Another quarter, another CoStar earnings call. This one marked the 20 year anniversary since the company went public and the CEO Andy Florance gave a shout-out to all of their investors and PropTech spectators like us by saying, “The only thing better than your 4000% gain is the thrill you enjoyed listening to more than one hundred hours of these excellent, information-packed CoStar Group earnings calls.”
This quarter put them well on pace for their billion dollar revenue target with $297 million and EBITDA is tracking to stay at their 40% goal. Some of the increase in revenue can be attributed to the increase in LoopNet advertising. You may remember that they have consolidated CoStar and LoopNet data and have separated the two platforms by use case: CoStar is for research and LoopNet is for advertising.
On the advertising front, Andy reported that the company has seen growth by focusing on the high-end packages: “Our commercial property and land marketplaces had their best sales quarter ever in the second quarter of 2018 with a year-over-year revenue increase of 105%. This increase featured significant sales of LoopNet Premium Lister and Power Ads on the loopnet.com. With the integration of the CoStar and LoopNet databases, we were able to eliminate LoopNet’s information product and focus LoopNet entirely on being the best possible marketing solution for commercial real estate.”
Besides just being able to feature listings and brokers in their search a new diamond level of advertising is filled with flashy perks: “The diamond ads on LoopNet reach the end user markets of its tenants and small investors more effectively with larger ads that soared to the top of relevant search results. They are enhanced with immersive virtual reality walkthroughs, drone shots, videos and more. They will also appear prominently throughout CoStar in order to make a strong impression on our broker audience. As we invest in growing our news service the diamond ads will reach this audience through our newsletters and news website.”
The research side of CoStar is also becoming more of a premium offering due to a price increase that, while lowering customer volume by 25%, increased the average price per new broker by 80%.
Apartments.com, another CoStar subsidiary, also had a record quarter with $100 million in revenue, due in part to a 37% YoY increase in monthly site visitors to 15.2 million and a partnership with Move Inc. The deal allows Appartments.com to show listings and ads on Move Inc. sites Realtor.com. Doorsteps.com and nine others.
Other notable takeaways from the call were the creation of a listing manager that lets brokers contribute and control their own listings and a “multi-day strategy session” with Cushman & Wakefield. Overall the numbers and strategic focus pleased investors and the stock price jumped to an all-time high of $437. CoStar has shown that they are still the company to beat when it comes to a comprehensive research and advertsing platform for commercial real estate. If they keep beating expectations like they did this week, it is a certainty that they will continue to have a lot of investors dollars to deploy.