Highlights from the CoStar Group Recent Conference Call

Victoria Haviland

April 29, 2020

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CoStar Group, Inc. has released the transcript of its most recent conference call. The contents of the call covered the 2020 Q1 financial numbers and what the company has done and plans to do to continue combating issues arising from the COVID-19 crisis

Sarah Spray, VP Head of Investor Relations started off the call with a briefing on the points of discussion, saying:

“Important factors that can cause actual results to differ include but are not limited to the duration and impact of COVID-19, the pace of recovery, customer usage and purchasing decisions, changes in investment strategy or plans, timing and success of acquisitions, those stated in CoStar Group’s press release issued earlier today and in our filings with the SEC, including our most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q, under the heading Risk Factors.”

CEO and Founder, Andy Florance explained the importance the group holds within the commercial real estate industry and the role it will play during the pandemic. 

“We believe that our products remain mission-critical to the vast majority of our clients even as they deal with pandemic driven market disruptions. The commercial real estate industry will continue to operate and to do so will need to sign and renew leases, find investment opportunities, value properties, dispose off properties, analyze markets and very importantly market vacancies to generate much-needed revenue.”

CoStar CFO, Scott Wheeler then spoke on the financial status of the company, saying that it was in a good position to prosper where other companies struggle. CoStar Group is in the green, its subscription revenue model is resilient, and the company already operates completely digitally

He then reported some numbers covering the 2020 Q1 financial period.

“We had a great start to the year with revenue in the first quarter up 19% over the first quarter of last year while revenue growth in the first quarter excluding the STR acquisition was 15% year-over-year. CoStar Suite revenues grew 12% in the first quarter of 2020 versus first quarter of 2019 as expected. As a stay-at-home orders began in early March, we saw the daily sales in the new contract flow for CoStar decline dropping to roughly half of the January and February levels of the third week in March.”

The conference call then opened up to a Q&A session. Highlights from that section are as follows: 

Peter Christiansen of Citi asked: 

“Will you think about changing any of your products or services, whether it be features or perhaps the way it's priced or packaged? Do you think CoStar will need to change any of its products because of this economic shock?”

Andy Florance replied:

“Yes. Yes. We are — our product teams have probably initiated a dozen or more product changes to deal with the situation. If you go to LoopNet, you'll see a very prominent virtual tour button now on a home page. We now have an ability in LoopNet, where a broker can — or 2 executives, a broker and a tenant or 2 executives can join each other on a LoopNet tour and actually initiate video conferencing together in the LoopNet website as they view properties. We call that co-tour. ”

Stephen Sheldon of William Blaire then asked: 

“How much visibility do you have right now looking at potential revenue in the third and fourth quarters this year? Is there at least a meaningful likelihood that revenue in the second half of the year could be down organically? Or were you just saying that as a general possibility, but maybe not what we should expect at this point?”

Andy Florance replied:

“I have to assume that some elements of our business, as with other downturns, we'll see softness. Cancellations will go up. We've had a number of customers ask for forbearance on their bills. We've probably negotiated some deferrals on about 160 customers in CoStar. We probably eliminated some user headcount at some sites, on 100 or 200 some sites [technical difficulty].”

For the full conference call transcription, visit CoStar Group’s website.

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Simon Baker is the Founder and Executive Chairman of Online Marketplaces and Property Portal Watch. Involved with property portals for 15 years, he’s a well-recognized expert and industry consultant.
As former CEO/MD of the REA Group for 8 years, Simon led the group to its current market-leading position. When he joined REA Group in 2001, it had $4m in revenues, $6m in losses and an $8m market cap.
By 2008, the company presided over $155m in revenues, $35m in EBITDA and enjoyed a peak market cap of $1b. Simon is currently Chairman of the Mitula Group and Real Estate Investar and a serial portal founder and, investor.