CoStar revenue up 12%, but Homes.com advertising eats into profits 

CoStar's big bet on advertising its Homes.com brand is paying off: Traffic is up, and the site's membership program has become the company's most successful product launch ever, Founder and CEO Andy Florance told investors during Tuesday's first-quarter earnings call.

"We believe the Homes.com marketing program is the largest in the history of real estate, delivering almost 9,000 commercial placements in the first quarter," Florance said.

But while revenues rose by 12% from the same period last year, net profits nosedived from $87 million a year ago to $6.7 million in Q1, reflecting, in part, the cost of that campaign.

Florance appeared unfazed, touting the success of the Homes.com agent subscription program, which he said launched February 12 and has grown to nearly 8,000 memberships so far. 

What CoStar had to say

"With less than two months of selling in the first quarter, Homes.com membership subscriptions reached nearly $40 million in net new bookings," Florance said. "This is by far the strongest sales launch of any product in the company's history, and we are raising our sales and revenue forecast for Homes.com for the full year 2024."

Florance said traffic to the company's residential network of sites — Homes.com, Apartments.com, and Land.com — reached a record combined traffic of 156 million unique visitors in March. 

"We believe that Homes.com is now one of two most heavily trafficked residential marketplace portals in the U.S.," he claimed.

Both Florance and Homes.com President Dave Mele have made it clear they want Homes.com to be the No. 1 portal — and during the earnings call, Florance laid out a path to achieve that goal.

"I believe CoStar group faces two major challenges in our effort to make Homes.com the leading U.S. real estate portal," Florance said. "First we need to build massive site traffic and second, we need to successfully monetize our new 'Your listing, your lead' model. As we report our first-quarter results, I believe we are showing for the first time clear proof that we are very successfully delivering against those two important challenges."

Key numbers

Revenue: $656 million, up 12% from $584 million for the same period last year.

Cash and cash equivalents: $4.95 billion, down from $5.2 billion at the end of 2023.

Gross profits: $515 million, up from $465 million in the first quarter of last year.

Net income: $6.7 million, down dramatically from $87.1 for the first quarter of 2023, thanks in part to a $165 million increase in operating expenses.

EBITDA (earnings before interest, taxes, depreciation and amortization): A loss of $12.7 million, compared with earnings of $97.8 million for the first quarter of 2023.

Site traffic: 156 million combined monthly unique visitors in March for Homes.com, the Apartments.com network and the Land.com network, up 102% year over year.

Notable moves

CoStar announced earlier this week the $1.6 billion purchase of Matterport, an digital property data and artificial intelligence company. The acquisition gives CoStar access to a massive amount of additional property data, giving it a leg up as it goes head-to-head with Zillow and other portals that offer immersive digital listing experiences.

Chief Financial Officer Scott Wheeler, whose retirement was announced earlier this year, will step down in June.