes, and CoStar in Australia within 18 months. There's currently, we believe, no equivalent to CoStar in Australia. While Domain and REA Group offers products similar to LoopNet, I do not believe that they're on par with what LoopNet offers. This presents a significant opportunity for us to quickly establish a leading presence.

The more I live with Matterport, the more impressed I am with its technology, how well it works, and how useful it is to real estate. Matterport creates a strategic advantage in both our residential and commercial product portfolios. Matterport's digital twins unlock value by bringing a new important dimension of digitizing real estate in every product we offer.

As part of CoStar Group, we see Matterport set on two pillars.

On one pillar, Matterport is a standalone solution for industries such as insurance, construction, public safety, facilities management, and similar, which we believe is, by itself, a multi-billion dollar revenue opportunity.

In the second pillar, Matterport is brought to market as an integrated solution within our marketplaces and information solutions through our existing sales forces of 2,000-some people. We believe that in the second pillar, Matterport can help CoStar compete and achieve more than $1 billion in incremental value. Integration of Matterport in the second pillar is well underway. You can see deeper-than-ever integration of Matterport within our products.

I believe that prior to merging with CoStar, Matterport was a world-class transformative technology held back by lack of focus on go-to-market strategy, with an underscaled sales and marketing effort. Matterport had fewer than 30 sales representatives globally, leaving many huge revenue opportunities untapped. We plan to expand the sales force by 200 by the end of '26 and drive accelerated revenue growth.

Matterport's Q3 revenue is 12% higher than our expectations, $44 million versus $40 million. Our Q3 '25 net bookings were up 194% over Q3 last year. We emphasized new customer acquisition, which resulted in a 94% increase year-over-year in incremental new customer logos.

Our Matterport MAX rollout for Apartments.com began at the NAA conference in June of this year. We have already sold over 530 Matterport MAX subscriptions, which are adding upwards of $5,000 per year in annual subscription revenue per unit.

We just completed a successful developer summit and hackathon with the Matterport team. Coming out of that, I'm very confident that we have an outstanding and innovative product roadmap that will delight our customers, and for you, all, more importantly, our shareholders.

Turning to CoStar, CoStar generated $277 million in Q3-of-'25 revenue, reflecting 8% year-over-year growth. Revenue growth has steadily improved in '25, as net new bookings remain strong. [Per-rep] productivity in Q3 was at its highest since Q3 '23. Cancellation rates have declined over the past two quarters. Our renewal rate reached 93.3, the highest since '23. Our subscriber count rose to 284,000 in the third quarter, up 20% year over year.

Our Lender business achieved a record quarter, closing $4.3 million annual net new bookings. With nearly-almost-just-there $100 million in revenue and over 450 clients, including banks, credit unions, private lenders, regulars, insurers, CoStar for Lenders has demonstrated strong success and has significant potential. CoStar Lender has already uploaded over $1 trillion dollars of loans into CoStar.

Clients' loan portfolios are securely uploaded to our SOC 2-compliant platform, unavailable to any AI scraper; and integrated with CoStar's proprietary data analytics and credit modeling, informed by our research and marketplace solutions. This comprehensive ecosystem delivers unmatched value for regulatory examinations, asset allocation, and responsible growth.

In '26, we plan to launch our benchmarking product and have begun developing a loan origination system, expanding our total addressable market. One of our core goals for all of our emerging businesses is to cross that oh-so-important $100 million revenue milestone. So congratulations to John Vecchione, (inaudible), and the entire Lender team. Well done. Dinner is on me.

LoopNet remains the world's largest and most active real estate marketplace, capturing 8.5 times more searches than our nearest competitor. In the third quarter of '25, LoopNet achieved 10% revenue growth. Based on net new bookings from the last three quarters of '25, we expect the platform to deliver low-double-digit growth next year. I firmly believe that LoopNet should and can return to 20%-plus annual growth rates soon.

Our strategic focus has been on offering LoopNet advertising packages that enable clients to promote their entire property portfolios, rather than just select assets. These silver ads, their portfolio comprehensive design, are designed to drive higher renewal rates, deliver strong ROI for clients, expand listing coverage, and enhance both the consumer and customer experience. We are also continuing to roll out asset-based pricing for renewals, aligning our service pricing with the value delivered to clients.

International expansion remains a key pillar of LoopNet's growth. Many of the largest multinational companies in the world are heavy users of LoopNet. We could provide them even more value, if we carried listings in more countries. In August of '25, we integrated all French listings from BureauxLocaux into LoopNet, bringing the total number of European listings to 100,000 across France, Spain, and the UK.

We can see major tenants like Amazon and many others searching LoopNet for commercial real estate not only in the US but also in Canada, France, the UK, and Spain so wherever we're going, they're searching.

We will soon add Australia, as I mentioned, through our Domain acquisition, further growing our global reach.

We believe that LoopNet can deliver more value to local advertisers, if we're delivering a unique and valuable global audience with high buying power.

Our data consistently shows that properties listed on LoopNet sell and lease faster. For properties listed in January '24, 30% of those on LoopNet transacted; while only 22% of those not listed on LoopNet transacted. For firms listing 90% to 100% of their listings on LoopNet, they're 24-month close rate 36%; while those not listed on LoopNet only had a 20% close rate.

If a few hundred dollars invested in the LoopNet could increase your chance of transacting a commercial property by 80%, I believe that's a no-brainer.

Turning to CoStar Real Estate Manager, CoStar Real Estate Manager and Visual Lease now support real estate lease management accounting; project management needs for 2,000 corporate clients, including more than half of the Fortune 500.

Third-quarter '25 revenue climbed 63% year over year to $30.6 million. The business is very profitable with growing margins.

We are making good progress integrating CoStar Real Estate Manager, Visual Lease, and CoStar into one extremely valuable corporate real estate solution. We expect to launch lease benchmarking capabilities mid-'26, creating a new level of transparency, helping investors, brokers, corporates, and lenders gain a more accurate and timely understanding of serial rents and potential income. We expect to release an integrated product with Real Estate Manager and CoStar Suite in late '26.

Clients will be able to access comprehensive market data and gain visibility into previously unseen opportunities to optimize their real estate portfolios. This will allow them for detailed analysis to make the most-informed decisions that we believe will significantly drive significant ROI and cost savings for these clients.

We shared our new product roadmap in our recent customer advisory meeting with major clients, which include real estate finance and accounting leaders. We received very, extremely positive feedback on the new product direction.

CoStar Group's European business continues to deliver record net new bookings, reaching $5.7 million in Q3 2025 and $16.9 million year to date, representing a 51% year-over-year growth. UK business achieved another record quarter with year-to-date net new bookings up 125% and revenue up 17% year over year. In France, our research team has curated over 260,000 buildings, 50,000 availabilities, 140,000 tenants, and 60,000 sale and lease comps.

Business Immo, now fully integrated into CoStar News, reaches over 100,000 French CRE professionals monthly. We're confident that CoStar will soon become the leading source for CRE data in France, connecting global and French investors.

In closing, I believe that our results this quarter demonstrate that my colleagues here at CoStar Group are making great progress continuing to successfully grow our existing businesses, while effectively investing into new real estate segments and new global markets.

With $350 trillion of real estate in the world, we believe we're creating value, digitizing it with leading marketplaces and information solutions that can result in a $1 trillion addressable market with a deep moat. We're busy building it one brick at a time.

At this point, I'll turn the call over to our CFO, Chris.

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 grow 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 to more than double to $210 million to $215 million from $101 million in 2024.

Apartments.com's third-quarter revenue growth came in at 11% year over year. Our Apartments.com sales reps are consistently the most productive of our large brands. We have increased the size of this team by 20% year to date. We now have more than 500 Apartments.com sales reps for the first time in its history. These reps will take time to ramp up their productivity. But this investment puts us in a great position for longer-term growth. For 4Q '25, we expect 11% to 12% revenue growth, resulting in full-year 2025 revenue growth of 11% to 12%.

LoopNet revenue grew 12% in the third quarter, with a 2 percentage points lift from the Domain acquisition. LoopNet's organic performance was in line with last quarter's guidance. Our sales team is consistently outperforming prior productivity levels. In conjunction with the Domain contribution, we now expect 4Q revenue growth of between 15% to 17% and full-year revenue growth of 10% to 11%. On an organic basis, 4Q revenue growth is expected to be 11%, its highest growth rate since 2023. This acceleration throughout 2025 sets us up nicely for 2026.

Revenue from Information Services was $41 million in the third quarter. We expect fourth-quarter revenue to be consistent with the third quarter; and full-year revenue growth of between 18% to 20%. We are excited about launching our new rent analytics product in the first half of 2026 and our new lease platform in the fourth quarter of 2026.

Other revenue was $78 million in the third quarter, with Matterport contributing $44 million. For the fourth quarter, we expect Other revenue to range between $70 million and $72 million. The fourth quarter is expected to be slightly impacted by revenue recognition timing for Ten-X and lower camera sales at Matterport as we sunset the Pro2 camera.

As previously stated, adjusted EBITDA for the third quarter was $115 million, meaningfully above the high end of our $75 million to $85 million guidance. The favorable performance came from higher-than-projected revenue, lower-than-anticipated professional service costs, and greater-than-expected headcount savings, as we remain laser-focused on expenses.

Our contract renewal rate was 89% for the third quarter, with a renewal rate for customers who have been subscribers for five years or longer holding steady at 94%. Subscription revenue on annual contracts was 75% for the third quarter. The acquisitions of Matterport and Domain are the driving factors for the change in our subscription revenue metric.

Our September 30 balance sheet included $2 billion in cash, which earned net interest income of $26 million in the third quarter, a 4% rate of return.

We repurchased 576,000 shares in the third quarter for $51 million, bringing our year-to-date total to 1.4 million shares repurchased for $115 million. We expect to purchase approximately $50 million of additional shares in the fourth quarter, bringing our 2025 total to approximately $165 million of the $500 million share repurchase authorization.

We closed on the Domain group acquisition on August 27. The total consideration was USD1.9 billion. Domain contributed $25 million of revenue for the stub period from August 28 to September 30. For context, around 90% of Domain's revenues is Residential, while the remaining 10% is split between Commercial Marketplaces and Information Services.

With nine months of 2025 in the books and with the closing of Domain, we now expect full-year revenue of between $3.23 billion to $3.24 billion, broadly in line with our guidance, excluding Domain. Fourth-quarter revenue is now expected to be between $885 million and $895 million.

Full-year adjusted EBITDA is now expected to range between $415 million and $425 million, with Domain contributing approximately $15 million. This $25 million increase in our guidance, excluding the impact from Domain, is indicative of our strong third-quarter performance. Fourth-quarter adjusted EBITDA is expected to range between $150 million and $160 million.

With that, I will now turn the call back to our call operator to open the lines for questions.

Thank you.

(Operator Instructions)

Pete Christiansen, Citi.

Good evening. Thanks for the question here. Nice results, guys. Good trends here.

Andy, it's interesting. I was looking across the last eight 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 are also contributing to some of that growth being above seasonality.

But I'm just curious if you could point out any seasonal behaviors that you noticed. Maybe, special attention on the Residential side, are agents canceling now, plan 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. I guess you got the first question because we sourced Citi during our script.

But the Apartments.com does have seasonality. As you know, the prior quarter, you have unusually large sales because of the NAA event where people, major property managers, do their annual purchasing for the year to come.

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. The only seasonality in that sales line is Saturday and Sunday. So it's a very smooth progression up, right now. We're not yet seeing seasonality.

Maybe in Christmas holidays, that you might get something. But not yet.

Stephen Sheldon, William Blair.

Hey. Thanks. Just wanted to follow up on that question.

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-round bookings, especially with a bigger sales force and the ramping productivity?

Yeah. Just, what are you -- how are you thinking about the bookings trajectory into 4Q?

Chris?

Yeah. I think, as you see (multiple speakers) --

They didn't like my answer, you try.

I think what you see is you see our full-year guidance, you see our sequential trends, we're very pleased with the bookings. I think we're just getting started from the sales force expansion.

A lot of sales force came in 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. 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.

Thank you.

Yeah. 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.

Again, because of the number of people, a very smooth upward growth trajectory.

Yeah. Just to expand a little further: CoStar's trend is very positive. We're seeing reacceleration there, which we're very excited by.

We talked about LoopNet. Andy talked about LoopNet and what's going on there.

On Apartments, as I said, the trends are as expected and as modeled.

So I think we feel really good on the underlying trends and are resulting in our change in guidance.

Ryan Tomasello, KBW.

Hi, everyone. Thanks for taking the questions.

At Apartments.com, in terms of bookings, can you say how those perform sequentially versus, I think, $45 million in the second quarter?

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 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 the number of funds.

One, we continue to see rooftop expansion at Apartments.com. We're expanding the sales force. We've talked, historically, about the seasonality; or the contributions on a quarterly basis, as we look at back -- historically -- with the second quarter being the largest quarter, the third and fourth quarters 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 four or five quarters.

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

Yes. I think I caught that, Andy. Thank you.

Okay. I just want to make sure.

Curtis Nagle, Bank of America.

Great. Thanks so much for taking the question.

Andy, I just wanted to go back to the point. You're investing 50% of your software costs now into AI. Where are you redirecting those expenses from?

Any thoughts you could give on how to think about total expenses for '26 for Homes.com?

I thought you'd never ask.

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? (inaudible)

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

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

Okay. Thank you, Andy.

Brett Huff, Stephens.

Hey. Good afternoon. Thanks for the time.

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 to get up to speed? Pricing?

Any of the numbers that go into that bookings number would be super helpful, as we try and tweak our model. Thanks.

Sure. We are in a period of remarkable headcount growth in 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 consistent growth in those bookings.

What was the second part of the question?

Productivity.

Yeah. The productivity is still -- we're seeing a very positive ROI on each incremental sales person added. But you are seeing the effects of so many people coming in. We are slowing the growth; or, I believe, have capped the growth of sales people to allow for training and onboarding to catch up.

Right.

We haven't 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.

(inaudible), Deutsche Bank.

Yes. Hi. Thank you.

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 timeframe on that and what needs to happen for you to get there.

Yeah. For the Residential business, obviously, you have Domain in there; you have OnTheMarket; you have Homes in there; you have Apartments.com. Past this prologue, you see us adding components to it through time.

But when you look at our business model that's uniform across all four 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, be it Rightmove or idealista or CLJ or REA Group and the like, they all operate up at margins that are typically around 50% and, 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 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.

Thank you.

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

Well, I think our participants in the call today have probably modeled good behavior in keeping it brief. I'll try to be briefer 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.

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.