CSGP Q1 Earnings Call: Product Expansion, Cost Controls, and Guidance in Focus

Real estate data provider CoStar Group (NASDAQ: CSGP) met Wall Street’s revenue expectations in Q1 CY2025, with sales up 11.5% year on year to $732.2 million. The company expects next quarter’s revenue to be around $772.5 million, close to analysts’ estimates. Its non-GAAP profit of $0.16 per share was 46.8% above analysts’ consensus estimates.

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StockStory’s Take

CoStar’s first quarter results reflected ongoing investment across its digital real estate platforms, with CEO Andy Florance emphasizing the continued strength in commercial information services and accelerating sales momentum in key brands like Apartments.com, LoopNet, and the recently acquired Matterport. Management highlighted strong net new bookings and noted that operational cost controls contributed to profits above Wall Street’s expectations, despite a challenging commercial real estate environment that has seen low transaction volumes and muted rent growth.

Looking ahead, management attributed its full-year and next-quarter guidance to anticipated improvements in the real estate cycle and strategic expansion of sales capacity, especially at Homes.com. CFO Christian Lown reaffirmed that capital allocation would remain focused on scaling the sales force and integrating Matterport, while noting that cost-saving measures would continue to offset higher investments in growth initiatives. The company expects revenue growth to pick up in the second half of the year, driven in part by maturing sales teams and product integration.

Key Insights from Management’s Remarks

Management noted that revenue growth was supported by both product innovation and changes to go-to-market strategies, particularly in digital marketplaces. The following points summarize the most significant drivers and themes from the quarter:

• Apartments.com sales force expansion: CoStar added 56 new sales professionals in Q1 and plans further hiring, aiming to capitalize on a large addressable market in the multifamily segment and recent competitor exits. The absorption of experienced sales staff from Redfin’s rent division was cited as a positive for pipeline growth and execution.
• LoopNet strategic pivot: A shift in sales strategy from focusing on selling high-value signature ads to broader subscription packages resulted in a surge in net new bookings. Management reported twice the productivity per sales representative compared to the prior year, reflecting improved alignment with customer needs.
• Matterport acquisition impact: The recently closed Matterport acquisition contributed to revenue and is expected to yield long-term benefits as the technology is embedded across CoStar’s platforms. Management described opportunities to grow both R&D and sales, and to accelerate the adoption of Matterport’s digital twin technology in real estate listings.
• Homes.com brand and sales ramp: The dedicated Homes.com sales force grew to 314 reps, with management pointing to improved Net Promoter Scores and a significant decline in early contract cancellations. The company’s marketing campaign increased unaided brand awareness to 36%, while new pricing strategies and the launch of product options like Boost aim to further drive agent adoption.
• Cost optimization measures: Over $50 million in annualized savings were realized, primarily through reduced Homes.com investment and a company-wide headcount reduction. These efforts helped deliver profitability above consensus, despite ongoing investments in product and brand expansion.

Drivers of Future Performance

Management’s outlook for the remainder of the year centers on continued investment in sales capacity, integration of recent acquisitions, and gradual improvement in real estate markets. The company expects these trends to support revenue growth and margin improvement in the back half of the year.

• Scaling sales across platforms: Expansion of dedicated sales teams—especially for Homes.com and Apartments.com—is expected to accelerate revenue growth as new hires mature and contribute to bookings.
• Integration of Matterport technology: Embedding Matterport’s digital twin solutions across CoStar’s ecosystem is seen as a lever for increasing customer engagement and reducing churn, with management citing opportunities for enhanced product differentiation.
• Real estate market recovery: Management believes that improving fundamentals in the commercial real estate sector, including falling vacancy rates and higher transaction volumes, will support higher pricing and increased product adoption, although ongoing market uncertainty remains a risk.

Top Analyst Questions

• Alexei Gogolev (JPMorgan): Asked about industry reactions to changes in listing rules and the competitive dynamics with Zillow; CEO Andy Florance described agent sentiment as overwhelmingly negative toward certain competitor moves, viewing it as an opportunity for CoStar.
• Peter Christiansen (Citi): Inquired about the integration and monetization plans for Matterport; Florance and CFO Christian Lown highlighted plans for deep product integration and expanded R&D, expecting usage to drive engagement and retention across platforms.
• George Tong (Goldman Sachs): Questioned the sustainability of cost reductions and capital allocation; Lown confirmed the $900 million investment plan remains unchanged, with cost management focused on reallocating spend to more productive growth initiatives.
• Ryan Tomasello (KBW): Sought clarity on the drivers behind revenue growth deceleration in multifamily for Q2 and confidence in acceleration later in the year; Lown pointed to seasonal factors and the ramping sales force, with optimism for the second half.
• Stephen Sheldon (William Blair): Asked if CoStar could become more aggressive with pricing for its core suite as market conditions improve; Florance indicated that stronger market conditions could lead to higher price adjustments and volume growth.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will be watching (1) the ramp-up and productivity of new sales hires for Homes.com and Apartments.com and their impact on net new bookings, (2) the pace and effectiveness of Matterport’s integration and the rollout of new digital twin features, and (3) early signs of a real estate market recovery reflected in transaction volumes and vacancy trends. Continued execution on cost management and successful product launches will also be important markers of progress.

CoStar currently trades at a forward P/E ratio of 71×. Should you load up, cash out, or stay put? See for yourself in our free research report.

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