The company closed three acquisitions in 2020, and CEO Andrew Florance indicated during an earnings call that CoStar’s buying spree is far from over.

Real estate juggernaut CoStar Group took in $1.66 billion in revenue in 2020, an increase of 18.5 percent from $1.4 billion in 2019, as consumer interest in real estate spiked in the latter half of the year, according to an earnings report Tuesday.

At the same time, the company’s profits fell 27.9 percent to $227.1 million, from $315 million in 2019, in part due to a one-time $59.5 million expense related to the company’s attempted acquisition of rival RentPath.

Andrew Florance (Photo courtesy of CoStar)

In a statement, CoStar founder and CEO Andrew Florance said 2020 was “an exceptional year” for the company, during which CoStar closed three acquisitions — Ten-X, Emporis, and Homesnap — and raised $2.7 billion in debt and equity.

“Following the initial pandemic disruption early in the year, we demonstrated that our business is strongly countercyclical as our sales rebounded strongly in the second half of the year,” Florance said.

“In the fourth quarter, we delivered annualized net new sales of $49 million, bringing our total sales bookings to over $100 million in the second half of 2020,” he noted, adding that CoStar Suite “had its best sales quarter of 2020 in the fourth quarter, more than doubling the third quarter sales level.”

Unique visitors to CoStar marketplaces in 2020 also increased by more than 20 percent year-over-year, and by 29 percent in the fourth quarter alone.

The company’s earnings report does not include financial results from Homesnap because CoStar only owned the company for a “handful of days” in 2020, CoStar CFO Scott Wheeler said in an earnings call.

CoStar anticipates that Homesnap will have a profit impact of negative $5 million in 2021 as the company absorbs “acquisition deferred revenue adjustments” and the cost of moving Homesnap’s 165 employees to CoStar’s compensation and benefits plans. CoStar anticipates Homesnap will bring in about $50 million in revenue in 2021 with $10 million of that revenue coming in during Q1.

CoStar also purchased the houses.com URL in December, joining CoStar’s portfolio of consumer-facing real estate websites, which includes commercial real estate sites Loopnet.com, Cityfeet.com and Showcase.com; multifamily listing portals Apartments.com, ForRent.com, ApartmentFinder.com, ApartmentHomeLiving.com and Apartamentos.com; and land for sale websites with Land.com, LandsofAmerica.com, LandWatch.com and LandandFarm.com.

During the earnings call, Florance indicated CoStar’s buying spree was far from over.

“Overall, 2020 was clearly a transformative year,” he said. “And as we look ahead to 2021, our strong balance sheet and acquisition track record position us to successfully pursue multiple large growth opportunities through organic investment and M&A.”

Last week, CoStar put in a $7 billion bid to buy national real estate data and analytics provider CoreLogic, which Florance described in the call as a “superior proposal.”

“This combination would triple CoStar Group’s total addressable market by combining the global leader in digitizing commercial property with a global leader in digitizing residential real estate,” Florance said.

“We estimate that globally commercial properties have an aggregate value of $66 trillion, and residential properties have an aggregate value of $114 trillion. Combined, these companies will be very well positioned for growth, meeting the information analysis and marketing needs of the $180 trillion global real estate industry. The global value of real estate is twice the value of all public companies combined.”

With the acquisition of CoreLogic, CoStar hopes to “eliminate the artificial differences” between commercial and residential real estate digital products where customers interested in both currently have to purchase different products from CoStar and CoreLogic, according to Florance. CoStar would do this in part by offering several of CoreLogic’s residential products to commercial customers.

“We believe that these integrated solutions will create massive cross-selling opportunities, significantly increasing product uptake sales and hundreds of millions in revenue synergies,” Florance said.

But because the companies currently serve “completely different markets,” CoStar believes the deal is unlikely to attract the attention of antitrust regulators as occurred with the RentPath deal, according to Florance.

If CoreLogic’s board approves the deal, it could close within four to 12 months, he added.

Florance also offered a behind-the-scenes explanation for the Federal Trade Commission shutdown of the RentPath acquisition involving “a household name Internet giant” showing interest in launching a rival and then backing off.

While Florance’s remarks mentioned Zillow, it’s unclear whether that was the “household name” he was referring to. Florance has been explicit that his business model will not mirror that of Zillow’s, even going as far as saying that the “residential agent is Zillow’s competitor.”

“The inflection point first came down to our learning of a nonpublic rumor that a household name Internet giant shared their plans to launch a marketing solution that would be more directly competitive with both us and RentPath,” Florance said during the call.

“While the giant intended to partner with us, they would clearly provide a potential competitive alternative.”

Because of this potential for increased competition, CoStar felt the RentPath deal would be cleared by the FTC.

“However, during the process, the giant drew significant antitrust scrutiny of their own,” Florance said. “And we have reason to believe that in conversations with the government, the giant pledged not to enter our space.

“As a result, three things happened. One, the giant did not enter our space, which is really good news. Secondly, the antitrust analysis and acquisition of RentPath shifted out of our favor, which was bad news. Third, in the FTC’s opinion, they say that their investigation concluded that Zillow is not an effective competitor to Apartments.com, which we enjoyed.

“So as a reward for the nearly a year we spent on RentPath, we had 4 of the 5 best-selling quarters in the history of Apartments.com, sold an all-time high of $37.5 million of new sales in the second quarter of 2020, and added over 5,000 new advertisers to our platform to the year-end at 57,828 and had over one-third of the properties that began the year advertising exclusively on RentPath decide to switch their marketing to Apartments.com.

“So I think you’ll agree that all in all, including with a break fee, it was not such a bad outcome for the process.”

CoStar expects full-year revenue for 2021 to come in between $1.925 billion to $1.945 billion in 2021, which at the midpoint of that range would be an increase of 17 percent year over year. For first-quarter 2021, the company expects revenue of $450 million to $455 million, which at the midpoint would be a 15 percent jump.

CoStar also plans to increase its marketing spend this year by about $70 million compared to 2020, to about $345 million, according to Wheeler. The company will spend a little over $20 million of the increased spend on Homesnap and the remaining net increase will be spent on LoopNet and Ten-X.

Asked during the call how CoStar plans to cost-effectively build consumer traffic on Homesnap, Florance said CoStar has already shown it can enter a new space and build traffic through time.

“In particular, we entered the apartment space seven years after Zillow and made it a significant priority,” he said. “We ultimately were clearly more successful in doing that. I think one of the important considerations as you build a marketplace or build traffic on a marketplace is what is your revenue model and how strong is that revenue model? And will that revenue model fund investments to continue growing traffic? Or is your revenue model actually a drag on your ability to grow traffic?

“And I think we see those conditions existing in the home sale market. Definitely, Homesnap is a useful component of this, and there’s one or two other useful components that we’re looking at. But there’s no guarantees on any of these things, but we are pretty excited to get working on it, and we have a pretty clear view as to where we think we can take it and how we can get it there.”

Email Andrea V. Brambila.

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