Halfway through a positive but uneventful Q4 company earnings call on February 21, CoStar CEO Andy Florance suddenly changed gears dramatically, announcing that the company would not be acquiring realtor.com® from News Corp. Speculation had been rampant for the last month that CoStar would be making a $3 billion acquisition of realtor.com®’s parent company, Move, Inc., but Florance put an end to it.
“As you’ve heard us say before, CoStar is always assessing opportunities to maximize shareholder value, including strategic acquisitions, and the discussions announced last month by News Corp with respect to a potential sale of Move, Inc., the operator of realtor.com®, were part of that ongoing effort,” he said.
“While we typically do not comment on potential acquisition opportunities, we are confirming here that CoStar Group is not acquiring realtor.com®. We have tremendous respect for the people behind realtor.com®, and for the National Association of REALTORS® (NAR), but again, I need to make it clear at this point: CoStar Group is not acquiring realtor.com®. We continue to believe that Homes.com’s business model and our principles are well aligned with the interests of NAR members and real estate agents generally.”
The reveal overshadowed what had been an upbeat presentation of CoStar’s fourth quarter and full-year performance in 2022.
A leading provider of online real estate marketplaces, information and analytics in the property markets, CoStar revenue for the year ended December 31, 2022 was $2.18 billion, an increase of 12% over revenue of $1.94 billion for the full year of 2021. Revenue for the fourth quarter of 2022 was $573 million, an increase of 13% over revenue of $507 million for the fourth quarter of 2021.
Net income for the year ended December 31, 2022 was $369 million, an increase of 26% compared to net income of $293 million for the full year of 2021. Net income for the fourth quarter of 2022 was $124 million, or $0.31 per diluted share, an increase of 34% compared to net income of $93 million for the fourth quarter of 2021. Adjusted EBITDA was $672 million for the full year and $182 million for the fourth quarter of 2022.
“2022 was an outstanding year for CoStar Group,” said Florance. “We delivered 12% year-over-year revenue growth while setting a record for full year net new sales bookings of $305 million, an increase of 41% over 2021. Our two largest product platforms, CoStar and Apartments.com, delivered revenue growth of 15% and 16%, respectively, in the fourth quarter, while LoopNet revenue grew 12% to end the year. I believe our efforts to expand our sales team in 2022 are starting to pay off.”
In a portent to potentially ratcheting up his company’s competition with Zillow, Florance expressed particular satisfaction with CoStar’s residential homes performance.
“We’ve made great progress on our residential strategy in 2022,” he said. “Traffic to our Homes.com network has passed 20 million unique monthly visitors and has doubled in the last few months. Our new product received an incredible response from agents at the NAR tradeshow recently, while our ‘your listing, your lead’ strategy is delivering hundreds of thousands of valuable consumer leads directly to listing agents. Given the strong momentum of Homes.com, we plan to increase our residential investments in the year ahead.”
Florance also promoted the Homes.com customer experience, positioning theirs against competing websites, which he said he’s tried and been left unimpressed.
“I’ve used some of these competing sites and submitted leads on properties I’m interested in,” he said. “The experience is remarkably awful the moment you submit a lead, and for months afterwards you’re bombarded with cold calls from countless agents who have questionable qualifications.
“We believe that Homes.com offers a significantly improved consumer experience over competition. Not only do we believe we offer a superior consumer experience for buyers, we also believe we are much better aligned with real estate agents. The competing models use all the agents’ listings in a market to funnel monetized leads to just a very small percentage of agents, who pay huge fees, and the vast majority get little value.”
Finally, in an answer to a question posed about whether CoStar might look to make acquisitions to further fortify its residential business, Florance was short and to the point, saying, “I don’t think you can rule anything out.”
