Commercial real estate giant and growing Zillow rival CoStar announced Tuesday that it took in $499 million in revenue between July and September, making those months the company‘s best quarter for revenue in at least the past two years.
The company revealed its earnings in a third quarter report published Tuesday afternoon. The report shows that CoStar’s revenue for the quarter was up 17 percent year over year. The third quarter also beat every other prior three-month period from both this year and 2020.
The report further notes that CoStar brought in $64 million in net profit between July and September of this year. That’s up compared to both one year ago and last quarter, but short of the highs achieved during the first quarters of both this year and 2020.
Andy Florance | Photo credit: CoStar
In the report, company founder and CEO Andrew Florance described “another great quarter of strong results.”
“CoStar performance continues to improve, with revenue returning to double-digit growth rates in the third quarter of 2021 and our CoStar sales team produced net sales bookings 57 percent higher quarter-over-quarter and 566 percent higher year-over-year,” Florance continued.
CoStar stock spent Tuesday trading at just under $100 per share. That was up more than $2 per share compared to five days ago, and more than $10 per share compared to a month ago. Overall, CoStar stock is currently hovering near its all-time high. The company has a market cap of about $39.4 billion.
After CoStar published its earnings Tuesday, its stock price fluctuated in after hours trading, falling from a closing price of $99.74 per share to a low of just over $92. Later as Florance held a conference call with investors, the price began recovering and rose to $97 per share.
Credit: Google
Analysts had expected CoStar to report $497.96 million in revenue, meaning the company slightly surpassed expectations.
CoStar last reported earnings in July. At the time, the company saw its revenue jump 21 percent year-over-year to $480 million. One quarter earlier, in April, CoStar’s revenue grew 17 percent compared to one year earlier, hitting $458 million.
Tuesday’s earnings report also comes as CoStar increasingly edges its way onto the turf of other real estate giants. Most notably, the company is positioning itself as a challenger to Zillow; Costar announced earlier this month that it is working with the Real Estate Board of New York (REBNY) to launch Citysnap, a portal serving New York City. The portal will represent a competitor to Zillow, and to Zillow’s New York offering StreetEasy.
The portal announcement was just the latest development in a growing cold war between CoStar and Zillow that began when the former company acquired portal maker Homesnap last year. Florance has shied away from explicitly saying his firm and Zillow are rivals, though he has said real estate agents are Zillow’s competitors while also framing CoStar as an ally to agents.
Florance came close to explicitly criticizing Zillow Tuesday. During his call with investors, he said that a number of StreetEasy’s practices are unpopular among real estate agents, including the costs and the way the platform displays agents’ names on listings.
“Blackmail is too strong a word for it,” Florance said, quipping that a better word might be “Zillow-mail.”
He went on to say that Citysnap will offer a counterpoint to those complaints. The platform will be free for agents to use, for example, and will operate with a “your listing, your lead” philosophy that is design to drive leads to agents who actually hold listings. Florance ultimately called Citysnap “revolutionary.”
To make money, Citysnap will offer a promoted listings option so that agents can “can buy preferred placement to increase exposure,” Florance said. Agents can also subscribe to monthly services such as marketing and concierge offerings.
“We don’t really have to do anything like what StreetEasy is doing, which is so unpopular, in order to be financially successful,” Florance said during the call.
In addition, Florance also said Homesnap itself has seen growing revenue and users. He ultimately described the company as “a great product,” and one “that residential agents like.”
Florance also discussed the market. In Tuesday’s report, he said that in the rental sector there is “record levels of demand for apartments” and that “vacancies have declined to the lowest levels in decades creating some headwinds for demand in apartment advertising.”
“However, traffic to our network of sites increased 17 percent year-over-year in the third quarter of 2021,” Florance continued in the report, “with Apartments.com generating millions more high-quality leads for our customers year-over-year in a low-vacancy environment while our clients are increasing their rents to record levels.”
During his call with investors Tuesday, Florance also described “sky high rents” and demand that is “super high. That’s good for owners and investors, though it is also contributing to a housing crisis. Florance went on to say that he expects the situation to resolve within a few quarters, though for now the situation is “unprecedented” and “whipsawing or extremely volatile.”
“When you see it on a chart,” Florance added, “the slope of the curve is unprecedented.”
Update: This post was updated after publication with additional information from CoStar’s earnings report and from a call executives held with investors.
