COSTAR GROUP, INC. 
With an estimated addressable market of over $100 billion for global real estate information, it has invested heavily in its database, allocating over $5 billion and mobilizing over 1,500 researchers to maintain its competitive edge.
CoStar 's financial model is remarkably robust, characterized by subscription revenues that account for over 95% of its total revenues, and impressive contract renewal rates of 90% for commitments of twelve months or more. The company has delivered double-digit revenue growth every quarter since Q2 2011, while maintaining strong margins and substantial free cash flow.
Source : CoStar
The company continues to invest in improving its products and services, with a particular focus on enhancing its online information, analytics and marketplaces. CoStar's focus on innovation is supported by a team of highly qualified professionals, enabling it to provide invaluable tools and resources for the commercial real estate market. The combination of its extensive database, solid financial model and dedicated team puts CoStar Group in a strong position to continue dominating the real estate information market.
Its websites (CoStar, LoopNet, Ten-X, Appartements.com, Homes.com, STR, BizBuySell, Land.com, Thomas Daily, OnTheMarket, Business Immo, Bureaux Locaux, Belbex, Grecam), attracted over 156 million unique monthly visitors in March 2024.
Source : CoStar Group
Subsidiary details:
- CoStar is the world leader in commercial real estate information, analysis and news, enabling customers to analyze, interpret and obtain unrivalled information on property values, market conditions and availability.
- Apartments.com is the leading online marketplace for tenants looking for great apartments, offering property managers and owners a proven platform to market their properties.
- LoopNet is the busiest online commercial real estate marketplace, with over twelve million unique monthly visitors worldwide.
- STR provides superior data benchmarking, analysis and market intelligence for the global hospitality industry.
- Ten-X offers a leading platform for conducting online auctions and negotiated offers of commercial real estate.
- Homes.com is the fastest growing online residential marketplace connecting agents, buyers and sellers.
- OnTheMarket is the UK's leading residential property portal.
- BureauxLocaux is one of the largest real estate portals specializing in the purchase and rental of commercial property in France.
- Business Immo is France's leading commercial real estate information service.
- Thomas Daily is Germany's largest online real estate data pool.
- Belbex is Spain's leading source of commercial space for sale and lease.
Source : CoStar
Acquisition of Matterport
CoStar Group has announced its intention to acquire Matterport, a company specializing in the creation of 3D digital twins and artificial intelligence for the real estate sector. The transaction, valued at $1.6 billion, will be a combination of cash and stock, with Matterport shareholders receiving $5.50 per share, split equally between cash and CoStar shares. Matterport, founded in 2011, has revolutionized real estate visualization with its 3D technology enabling precise, photorealistic virtual tours. Its technology, accessible via a variety of cameras including those on smartphones, is underpinned by Cortex, an AI engine that generates 3D digital twins and provides detailed property information. With a global footprint, Matterport has captured over 12 million spaces in 177 countries. CoStar, known for platforms such as Apartments.com and LoopNet, is already using Matterport's 3D virtual tours, with nearly 300,000 digital twins available on its sites. Matterport tours have proven their worth, increasing the time users spend on listings. CoStar plans to extend the use of Matterport to Homes.com to enhance the user experience. Andy Florance, CEO of CoStar, sees this acquisition as a union of similar missions and envisions a future where real estate visits will be primarily online. CoStar plans to invest in the development of Matterport's technology, in particular by applying AI to extract and reinvent spatial information. RJ Pittman, CEO of Matterport, sees the merger as a step towards transforming the global real estate market. He emphasizes the opportunity for Matterport shareholders to participate in the future growth resulting from this combination. Completion of the acquisition is expected later this year, subject to Matterport shareholder approval and customary regulatory conditions. CoStar will provide further information on this acquisition during a conference call scheduled for April 23, 2024. Matterport, based in Sunnyvale, California, with around 440 employees, recorded sales of $158 million for the year ending December 31, 2023, marking annual growth of 16%.
Source : CoStar Group
Recent results
CoStar recently published (end of April) its Q1 2024 quarterly results. The company reported sales of $656 million, marking a 12% increase on the $584 million recorded in Q1 2023. Net income amounted to $7 million, with net earnings per diluted share of $0.02. One of the highlights of the quarter was the successful launch of Homes.com monetization, which generated nearly $40 million in net new bookings, despite less than two months of sales in the quarter. This performance is described by Andy Florance, founder and CEO of CoStar Group, as the most successful product launch in the company's history. As a result, the company has raised its sales and revenue forecasts for Homes.com for the full year 2024. Traffic on the residential network, which reached a record 156 million unique monthly visitors in March, supported sales of Homes.com subscriptions. This significant increase in traffic has propelled Homes.com into the top two most-visited residential market portals in the United States. CoStar's aggressive marketing campaign also succeeded in increasing spontaneous brand awareness, from 4% in the fourth quarter of 2023 to 24% at the end of March 2024. In addition, it recorded record net bookings of $86 million in the first quarter of 2024, the highest figure ever achieved by the sales team. Revenues were up 12% year-on-year, with Apartments.com posting growth of over 20% for the fifth consecutive quarter, and CoStar increasing revenues by 11% in the first quarter. Apartments.com and CoStar both passed the $250 million revenue mark in the first quarter, reaching an annualized revenue rate of $1 billion.
Source : CoStar
For 2024, Scott Wheeler, CFO of CoStar Group, announced that the company is now forecasting sales of between $2.76 billion and $2.77 billion, representing growth of around 13% year-on-year. For the second quarter of 2024, revenues are expected to be between $674 million and $679 million, representing growth of around 12%. Adjusted EBITDA for the full year is now forecast at between $185 million and $205 million, up $15 million on previous forecasts. For the second quarter, adjusted EBITDA is expected to be between $5 million and $10 million. For non-GAAP net earnings per diluted share, the company forecasts a range of $0.58 to $0.62 for the full year 2024, and $0.09 to $0.10 for the second quarter, based on 409 million shares. These forecasts include an estimated non-GAAP tax rate of 26% for the full year and for the second quarter. These results and forecasts testify to CoStar Group's positive momentum, driven by strategic innovations and effective execution in its key markets despite a challenging market environment.
Source : CoStar
As a leading provider of information services for commercial real estate markets in particular, CoStar is well positioned to benefit from long-term trends in this segment. Its balance sheet gives it greater capacity for expansion and resilience than its peers. The recent acquisition of Matterport strengthens its competitive edge: it will broaden its scope of action in both commercial and residential real estate. However, the valuation leaves little room for error, and a compression of multiples towards 40x EV/EBITDA (central scenario) would be the most prudent way to position oneself on the dossier (versus 64x EV/EBITDA on 2023 data at the current price). Growth is such that valuation should fall rapidly to this level. If not, the share price should continue to rise.
